Eurotech Ltd – ‘10-K’ for 12/31/97

As of:  Tuesday, 4/14/98   ·   For:  12/31/97   ·   Accession #:  1005477-98-1216   ·   File #:  0-22129

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Annual Report   —   Form 10-K
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 ---------
 FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE 
ACT OF 1934 For the fiscal year ended December 31, 1997             

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 [   ]

EUROTECH, LTD.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

DISTRICT OF COLUMBIA                        33-0662435      

 (State or other jurisdiction of      (I.R.S. Employer Identification No.)
incorporation or organization)                                        

1101 30th Street, N.W.
Suite 500             
     Washington, D.C. 20007-3772

(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (202) 625-4382

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                      NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS                     WHICH REGISTERED  

Common Stock, $0.00025 par value                    N/A               

   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 |X|  No |_|                     

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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. |X|                    

     As of March 31, 1998 the Registrant had 18,932,834 shares of Common Stock
outstanding.                                                                    

 DOCUMENTS INCORPORATED BY REFERENCE

    Certain exhibits filed with the Company's Registration Statement on Form
S-1, file number 333-26673 are incorporated by reference into Part IV.          

 TABLE OF CONTENTS
                                                                            PAGE
                                                                            ----
PART I

ITEM 1.  BUSINESS...........................................................  1 
ITEM 2.  DESCRIPTION OF PROPERTY............................................ 12 
ITEM 3.  LEGAL PROCEEDINGS.................................................. 12 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 13 

 PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                      
        STOCKHOLDER MATTERS................................................ 14
ITEM 6.  SELECTED FINANCIAL DATA............................................ 17 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                      
        CONDITION AND RESULTS OF OPERATIONS................................ 19
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 23 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON                       
        ACCOUNTING AND FINANCIAL DISCLOSURE................................ 24

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................. 24 
ITEM 11. EXECUTIVE COMPENSATION............................................. 26 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS                        
        AND MANAGEMENT..................................................... 27
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 28 

 PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS                             
        ON FORM 8-K........................................................ 32

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PART I

Item 1. Business                                                                

General                                                                         

   Eurotech, Ltd. (the "Company" or "Registrant") was incorporated in May,
1995 under the laws of the District of Columbia, and is a development stage,    
technology transfer, holding and management company formed to commercialize new,
existing but previously unrecognized, and previously "classified" technologies, 
with a particular current emphasis on technologies developed by prominent       
research institutes and individual researchers in the former Soviet Union and in
Israel, and to commercialize those and other Western technologies for business  
and other commercial applications principally in Western and Central Europe,    
Ukraine, Russia, and North America. Since the Company's formation it has        
acquired development and marketing rights to a number of technologies by        
purchase, assignments, and licensing arrangements. Although the Company intends 
to continue identifying, monitoring, reviewing and assessing new technologies,  
its primary emphasis is marketing and sales of four of its present technologies 
that it deems to be ready for commercialization (the "Principal Technologies"). 
To that end, the Company recently has initiated discussions with a number of    
potential end-users of those technologies, with a view towards the future       
negotiation and execution of licensing and/or joint venture marketing           
agreements. Additionally, the Company is proceeding with the marketing and      
potential application of its silicon-organic ("EKOR") compound technology (which
is one of the Principal Technologies) in connection with nuclear contamination  
remediation projects at the Chernobyl Nuclear Power Plant ("ChNPP") in Ukraine, 
and in the United States, Russia and Germany. See "Business - Principal         
Technologies," and "Management's Discussion and Analysis of Results of Operation
and Financial Condition - Plan of Operation." The Company intends to operate its
business by licensing its technologies to end-users and through development and 
operating joint ventures and strategic alliances. To date, the Company has not  
generated any significant revenues from operations.                             

Acquisition of Israeli Technologies                                             

Incubator Technologies                                                          

The Company has informally agreed in principle with three Israeli   
technology incubators, the Technion Entrepreneurial Incubator Co., Ltd. ("TEI"),
the Ofek Le-Oleh Foundation ("Ofek") and the Incubator for Technological        
Entrepreneurship-Kiryat Weizmann, Ltd. ("Weizmann") (collectively, the          
"Incubators"), to participate in certain technology research and development    
projects which the Incubators individually sponsor. Pursuant to such informal   
arrangement, the Company would provide 15%-20% of the financing required for,   
and would receive a 20% equity interest in, research and development projects   
selected by the Company and such Israeli corporations as are formed for the     
purpose of owning, developing and commercializing the technologies resulting    
from those selected projects (each, an "Israeli Technology Company"). In        
furtherance of this, the Company has opened an office at the premises of TEI in 
Haifa, Israel. See "Description of Property." The Company has not entered into a
written agreement with any of the Incubators memorializing any such agreement in
principal, and the only written agreements between the Company and any Incubator
are those disclosed herein in connection with Chemonol, Ltd. ("Chemonol"),      
Separator, Ltd. ("Separator"), Remptech, Ltd. ("Remptech"), and Comsyntech, Ltd.
("Comsyntech"), each of which is an Israeli corporation. None of the Incubators 
are legally obligated to enter into any further such agreements with the        
Company, and as a result there is no assurance that the Company will be able to 
invest in or acquire any additional Incubator-sponsored technologies.           

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Pursuant to agreements with each of Chemonol, Ofek and Weizmann, the
Company has invested in four Israel Technology Companies, to wit: (i) Chemonol, 
which has developed materials and processes for manufacturing non-isocyanate    
polyurethane ("NIPU") industrial coatings (see "Business -- Principal           
Technologies -- Non-isocyanate Polyurethane"); (ii) Separator, which is         
developing a process for the electromagnetic separation and production of high  
temperature superconductive metallic powders; (iii) Remptech, which is          
developing processes for the production of extra-fine cobalt and nickel powders;
and, (iv) Comsyntech, which is developing a process for the continuous          
combustion synthesis of ceramic, composite and intermetallic powders. See       
"Business-Other Technologies." Under those agreements the Company will receive  
20% of each Israeli Technology Company's common equity, and will invest U.S.    
$60,000 in each such corporation. In connection with these investments, the     
Company also has obtained: (i) options to purchase Ofek's 20% common equity     
interest in each of Remptech and Comsyntech, each of which is exercisable for a 
period of 90 days commencing on November 6, 1999 at an exercise price to be     
established by the parties; (ii) options to acquire from the holders of a       
majority of the outstanding common equity (the "Principal Shareholders") of each
of Chemonol, Separator, Remptech and Comsyntech an additional 31% of each       
corporation's common equity, which are exercisable for a period of 6 months     
commencing on May 4, 1998 in the case of Chemonol, 12 months commencing on      
September 4, 1998 in the case of Separator, and 12 months commencing on May 6,  
1998 in the cases of Remptech and Comsyntech, each at an exercise price of      
U.S.$93,000, and (iii) the perpetual right to direct the voting of the common   
equity of the Principal Shareholders' of each company, giving the Company voting
control in each case.                                                           

     In the event the Company exercises the foregoing equity purchase options,
it will own 51% of each of Chemonol's and Separator's common equity and 71% of  
the common equity of each of Remptech and Comsyntech, and for financial         
reporting purposes will consolidate each of those corporation's balance sheets  
and other financial statements with the Company's. Although the Company         
presently anticipates it will exercise the Chemonol option, there is no         
assurance that it or any other of the foregoing options will be exercised. There
is no assurance that when such options become exercisable the Company will have 
sufficient funds to exercise any of them.                                       

      For a period of two years commencing on the date of its registration as an
Israeli corporation, the sale or other transfer of 25% or more of the           
outstanding common equity of each of Chemonol, Separator, Remptech and          
Comsyntech requires the consent of the Chief Scientist of the Israeli Ministry  
of Commerce and Technology. The Company's options to acquire additional common  
equity of the above Israeli Technology Companies are exercisable within such two
year periods and any acquisition of the common equity purchasable thereunder    
will, therefore, require the Chief Scientist's consent. Although the Company    
presently expects that if requested such consent would be given, there is no    
assurance that such consent will be obtained. Accordingly, the Company plans to 
seek to amend the terms of those options to extend their respective exercise    
periods beyond the applicable two-year periods during which the Chief           
Scientist's consent is required, prior to the times they each first commence.   

Technologies Acquired from Prof. Oleg L. Figovsky                               

   Pursuant to three Technology Purchase Agreements, each dated January 1,
1998, the Company has acquired from Oleg L. Figovsky, Ph.D. ("Prof. Figovsky")  
(who is a consultant to the Company) all right, title and interest in and to the
following three technologies developed by him, inclusive of future improvements 
thereto: (i) a group of related technologies collectively known as              
"Interpenetrated Network Polymers" ("INPs"), (ii) "Liquid Ebonite Material"     
("LEM") and (iii) "Rubber Concrete" ("RubCon") for purchase prices of $75,000,  
$15,000 and $35,000, respectively (each, a "Purchase Price"). Pursuant to each  
such Technology Purchase Agreement, during the 15-year period commencing on     
January 1, 1998, the                                                            

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Company is also obligated to pay to Prof. Figovsky royalties equal to 49% of the
Company's net revenues from the sales or licensing of any products incorporating
the applicable technology, subject to the Company's right to deduct from the    
first royalties otherwise payable under each agreement an aggregate sum equal to
the Purchase Price paid thereunder. The Company has prepared patent applications
for these technologies and plans to file the same during the second quarter of  
1998 in the U.S., Canada, China, Korea, Russia, Ukraine, Germany, Japan and the 
countries of the European Patent Agreement.                                     

    The Company believes that two of these technologies, RubCon and LEM, are
ready for commercialization, and has included them in the Principle Technologies
which the Company intends to be the focus of its marketing and sales program.   
RubCon is a rubberized concrete which the Company believes is superior to       
presently available similar concretes and to conventional cement-based concretes
for applications in, among other things, the manufacture of industrial          
floorings, equipment operating in aggressive chemical media, building           
foundations, concrete pipes and outdoor structures. LEM is a synthetic, liquid  
rubber having enhanced mechanical, permeability and anti-corrosive qualities,   
that the Company believes can be applied successfully as a protective covering  
for such objects as small-diameter piping, and the intricate parts of pumps,    
fans and centrifuge rotors. See "Business - Principal Technologies."            

     The INP technology consists of a related group of technological processes
to produce a variety of polymeric compounds, including polyurethanes, that is   
based on modifying the molecular structure of olygomeric cyclocarbonates. The   
INP constituent technologies presently are in their respective research and     
development phases. No assurance can be given that any INP constituents will be 
successfully developed or, if developed, will result in commercially saleable or
profitable products or processes.                                               

Principal Technologies                                                          

 Silicon-Organic (EKOR) Compound. The Company's silicon-organic (EKOR)
compound technology was jointly developed by scientists at the I.V. Kurchatov   
Institute ("Kurchatov") in Moscow and the Euro-Asian Physical Society ("EAPS")  
for the conservation and containment of ecologically hazardous radioactive      
materials. The EKOR compound is based on radiation-resistant compounds produced 
from silicon-organic elastomers. Kurchatov is a physics and scientific research 
institute, which in the former Soviet Union enjoyed a position of prestige,     
sophistication and importance roughly equivalent to that of the                 
Lawrence-Livermore National Laboratory in the United States. EAPS is a          
professional society of over 5,000 scientists, physicists, and engineers in the 
former Soviet Union. Until August 1, 2014, the Company is the exclusive licensee
of all right, title and interest (inclusive of all patent and other intellectual
property rights) in and to the EKOR technology in Canada, China, Japan, the     
Republic of Korea, the United States of America, Ukraine, and all member        
countries of the European Patent Agreement. See "Certain Relationships and      
Related Transactions."                                                          

     In testing conducted at Kurchatov, the EKOR compound has been shown to be
highly resistant to radiation and structural degradation from exposure to       
radiation, highly fire-resistant, water-proof, and capable of being formulated  
in densities that display considerable structural strength and weight-bearing   
properties (based on testing to date) of 100 lbs. per square inch. The Company  
believes that the EKOR compound is the most technologically advanced material   
for comprehensively containing both solid and liquid radioactive materials,     
suppressing radioactive dust and preventing such materials and dust from        
escaping into the atmosphere or leaching into and contaminating ground-water    
supplies.                                                                       

 The Company expects that one of the first commercial uses of its EKOR
compound technology will be to contain and stabilize the extensive radioactive  
debris and dust that continues to accumulate and                                

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contaminate the environment at Reactor 4 of the Chernobyl Nuclear Power Plant in
Ukraine, the site of a disastrous explosion and near-reactor core meltdown in   
1986, and to help structurally support the concrete and steel "sarcophagus" that
was built over Reactor 4 as an interim containment measure after the accident.  
The rapid deterioration of the "sarcophagus," caused by the intense radiation   
persisting at Reactor 4, has occasioned international concern that without the  
implementation of effective site containment measures, a second nuclear disaster
and possible melt-down may occur. In high dosage radiation tests EKOR compound  
has met or exceeded all specifications established by the ChNPP authorities for 
containment materials. In April 1997 the equipment for synthesizing and applying
the EKOR compound was successfully demonstrated for officials of ChNPP and other
entities.                                                                       

The G-7 group of industrialized nations (the United States, United  
Kingdom, Italy, France, Canada, Japan and Germany) has pledged up to U.S. $3.1  
billion to assist in a multi-step project of remediating and closing the plant, 
with approximately U.S. $300 million budgeted for the project's first           
containment and site stabilization phase. In September 1997, pursuant to a joint
bidding agreement with Duke Engineering & Services, Inc. ("DES"), a business    
unit of Duke Power Company (the "Company-DES Agreement"), DES and the Company   
gave formal notice of their intent to bid on the ChNPP Reactor 4 remediation    
project to the European Bank of Reconstruction and Development ("EBRD").        

      Pursuant to an agreement with Kurchatov Research Holdings, Ltd., ("KRH") a
Delaware corporation jointly owned by ERBC Holdings, Limited, a British Virgin  
Islands corporation ("ERBC"), and CIS Development, Inc., a Delaware corporation 
("CIS"), 50% of the net profits derived from the sale or licensing of the EKOR  
compound will be retained by the Company, and 50% will be remitted to KRH. One  
present employee and one former business representative of ERBC are beneficial  
owners of shares of the Company's Common Stock, and the chief executive officer 
and sole shareholder of ERBC is the beneficial owner of 6.9% of the Company's   
outstanding Common Stock. Peter Gulko, who is a former director, and presently  
is the President and Secretary of the Company, is the sole record owner of CIS. 
Pursuant to an agreement between CIS and EAPS (as representative of individual  
Russian scientists, researchers and academics affiliated with Kurchatov and     
EAPS), the shares of KRH common stock registered to CIS are being held by CIS   
for the benefit of EAPS. From June, 1997 until February 13, 1998, Dr. Randolph  
A. Graves (who served as the Chairman, Chief Executive Officer and a director of
the Company until January 23, 1998) also served as a director and Secretary of  
KRH. See "Certain Relationships and Related Transactions."                      

  In addition to remediation of ChNPP Reactor 4, the Company's near- and
mid-term commercialization and marketing efforts relative to the EKOR compound  
principally are directed at nuclear waste remediation projects in the U.S.,     
Russia and Germany. Pursuant to the Company-DES Agreement, the Company and DES  
have submitted a successful, first-round demonstration project bid on the U.S.  
Department of Energy's ("DoE") reactor decommissioning technology program at    
DoE's Hanford, Washington, reactor facility. Joint Company-DES bids presently   
are being prepared for other DoE demonstration projects. The Company also has   
entered into an agreement with the Research Center Julich, a German governmental
research institution, providing for its assistance with certifying the EKOR     
compound for use in Germany. Additionally, the Company is in the process of     
identifying potential licensees of the EKOR technology, and has commenced       
initial licensing discussions with a Japanese corporation. No assurance can be  
given that the EKOR compound will be certified for use in Germany, that the     
Hanford, Washington DoE demonstration will be successful or that if successful  
it will result in a project contract being awarded to the Company, or that such 
licensing discussions will successfully result in the execution of an EKOR      
license.                                                                        

In addition, further applications of the EKOR technology are being  
reviewed for several sites in Russia: Chelyabinsk Mayak (a plutonium production 
site), Kola (a disposal site for nuclear fuel from atomic-powered               

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ships and submarines), and Krasnoyarsk (a uranium mining and enrichment         
facility). To this end, at nominal cost to it, the Company has provided EKOR    
documentation and material samples to these sites, and has arranged for         
personnel from Kurchatov and EAPS to be available to provide technical advice   
regarding pertinent applications of the EKOR compound. To date, the Company has 
not entered into any agreements pertaining to either the testing or application 
of the EKOR compound at these sites.                                            

      Non-isocyanate Polyurethane. NIPU is a modified polyurethane that does not
contain the toxic isocyanates used in the production of conventional            
polyurethane, and has lower permeability and greater chemical resistance        
qualities as compared to conventional polyurethane. The Company believes that   
these advanced characteristics make NIPU superior to conventional polyurethanes 
in connection with their use in a number of industrial application contexts such
as manufacturing automotive bumpers, paints, plastics and truck beds; airplane  
and rocket sealants, interior components and seating; construction adhesives,   
coatings, flooring, glues and rooftops; industrial equipment and machinery; and 
consumer goods such as appliances, footwear, furniture and plastic products.    
NIPU was developed by Chemonol. Pursuant to a voting agreement with the Company,
Chemonol's Principal Shareholder has agreed to vote his common equity as        
directed by the Company. See "Business - Acquisition of Israeli Technologies -  
Incubator Technologies."                                                        

   The Company intends to market and sell NIPU through one or more license
and/or joint venture agreements with major chemical companies, and has recently 
commenced initial discussions with several such companies with a view towards   
negotiating one or more licenses and/or joint venture agreements. Such          
discussions are in their initial stages, only, and no assurance can be given    
that all or any of them will result in an NIPU license or joint venture         
agreement, or that such license or agreement, if concluded, will be on terms    
favorable to the Company.                                                       

   Liquid Ebonite Material. 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 such tests, the    
Company believes 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.                             

     LEM was independently developed by Prof. Figovsky and was acquired by the
Company pursuant to a Technology Purchase Agreement dated January 1, 1998, for a
purchase price of $15,000, plus royalties equal to 49% of the Company's net     
revenues from sales or licenses of any products incorporating LEM, payable for a
period of 15 years commencing on January 1, 1998. To date, the Company has not  
derived any such revenues and does not expect to derive any such revenues in    
1998. Prof. Figovsky is a consultant to the Company. See "Business Acquisition  
of Israeli Technologies - Technologies Acquired from Prof.                      
Oleg L. Figovsky."                                                              

A major international chemical company has expressed interest in    
potentially licensing LEM for production and world-wide distribution and sales. 
At such company's request, the Company is preparing evaluation samples of LEM.  
No assurance can be given that such chemical company or any chemical or other   
company will determine that LEM is suitable or economically viable for its      
business purposes or that any production/distribution license for LEM will be   
negotiated or executed. See "Business - General," and "Management's Discussion  
and Analysis of Results of Operation and Financial Condition - Plan of          
Operation."                                                                     

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     RubCon. "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. The Company believes 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, climatic and corrosive conditions.          

     RubCon was independently developed by Prof. Figovsky, and was acquired by
the Company pursuant to a Technology Purchase Agreement dated January 1, 1998,  
for a purchase price of $35,000, plus royalties equal to 49% of the Company's   
net revenues from sales or licenses of any products incorporating LEM, payable  
for a period of 15 years commencing on January 1, 1998. To date, the Company has
not derived any such revenues and does not expect to derive any such revenues in
1998. See "Business - General Acquisition of Israeli Technologies - Technologies
Acquired from Prof. Oleg L. Figovsky."                                          

      The Company currently anticipates that it will enter into discussions with
one or more of four major chemical companies that presently are evaluating      
RubCon, with a view towards negotiating product purchase and/or license         
agreements. No assurance can be given that any of those or any other companies  
will determine that RubCon is suitable or economically viable for its business  
purposes, that the Company will enter into discussions or negotiations with any 
of those companies, or that, if entered into, they will result in product       
purchases or license agreements. See "Business - General," and "Management's    
Discussion and Analysis of Results of Operation and Financial Condition - Plan  
of Operation."                                                                  

Other Technologies                                                              

     The Company also is engaged in the continuing research and development of
other technologies it believes to be of potential, future commercial            
significance.                                                                   

Electromagnetic Separation ("EMS") Technology. The Company is       
participating in the further research and development of a process to           
electromagnetically separate high temperature superconducting ("HTSC") metal    
powders, that has been developed by Separator. The Company is the holder of 20% 
of Separator's common equity and has an option to purchase an additional 31% of 
such common equity. Pursuant to a voting agreement with the Company, Separator's
Principal Shareholders have agreed to vote their common equity as directed by   
the Company. See "Business - General - Acquisition of Israeli Technologies      
Incubator Technologies." There can be no assurance that such equity purchase    
option will be exercised, which will principally depend upon the results of     
further research and development activities and later expressions of commercial 
interest, if any, in the EMS technology.                                        

  The electromagnetic separation of HTSC powdered metals is based on the
interaction of HTSC particles with alternating magnetic fields at temperatures  
approaching the level required for "HTSC transition," i.e., the point at which a
substance becomes superconducting. The research and testing data provided by    
Separator indicates that the EMS technology allows for the extraction of        
powdered metal particles having optimal electrophysical qualities, and in the   
production of HTSC metallic powders with a critical electrical current that     
exceeds those of HTSC powders produced using conventional technologies. Based on
demonstration testing conducted by Separator, the Company believes that the EMS 
process for HTSC metallic powder can be used with a variety of powdered metals, 
and can be configured either as a small                                         

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bench testing device for laboratory applications at universities and research   
and development companies, or as an industrial-scale device with the capacity to
produce up to 8 kilograms per hour of HTSC powdered metal. The Company believes 
that the EMS technology can be commercially applied in the production of        
underground electric transmission cables, transformers, electric power system   
control and protection systems, motors, generators, magnetic resonance imaging  
equipment and cellular telephone base stations.                                 

Powdered Metallurgy Technology. The Company is participating in the 
further research and development of a process developed by Remptech, to produce 
extra fine cobalt and nickel powders by recycling materials containing cobalt   
and nickel. Powdered metallurgy is generally acknowledged as being capable of   
yielding product with superior structural, physical and mechanical properties.  
The Company believes 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. The Company believes 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.           

The Company is the holder of 20% of Remptech's common equity and has
options to purchase the 20% common equity interest in Remptech held by Ofek     
which is partially sponsoring Remptech's research and development activities,   
and an additional 31% of such common equity from Remptech's Principal           
Shareholders. Pursuant to a voting agreement with the Company, Remptech's       
Principal Shareholders have agreed to vote their common equity as directed by   
the Company. See "Business - Acquisition of Israeli Technologies - Incubator    
Technologies." There can be no assurance that such equity purchase options will 
be exercised, which will principally depend upon the results of further research
and development activities and later expressions of commercial interest, if any,
in the Powdered Metallurgy technology.                                          

Continuous Combustion Synthesis Technology. The Company also is     
participating in the further research and development of a process for the      
continuous combustion synthesis ("CCS") of ceramic, composite and intermetallic 
powders, including titanium carbide powder, developed by Comsyntech. 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. The Company believes 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, the Company believes that the CCS         
technology is of 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.                                            

  The Company is the holder of 20% of Comsyntech's common equity and has
options to purchase the 20% common equity interest in Comsyntech held by Ofek,  
which is partially sponsoring Comsyntech's research and development activities, 
and an additional 31% of such common equity from Comsyntech's Principal         
Shareholders. Pursuant to a voting agreement with the Company, Comsyntech's     
Principal Shareholders have agreed to vote their common equity as directed by   
the Company. See "Business Acquisition of Israeli Technologies - Incubator      
Technologies." There can be no assurance that such equity purchase options will 
be exercised, which will principally depend upon the results of further research
and                                                                             

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development activities and later expressions of commercial interest, if any, in 
the powdered metallurgy technology.                                             

   Silicon-Carbide "Wafer" Technology. The Company has participated in the
development of a silicon carbide "wafer" technology in conjunction with         
Kurchatov and EAPS. Although no assurance can be given, the Company presently   
expects that upon the successful completion of its development, all intellectual
property, marketing and sales rights in and to the silicon carbide "wafer"      
technology will be assigned to the Company. While there is no assurance that    
such technology will be successfully developed, based on reports from Kurchatov 
the Company believes the silicon carbide technology will permit the production  
of defect-free, radiation-resistant "wafers" (from which integrated circuit     
chips are fabricated) that will be approximately twice the size of those        
currently available. The Company expects that integrated circuit chips          
fabricated from its silicon carbide wafers will have particular application in  
high power environments such as automobile and aircraft engine control systems, 
high power environments such as power control transistors, and environments     
subject to ionizing radiation such as spacecraft.                               

    Presently, the Company is not devoting any significant time or resources
to the further development of this technology. The Company anticipates that it  
will resume such participation only after the completion of the ChNPP Reactor 4 
remediation project. See "Business - Principal Technologies - Silicon- Organic  
(EKOR) Compound".                                                               

     Waste-to-Energy Technology. The Company's waste-to-energy technology is a
combination of "low-tech" mechanical technologies, "high-tech" combustion       
controls, modern emissions abatement technology and effective operation         
procedures configured into modules that produce steam energy from ordinary      
municipal waste. The basic configuration was pioneered in 1980 by the U.S.      
National Aeronautics and Space Administration ("NASA") and the city of Hampton, 
Virginia, to provide steam power for NASA's Langley Research Center and the     
Langley Air Force Base.                                                         

The Company has entered into a technology transfer and consulting   
agreement with Eurowaste Management, Ltd., a Delaware corporation ("EuroWaste"),
under which Eurowaste will pay the Company a U.S. $2.4 million technology       
transfer fee prior to the construction of the first waste-to-energy plant, and a
design and implementation consulting fee of U.S. $425,000 for each subsequent   
plant. A shareholder of the Company who beneficially owns less than 1% of the   
Company's Common Stock is the chairman, chief executive officer and a           
shareholder of Eurowaste. See "Certain Relationships and Related Transactions." 

   The Company recently has de-emphasized its prior plans to introduce its
waste-to-energy technology in the city of Cherkassy, Ukraine principally because
neither the Ukrainian government, the city of Cherkassy nor Eurowaste has       
obtained construction or other financing for the proposed Cherkassy             
waste-to-energy facility, and because the Company believes that marketing its   
Principal Technologies is more likely to result in near-to-mid-term revenues    
than is the Cherkassy waste-to-energy project. If commenced, the Cherkassy      
waste-to-energy facility will take approximately thirteen months to construct,  
with an expected energy output of approximately seven megawatts per day, based  
on an assumed consumption of approximately 240 tons of municipal waste per day. 

  There is no assurance that the necessary financing will be obtained or
that, if obtained, it will be on terms favorable to the venture. Neither is     
there any assurance that the Ukrainian government will not abandon its support  
of the proposed Cherkassy facility. In the absence of such financing and        
governmental support the construction in Ukraine of any waste-to-energy         
facilities utilizing the Company's technology cannot be expected to occur.      

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 Automated Parking Garages. Automated parking technology consisting of
computer-controlled, rotating carousels which can be configured to contain      
varying numbers of automobile parking spaces, substantially reduces the         
economically unproductive space devoted to ramps and maneuvering areas in       
traditional, multi-story parking garages, and through the use of elevators and  
multi-level "stacking" of the carousels, permits the erection of high-capacity  
garages on parcels of land otherwise too small for such use. Essentially,       
automobiles are raised by elevators to computer-controlled carousels which      
rotate the vehicles to their respective parking slots. The Company believes that
its automated parking technology is particularly useful in congested urban areas
and in cities where available land for parking is scarce.                       

  The Company contemplates that the automated parking technology will be
introduced in Moscow, Russia. Moscow has experienced a substantial increase in  
automobile ownership and traffic congestion, and which has a relative scarcity  
of existing parking spaces and construction sites of a size suitable for        
traditionally designed parking garage facilities. The municipal government of   
Moscow has allocated a suitable construction site for the Company's intended,   
initial automated parking venture, located at Arbat 8-10. Arbat is one of the   
City of Moscow's principal commercial districts.                                

   The Moscow automated parking garage will be developed, and if completed
will be owned and operated, by "Cinema World on Arbat," a Russian joint stock   
company, the equity of which is owned 50% by Arbat American Autopark, Ltd., a   
Delaware corporation ("Arbat American"), 45% by "Soyuz Agat Fil," a Russian     
company to which the Moscow municipal government has allocated the construction 
site and which holds the necessary construction approvals and permits, and 5% by
a privately owned Russian affiliate of "Mosinterstroi," a quasi-governmental    
entity of the City of Moscow. 40% of the equity of Arbat American is owned by   
ERBC. One present employee and one former business representative of ERBC are   
beneficial owners of shares of the Company's Common Stock, and the chief        
executive officer of ERBC is the beneficial owner of 6.9% of the Company's      
outstanding Common Stock. One of the directors of Arbat American is a           
shareholder of the Company's Common Stock, and another individual, who is a     
director and the president of Arbat American, is a shareholder of the Company's 
Common Stock.                                                                   

 The Company has identified automated parking garage equipment, plant,
specifications and engineering documentation, adaptable to the multiple         
applications required for garage sites in Moscow, for use by Arbat American.    
Arbat American will purchase such equipment, plant, specifications and          
documentation from MEPA-Sachisische Parksystemme GmbH, a German company.        

    Pursuant to a technology agreement entered into with Arbat American, the
Company has been paid a one-time fee of U.S. $225,000 in respect of the Arbat   
parking garage ($1,250 for each parking space to be contained in the automated  
parking facility), which constitutes the Company's sole compensation in respect 
of that facility. That agreement also provides for the payment to the Company of
a one-time fee of U.S. $1,250 for each parking space to be contained in any     
garage facilities that in the future are developed, owned and/or operated by    
Arbat American and use the automated parking technology. Presently, the Company 
is not aware of any plans of Arbat American for any further such parking        
garages.                                                                        

The Company has been advised that Arbat American has, to date, not  
obtained project financing for the proposed Arbat facility, and that Arbat      
American could for that reason be declared in default of its obligations under  
its agreements with the Municipal Government of Moscow. If Arbat American is    
declared to be in default, its ability to commence the project, and any other   
similar project in Moscow, could be jeopardized. See "Certain Relationships and 
Related Transactions."                                                          

Re-sealable Containers. Pursuant to a sublicense (the "Re-sealable  
Container Sublicense") entered into in December 1997, the Company has acquired  
from ERBC an exclusive, worldwide and perpetual license                         

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to commercialize, use, exploit and market two mechanical systems (the           
"Re-sealable Container Systems") for re-sealing soft-drink (and other similarly 
configured) beverage cans, and cardboard "TetraPak" beverage containers.        
"TetraPak" containers are four-sided, pyramidical beverage containers widely    
used in Europe, made of packaging material similar to milk "cartons" familiar to
the U.S. market. The "TetraPak" resealing system attaches to and re-seals opened
containers by creating an air-pocket between the containers outer surface and   
the re-sealing device. The beverage can re-sealing device is designed to attach 
to the top of the beverage can and provides a manually operated metal flap that,
when rotated into position over the opening in the can, creates a leak-proof,   
gas-tight seal.                                                                 

     The Re-sealable Container Systems are each designed to integrate with the
"TetraPak" container or beverage can top, as the case may be, and permit        
re-sealing without deforming the container's shape or diminishing its volume    
capacity. The Company believes that the Re-sealable Container Systems more      
effectively preserve the freshness and hygiene of the contents of opened        
beverage cans and "TetraPak" containers, and (in the case of the beverage can   
re-sealing system) more effectively prevents leakage and loss of carbonation,   
than presently available re-sealing devices. The Company further believes that  
the Resealable Container Systems have a variety of potential applications that  
include carbonated and noncarbonated beverages, canned infant formula, canned   
motor oil, and dry package contents such as breakfast cereals, coffee, flour and
sugar.                                                                          

ERBC acquired an exclusive, worldwide and perpetual license to the  
Re-sealable Container Systems pursuant to a license agreement, dated March 20,  
1997, with Cetoni Unwelttechnologie-Emwik Lungs GmbH ("Cetoni"), a German       
company that developed and held all right, title and interest in and to those   
systems, in consideration of ERBC's payment to Cetoni of U.S. $495,000 plus 50% 
of all royalties received by ERBC from sales of products and devices embodying  
or otherwise using Re-sealable Container Systems. Under the Re-sealable         
Container Sublicense the Company paid ERBC U.S. $495,000 in consideration of the
sub-license granted thereunder, and is obligated to pay to Cetoni 50% of all    
royalties received by the Company from sales of such products and devices. ERBC 
will not receive from the Company any portion of such royalties.                

  ERBC is the beneficial owner of 255,000 shares of the Company's Common
Stock. The chief executive officer and sole shareholder of ERBC is the          
beneficial owner of 6.9% of the Company's Common Stock, and one present employee
and one former business representative of ERBC are beneficial owners of shares  
of the Company's Common Stock. See "Certain Relationships and Related           
Transactions."                                                                  

   Other technologies, including the "CORO" telephone technology (see note
9(d) to the Company's Financial Statements) are presently being evaluated by the
Company. Pending the results of those evaluations, the Company has no current   
plans to develop or commercialize those technologies.                           

   The Company is not a subsidiary of another corporation, entity or other
person. The Company does not have any subsidiaries.                             

Employees                                                                       

  The Company has five full-time employees and four part-time employees.

 None of the Company's employees is covered by a collective bargaining
agreement. The Company considers its employee relations to be satisfactory and  
has not experienced any labor problems.                                         

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Competition and Marketing                                                       

      The near-term, primary markets for the Company's products and technologies
and chemical manufacturing and radioactive contamination containment,           
remediation and transportation. Mid-term markets are expected to continue in    
these industries. The Company has limited experience in marketing its products  
and technologies and, other than in connection with the remediation of Reactor 4
at ChNPP, intends to rely on licenses and joint ventures with major             
international chemical and other companies (and in the case of the EKOR         
compound, upon its joint bidding agreement with DES) for the marketing and sale 
of its Principal Technologies. In contrast, other private and public sector     
companies and organizations have substantially greater financial and other      
resources and experience than the Company. Competition in the Company's business
segments is typically based on product recognition and acceptance, price, and   
marketing and sales expertise and resources. Any one or more of the Company's   
competitors or other enterprises not presently known to the Company may develop 
technologies and/or products which are superior to the Company's, significantly 
underprice the Company's products and technologies, and/or more successfully    
market existing or new competing products and technologies. To the extent that  
the Company's ability to compete could be materially and adversely affected.    

Regulation                                                                      

    The Company is not aware of any U.S. or foreign laws or regulations that
govern the marketing, sale or use of any of its present technologies, other than
U.S., Russian and various Western European environmental safety laws and        
regulations pertaining to the containment and remediation of radioactive        
contamination and the toxicity of materials used in connection therewith (in the
case of the EKOR compound), and local, Russian and Ukrainian site approval and  
construction permit, and construction code compliance requirements (in the cases
of the Company's automated parking and waste-to-energy technologies). Based on  
the results of tests conducted at Kurchatov, the Company believes that the EKOR 
compound meets applicable U.S. and German regulatory standards. However, there  
can be no assurance that more stringent standards may not in the future be      
adopted, or that if adopted, they will not materially increase the cost to the  
Company of licensing and using the EKOR compound, or prevent its use altogether.
Moreover, there can be no assurance that any or all jurisdictions in which the  
Company presently or in the future conducts its business will not enact laws or 
adopt regulations which increase the cost of or prevent the Company from        
licensing its other technologies or otherwise doing business therein.           
Particularly in the cases of Russia and Ukraine, the enactment of such laws or  
the adoption of such regulations may have a presently unquantifiable,           
substantial adverse impact on the Company's financial condition, business and   
business prospects.                                                             

Intellectual Property                                                           

    Of the Company's present technologies, patent protection has been sought
only for the EKOR compound material and the Re-sealable Container Systems.      
Patent applications on EKOR have been filed by the Company and are pending in   
the U.S., Ukraine and Japan, and two such patent applications have been filed by
EAPS in Russia, one of which is pending, and one of which has been granted.     
Patent applications on the Re-sealable Container Systems have been filed and are
pending in Germany. The Company's success depends, in part, on its ability to   
obtain and protect patents covering, and maintain trade secrecy protection of   
its EKOR compound and other Principal Technologies, as well as other, future    
technologies, and to operate without infringing on the proprietary rights of    
third parties. Additionally, since the waste-to-energy technology is a          
combination of existing, public domain technologies, it is uncertain whether the
waste-to-energy technology is patentable. Accordingly, such technology could be 
subject to appropriation and use by any individual or entity that is so         
inclined, for which the Company might not have legal recourse under any national
or                                                                              

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international patent law. There can be no assurance that any of the Company's   
pending or future patent applications will be approved, that the Company will   
develop additional proprietary technology that is patentable, that any patents  
issued to the Company will provide the Company with competitive advantages or   
will not be challenged by third parties or that the patents of others will not  
have an adverse effect on the Company's ability to conduct its business.        
Furthermore, there can be no assurance that others will not independently       
develop similar or superior technologies, duplicate any of the Company's        
processes, or design around any technology that is patented by the Company. It  
is possible that the Company may need to acquire licenses to, or to contest the 
validity of, issued or pending patents of third parties relating to its         
products. There can be no assurance that any license acquired under such patents
would be made available to the Company on acceptable terms, if at all, or that  
the Company would prevail in any such contest. In addition, the Company could   
incur substantial costs in defending itself in suits brought against the Company
on its patents or in bringing patent suits against other parties.               

In addition to patent protection, the Company also relies on trade  
secrets, proprietary know-how and technology which it seeks to protect, in part,
by confidentiality agreements with its prospective working partners and         
collaborators, employees and consultants. There can be no assurance that these  
agreements will not be breached, that the Company would have adequate remedies  
for any breach, or that the Company's trade secrets and proprietary know-how    
will not otherwise become known or be independently discovered by others.       

Item 2. Description of Property                                                 

   The Company's headquarters are located at 1101 30th Street, N.W., Suite
500, Washington, D.C. 20007 pursuant to a lease commencing March 1, 1998, and   
ending August 31, 1998, for which the Company pays monthly rent of $3,350. The  
Company believes that its current facilities are sufficient to meet its         
requirements.                                                                   

The Company also occupies office space at the premises of Technion  
Entrepreneurial Incubator, Ltd., in Haifa, Israel, on a month-to-month tenancy  
basis. The Company expects to commence rental payments for such Israeli office  
in March, 1997 at the rate of $300 per month. Such office will be utilized by   
the Company for its contemplated, Israeli technology development and marketing  
activities. See "Business -- General."                                          

Item 3. Legal Proceedings                                                       

   In December 1997, Raymond Dirks, Jessy Dirks, Robert Brisotti and David
Morris filed an action in the Supreme Court for the State of New York, County of
New York, against Eurotech Ltd. for breach of contract, seeking injunctive      
relief, specific performance and monetary damages of nearly $5 million (the     
"Dirks Litigation"). The Dirks Litigation arises solely from an agreement       
between Eurotech and National Securities Corporation ("National") relating to   
financial advisory services to be performed by National Securities Corporation, 
a broker/dealer with which the plaintiffs were affiliated and of which Raymond  
Dirks Research was a division. Eurotech granted National a warrant certificate  
for 470,000 shares at $1.00 per share (as adjusted to reflect the June 1, 1996, 
four-to-one forward split of the Company's Common Stock) as a retainer for      
general financial advisory services. In conjunction with the separation of the  
plaintiffs and Raymond Dirks Research from National Securities Corporation,     
National assigned a significant portion of the warrant certificate to the       
plaintiffs.                                                                     

      The plaintiffs allege among other things that they are entitled to damages
composed of both the value of the stock on the date of their purported exercise 
of an alleged assignment of the warrant certificate, and                        

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the decrease in value of the price of the stock since the date of their         
purported exercise. Eurotech believes that the plaintiffs have significantly    
overstated their monetary damage claim and that, having sought monetary damages,
the plaintiffs are not entitled to any type of equitable relief.                

      Process was served upon Eurotech in late January 1998. Eurotech intends to
vigorously defend and believes that the plaintiffs' claims will be resolved     
favorably to the Company. If the Company were to be adjudged liable in the Dirks
Litigation, the resolution of the litigation could have a material adverse      
effect on the Company.                                                          

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

     No matters were submitted to a vote of security holders during the fourth
quarter of 1997.                                                                

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 PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters   

Trading Market                                                                  

   The Company's Common Stock trades on the NASD Electronic Bulletin Board
market under the symbol Euro.                                                   

Number of Shareholders of Record                                                

As of March 31, 1998, the Company had 151 shareholders of record.   

Dividends. To date the Company has not declared or paid dividends on its Common 
Stock. The Company presently plans to retain earnings, if any, for use in its   
business.                                                                       

Market Price. Over the counter market quotations reflect inter-dealer prices    
without markup, markdowns, or commissions and may not represent actual          
transactions. The following table set forth the quarterly high and low closing  
bid and closing asked prices (in U.S. dollars) for the Company's Common Stock,  
since July 25, 1995.                                                            

                                            CLOSING BID        CLOSING ASKED

                     1995                  HIGH      LOW       HIGH      LOW
                     ----                  ----      ---       ----      ---

JULY 25 (First Available) THRU SEPT. 29      .718     .531       .781     .593  

OCT. 2 THRU DEC. 29                         1.000     .562      1.125      .75  

1996                              
----                              

JAN. 2 THRU MAR. 29 (Excluding Jan. 8)      1.343    1.000      1.467    1.125  

APR. 1 THRU JUNE 21                         2.312     .625      2.406      .75  

JUNE 24 THRU JUNE 28                        2.625    2.000      2.875    2.375  

JULY 1 THRU SEPT. 30                        2.500    1.325      2.625  1.40625  

OCT. 1 THRU DEC. 31                        10.000   1.9375     10.250   2.0625  

1997                              
----                              

JAN. 2 THRU MAR. 31                         12.25    5.625     12.500    6.000  

APR. 1 THRU JUNE 30                         9.625    4.000      9.750    4.250  

JULY 1 THRU SEPT. 30                        6.875    5.000      7.125   5.1875  

OCT. 1 THRU DEC. 31                        5.4375    1.875     5.5625   1.9375  

1998                              
----                              

JAN. 2 THRU MAR. 31                        3.3125    2.000      3.375   2.18725 

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Recent Sales of Unregistered Securities                             

In December, 1995, the Company completed a private placement of     
4,280,000(1) shares of its Common Stock for an aggregate offering price of      
$305,000, of which: (i) 440,000 shares were issued in exchange for services     
rendered in connection with that offering, valued by the Company at $27,500;    
(ii) 600,000 shares were issued in exchange for certain legal, financial public 
relations and investment banking services rendered to the Company and valued by 
the Company at $75,000 in the aggregate; and (iii) 600,000 shares were issued in
exchange for a certain technology license, valued by the Company at $37,500. The
shares were offered and sold in reliance on an exemption from registration      
pursuant to Rule 504 of Regulation D under the Securities Act of 1933 (the      
"Act") and only to accredited investors within the meaning of Rule 501 of the   
Regulation D under the Act. The proceeds of such offering have been used as     
follows:                                                                        

    Purpose                         Amount
    -------                         ------

Payment for services rendered             $  102,500      
Acquisition of technology license         $   37,500      
Technology development                    $  165,000      

  In June, 1996, the Company completed a private placement of 2,718,0001
shares of its Common Stock for an aggregate offering price of $679,500. The     
shares were offered and sold in reliance on an exemption from registration      
pursuant to Rule 504 of Regulation D under the Act and only to accredited       
investors within the meaning of Rule 501 of the Regulation D under the Act. The 
proceeds of such offering have been used as follows:                            

    Purpose                         Amount
    -------                         ------

Bonuses                                   $  20,000       
Accounting Fees                              22,000       
Technology Development                      637,500       

     In December, 1996, the Company completed a private placement of 40 Units,
each consisting of the Company's one-year promissory note in the principal      
amount of $50,000 and 25,000 shares of its Common Stock for an aggregate        
offering price of $2,000,000. The Units were offered and sold in reliance on an 
exemption from registration pursuant to Rule 506 of Regulation D under the Act, 
and only to accredited investors within the meaning of Rule 501 of Regulation D 
under the Act.                                                                  

----------                                                                      
(1) On June 1, 1996, the Company's Board of Directors authorized a  
four-for-one forward split of the then outstanding shares of the Company's      
Common Stock. The number of shares issued in this offering have been re-stated  
adjusted to reflect such stock split.                                           

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The proceeds of such offering have been used as follows:            

    Purpose                         Amount
    -------                         ------

Legal fees                                $ 120,000       
Accounting fees                               5,000       
Consulting fees                             350,000       
Repayment of loans                          210,000       
Salaries                                    100,000       
Technology development                      915,000       
Reserved for working capital                300,000       

     In November 1997, the Company completed a private placement of $3,000,000
principal amount of its 8% Convertible Debentures due November 27, 2000 (the    
"Debentures") and of Warrants to purchase up to 60,000 shares of the Company's  
Common Stock (the "Warrants") (the Debentures and the Warrants, collectively,   
the "Securities"). The Warrants were issued as additional consideration for the 
purchase of the Debentures. The Securities were offered and sold in reliance on 
an exemption from registration pursuant to Rule 506 of Regulation D under the   
Act, and only to "accredited investors" within the meaning of Rule 501 of       
Regulation D. See "Management's Discussion and Analysis of Results of Operation 
and Financial Condition -- Liquidity and Capital Resources." The proceeds of    
such offering have been and will be used as follows:                            

    Purpose                         Amount
    -------                         ------

Technology acquisition and development    $ 1,000,000     

Interest on debt                              678,000     

Working capital                             1,000,000     

    In February 1998 the Company completed a private placement of $3,000,000
principal amount of its 8% Convertible Debentures due February 23, 2001 (the    
"Debentures") and of Warrants to purchase up to 60,000 shares of the Company's  
Common Stock (the "Warrants") (the Debentures and the Warrants, collectively,   
the "Securities"). The Warrants were issued as additional consideration for the 
purchase of the Debentures. The Securities were offered and sold in reliance on 
an exemption from registration pursuant to Rule 506 under Regulation D under the
Act, and only to "accredited investors" within the meaning of Rule 501 of       
Regulation D. See "Management's Discussion and Analysis of Results of Operation 
and Financial Condition - Liquidity and Capital Resources." The proceeds of such
offering have been and will be used as follows:                                 

    Purpose                         Amount
    -------                         ------

Retirement of Debt                        $ 2,000,000     

Working Capital                               765,000     

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Item 6. Selected Consolidated Financial Information                             

  The selected financial information set forth below is derived from the
Company's financial statements and should be read in conjunction with the       
financial statements and related notes of the Company and Management's          
Discussion and Analysis of Financial Condition and Results of Operations        
included under Item 7 of this Form 10-K.                                        

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Statement of Operations Data:(2)                                                

                                                        [Enlarge/Download Table]

                                                                                                                    For the Period  
                                                    For the Period from                           For the Year      from Inception  
                                                  Inception (May 26, 1995)  For the Year Ended       Ended         (May 26, 1995) to
                                                    to December 31, 1995    December 31, 1996   December 31, 1997  December 31, 1997
                                                    --------------------    -----------------   -----------------  -----------------
                                                                                                                                    
RESEARCH AND DEVELOPMENT EXPENSES                       $    212,061          $  1,170,782        $  1,007,671       $  2,390,514   

CONSULTING FEES                                              266,900             1,486,830           1,392,845          3,146,575   

OTHER GENERAL AND ADMINISTRATIVE EXPENSES                     34,265               547,447           1,262,067          1,843,799   

INTEREST EXPENSE                                                  --                43,422             270,740            314,162   

AMORTIZATION OF DEFERRED AND UNEARNED FINANCE COSTS               --               228,502           8,507,919          8,736,421   
                                                        ------------          ------------        ------------       ------------   

      NET LOSS                                          $   (513,226)         $ (3,476,983)       $(12,441,242)      $(16,431,451)  
                                                        ============          ============        ============       ============   

NET LOSS PER SHARE                                      $      (0.06)         $      (0.23)       $      (0.71)                     
                                                        ============          ============        ============                      

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING              8,159,467            14,808,000          17,581,711                      
                                                        ============          ============        ============                      

Balance Sheet Data:                                                             

                                 At December 31,

                                1995            1996              1997
                                  ---------      -----------      ------------

Working Capital (deficit)          $  42,000      $(1,809,237)     $ (2,156,753)
Total assets                       $  56,000      $   617,492      $    952,243 
Total liabilities                  $  13,000      $ 2,292,316      $  5,801,966 
Deficit accumulated during                                                      
the development stage              $(513,000)     $(3,990,209)     $(16,431,451)
Total stockholders' equity                                                      
(deficiency)                       $  43,000      $(1,674,824)     $ (4,849,723)

----------                                                                      
   (2) Through December 31, 1997, and since that date, the Company has not
derived any significant sales revenues.                                         

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Item 7. Management's Discussion and Analysis of Results of Operations and       
Financial Condition                                             

The following discussion of the financial condition and results of  
operations of the Company should be read in conjunction with the selected       
financial data and the financial statements and notes thereto appearing         
elsewhere herein.                                                               

Forward-Looking Statements                                                      

 The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The forward-looking statements  
contained in this Form 10-K are subject to certain risks and uncertainties.     
Actual results could differ materially from current expectations. Among the     
factors that could affect the Company's actual results and could cause results  
to differ from those contained in the forward-looking statements contained      
herein is the Company's ability to commercialize its technologies successfully, 
which will be dependent on business, financial and other factors beyond the     
Company's control, including, among others, market acceptance, ability to       
manufacture on a large scale basis and at feasible costs, and all the risks     
inherent in the establishment of a new enterprise and the marketing and         
manufacturing of new products.                                                  

Plan of Operation                                                               

The Company is a development stage, technology transfer, holding and
management company formed to commercialize new, existing but previously         
unrecognized, and previously "classified" technologies, with a particular       
emphasis on those developed by prominent research institutes and individual     
researchers in the former Soviet Union and in Israel, and to commercialize those
and other Western technologies for business and other commercial applications   
principally in Central Europe, Ukraine, Russia and North America. Until recently
the Company had been principally engaged in identifying, monitoring, reviewing  
and assessing technologies for their commercial applicability and potential, and
in acquiring selected technologies by equity investment, purchase, assignments, 
and licensing arrangements. The Company believes that the Principal Technologies
are presently ready for commercialization and marketing. To that end, the       
Company has decided to devote its business activities and resources principally 
to the marketing and sale of the Principal Technologies, which include its EKOR 
compound technology. The Company recently has initiated a marketing and sales   
program for the Principal Technologies, and also has initiated discussions with 
a number of prominent, potential users thereof, with a view towards the future  
negotiation and execution of licensing and/or joint venture marketing and sales 
agreements. The Company is proceeding with the marketing and potential          
application of its EKOR compound technology in connection with nuclear          
contamination remediation projects at the Chernobyl Nuclear Power Plant, and in 
the U.S., Russia and Germany. See "Business." The Company intends to operate its
business by licensing its technologies to end-users and through development and 
operating joint ventures and strategic alliances.                               

 The Company was organized and commenced operation in May of 1995. The
Company is in the development stage and until recently its efforts have been    
principally devoted to research and development activities and organizational   
efforts, including the identification, review and acquisition of various        
technologies, recruiting its scientific and management personnel and alliances  
and raising capital.                                                            

    The Company has not been profitable since inception and expects to incur
substantial operating losses over the next twelve months. For the period from   
inception to December 31, 1996, the Company incurred a cumulative net loss of   
$3,990,209, and for the period from inception to December 31, 1997, a cumulative
net loss of $16,431,451. The Company expects that it will generate losses until 
at least such time as it can commercialize its technologies, if ever. No        
assurances can be given that any of the Company's technologies 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.             

      The Company's plan of operation for the next twelve months will consist of
activities aimed at: (i) negotiating and executing license and/or joint venture 
agreements with industrial end-users for the marketing and sale of "NIPs,"      
"RubCon" and "LEM", Israeli technologies as to which the Company has acquired   
equity participation and marketing rights see "Business"; (ii) continuing its   
work with Kurchatov, EAPS and ChNPP with a view towards using the EKOR compound 
in the remediation of ChNPP Reactor 4; and (iii) through an agreement entered   
into in April, 1997 with DES, continue to bid jointly with DES on U.S. nuclear  
waste transportation, contaminant and like projects utilizing the EKOR compound.
See "Business - Principal Technologies." To a lesser extent (and apart from the 
Principal Technologies), the                                                    

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Company also intends to continue its efforts in connection with those of its    
technologies that are not presently ready for commercialization and marketing.  
See "Business - Other Technologies."                                            

Results of Operation                                                            

For the Year Ended December 31, 1996 vs. the Period                             
from Inception (May 26 1995) to December 31, 1995:                              

    The Company commenced operations on May 26, 1995. The Company has had no
significant revenues to date. Consulting and other general and administrative   
expenses increased from $301,000 for the period ended December 31, 1995 to      
$2,034,000 for the year ended December 31, 1996 principally as a result of      
adding an executive secretary, a Director of Corporate Planning and a Market    
Research Analyst as employees and increased marketing and research consulting   
expenses. During 1996, the Company satisfied obligations under consulting       
arrangements aggregating $1,210,000 by the issuance of 4,345,036 shares of      
Common Stock.                                                                   

 The Company is focusing on the commercialization of its technologies.
Research and development expenses (consisting principally of expenses associated
with the final development of the EKOR compound, validation testing of the EKOR 
compound and its application, and the fabrication of EKOR production equipment) 
increased in the year ended December 31, 1996 to $1,171,000 from $212,000 for   
the period ended December 31, 1995 as the Company funded the development of     
additional technologies.                                                        

   For the year ended December 31, 1996 and the period from inception (May
26, 1995) through December 31, 1995, the Company incurred operating losses of   
$3,205,000 and $513,000, respectively. The losses are principally due to        
expenses incurred in the development of the technologies, including             
administrative expenses and consulting expenses.                                

    Interest expense and amortization of deferred and unearned finance costs
increased from $-0- in 1995 to $272,000 in the year ended December 31, 1996.    
This increase was attributable to financing costs related to promissory notes of
$341,000 and a bridge loan of $2,000,000. See Note 6 to the accompanying        
financial statements.                                                           

For the Year Ended December 31, 1997                                            
vs. the Year Ended December 31, 1996:                                           

  For the year ended December 31, 1997, consulting expenses decreased to
$1,392,845 from $1,486,830 for the year ended December 31, 1996. Other general  
and administrative expenses for the year ended December 31, 1997, increased to  
$1,262,067 from $547,447 for the year ended December 31, 1996 principally as a  
result of an increase of $469,000 in legal fees, recording a charge against     
operations of $75,000 in connection with the abandoned initial public offering, 
and a $90,000 increase in salaries from additions to staff, in the 1997 period  
as compared to the 1996 period.                                                 

   Research and development expenses for the year ended December 31, 1997,
decreased to $1,007,671 from $1,170,782 for the year ended December 31, 1996,   
attributable to the Company having completed research and development related to
its EKOR compound technology.                                                   

    For the years ended December 31, 1997 and December 31, 1996, the Company
incurred operating losses of $3,662,583 and $3,205,059, respectively. These     
losses are principally the result of expenses incurred in developing the        
Company's EKOR technology and the lack of revenues.                             

    Interest expense and amortization of deferred and unearned finance costs
increased from $271,924 for the year ended December 31, 1996, to an aggregate of
$8,778,659 for the year ended December 31, 1997 (of which, $270,740 represents  
interest expense). This increase was attributable principally to $7,218,219 of  
financing costs, exclusive of interest expense, related to the issuance of      
2,000,000 additional shares of Common Stock to holders of promissory notes      
issued in connection with a bridge financing completed in December 1996 as      
penalties in connection with such holders' registration rights,                 

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$367,128 of financing costs related to the issuance on November 27, 1997, of    
$3,000,000 principal amount of 8% Convertible Debentures, and $862,680 of       
financing costs related to the issuance of warrants to purchase 364,000 shares  
of Common Stock in repayment of certain shareholder loans.                      

     The Company recorded an additional charge against income of approximately
$2,000,000 during the fourth quarter of 1997 related to shares of common stock  
issued in connection with the bridge financing completed in December 1996. The  
Company has only recently initiated marketing and sales efforts in connection   
with its Principal Technologies (see "Business - General; - Principal           
Technologies"), and, consequently, there can be no assurance that the company   
will be profitable on quarterly or annual basis.                                

Liquidity and Capital Resources                                                 

     The Company's principal sources of working capital have been net proceeds
of $842,000 from the offering of common stock under Rule 504 of Regulation D,   
shareholder advances aggregating $761,440, the bridge financing discussed below,
completed in December 1996 of $2,000,000, and from the private placement of     
$3,000,000 principal amount of 8% Convertible Debentures completed in November  
1997. Of the shareholder advances, promissory notes evidencing approximately    
$200,000 of shareholder indebtedness were exchanged for units in the bridge     
financing and the balance was repaid from the proceeds of the bridge financing. 
The net proceeds of the bridge financing reflect the cancellation of the notes  
referred to above were used for repayment of accrued liabilities and funding the
development of certain technologies and for other working capital purposes. The 
Company had a working capital deficiency and stockholders' deficiency of        
$1,809,237 and $1,674,824, respectively, as of December 31, 1996 and $2,156,753 
and $4,849,723, respectively, at December 31, 1997. The report of the Company's 
independent certified public accountants contains an explanatory paragraph which
expresses substantial doubt as to the Company's ability to continue as a going  
concern.                                                                        

  In December 1996, the Company entered into a purchase agreement for an
offering of up to an aggregate of 40 units to certain accredited investors as   
defined by Rule 501 of Regulation D under the Act in reliance on an exemption   
from registration under Rule 506 of Regulation D (the "Bridge Financing"). Each 
unit consists of one promissory note (a "Bridge Note") issued by the Company in 
the principal amount of $50,000 bearing interest at the rate of 12% per annum   
and 25,000 shares of the Company's Common Stock. Under the agreement, the notes 
were due one year from the issuance date. Gross proceeds received under this    
offering were $2,000,000. Holders of the shares of common stock issued pursuant 
to this agreement have, among other things, demand and mandatory registration   
rights, including penalties, which require the Company to issue to the unit     
holders up to 1,000,000 additional shares of common stock if such shares were   
not registered under the Act within the specified time frame. As of December 31,
1996, the Company recorded an additional 500,000 shares of Common Stock to be   
issued under the offering based on the Company's belief that it would not meet  
one of the two filing deadlines. The Company did not meet either filing deadline
and, accordingly the 500,000 additional common shares recorded as of December   
31, 1996, were issued to such holders in April, 1997, and a further 500,000     
common shares were issued to such holders in August, 1997. See Note 6 to        
accompanying financial statements. As of their maturity in December 1997, the   
Company had insufficient funds to repay such notes and, accordingly, has        
obtained the agreement of the noteholders to extend the notes' maturity until   
March 18, 1998, in consideration of the issuance to the noteholders of an       
aggregate of 1,000,000 shares of the Company's Common Stock. The Company has    
agreed to register such shares of Common Stock under the Act, and they are      
included in the shares offered hereby. Pursuant to the terms of the notes, as of
December 19, 1997 their interest rate has been increased to 15% per annum. The  
Bridge Notes and all accrued interest thereon were repaid by the Company on     
February 26, 1998.                                                              

 In November 1997 and February 1998, the Company completed two private
placements, each of $3,000,000 principal amount of its 8% Convertible Debentures
due November 27, 2000 and February 23, 2001, respectively (the "Debentures"). In
each such private placement, warrants (the "Warrants") to purchase up to 60,000 
shares of Common Stock (the Debentures and Warrants, collectively, the          
"Securities," each offering of the Securities a "Debenture Offering," and the   
offering of the Securities                                                      

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the "Debenture Offerings")were also issued. The Securities were offered and sold
only to accredited investors as defined by Rule 501 of Regulation D under the   
Act, in reliance on an exemption from registration under Rule 506 of Regulation 
D.                                                                              

     The Debentures may be converted by the holders thereof (each a "Debenture
Holder" and collectively the "Debenture Holders"), in whole or in part, at any  
time and from time to time during the period beginning on the earlier of        
February 25, 1998 (August 22, 1998 in the case of the Debentures issued in the  
February 1998 Debenture Offering), or the date upon which a Registration        
Statement under the Act covering the shares of Common Stock into which the      
Debentures are convertible (the "Underlying Shares") is declared effective by   
the Securities and Exchange Commission (the "SEC"), and ending on November 27,  
2000 (February 23, 2001, in the case of the Debentures issued in the February   
1998 Debenture Offering). The Debentures may be converted into a number of      
shares of Common Stock equal to the quotient of (i) the outstanding principal   
amount of Debentures to be converted (plus all accrued but unpaid interest      
thereon), divided by (ii) the "Conversion Price" (determined as set forth       
below). The Debentures may also be converted by the Company, in whole or in     
part, at any time and from time to time on or after November 27, 1999 (February 
23, 2000, in the case of the Debentures issued in the February 1998 Debenture   
Offering) into a number of shares of Common Stock determined in accordance with 
the foregoing calculation, subject to certain restrictions relating to the      
registration of the Underlying Shares and the trading of the Company's Common   
Stock. The "Conversion Price" in relation to conversion of the Debentures by    
either the Debenture Holders or the Company is the lesser of (a) $5.38 or (b)   
the average closing bid price per share of Common Stock for the five trading    
days immediately preceding the conversion date, multiplied by (x) 80% in the    
case of conversions effected prior to May 29, 1998 (August 22, 1998 in the case 
of the February 1998 Debenture Offering), (y) 75% in the case of conversions    
effected on or after May 29, 1998 (August 22, 1998 in the case of the February  
1998 Debenture Offering) but prior to November 25, 1998 (February 8, 1999 in the
case of the February 1998 Debenture Offering) and (z) 70% in the case of        
conversions effected on or after November 25, 1998 (February 8, 1999 in the case
of the February 1998 Debenture Offering). In the case of Debenture conversions  
by Debenture Holders, the "Conversion Price" may not be less than a specified   
"floor" initially set at $2.00 ($1.625 in the case of the February 1998         
Debenture Offering).                                                            

 The Warrants may be exercised by the holders thereof (each a "Warrant
Holder" and collectively the "Warrant Holders") at any time and from time to    
time during the period beginning on November 27, 1997 (February 23, 1998, in the
case of the Warrants issued in the February 1998 Debenture Offering) and ending 
at 5:30 p.m. New York time on November 27, 1999 (February 23, 2000, in the case 
of the Warrants issued in the February 1998 Debenture Offering) at a per share  
exercise price of $4.73 ($2.73 in the case of the February 1998 Debenture       
Offering). The Warrant Holders have "piggy-back" registration rights with       
respect to all or any portion of the Warrant Shares, pursuant to which the      
Company, upon the request of any Warrant Holder, is obligated to include the    
Warrant Holder's Warrant Shares (or any portion thereof as the Warrant Holder   
may elect) in any Registration Statement under the Act that the Company files   
with the SEC (other than Registration Statements on Form S-8 or Form S-4        
covering securities issued by the Company pursuant to an employee benefit plan  
or in connection with a merger, acquisition or similar transaction,             
respectively), and naming the Warrant Holder as a selling shareholder therein.  

Pursuant to the Debenture Offerings the Company agreed that if a    
Registration Statement under the Act covering the Underlying Shares were either 
not filed with the SEC on or prior to January 15, 1998 or, if filed, not        
declared effective by the SEC on or prior to February 16, 1998, the Company will
be obligated to pay to the Debenture Holders liquidated damages equal to 1% of  
the aggregate principle amount of the then outstanding Debentures, on the first 
day of each month until such filing or effectiveness deficiency is cured.       
Neither deadline was met, and the Company was obligated to make monthly         
payments of $30,000 to the Debenture Holders until the Registration             
Statement was declared effective.                                               

The Company has agreed to fund the commercialization of certain     
technologies developed in the former Soviet Union by scientists and researchers 
at Kurchatov, other institutes associated therewith, and EAPS, collectively the 
"Scientists". Kurchatov will provide the materials, facilities and personnel to 

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complete the necessary work to commercialize such technologies. The Company also
has agreed to provide funding in connection with the marketing and sale of three
Israeli technologies (RubCon, LEM and NIPs, see "Business -- General; --        
Principal Technologies") and to provide funding for the further research and    
development of four other Israeli technologies. See "Business -- Other          
Technologies." Total planned expenditures under these programs, including       
related general and administrative expenses, are expected to approximate        
$1,500,000 during fiscal year 1997 and $800,000 during fiscal year 1998. The    
Company's principal sources of funding for these expenditures during fiscal 1997
were remaining cash from the Bridge Financing ($380,000 as of December 31, 1996 
and $0 as of December 31, 1997) and loans from shareholders and other private   
lenders, which for the period January 1, 1997, through December 31, 1997, have  
totalled approximately $450,000. The Company's principal source of funding for  
these expenditures during fiscal year 1998 will be the proceeds of the Debenture
Offerings. As the development of each technology is completed and the           
technology's commercial applications are identified, the Company also will seek 
joint venture partners to fund any further capital expenditures, including the  
project financing.                                                              

As discussed above, the Company may require additional financing to 
continue to fund research and development efforts, operating costs and complete 
necessary work to commercialize its technologies. The Company has determined not
to proceed with a previously contemplated, initial public offering of 5,000,000 
shares of cumulative convertible preferred stock. Costs in connection therewith,
aggregating $75,000, will be charged to expenses during fiscal year 1997.       

     The Company is exploring additional sources of working capital, including
further private sales of securities and joint ventures and licensing of         
technologies. During the first three quarters of 1997 the Company relied on     
shareholder loans and remaining Bridge Financing proceeds as its principal      
sources of working capital. Through its joint bidding agreement with DES (see   
"Business -- Principal Technologies -- Silicon-Organic Compound"), the Company  
has successfully bid on a remediation demonstration project at the federal      
nuclear facility in Hanford, Washington. While management believes that other   
successful private placement and successful bids on U.S. nuclear remediation    
demonstration projects are possible, there is no assurance that the its present 
joint venture with Duke Engineering and Services will result in the award of any
further nuclear remediation contracts.                                          

  No assurance can be given that the Company can successfully obtain any
additional working capital or complete any additional offerings or, if obtained,
that such funding will not cause dilution to shareholders of the Company.       
Further, no assurance can be given as to the completion of research and         
development and the successful marketing of the Company's technologies.         

Computer System - "Year 2000" Issues                                            

The Company is not significantly dependent on customized or highly  
sophisticated computer systems and software. Presently and for the foreseeable  
future the Company utilizes and will utilize commercially available, "small     
office" computers and commercially available "off-the-shelf" software. The      
Company is not part of and is not interfaced or otherwise electronically        
connected to any large or sophisticated industrial, financial or banking        
computer networks or systems. Accordingly, the Company does not expect to be    
faced with a "Year 2000 Problem," which refers to a design flaw in many computer
systems (and, particularly, in large, highly sophisticated or custom-designed   
systems) whereby the system cannot distinguish between the year (or numbers)    
1900 and 2000. The Company believes that appropriate "off-the-shelf" hardware   
and software up-grades will be readily available, at reasonable cost, in time   
for the Company to purchase, install and test them prior to the year 2000.      

Item 8. Financial Statements and Supplementary Data                             

The report of independent auditors and consolidated financial statements are    
included in Part IV, Item 14 of this Report beginning on page F-1.              

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Item 9. Changes in and Disagreements with Accountants on Accounting and         
Financial Disclosure                                            

None.                                                                           

PART III

Item 10. Directors and Executive Officers of the Company.                       

    Set forth below for each Director and Officer is his name, age, the year
in which he became a Director or Officer of the Company, his principal          
occupation during the last five years and any additional directorships in       
publicly-held companies.                                                        

Executive Officers and Directors                                                

Name                Age             Position with the Company     
----                ---             -------------------------     

James D. Watkins           70       Director and Chairman                       
Maxwell Rabb               87       Director                                    
Peter Gulko                48       President and Secretary                     
Lawrence McQuade           70       Director                                    
John McNeil Wilkie         59       Sr. Vice President and Chief Financial      
Officer 

      The Company has a Board of Directors comprised of three persons. Directors
are elected at the annual meeting of shareholders and hold offices until the    
next annual meeting of shareholders or until their successors have been elected.

     James D. Watkins is a retired Admiral of the U.S. Navy, and has served as
Director and Chairman of the Board of the Company since January 1998. Admiral   
Watkins has also served the Company as a technology consultant since October,   
1996. Since 1993, Admiral Watkins has served as the President of the Joint      
Oceanographic Institutions, Inc., in Washington, D.C., and later, President,    
Consortium for Oceanographic Research and Education (two non-profit consortia   
that manage research projects). He is also a director of the International      
Technology Corporation (IT Corp) and GTS-Duratek. From March 1989 until January 
1993 Admiral Watkins served as the Secretary of the U.S. Department of Energy in
the administration of President Bush. Admiral Watkins was named Chief of Naval  
Operations by President Reagan in June, 1982. Admiral Watkins is a 1949 graduate
of the U.S. Naval Academy, and received a Master's Degree in Mechanical         
Engineering from the U.S. Naval Postgraduate School in 1958.                    

    Maxwell Rabb has been a Director of the Company since January, 1998. Mr.
Rabb served as the U.S. Ambassador to Italy from 1981 to 1989, and has held many
U.S. government assignments. He is currently counsel to the law firm of Kramer, 
Levin, Neftalis & Frankel. From 1953 to 1956, he served as Secretary of the     
Cabinet of the President of the United States in the Eisenhower Administration. 
Since then, Ambassador Rabb has served every President in each administration   
thereafter in various government posts, including: Chairman of the U.S.         
Delegation to UNESCO in Paris (1959-1960); U.S. Representative to the World Bank
and Member of the Conciliation Panel for the Settlement of International        
Disputes (1967-1973); and the Panel for Relief Assistance for India, Pakistan   
and Bangladesh. From 1937 to 1943, Ambassador Rabb served as Administrative     
Assistant to U.S. Senator Henry Cabot Lodge and to U.S. Senator Sinclair Weeks  
in 1944, prior to entering the Navy during World War II. In 1946, he became     
legal and legislative counsel to Secretary of the Navy, Honorable James         
Forestal, and a consultant to the U.S. Senate Rules Committee in 1952. In 1989, 
Ambassador Rabb was awarded the Grand Cross of the Order of Merit of the Knights
of Malta in Rome. He received an LLB from Harvard Law School.                   

   Lawrence C. McQuade has served as Director of the Company since January
1998. In 1997, Mr. McQuade was a founding partner of River Capital International
and continues as one of two partners                                            

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engaged in the creation and execution of all phases of River Capital            
International's financial services business, primarily in Russia. Since 1995,   
Mr. McQuade has been the Chairman of Qualitas International, a financial        
consulting business with business in Russia and South America. From 1996 to     
1997, Mr. McQuade was a director of Country Baskets Index Fund, a director of   
Applied Bioscience International from 1995 to 1996 and a director of the Czech &
Slovak American Enterprise Fund from 1994 to 1996 serving as chairman of the    
board from 1995 to 1996. From 1988 to 1995, Mr. McQuade was the Vice Chairman of
Prudential Mutual Fund Management, Inc., where he was the President and a       
director of 39 mutual funds. Mr. McQuade served as Assistant Secretary to the   
U.S. Department of Commerce under President Lyndon Johnson. Mr. McQuade is a    
1950 graduate of Yale University, received a B.A. and an M.A. from Oxford       
University where he was a Rhodes Scholar and earned is law degree at Harvard Law
School.                                                                         

 Peter Gulko has been the President and Secretary of the Company since
February, 1998, and served as a Director of the Company from its incorporation  
in May, 1995 until January, 1998. From May 1994 until February 1998 Mr. Gulko   
also acted as a business agent for ERBC particularly with respect to that       
company's activities in the former Soviet Union. See "Risk Factors Conflicts of 
Interest," and "Certain Transactions." From 1995 Mr. Gulko has also been the    
President of CIS Development, Inc., a consulting company of which he is the sole
owner. From 1991 until 1994 Mr. Gulko was the director of the Moscow, Russia,   
office of TMR, International, a technology transfer company that specialized in 
oil refining. Mr. Gulko is a 1973 recipient of a Masters Degree in Civil        
Engineering from Novocherkassk University in Russia.                            

   John McNeil Wilkie was appointed Sr. Vice President and Chief Financial
Officer of the Company on April 13, 1998. From 1992 through 1997 Mr. Wilkie     
served as the President of Telluride Music Co., Inc., which he founded and which
owns and operates a retail music store in Telluride, Colorado. From 1990 through
1991 Mr. Wilkie was a managing director of The Consulting Group, Ltd., an       
executive search firm, for which he developed and executed executive searches   
for U.S., European and Japanese companies in the financial services industry.   
From 1986 through 1989 he served as Vice Chairman of Morgan Guaranty            
International Bank, where he served as Chairman of the Credit Policy Committee  
and performed strategic planning and developed policy directed towards high net 
worth individuals and international trade. From 1986 through 1989 Mr. Wilkie    
served as Vice President and General Manager for Corporate Finance - Latin      
America of Morgan Guaranty Trust Company, where he managed line units           
responsible for sovereign debt, corporate and government lending, debt trading  
and sales, and correspondent banking relationships with U.S. and Latin American 
clients. Mr. Wilkie received a B.A. degree in History from Harvard University in
1960.                                                                           

On November 17, 1997, Karl J. Krobath resigned as a Director of the 
Company. On January 23, 1998, Randolph Graves, Peter Gulko and Hans Joachim     
Strobanek resigned as Directors of the Company, and Randolph Graves and Hans    
Joachim Skrobanek resigned as officers of the Company.                          

 On January 23, 1998, Adm. James D. Watkins, Maxwell Rabb and Lawrence
McQuade were elected by the departing Directors to serve as Directors of the    
Company.                                                                        

Key Consultants                                                                 

Oleg L. Figovsky, Ph.D. has served as a technology and business     
development consultant to the Company since April, 1996. From 1993 Prof.        
Figovsky has served as the General Manager of Polyadd, Ltd., an Israeli         
corporation. From 1992 until 1993, Prof. Figovsky was the Manager of Research   
and Development at the Israeli Corrosion Research Institute. From 1990 until    
1991 Prof. Figovsky served as the Director of Research Center of "Intercorr", an
Austrian-Russian joint venture, and from 1986 until 1991 he was the Head of the 
Corrosion Protection Department of the All-Union Corrosion Protection Research  
Institute in Moscow, Russia. Prof. Figovsky received a Masters of Science degree
in Materials Engineering from the All-Union Civil Engineering Institute, Moscow,
Russia, in 1964, a Ph.D in Materials Engineering from the Moscow Civil          
Engineering Institute in 1971, and a Doctor of Science in Materials Engineering 
from the Institute of Corrosion Protection, Moscow, in 1989.                    

    Richard A. Wall acted as a financial and business development consultant
to the Company from its inception until December 1997. Since 1996 Mr. Wall has  
been a U.S. Resident Partner in the Institute for Applied Social Sciences       
(Dusseldorf, German - Zurick, Switzerland - LaJolla, California). Since 1983 he 
has been engaged in private, international investment banking activities head   
quartered in New York City.                                                     

     In 1996 and 1997 Mr. Wall loaned an aggregate of $561,440 to the Company,
all of which, together with accrued interest, has been repaid. Mr. Wall is the  
beneficial holder of 120,000 shares of the Company's Common Stock and of options
to purchase 364,000 shares of Common Stock. See "Certain Relationships and      
Related Transactions."                                                          

Founder                                                                         

  Kurt Seifman, through ERBC Holdings, Limited (of which he is the chief
executive officer and sole shareholder), is the Founder of the Company. Mr.     
Seifman is 85 years old, and is principally engaged                             

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in investment activities personally and through ERBC. For the past five years   
Mr. Seifman has not been an executive employee, director or officer of any      
business entity other than ERBC.                                                

    Mr. Seifman is the beneficial owner of 1,246,300 shares of the Company's
Common Stock. ERBC is the beneficial owner of 255,000 shares of the Company's   
Common Stock. ERBC has sub-licensed to the Company the EKOR compound and the    
Re-sealable Container Systems. See "Certain Relationships and Related           
Transactions."                                                                  

Item 11. Executive Compensation.                                                

      The following Summary Compensation Table table sets forth the compensation
paid by the Company for services rendered in all capacities during the calendar 
years 1996 and 1997 to Randolph A. Graves, Jr., its chief executive officer     
during 1996. No other executive officer or key employee was compensated in      
excess of $100,000.                                                             

                              SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                       Annual Compensation           

                                                                      Other Annual   
                                                    Salary    Bonus   Compensation(1)
       Name and Principal Position            Year    ($)      ($)        ($)        
                                                                                     
Randolph A. Graves, Jr, President & Chief     1997  $77,374     0          0         
Executive Officer(2)......................... 1996  $77,374  $20,000    $243,109     

Compensation Arrangements                                                       

Compensation of Directors                                                       

     The Company's directors do not receive any compensation for their service
as directors or on any committee of the Board.                                  

1995 Incentive Stock Option Plan                                                

      The Company has adopted its 1995 Incentive Stock Option Plan ("Plan"). The
Board of Directors (the "Board") believes that the Plan is desirable to attract 
and retain executives and other key employees of outstanding ability. Under the 
Plan, options to purchase an aggregate of not more than 500,000 shares of Common
Stock may be granted from time to time to key employees, officers, directors,   
advisors and consultants to the Company.                                        

The Plan is currently administered by the Board which may empower a 
committee to administer the Plan. The Board is generally empowered to interpret 
the Plan, prescribe rules and regulations relating thereto, determine the terms 
of the option agreements, amend them with the consent of the optionee, determine
the individuals to whom options are to be granted, and determine the number of  
shares subject to each option and the exercise price thereof. The per share     
exercise price for options granted under the Plan are determined by the Board   
provided that the exercise price of incentive stock options ("ISOs") will not be
less than 100% of the fair market value of a share of the Common Stock on the   
date the option                                                                 

----------                                                                      
     (1) Reflects the value of common stock issued as partial compensation for
services rendered in 1996.                                                      

     (2) Dr. Graves resigned as a Director, and as the Chairman, President and
Chief Executive Officer of the Company on January 23, 1998.                     

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is granted (110% of fair market value on the date of grant of an ISO if the     
optionee owns more than 10% of the Common Stock of the Company). Upon exercise  
of an option, the optionee may pay the purchase price with previously acquired  
securities of the Company, or at the discretion of the Board, the Company may   
loan some or all of the purchase price to the optionee.                         

      Options will be exercisable for a term determined by the Board, which will
not be greater than ten years from the date of grant (five years in the case of 
ISO's). Options may be exercised only while the original grantee has a          
relationship with the Company which confers eligibility to be granted options or
within three months after termination of such relationship with the Company, or 
up to one year after death or total and permanent disability. In the event of   
the termination of such relationship between the original grantee and the       
Company for cause (as defined in the Plan), all options granted to that original
optionee terminate immediately. In the event of certain basic changes in the    
Company, including a reorganization, merger or consolidation of the Company, or 
the purchase of shares pursuant to a tender offer for shares of Common Stock of 
the Company, in the discretion of the Committee, each option may become fully   
and immediately exercisable. ISOs are not transferable other than by will or the
laws of descent and distribution. Non-qualified stock options may be transferred
to the optionee's spouse or lineal descendants, subject to certain restrictions.
Options may be exercised during the holder's lifetime only by the holder, his or
her guardian or legal representative.                                           

    Options granted pursuant to the Plan may be designated as ISOs, with the
attendant tax benefits provided under Section 421 and 422 of the Internal       
Revenue Code of 1986. Accordingly, the Plan provides that the aggregate fair    
market value (determined at the time an ISO is granted) of the Common Stock     
subject to ISOs exercisable for the first time by an employee during any        
calendar year (under all plans of the Company and its subsidiaries) may not     
exceed $100,000. The Board may modify, suspend or terminate the Plan; provided, 
that certain material modifications affecting the Plan must be approved by the  
stockholders, and any change in the Plan that may adversely affect an optionee's
rights under an option previously granted under the Plan requires the consent of
the optionee.                                                                   

To date, no options have been granted pursuant to the Plan.         

Item 12. Security Ownership of Certain Beneficial Owners and Management.        

To the knowledge of the Company, the following table sets forth the 
ownership of the Company's Common Stock as of March 31, 1998, by each person    
owning more then 5% such Common Stock, by each officer and director and by all  
officers and directors as a group.                                              

                                     Number of Shares       Percentage of Shares
   Name and Address (1)           Beneficially Owned(2)     Beneficially Owned
   --------------------           ---------------------     ------------------

Peter Gulko                              1,110,000                  5.9%        

Maxwell Rabb                                80,000                    *         

Kurt Seifman                             1,246,300                  6.9%        

James D. Watkins                            97,000                    *         

Lawrence McQuade                                 0                    0         

John McNeil Wilkie                               0                    0         

Directors and Officers                                                          
As a Group (5 Persons)                   2,533,300                 13.7%        

----------                                                                      
*     Less than 1%                                                              
(1)   Unless otherwise indicated, the address of each of the beneficial owners  
   identified is 1101 30th Street, N.W., Suite 500, Washington, D.C. 20007
(2)   Unless otherwise indicated, each person has sole voting and investment    
power with respect to all shares.                                   

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Item 13. Certain Relationships and Related Transactions.                        

Shareholder and Other Loans.                                                    

      On June 30, 1996, Richard A. Wall Associates, Inc. a company controlled by
Richard A. Wall (who has acted as a consultant to the Company) loaned $128,300  
to the Company, payable with accrued interest at the rate of 10% per anum, on   
December 31, 1996.                                                              

On August 31, 1996, Richard A. Wall Associates, Inc., Chad Nellis (a
shareholder and the son of Mr. Wall) and D.K. Rogers (a shareholder and         
consultant to the Company) loaned to the Company $13,000, $100,000, and         
$100,000, respectively, each such loan being payable, with accrued interest at  
the rate of 10% per annum, on December 31, 1996.                                

 During 1997, Richard A. Wall Associates, Inc., loaned $420,140 to the
Company.                                                                        

   The loans made by Richard A. Wall Associates, Inc., in 1996 and in 1997
were repaid in full in fiscal years 1996 and 1997, respectively. The loans made 
by Mr. Nellis and Ms. Rogers were fully converted into four Units in the        
Company's third unregistered offering of Common Stock pursuant to Rule 506 of   
Regulation D under the Securities Act.                                          

In April 1997 ERBC Holdings, Limited, which is wholly-owned by Kurt 
Seifman, a shareholder of the Company, loaned $30,000 to the Company, which     
remains outstanding.                                                            

Issuance of Common Stock to Consultants and Advisors.                           

   On October 10, 1995, the Company granted options to Richard A. Wall and
Kelly Capital Corporation to acquire 200,000(1) shares, each, of the Company's  
Common Stock in exchange for past financial public relations and investment     
banking services, respectively. The shares issuable upon exercise of those      
options were part of the Company's first unregistered offering of Common Stock  
pursuant to Rule 504 of Regulation D under the Securities Act of 1933. All such 
options were exercised on January 18, 1996.                                     

      The services of Mr. Wall and Kelly Capital Corporation were each valued by
the Company at $25,000, which valuation the Company believes to be fair and     
reasonable.                                                                     

Acquisition of Technologies from Consultant                                     

    Prof. Figovsky who is a consultant to the Company, is the originator and
developer of three technologies, INP, LEM and RubCon, all right, title and      
interest in which was purchased by the Company from Prof. Figovsky in January,  
1998, for an aggregate purchase price of $125,000 plus royalties equal to 49% of
the company's net revenues from the sale and/or licensing of such technologies, 
payable for a period of 15 years commencing on January 1, 1998. See "Business --
General -- Acquisition of Israeli Technologies -- Incubator Technologies        
-Technologies Purchased from Prof. Oleg L. Figovsky; - Principal Technologies." 

Common Directors, Officers and Shareholders                                     

     ERBC Holdings, Limited. ERBC is the beneficial owner of 255,000 shares of
the Company's Common Stock. One present and one former employee of ERBC,        
Hans-Joachim Skrobanek and Peter Gulko, respectively, are shareholders and      
former directors of the Company, and Mr. Skrobanek is the                       

----------                                                                      
(1) On June 1, 1996, the Company's Board of Directors authorized a  
four-for-one forward split of the then outstanding shares of the Company's      
Common Stock. The number of shares of Common Stock issuable upon exercise of the
foregoing options has been restated to reflect such stock split.                

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former Secretary of the Company. Mr. Skrobanek is the beneficial owner of       
145,000 shares, and Mr. Gulko is the beneficial owner of 1,110,000 shares, of   
the Company's Common Stock. The chief executive officer and sole shareholder of 
ERBC, Kurt Seifman, is the beneficial owner of 1,246,300 shares of the Company's
Common Stock. Mr. Gulko currently is the President and Secretary of the Company.

     Eurowaste Management, Ltd. Karl Krobath, the chairman and chief executive
officer of Eurowaste, is the beneficial owner of 25,000 shares of the Company's 
Common Stock.                                                                   

   Arbat American Autopark, Ltd. Hans-Joachim Skrobanek, a shareholder and
former director and the Secretary of the Company, is a shareholder and president
of Arbat American. ERBC is the beneficial owner of 40% of the outstanding common
stock of Arbat American.                                                        

      Kurchatov Research Holdings, Ltd. During the period of June, 1997, through
February 13, 1998, Dr. Graves (who until January 23, 1998, served as the        
Chairman, Chief Executive Officer and a director of the Company) served as a    
director and Secretary of KRH, which is entitled to receive 50% of the net      
profits derived by the Company from the sale or licensing of the Company's EKOR 
compound. During Dr. Grave's tenure as President of KRH, the Company did not    
enter into any material agreements or commitments with KRH. See "Business -     
Principal Technologies - Silicon - Organic (EKOR) Compound" and "Certain        
Relationships and Related Transactions." The outstanding common stock of KRH is 
owned of record by ERBC and by CIS. Such Stock is held by CIS for the benefit of
the EAPS in EAPS's capacity as representative of various individual Russian and 
Ukrainian scientists, researchers and academics affiliated with EAPS and        
Kurchatov. KRH is entitled to receive 50% of the net profits derived by the     
Company from the sale and licensing of the EKOR compound, one of the Company's  
Principal Technologies. Peter Gulko, the beneficial owner of 1,110,000 shares of
the Company's Common Stock, who served as a director of the Company until       
January 23, 1998, and who presently is the President and Secretary of the       
Company, is the sole shareholder of CIS. See "Business - Principal Technologies 
- Silicon - Organic (EKOR) Compound."                                           

Transactions Involving ERBC, Eurowaste and Arbat American.                      

   Business Structure; Inter-company Relationships. The business structure
and relationships between the Company, ERBC, Eurowaste and Arbat American       
diagrammed and described below (i) separate the Company's business purpose of   
developing and commercializing technologies from end-user business operations,  
and from on-going research in Russia, and (ii) advance the Company's strategy of
commercializing technologies through joint ventures, license arrangements and   
strategic alliances. Additionally, such structure reduces the Company's exposure
to the various risks of conducting on-going business operations in Russia and   
Ukraine.                                                                        

  Re-sealable Containers. ERBC is the sub-licensor to the Company of the
Re-sealable Container Systems.                                                  

  Silicon-Organic (EKOR) Compound. EAPS is the applicant under a pending
patent application in respect of the EKOR compound filed in Russia, and the     
holder of a Russian EKOR patent. The Company is the applicant under pending     
patent applications in respect of the EKOR compound filed in the U.S., Ukraine, 
Japan and Germany. Pursuant to a License Agreement among EAPS (as Licensor), and
ERBC (as Licensee) dated September 6, 1996 (the "EAPS-ERBC License") ERBC became
the exclusive licensee of all right, title and interest in and to the EKOR      
technology in Canada, China, Japan, the Republic of Korea, the United States of 
America, Ukraine and all countries that are members of the European Patent      
Agreement (the "Territory") for a term expiring on August 1, 2014. The EAPS-ERBC
License, among other things, grants ERBC the right to sub-license its rights and
interest thereunder. Pursuant to the License Agreement among ERBC and the       
Company dated September 16, 1996 (the "ERBC-Eurotech License"), ERBC exclusively
sub-licensed all of its right, title and interest in and to the EKOR technology 
to the Company for a term co-terminus with the term of the EAPS-ERBC License.   
Pursuant to an agreement among KRH and the Company dated January 28, 1997, 50%  
of the net profits the Company derives from the commercialization, sale or      

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licensing of any technology developed by Kurchatov and EAPS (which includes the 
EKOR compound) will be remitted to KRH. KRH's outstanding capital stock is owned
by ERBC and by CIS. Such stock is held by CIS for the benefit of EAPS (which in 
such regard is acting as representative of individual Russian scientists,       
researchers and academics affiliated with either or both Kurchatov and EAPS).   
See "Certain Relationships and Related Transactions."                           

----------              
|  EAPS  |              
----------              
|             
|             
Technology              
License             
v             
----------              
----------------|  ERBC  |--------------                
|               ----------             |                
minority                |                 |                   
shareholder               |            shareholder                
|                    v                 v                
|                Sublicense            |                
|             ---------------       -------             
|             |  EUROTECH,  |       | KRH |             
------------->|     LTD.    |       -------             
---------------          ^  
     |                 |
     |       50% of    |
     ------>net EKOR----
         profits

Waste-to-Energy Technology. Pursuant to a letter agreement among the
Company and Eurowaste dated September 18, 1996, Eurowaste has agreed to pay to  
the Company $2,450,000 upon the initiation of construction of the first         
waste-to-energy plant in which Eurowaste is involved, and to pay to the Company 
$425,000 upon the initiation of construction of each additional waste-to-energy 
plan in which Eurowaste is involved. The Company believes that the terms of this
agreement are fair and commercially reasonable.                                 

------------------            
|                |            
------------->| EUROTECH, LTD. |---------                 
|             |                |        |                 
|             ------------------        |                 
|                     v                 |                 
|                 Technology            |                 
|                  License              |                 
Technology                v                 |                     
License &         ------------------        |                     
Transfer         |    EUROWASTE   -<--------                    
Fees            ------------------                            
--<-------------                                          

Automated Parking Garages. Pursuant to a letter agreement among the 
Company and Arbat American dated January 28, 1997, Arbat American has agreed to 
pay to the Company $1,250 per parking space in each parking garage erected by   
Arbat American or any affiliate of Arbat American the design of which           
substantially conforms to the technology, designs, renderings, blueprints and   
plans previously furnished by the Company to Arbat American. The Company        
believes that the terms of such agreement are fair and commercially reasonable. 

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----------------            
|   EUROTECH,  |            
----------->|      LTD.    |<-------------          
|           ----------------             |          
|                  v                 minority       
|             Technology            shareholder     
Technology          License                  ^              
fees                |                  --------       
|                  |                  | ERBC |      
|                  |                  --------      
          v                    40%
|         --------------------      shareholder     
----------|  ARBAT AMERICAN  |           |          
--------------------------------
v             
50% shareholder           
v             
------------------------------              
|   CINEMA WORLD ON ARBAT (1)|              
| (Russian operating entity) |              
------------------------------              

----------                                                                      
(1) See "Business - Other Technologies - Automated Parking Garages."

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 PART IV

Item 14. Exhibits, Financial Statements, and Reports on Form 8-K                

(a)   (1)  See Audited Financial Statements and supplementary data index        
which appears on page F-1 herein.                         

      (2)  Schedules have been omitted because they are either not applicable or
      the required information is shown in the financial statements or
notes thereto.                                            

(3)  Exhibits                                                       

Exhibit                                                   
No.        Description of Exhibit                         
---        ----------------------                         

3.1        Certificate of Incorporation of the Company(1) 
3.2        By-Laws of the Company(1)                      
4.1        Form of Common Stock Certificate(1)            
10.1       Material Contracts(1)                          
           10.2       Technology Purchase Agreement between the Company and Oleg
L. Figovsky(1)                      
           10.3       Technology Purchase Agreement between the Company and Oleg
L. Figovsky(1)                      
           10.4       Technology Purchase Agreement between the Company and Oleg
L. Figovsky(1)                      
           10.5       Teaming Agreement between the Company and Duke Engineering
& Services, Inc.(1)                 
           10.6       Form of Agreement between the Company, V. Rosenband and C.
      Sokolinsky, and Ofek Le-oleh Foundation(1)
           10.6.2     Equity Sharing Agreement between the Company, V. Rosenband
and C. Sokolinsky(1)                
          10.6.3     Voting Agreement between the Company, V. Rosenband and C.
Sokolinsky(1)                       
       10.7.1     Investment Agreement between the Company and Chemonol,
Ltd.(1)                             
        10.7.2     Equity Sharing Agreement between the Company and Leonid
Shapovalov(1)                       
10.7.3     Voting Agreement between the Company and Leonid
Shapovalov(1)                       
     10.8.1     Agreement between the Company and Separator, Ltd.(1)
      10.8.2     Equity Sharing Agreement between the Company and Efim
Broide(1)                           
        10.8.3     Voting Agreement between the Company and Efim Broide(1)
   10.9.1     Form of Agreement between the Company, Ofek L-Oleh
Foundation and Y. Kopit(1)          
           10.9.2     Equity Sharing Agreement between the Company, Y. Kopit and
V. Rosenband(1)                     
      10.9.3     Voting Agreement between the Company, Y. Kopit and V.
Rosenband(1)                        
       10.10      Form of License Agreement between the Company and ERBC
Holdings, Ltd.(1)                   
10.11      Cooperation Agreement between the Company and  
Forschungszentrum julich GmbH(1)    
   10.12.1    Convertible Debenture Purchase Agreement among the
               Company, JNC Opportunity Fund, Ltd. and Diversified
Strategies Fund, L.P.(1)            
           10.12.2    Escrow Agreement among the Company, Inc. opportunity Fund,
                     Ltd., and Diversified Strategies Fund, L.P. and Robinson,
        Silverman, Pearce, Aronsohn & Berman, LLP(1)
    10.12.3    Registration rights Agreement among the Company the
                Company, JNC Opportunity Fund, Ltd., and Diversified
Strategies Fund, L.P.(1)            
       10.12.4    Form of 8% Convertible Debenture Due November 27, 2000
                 between the Company and JNC Opportunity Fund, Ltd.(1)
       10.12.5    Form of 8% Convertible Debenture Due November 27, 2000
                between the Company and Diversified Strategies Fund,
L.P.(1)                             
      10.12.6    Warrant No. 1 between the Company and JNC Opportunity
Fund, Ltd.(1)                       
  10.12.7    Warrant No. 2 between the Company and Diversified
Strategies Fund, L.P.(1)            
  10.12.8    Warrant No. 3 between the Company and Diversified
Strategies Fund, L.P.(1)            

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     10.13.1    Convertible Debenture Purchase Agreement between the
     Company and JNC Opportunity Fund, Ltd.(1)
          10.13.2    Escrow Agreement among the Company, JNC Opportunity Fund,
               Ltd. and Robinson, Silverman, Pearce, Aronshohn and
Berman, LLP(1)                      
          10.13.3    Registration Rights Agreement between the Company and JNC
Opportunity Fund, Ltd.(1)           
       10.13.4    Form of 8% Convertible Debenture Due February 23, 2001
                 between the Company and JNC Opportunity Fund, Ltd.(1)
      10.13.5    Warrant No. 3 between the Company and JNC Opportunity
Fund(1)                             
23.1       Report of Tabb, Conigliaro & McGann(2)         

(b) Reports on Form 8-k.                                  

 The Company filed a report on Form 8-k on December 2, 1997.

----------                                                                      
    (1) Incorporated by reference to the Company's Registration Statement on
Form S-1 under the Securities Exchange Act of 1934, on file with the Commission,
file number 333-26673.                                                          

(2) Filed with this Form 10-K.                                      

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EUROTECH, LTD.
 (A Development Stage Company)
 INDEX TO FINANCIAL STATEMENTS

                                                                       Page Nos.
                                                                       ---------

INDEPENDENT AUDITORS' REPORT                                              F-2   

BALANCE SHEETS                                                                  
At December 31, 1996 and December 31, 1997                              F-3 

STATEMENTS OF OPERATIONS                                                  F-4   
For the Period from Inception (May 26, 1995) to December 31, 1995           
For the Years Ended December 31, 1996 and 1997                              
For the Period from Inception (May 26, 1995) to December 31, 1997           

STATEMENTS OF STOCKHOLDERS' DEFICIENCY                                 F-5 - F-6
For the Period from Inception (May 26, 1995) to December 31, 1995           
For the Years Ended December 31, 1996 and 1997                              

STATEMENTS OF CASH FLOWS                                                  F-7   
For the Period from Inception (May 26, 1995) to December 31, 1995           
For the Years Ended December 31, 1996 and 1997                              
For the Period from Inception (May 26, 1995) to December 31, 1997           

NOTES TO FINANCIAL STATEMENTS                                         F-8 - F-34

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Board of Directors and Stockholders                                             
Eurotech, Ltd.                                                                  

INDEPENDENT AUDITORS' REPORT                    

We have audited the accompanying balance sheets of Eurotech, Ltd. (the "        
Company") (a development stage company) as of December 31, 1996 and 1997 and the
related statements of operations, stockholders' deficiency, and cash flows for  
the period from inception (May 26, 1995) to December 31, 1995, the years ended  
December 31, 1996 and 1997 and for the period from inception (May 26, 1995) to  
December 31, 1997. These financial statements are the responsibility of the     
Company's management. Our responsibility is to express an opinion on these      
financial statements based on our audits.                                       

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

In our opinion, the financial statements referred to above present fairly, in   
all material respects, the financial position of Eurotech, Ltd. (a development  
stage company) at December 31, 1996 and 1997 and the results of its operations  
and its cash flows for the period from inception (May 26, 1995) to December 31, 
1995, the years ended December 31, 1996 and 1997 and for the period from        
inception (May 26, 1995) to December 31, 1997, in conformity with generally     
accepted accounting principles.                                                 

The accompanying financial statements have been prepared assuming that the      
Company will continue as a going concern. The Company has suffered a loss from  
operations in each of its three years of operations and, as of December 31,     
1997, had a working capital deficiency of $2,156,753 and stockholders'          
deficiency of $4,849,723. As discussed in Note 1 to the financial statements,   
these factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also         
described in Note 1. The financial statements do not include any adjustments    
that might result from the outcome of this uncertainty.                         

 TABB, CONIGLIARO & McGANN, P.C.

New York, New York                                                              
April 14, 1998                                                                  

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EUROTECH, LTD.
 (A Development Stage Company)

BALANCE SHEETS

ASSETS
------
(Note 1)

                                                        [Enlarge/Download Table]

                                                                                          At December 31,       

                                                                                       1996            1997     
                                                                                   ------------    ------------ 
                                                                                                                
CURRENT ASSETS:                                                                                                 
  Cash (Note 2)                                                                    $    380,183    $    617,756 
  Receivable from related parties (Note 6)                                               89,918           5,918 
  Prepaid expenses and other current assets                                              12,978          21,539 
                                                                                   ------------    ------------ 

      TOTAL CURRENT ASSETS                                                              483,079         645,213 

PROPERTY AND EQUIPMENT - net of accumulated  depreciation                                                       
   (Notes 2 and 4)                                                                       10,556          14,050 

OTHER ASSETS:                                                                                                   
  Organization and patent costs - net of accumulated amortization (Notes 2 and 5)        25,402          28,651 
  Deferred financing costs (Notes 2 and 10)                                              20,304         261,178 
  Deferred offering costs (Note 14)                                                      75,000              -- 
  Other assets                                                                            3,151           3,151 
                                                                                   ------------    ------------ 

      TOTAL ASSETS                                                                 $    617,492    $    952,243 
                                                                                   ============    ============ 

                                         LIABILITIES AND STOCKHOLDERS' DEFICIENCY                               
                                         ----------------------------------------                               

CURRENT LIABILITIES:                                                                                            
  Notes payable - bridge notes (Notes 7, 10 and 15)                                $  2,000,000    $  2,000,000 
  Accrued liabilities (Note 12)                                                         292,316         576,966 
  Deferred revenue (Notes 2 and 3)                                                           --         225,000 
                                                                                   ------------    ------------ 

      TOTAL CURRENT LIABILITIES                                                       2,292,316       2,801,966 
                                                                                   ------------    ------------ 

CONVERTIBLE DEBENTURES (Notes 8 and 15)                                                      --       3,000,000 
                                                                                   ------------    ------------ 

COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Notes 1, 3, 7, 8, 10, 12, and 15)                                 

STOCKHOLDERS' DEFICIENCY: (Notes 2, 7, 8, 10, 11, 12 and 15)                                                    
  Preferred stock - $0.01 par value; 1,000,000 shares authorized;                                               
     -0- shares issued and outstanding                                                       --              -- 
  Common stock - $0.00025 par value; 50,000,000 shares authorized;                                              
     17,233,836 and 18,928,836 shares issued and outstanding at December 31,                                    
    1996 and December 31, 1997, respectively                                              4,306           4,732 
  Additional paid-in capital                                                          4,804,298      12,892,313 
  Unearned financing costs                                                           (2,493,219)     (1,315,317)
  Deficit accumulated during the development stage                                   (3,990,209)    (16,431,451)
                                                                                   ------------    ------------ 

      TOTAL STOCKHOLDERS' DEFICIENCY                                                 (1,674,824)     (4,849,723)
                                                                                   ------------    ------------ 

      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                               $    617,492    $    952,243 
                                                                                   ============    ============ 

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

 F-3

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EUROTECH, LTD.
 (A Development Stage Company)

STATEMENTS OF OPERATIONS

                                                        [Enlarge/Download Table]

                                       For the Period from                                          For the Period  
                                        Inception (May 26,      For the Years Ended December 31,    from Inception  
                                             1995) to                                              (May 26, 1995) to
                                        December 31, 1995         1996                1997         December 31, 1997
                                                                                                                    
REVENUES                                $             --    $             --    $             --   $             -- 
                                        ----------------    ----------------    ----------------   ---------------- 

OPERATING EXPENSES:                                                                                                 
  Research and development                                                                                          
      (Notes 2 and 3)                            212,061           1,170,782           1,007,671          2,390,514 
  Consulting fees (Notes 10 and 12)              266,900             277,353             553,295          1,097,548 
  Compensatory element of stock                                                                                     
     issuances pursuant to consulting                                                                               
     agreements                                       --           1,209,477             839,550          2,049,027 
  Other general and administrative                                                                                  
     expenses                                     34,265             547,447           1,262,067          1,843,779 
                                        ----------------    ----------------    ----------------   ---------------- 

    TOTAL OPERATING EXPENSES                     513,226           3,205,059           3,662,583          7,380,868 
                                        ----------------    ----------------    ----------------   ---------------- 

OPERATING LOSS                                  (513,226)         (3,205,059)         (3,662,583)        (7,380,868)
                                        ----------------    ----------------    ----------------   ---------------- 

OTHER EXPENSES:                                                                                                     
  Interest expense (Notes 6, 7 and 8)                 --              43,422             270,740            314,162 
  Amortization of deferred and                                                                                      
     unearned financing costs                                                                                       
     (Notes 2, 7, 8 and 10)                           --             228,502           8,507,919          8,736,421 
                                        ----------------    ----------------    ----------------   ---------------- 

    TOTAL OTHER EXPENSES                              --             271,924           8,778,659          9,050,583 
                                        ----------------    ----------------    ----------------   ---------------- 

NET LOSS                                $       (513,226)   $     (3,476,983)   $    (12,441,242)  $    (16,431,451)
                                        ================    ================    ================   ================ 

NET LOSS PER COMMON SHARE               $          (0.06)   $          (0.23)   $          (0.71)                   
                                        ================    ================    ================                    

WEIGHTED AVERAGE NUMBER                                                                                             
   OF COMMON SHARES                                                                                                 
   OUTSTANDING                                 8,159,467          14,808,000          17,581,711                    
                                        ================    ================    ================                    

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

 F-4

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EUROTECH, LTD.
 (A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' DEFICIENCY

 FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1995
AND THE YEARS ENDED DECEMBER 31, 1996 AND 1997
(Notes 2, 7, 8, 10, 11, 12 and 15)

                                                        [Enlarge/Download Table]

                                                                     Common Stock                                  
                                                                     ------------        Additional                
                                                     Date of                               Paid-in       Due from  
Period Ended December 31, 1995:                    Transaction      Shares     Amount      Capital     Stockholders
-------------------------------------------------  -----------   -----------   -------   -----------   ----------- 
                                                                                                                   
Founder shares issued ($0.00025 per share)            05/26/95     4,380,800   $ 1,095   $    (1,095)  $        -- 
Issuance of stock for offering consulting                                                                          
   fees ($0.0625 per share)                           08/31/95       440,000       110        27,390            -- 
Issuance of stock ($0.0625 and $0.25 per share)        Various     4,080,000     1,020      5,23,980        (3,000)
Issuance of stock for license ($0.0625 per share)     08/31/95       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        (3,000)

Year Ended December 31, 1996:                                                                                      

Issuance of stock ($0.25 per share)                    Various     1,278,000       320       319,180            -- 
Exercise of stock options                             01/18/96       600,000       150            --            -- 
Issuance of stock for consulting fees                                                                              
  ($0.34375 per share)                                03/22/96       160,000        40        54,960            -- 
Issuance of stock for consulting fees                                                                              
  ($0.0625 per share)                                 05/15/96     2,628,000       657       163,593            -- 
Issuance of stock for consulting fees                                                                              
  ($0.590625 per share)                               06/19/96     1,500,000       375       885,563            -- 
Issuance of stock for consulting fees                                                                              
  ($1.82 per share)                                   11/12/96        57,036        14       104,275            -- 
Issuance of stock pursuant to bridge financing                                                                     
  ($1.81325 per share)                                   12/96     1,500,000       375     2,719,500            -- 
Amortization of unearned financing costs                                  --        --            --            -- 
Repayment by stockholders                                                 --        --            --         3,000 
Net loss                                                                  --        --            --            -- 
                                                                 -----------   -------   -----------   ----------- 
Balance - December 31, 1996                                       17,223,836   $ 4,306   $ 4,804,298   $        -- 
                                                                 ===========   =======   ===========   =========== 


                                                                     Deficit                                       
                                                                   Accumulated                                     
                                                     Unearned       During the                                     
                                                    Financing      Development                                     
Period Ended December 31, 1995:                       Costs          Stage          Total                          
-------------------------------------------------  -----------    -----------    -----------                       
                                                                                                                   
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)             --             --        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                                 --       (513,226)        43,376                       

Year Ended December 31, 1996:                                                                                      

Issuance of stock ($0.25 per share)                         --             --        319,500                       
Exercise of stock options                                   --             --            150                       
Issuance of stock for consulting fees                                                                              
  ($0.34375 per share)                                      --             --         55,000                       
Issuance of stock for consulting fees                                                                              
  ($0.0625 per share)                                       --             --        164,250                       
Issuance of stock for consulting fees                                                                              
  ($0.590625 per share)                                     --             --        885,938                       
Issuance of stock for consulting fees                                                                              
  ($1.82 per share)                                         --             --        104,289                       
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                       
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 financial statements.      

 F-5

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EUROTECH, LTD.
 (A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' DEFICIENCY

 FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1995 AND
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

(Notes 2, 7, 8, 10, 11, 12 and 15)

                                                        [Enlarge/Download Table]

                                                                   Common Stock                                        
                                                                   ------------              Additional                
                                                   Date of                                    Paid-in       Due from   
Period Ended December 31, 1997:                 Transaction      Shares         Amount        Capital     Stockholders 
----------------------------------------------  -----------   ------------   ------------   ------------  -------------
                                                                                                                       
Balance - December 31, 1996                                     17,223,836   $      4,306   $  4,804,298  $          --
Issuance of stock for consulting fees                                                                                  
  ($2.50 per share)                                   03/97         64,000             16        159,984             --
Issuance of stock for consulting fees                                                                                  
  ($5.45 per share)                                   06/97         39,000              9        212,540             --
Issuance of stock for consulting fees                                                                                  
  ($5.00 per share)                                   09/97         59,000             15        294,986             --
Issuance of stock pursuant to penalty                                                                                  
  provision of bridge financing                                                                                        
  ($5.45 per share)                                   06/97        500,000            125      2,724,875             --
Value assigned to conversion feature of                                                                                
  Convertible Debentures                              11/97             --             --      1,337,143             --
Value assigned to issuance of 127,500 warrants                                                                         
  in consideration for interest and placement                                                                          
  fees in connection with Convertible                                                                                  
  Debentures                                          11/97             --             --        284,480             --
Value assigned to issuance of 35,000 warrants                                                                          
  to shareholder for consulting services              11/97             --             --         39,588             --
Value assigned to issuance of 364,000 warrants                                                                         
  to shareholder as additional consideration                                                                           
  for financing activities                            11/97             --             --        862,680             --
Issuance of stock for consulting fees                                                                                  
  ($4.00 per share)                                   12/97         43,000             11        171,989             --
Accrual of stock issued January 1998 pursuant                                                                          
  to penalty provision of bridge financing                                                                             
  ($2.00 per share)                                   12/97      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  $          --
                                                              ============   ============   ============  =============


                                                                  Deficit                                              
                                                                 Accumulated                                           
                                                 Unearned        During the                                            
                                                 Financing       Development                                           
Period Ended December 31, 1997:                    Costs           Stage           Total                               
----------------------------------------------  ------------    ------------    ------------                           
                                                                                                                       
Balance - December 31, 1996                     $ (2,493,219)   $ (3,990,209)   $ (1,674,824)                          
Issuance of stock for consulting fees                                                                                  
  ($2.50 per share)                                       --              --         160,000                           
Issuance of stock for consulting fees                                                                                  
  ($5.45 per share)                                       --              --         212,549                           
Issuance of stock for consulting fees                                                                                  
  ($5.00 per share)                                       --              --         295,001                           
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 127,500 warrants                                                                         
  in consideration for interest and placement                                                                          
  fees in connection with Convertible                                                                                  
  Debentures                                        (284,480)             --              --                           
Value assigned to issuance of 35,000 warrants                                                                          
  to shareholder for consulting services             (39,588)             --              --                           
Value assigned to issuance of 364,000 warrants                                                                         
  to shareholder as additional consideration                                                                           
  for financing activities                          (826,680)             --              --                           
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 financial statements.      

 F-6

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EUROTECH, LTD.
 (A Development Stage Company)

STATEMENTS OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                                           For the Period                                        For the Period  
                                                           from Inception                                        from Inception  
                                                         (May 26, 1995) to   For the Years Ended December 31,  (May 26, 1995) to 
                                                          December 31, 1995         1996           1997        December 31, 1997 
                                                          -----------------    ------------    ------------    ----------------- 
                                                                                                                                 
CASH FLOWS FROM OPERATING ACTIVITIES                                                                                             
    Net loss                                              $        (513,226)   $ (3,476,983)   $(12,441,242)   $     (16,431,451)
    Adjustments to reconcile net loss to                                                                                         
      net cash used by operating  activities:                                                                                    
        Depreciation and amortization                                   182           1,009           4,810                6,001 
        Amortization of deferred and unearned                                                                                    
            financing costs                                              --         228,502       8,507,919            8,736,421 
        Stock issued for license                                     37,500              --              --               37,500 
        Consulting fees satisfied by  stock issuances                    --       1,209,477         839,550            2,049,027 

        Cash provided by (used in) the change in assets                                                                          
            and liabilities:                                                                                                     
            (Increase) decrease in advances to related                                                                           
                parties                                                  --         (89,918)         84,000               (5,918)
            (Increase) decrease in prepaid expenses                  (1,100)        (11,878)         (8,561)             (21,539)
            Increase in other assets                                     --          (3,151)             --               (3,151)
            Increase in accrued liabilities                          13,100         279,216         284,650              576,966 
            Increase in deferred revenue                                 --              --         225,000              225,000 
                                                          -----------------    ------------    ------------    ----------------- 

           NET CASH USED IN OPERATING                                                                                            
             ACTIVITIES                                            (463,544)     (1,863,726)     (2,503,874)          (4,831,144)
                                                          -----------------    ------------    ------------    ----------------- 

CASH FLOWS FROM INVESTING ACTIVITIES                                                                                             
    Organization and patent costs                                    (1,557)        (24,639)         (5,162)             (31,358)
    Capital expenditures                                                 --         (10,953)         (6,391)             (17,344)
                                                          -----------------    ------------    ------------    ----------------- 

           NET CASH USED IN INVESTING                                                                                            
             ACTIVITIES                                              (1,557)        (35,592)        (11,553)             (48,702)
                                                          -----------------    ------------    ------------    ----------------- 

CASH FLOWS FROM FINANCING ACTIVITIES                                                                                             
    Proceeds from exercise of stock  options                             --             150              --                  150 
    Proceeds from issuance of common stock                          522,000         319,500              --              841,500 
    Offering costs                                                   (2,898)        (75,000)         75,000               (2,898)
    Repayment by stockholders                                            --           3,000              --                3,000 
    Proceeds from bridge notes                                           --       2,000,000              --            2,000,000 
    Proceeds from Convertible Debentures                                 --              --       3,000,000            3,000,000 
    Borrowings from stockholders                                         --         141,000         420,140              561,140 
    Repayment to stockholders                                            --        (141,000)       (420,140)            (561,140)
    Deferred financing costs                                             --         (22,150)       (322,000)            (344,150)
                                                          -----------------    ------------    ------------    ----------------- 

         NET CASH PROVIDED BY FINANCING                                                                                          
           ACTIVITIES                                               519,102       2,225,500       2,753,000            5,497,602 
                                                          -----------------    ------------    ------------    ----------------- 

INCREASE (DECREASE) IN CASH                                          54,001         326,182         237,573              617,756 

CASH - BEGINNING                                                         --          54,001         380,183                   -- 
                                                          -----------------    ------------    ------------    ----------------- 

CASH - ENDING                                             $          54,001    $    380,183    $    617,756    $         617,756 
                                                          =================    ============    ============    ================= 

Supplemental Disclosure of Cash Flow Information:                                                                                

Cash paid during the period for:                                                                                                 

    Interest                                              $              --    $      8,127    $    270,804    $         278,931 
                                                          =================    ============    ============    ================= 
    Income taxes                                          $              --    $         --    $         --    $              -- 
                                                          =================    ============    ============    ================= 

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

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 1- BUSINESS AND CONTINUED OPERATIONS                                       

 Eurotech, Ltd. (the "Company") was incorporated under the laws of the
     District of Columbia on May 26, 1995. The Company is a development-stage,
technology transfer, holding and management company, formed to      
   commercialize new, existing but previously unrecognized, and previously
"classified" technologies, with a particular current emphasis on    
  technologies developed by prominent research institutes and individual
      researchers in the former Soviet Union and in Israel, and to license those
and other Western technologies for business and other commercial    
   applications principally in Western and Central Europe, Ukraine, Russia
and North America. 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 intends to operate
its business by licensing its technologies to end-users and through 
      development and operating joint ventures and strategic alliances. To date,
the Company has not generated any revenues from operations.         

  The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate    
    continuation of the Company as a going concern. However, as shown in the
   accompanying financial statements, the Company has incurred losses from
 operations from inception. As of December 31, 1997, the Company has a
   stockholders' deficiency of $4,849,723, a working capital deficiency of
     $2,156,753 and an accumulated deficit since inception of $16,431,451. 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. These factors raise substantial doubt
about the Company's ability to continue as a going concern.         

    Since inception, the Company has financed its operations through sale of
      its securities, shareholder loans, a bridge financing totalling $2,000,000
completed in December of 1996, a Convertible Debenture financing of 
$3,000,000 completed in November of 1997 and a Convertible Debenture
 financing of $3,000,000 completed in February of 1998. The Company is
    exploring additional sources of working capital, which include a private
offering of common stock, private borrowings and joint ventures.    

 F-8

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 1 - BUSINESS AND CONTINUED OPERATIONS (Continued)                          

     The $2,000,000 bridge financing was retired from proceeds of the February
1998 Convertible Debenture financing.                               

      While no assurance can be given, management believes the Company can raise
      adequate capital to keep the Company functioning during 1998. No assurance
     can be given that the Company can successfully obtain any working capital
      or complete any proposed offerings or, if obtained, that such funding will
      not cause substantial dilution to shareholders of the Company. Further, no
   assurance can be given as to the completion of research and development
and the successful marketing of the technologies.                   

     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.                                    

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                             

Use of Estimates                                                    

The preparation of financial statements in conformity with generally
    accepted accounting principles 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.                                                          

Equity Method of Accounting for Unconsolidated Foreign Affiliates   

      Investment in companies in which the Company has a 20% to 50% interest, in
     which it has the ability to exercise significant influence over operating
and financial policies are accounted for on the equity method.      
 Accordingly, the Company's proportionate share of their undistributed
earnings or losses are included in the statement of operations.     

  At December 31, 1997, investments in companies accounted for under the
      equity method consist of the following foreign companies which are located
in Israel:                                                          

Chemonol, Ltd. ("Chemonol")               20%             
Separator, Ltd. ("Separator")             20%             
Comsyntech, Ltd. ("Comsyntech")           20%             
Remptech, Ltd. ("Remptech")               20%             

 F-9

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                 

Cash and Cash Equivalents                                           

      The Company considers all highly liquid investments with original maturity
dates of three months or less to be cash equivalents.               

    The Company maintains cash balances at a bank which exceeded the Federal
      Depository Insurance Corporation's ("FDIC") maximum balance of $100,000 by
$623,581 as of December 31, 1997.                                   

Property and Equipment                                              

      Property and equipment is stated at cost. Depreciation is calculated using
  the straight-line method over the estimated useful life of five years.

Organization and Patent Costs                                       

  Organization costs are being amortized on a straight-line basis over 5
    years. Patent costs are being amortized on a straight-line basis over 17
years, which represent both the statutory and economic lives of the 
patents.                                                            

Impairment of Assets                                                

    In March 1995, the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 121, "Accounting for the Impairment
    of Long-Lived Assets and for Long-Lived Assets to be Disposed of", which
  requires impairment losses to be recorded on long-lived assets used in
     operations when indicators of impairment are present and the undiscounted
  cash flows estimated to be generated by those assets are less than the
    assets' carrying amount. Statement 121 also addresses the accounting for
      long-lived assets that are expected to be disposed of. The Company adopted
    Statement 121 on January 1, 1996 and there was no effect to the Company.

Income Taxes                                                        

      Deferred tax liabilities and assets are determined based on the difference
    between the financial statement carrying amounts and tax bases of assets
   and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.                            

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.                                              

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                 

Research and Development                                            

     Research and development expenditures are charged to expense as incurred,
   unless they are reimbursed under specific contracts. Losses incurred on
   the equity basis in the Company's interest in four Israeli research and
development companies are included in research and development. In  
      addition, expenditures in connection with a technology licensing agreement
      concluded in December 1997, aggregating $495,000, were charged to research
and development during 1997 (see Note 3).                           

Stock-Based Compensation                                            

     In October 1995, the Financial Accounting Standards Board issued SFAS No.
 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123
     requires compensation expense to be recorded (i) using the new fair value
    method, or (ii) using existing accounting rules prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to    
     Employees" (APB 25") and related interpretations with proforma disclosure
     of what net income and earnings per share would have been had the Company
 adopted the new fair value method. The Company intends to continue to
 account for its stock-based compensation plans in accordance with the
provisions of APB 25.                                               

Deferred and Unearned Financing Costs                               

  Financing costs in connection with a one-year bridge loan completed in
      December of 1996 are being amortized over the life of the promissory note.

Financing costs in connection with the November 1997 Convertible    
      Debentures offering are being amortized over the expectant life (180 days)
     of the obligation. The expectant life was determined to be the conversion
date that was most beneficial to the note holder, in accordance with
Emerging Issues Task Force ("EITF") topic number D-60.              

Stock Split                                                         

 On June 1, 1996, the Board of Directors authorized four-for-one stock
 split, thereby increasing the number of issued and outstanding common
     shares to 14,166,800 and decreasing the par value of each common share to
$0.00025. The accompanying financial statements, notes and other    
      references to share and per share data have been retroactively restated to
reflect the stock split for all periods presented.                  

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                 

Per Share Data                                                      

During 1997, the Company adopted Statement of Financial Accounting  
   Standards ("SFAS") No. 128, "Earnings Per Share", which changed certain
     requirements for computing and disclosing earnings per share, retroactive
      for all periods presented. Adoption of this statement had no effect on the
accompanying financial statements.                                  

   Basic net loss per common share has been computed based on the weighted
   average number of shares of common stock outstanding during the periods
   presented, which were retroactively adjusted to give recognition to the
stock split on June 1, 1996. Common stock equivalents, consisting of
warrants and Convertible Debentures discussed in Note 10, were not  
included in the calculation of diluted loss per share because their 
inclusion would have had the effect of decreasing the loss per share
otherwise computed.                                                 

Fair Value of Financial Instruments                                 

     The financial statements include various estimated fair value information
   at December 31, 1996 and December 31, 1997, as required by Statement of
Financial Accounting Standards 107, "Disclosures about Fair Value of
     Financial Instruments". Such information, which pertains to the Company's
 financial instruments, is based on the requirements set forth in that
    Statement and does not purport to represent the aggregate net fair value
to the Company.                                                     

      The following methods and assumptions were used to estimate the fair value
 of each class of financial instruments for which it is practicable to
estimate that value:                                                

  Cash and Cash Equivalents: The carrying amount approximates fair value
because of the short-term maturity of those instruments.            

 Receivables and Payables: The carrying amounts approximate fair value
because of the short maturity of those instruments.                 

 Notes Payable: The carrying amounts of notes payable approximate fair
    value due to the length of the maturities, the interest rates being tied
      to market indices and/or due to the interest rates not being significantly
different from the current market rates available to the Company.   

  All of the Company's financial instruments are held for purposes other
than trading.                                                       

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

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

a) Collaboration Agreements With Russian Organizations              

    Under various agreements, the Company has agreed to fund 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". Kurchatov will provide the materials, facilities and
      personnel to complete the necessary work to commercialize such
      technologies. Disbursements made by the Company related to the
      Kurchatov arrangement were charged to research and development
   expenses and amounted to $174,561, $1,109,550 and $408,000,
        respectively, during the period from inception (May 26, 1995) to
       December 31, 1995 and for the years ended December 31, 1996 and
1997.                                                   

         In addition, pursuant to an agreement with the Kurchatov Research
          Holdings, Ltd. ("KRH"), a Delaware corporation, beneficially owned
          by ERBC Holdings, Ltd. ("ERBC") and individual Russian scientists,
        researchers and academics, who are affiliated with Kurchatov and
          EAPS, the Company agreed to pay KRH 50% of the net profits derived
          from the sale, license or commercialization of any technologies or
        products based upon technologies developed by the scientists and
       transferred to the Company or supplied by the scientists to the
Company. The managing director and one former business  
representative of ERBC are shareholders of the Company. 

          In connection with the collaboration agreement discussed above, in
           September 1996, the Company entered into a licensing agreement with
     ERBC, whereby ERBC sublicensed its license to use and exploit
         certain technologies and inventions relating to a silicon organic
           ("EKOR") compound 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 the agreement, the Company shall
          pay to ERBC a royalty equal to 3% of the cost of contracts made by
           the Company on which the Company would have any income. In addition
            to the royalty payment, pursuant to the collaboration agreement with
        KRH, the Company will be required to remit 50% of the net profit
derived from the EKOR compound technology to KRH.       

b) Investments in Israeli Technology Companies                      

         During 1997, the Company acquired a 20% interest in four separate
   Israeli technology, research and development companies. The
      Company's share of losses incurred by these companies has been
      accounted for on the equity basis and included in research and
            development expenses. The amount charged to research and development
   for 1997 approximated $102,000, which reduced the Company's
investment in these four companies to zero.             

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

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

Technion Entrepreneurial Incubator, Ltd.                            

During April 1997, the Company entered into an informal agreement in
   principal with the Technion Entrepreneurial Incubator, Ltd. ("TEI"), an
  Israeli corporation, to participate in certain technology research and
development projects sponsored by the TEI, whereby the Company will 
 provide 15%-20% of the financing required for, and will receive a 20%
 equity interest in, research and development projects selected by the
     Company. In furtherance of this venture, the Company has opened an office
    at the premises of TEI in Haifa, Israel, has identified three technology
     development projects for investment, and has agreed to invest in a fourth
      such project, involving certain polyurethane technology with potential use
     in paints and coatings. Pursuant to that agreement, the Company agreed to
invest up to $60,000 in Chemonol, Ltd. ("Chemonol"), an Israeli     
   corporation established to own and develop that technology, in exchange
     for 20% of Chemonol's voting equity. As of December 31, 1997, the Company
      has made two payments totalling $30,000 to Chemonol. The remaining $30,000
     is scheduled to be paid by November 1, 1998. The Company has also entered
   into agreements with the holder of 50% of Chemonol's outstanding voting
     equity (the "Principal Shareholder") granting to the Company an option to
  acquire from the Principal Shareholder an additional 31% of Chemonol's
    voting equity for $93,000, and the present right to direct the voting of
     the Principal Shareholder's voting equity. There can be no assurance that
      these or any other development projects will result in useful technologies
or that the same will be commercially saleable or profitable.       

Incubator for Technological Entrepreneurship - Kiryat Weizmann, Ltd.

During July 1997, the Company entered into an informal agreement in 
    principal with the Incubator for Technological Entrepreneurship - Kiryat
Weizmann, Ltd. ("Kiryat Weizmann, Ltd.") to participate in certain  
     technology research and development projects sponsored by Kiryat Weizmann
Ltd.                                                                

Pursuant to that informal agreement, the Company agreed to invest,  
pursuant to a written agreement, up to $60,000 in Separator, Ltd.   
("Separator"), an Israeli corporation established to own and develop
technology, in exchange for 20% of Separator's voting equity. As of 
December 31, 1997, the Company has made total payments of $30,000 to
 Separator. The remaining $30,000 is scheduled to be paid by August 1,
      1998. The Company has also entered into written agreements with the holder
of 50% of Separator's outstanding voting equity (the "Principal     
Shareholder") granting to the Company an option to acquire from the 
    Principal Shareholder an additional 31% of Separator's voting equity for
$93,000, and the present right to direct the voting of the Principal
    Shareholder's voting equity. There can be no assurance that these or any
     other development projects will result in useful technologies or that the
same will be commercially saleable or profitable.                   

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

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

Ofek Le-Oleh Foundation                                             

 During August 1997, the Company entered into an informal agreement in
    principal with the Ofek Le-Oleh Foundation ("Foundation") to participate
    in certain technology research and development projects sponsored by the
Foundation.                                                         

Pursuant to that informal agreement, the Company agreed to invest,  
    pursuant to written agreements, up to $60,000 per company in Comsyntech,
     Ltd. ("Comsyntech") and Remptech, Ltd. ("Remptech"), Israeli corporations
established to own and develop technology, in exchange for 20% of   
   Comsyntech's and Remptech's voting equity. As of December 31, 1997, the
   Company has made its first payment of $21,000 per company to Comsyntech
  and Remptech. The last scheduled payment of $13,000 is scheduled to be
      made no later than February 1, 1999. In connection with these investments,
the Company obtained (I) an option to purchase a 20% common equity  
interest owned by the foundation exercisable for a period of 90 days
      commencing on November 6, 1999 at a price to be determined, (ii) an option
to acquire from the Principal Shareholders an additional 31% of     
Comsyntech's and Remptech's voting equity for $93,000, and (iii) the
    present right to direct the voting of the Principal Shareholders' voting
 equity. There can be no assurance that these or any other development
projects will result in useful technologies or that the same will be
commercially saleable or profitable.                                

Equity Transfer Consents for Israeli Companies                      

      For a period of two years commencing on the date of its registration as an
 Israeli corporation, the sale or other transfer of 25% or more of the
  outstanding common equity of each of Chemonol, Separator, Remptech and
 Comsyntech requires the consent of the Chief Scientist of the Israeli
 Ministry of Commerce and Technology. The Company's options to acquire
  additional common equity of the above Israeli Technology Companies are
      exercisable within such two-year periods and any acquisition of the common
equity purchasable thereunder will, therefore, require the Chief of 
Scientist's consent. Although the Company presently expects that if 
  requested such consent would be given, there is no assurance that such
consent will be obtained.                                           

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

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

    c)    Re-sealable Containers. Pursuant to a sublicense (the "Re-sealable
         Container Sublicense") entered into in December 1997, the Company
 has acquired from ERBC an exclusive, worldwide license to
          commercialize, use, exploit and market two mechanical systems (the
            "Re-sealable Container Systems") for resealing soft-drink (and other
     similarly configured) beverage cans, and cardboard "TetraPak"
  beverage containers. "TetraPak" containers are four-sided,
      pyramidical beverage containers widely used in Europe, made of
         packaging material similar to milk "cartons" familiar to the U.S.
market.                                                 

           ERBC acquired an exclusive and worldwide license to the Re-sealable
          Container Systems pursuant to a license agreement, dated March 20,
          1997, with Cetoni Unwelttechnologie-Emwik Lungs GmbH ("Cetoni"), a
    Germany company that developed and held all right, title and
            interest in and to those systems, in consideration of ERBC's payment
         to Cetoni of $495,000, plus 50% of all royalties received by ERBC
       from sales of products and devices embodying or otherwise using
     Resealable Container Systems. Under the Re-sealable Container
          Sublicense, the Company paid ERBC $495,000 in consideration of the
         sub-license granted thereunder, and is obligated to pay to Cetoni
            50% of the Company's net revenues from the sale or licensing of such
products and devices.                                   

    The Company has accounted for this technology license fee as
      acquired research and development and, in accordance with FASB
        Interpretation No. 4, has charged the license fee of $495,000 to
         research and development expenses for the year ended December 31,
1997.                                                   

     d)    On January 28, 1997, the Company entered into a technology transfer
        consulting arrangement with American Autopark, Ltd. ("Arbat") to
         license its technology, designs, renderings, blueprints and plans
          for the construction and operation of vertical parking structures.
            The Company is to receive a fee equal to $1,250 per parking space in
            each garage erected by Arbat or any of its affiliates based upon the
            technology transferred to Arbat by the Company. Certain shareholders
of the Company are shareholders of Arbat.               

           In August 1997, the Company received a $225,000 technology transfer
       fee under this agreement related to a construction of a parking
 structure in Moscow, Russia. The Company has deferred the
    recognition of this revenue until such time when all initial
       technology has been transferred to Arbat and the Company has no
remaining obligation once construction commences.       

   e)    In September 1996, the Company entered into a technology transfer
      and consulting agreement with Eurowaste, Ltd. ("Eurowaste"), a
            related party, under which Eurowaste will pay the Company $2,450,000
        upon the initiation of construction of the first waste to energy
         plant, and a design and implementation consulting fee of $425,000
            for each subsequent plant. A shareholder and director of the Company
     is the Chairman, Chief Executive Officer and a shareholder of
Eurowaste.                                              

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

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

        The Company intends to recognize revenue from the initial fee of
   $2,450,000 at the time when all initial technology has been
 transferred to Eurowaste and the Company has no remaining
          obligations once construction commences. Revenue from the $425,000
       design and implementation and consulting fee will be recognized
         during the construction period of each subsequent waste-to-energy
plant.                                                  

    f)    On May 1, 1995, the Company entered into a license agreement which
 granted the Company an exclusive right to license certain
        technologies for medical application systems in Russian/European
           countries for the remaining life of the patent for $37,500. In lieu
          of cash, the owner accepted 600,000 shares of the Company's common
           stock. The agreement called for quarterly royalty payments equal to
      5% of gross revenues earned and received by the Company with a
          minimum annual royalty of $100,000. No minimum royalty payment was
   to accrue or be payable until December 1, 1995. The Company
           terminated the agreement on November 30, 1995 and expensed the cost
    of the license. No products were developed or sold using the
licensed technology and no royalties were due the owner.

     g)    On May 29, 1995, the Company entered into a license agreement which
      granted the Company, for the life of the patent, territorially
           limited exclusive license to use technology marketed under the name
         Coherent On Receive Only ("CORO") in Europe and the Near East. In
     consideration for the grant of the license and the use of the
          proprietary engineering, the Company agreed to pay the developer a
           $200,000 initial license fee upon delivery of the technology, along
          with an 8% royalty payable semi-annually on equipment gross sales.

          If the technology is delivered, the Company intends to account for
          the $200,000, an initial license fee and amortize over the shorter
           of the economic life of the technology or remaining term of license
agreement.                                              

           Management is currently evaluating the viability of this technology
and its potential uses in various markets.              

NOTE 4 - MACHINERY AND EQUIPMENT                                                

Machinery and equipment consisted of the following:     

                    December 31,
                   -------------------------
                   1996             1997
                   --------         --------
Cost                                                                            
Accumulated depreciation             $ 10,953         $ 17,344                  
                        (397)          (3,294)
                   --------         --------
                   $ 10,556         $ 14,050
                   ========         ========

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 4 - MACHINERY AND EQUIPMENT (Continued)                                    

Depreciation expense for the period from inception (May 26, 1995) to
December 31, 1995 and for the years ended December 31, 1996 and 1997
amounted to $-0-, $397 and $2,897, respectively.                    

NOTE 5 - ORGANIZATION AND PATENT COSTS                                          

Organization and patent costs consisted of the following:           

                    December 31,
                   -------------------------
                   1996             1997
                   --------         --------

Organization costs                   $  1,557         $  1,557                  
Costs of patents                       24,639           29,801                  
Accumulated amortization                 (794)          (2,707)                 
                   --------         --------
                   $ 25,402         $ 28,651
                   ========         ========

   Patent costs capitalized during 1996 and 1997 represent legal and other
costs related to filing of patent applications in various countries.

Amortization expense for the period from inception (May 26, 1995) to
December 31, 1995 and for the years ended December 31, 1996 and 1997
amounted to $182, $612 and $1,913, respectively.                    

NOTE 6 - NOTES PAYABLE TO/RECEIVABLES FROM RELATED PARTIES                      

Loans from Related Parties                                          

      During 1996, three shareholders of the Company loaned the Company $341,300
    under four separate promissory note. The notes bear interest at the rate
    of 10% per annum and were due on December 31, 1996. In December of 1996,
      $141,300 of principal on such notes was repaid by the Company. The balance
of $200,000 was converted into four units of the bridge financing   
 discussed in Note 8. Interest expense related to these loans for 1996
amounted to $15,948.                                                

During 1997, the Company borrowed $420,140 from a shareholder of the
      Company. The loans were due on demand and provided for an interest rate of
10% per annum. As additional consideration, the shareholder received
    warrants to purchase 364,000 shares of common stock at $5.02 exercisable
    over the three-year period ending December 31, 2000 (see Note 10). As of
      December 31, 1997, the Company repaid all of the shareholder's loans which
amounted to $420,140, plus applicable interest of $7,075.           

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 6 - NOTES PAYABLE TO/RECEIVABLES FROM RELATED PARTIES (Continued)          

Loans to Related Parties                                            

In December 1996, the Company advanced $84,000 to a consultant and  
 shareholder of the Company. The full amount, plus interest at 10% per
annum, was repaid during February 1997.                             

During 1996, the Company advanced $5,918 to Arbat Autopark, Ltd., a 
company related by virtue of common shareholders. Said advance is   
non-interest bearing and outstanding at December 31, 1997.          

NOTE 7 - NOTES PAYABLE - BRIDGE LOAN                                            

    In December 1996, the Company completed a private placement of 40 Units,
      each consisting of the Company's one-year promissory note in the principal
 amount of $50,000, bearing interest at the rate of 12% per annum, and
25,000 shares of its common stock for an aggregate offering price of
      $2,000,000. Of such Units sold, four Units were issued to two shareholders
  in exchange for cancellation of promissory notes amounting to $200,000
(see Note 6).                                                       

     The proceeds of such offering were used to pay accrued liabilities, repay
shareholders promissory notes of $141,000 and fund research and     
development costs.                                                  

      In December of 1997, the Company and the promissory note holders agreed to
      extend the original maturity date from December 18, 1997 to March 18, 1998
 and increase the interest rate from 12% to 15% per annum effective on
    December 19, 1997. On March 6, 1998, the promissory notes were satisfied
by the Company from proceeds of a Convertible Debenture financing   
completed in February of 1998.                                      

See Note 10 for further discussion of this financing.               

NOTE 8 - 8% CONVERTIBLE DEBENTURES                                              

On November 27, 1997, the Company sold through a private placement  
 $3,000,000, 8% Convertible Debenture notes, due November 27, 2000. As
 additional consideration, the Company issued separate warrants to the
      purchasers to purchase 60,000 shares of the Company's common stock at 110%
    of the market price, determined over the last five trading days prior to
    November 27, 1997, or $4.73 per share. The warrants are exercisable over
two years.                                                          

See Note 10 for further discussion of the Convertible Debentures.   

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 9 - INCOME TAXES                                                           

For the period from inception (May 26, 1995) to December 31, 1995,  
      pursuant to Internal Revenue Service Code Section 195, the Company elected
to treat its expenditures as start-up costs. These costs totalling  
     approximately $510,000 were treated, for income tax purposes, as deferred
expenses to be amortized on a straight-line basis over five years.  

    The Company was not required to provide for a provision for income taxes
   for the period ended December 31, 1995 and for the years ended December
 31, 1996 and 1997 as a result of net operating losses incurred during
these periods.                                                      

      The components of deferred tax assets and liabilities at December 31, 1996
and 1997 are as follows:                                            

                                                   1996         1997
                                                  ----------    ----------
Deferred Tax Assets:                                                            
Net operating loss carryforwards                   $  803,902    $2,562,766 
Start-up costs                                        138,728       104,045 
Temporary differences, principally relates to tax                           
effects of compensatory element of stock                                
 issuances                                           411,251     2,831,219
                                                  ----------    ----------
Total Gross Deferred Tax Assets                    1,353,881     5,498,030

Less:  Valuation allowance                         (1,353,881)   (5,498,030)
                                                  ----------    ----------
Net Deferred Tax Assets                           $       --    $       --
                                                  ==========    ==========

    The net change in the valuation allowance for deferred tax assets was an
increase of $4,144,149.                                             

As of December 31, 1997, the Company had available approximately    
  $7,537,000 of net operating losses for income tax purposes that may be
carried forward to offset future taxable income, if any. These      
carryforwards expire during the year 2015 through 2017. 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.                                       

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 9 - INCOME TAXES (Continued)                                               

       A reconciliation of income tax expense at the statutory rate to
         income tax expense at the Company's effective rate is as follows:

                         1996           1997
                        -----------    -----------

Computed tax at the statutory rate     $(1,182,174)   $(4,230,022)              
Non-deductible expenses and losses           1,702         85,873               
Tax effects of temporary differences       411,251      2,419,968               
Start-up costs                             (34,681)       (34,683)              
Unutilized net operating loss              803,902      1,758,864               
State income taxes                              --             --               
                        -----------    -----------
Income Tax Expense                   $        --    $        --             
                        ===========    ===========

NOTE 10 - STOCKHOLDERS' DEFICIENCY                                              

Common Stock Transactions                               

        In May 1995, the Company issued 4,380,800 shares to its founder.

     Since inception (May 26, 1995) through December 31, 1997, the
          Company completed two offerings of common stock under Rule 504 and
            two offerings under 506 of the Securities Act of 1933 (the "Act") as
follows:                                                

First Offering                                          

           Under the first offering, during the period from inception (May 26,
        1995) to December 31, 1995, the Company sold 2,640,000 shares of
           common stock at $0.0625 per share and derived aggregate proceeds of
           $165,000, of which $3,000 was due from stockholders at December 31,
1995.                                                   

       During August 1995, the Company issued 440,000 shares of common
    stock, valued at $27,500, to two individuals and a financial
           institution as consideration for assistance in the above offerings.

       During August 1995, the Company issued 600,000 shares of common
    stock in connection with its purchase of a license valued at
      $37,500. The shares were issued as part of the first offering.

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 10 - STOCKHOLDERS' DEFICIENCY (Continued)                                  

           On October 10, 1995, the Company issued 600,000 non-qualified stock
          options to acquire shares of common stock to three related parties
            as consideration for financial public relations services, investment
  banking services and legal services, valued at $75,000, in
            connection with the above offerings. The options were issued outside
           of the 1995 Stock Option Plan and had a term of one year commencing
         January 1, 1996. All of the options were exercised on January 18,
            1996 and the related 600,000 shares were issued as part of the first
offering.                                               

Second Offering                                         

          Under the second offering, which commenced in October of 1995, the
            Company sold 2,718,000 shares of common stock at $0.25 per share and
         derived aggregate proceeds of $679,500. Of these 2,718,000 shares
         sold, pursuant to the second offering, 1,440,000 shares were sold
           during 1995 for aggregate proceeds of $360,000 and 1,278,000 shares
 were sold during 1996 for aggregate proceeds of $319,500.

Third Offering/Bridge Financing                         

        In December 1996, the Company completed a private placement (the
         "Bridge Financing") of 40 Units, each consisting of the Company's
            one-year promissory note in the principal amount of $50,000, bearing
       interest at the rate of 12% per annum, and 25,000 shares of its
       common stock for an aggregate offering price of $2,000,000, and
           aggregate number of common shares of 1,000,000. Of such Units sold,
  four Units were issued to two shareholders in exchange for
            cancellation of promissory notes amounting to $200,000 (see Note 6).
        The Units were offered and sold in reliance on an exemption from
            registration pursuant to Rule 506 of Regulation D under the Act, and
      only to accredited investors within the meaning of Rule 501 of
Registration D under the Act.                           

          Under the agreement, the notes were due one year from the issuance
           date. Holders of the shares of common stock issued pursuant to this
agreement have, among other things, demand and mandatory
           registration rights, including penalties, which require the Company
         to issue to the Unit holders up to 1,000,000 additional shares of
            common stock if such shares were not registered under the Act within
      the specified time frame. As of December 31, 1996, the Company
          recorded an additional 500,000 shares of common stock to be issued
          under the offering based on the Company's belief that it would not
      meet one of the two filing deadlines. The Company did not meet
       either filing deadline and, accordingly, the 500,000 additional
           common shares recorded as of December 31, 1996, were issued to such
       holders in April 1997, and a further 500,000 common shares were
      issued to such holders in August 1997. As of their maturity in
       December 1997, the Company had insufficient funds to repay such
           notes and also had not yet registered the shares of common stock as
           required under the agreement. Accordingly, the Company obtained the
        agreement of the noteholders to extend the notes' maturity until
           March 18, 1998, in consideration of the issuance to the noteholders
       of an aggregate of 1,000,000 additional shares of the Company's
          common stock. The Company agreed to register such shares of common
      stock under the Act. Pursuant to the terms of the notes, as of
            December 19, 1997, their interest rate has been increased to 15% per
annum.                                                  

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 10 - STOCKHOLDERS' DEFICIENCY (Continued)                                  

   Furthermore, under the terms of the December 1997 extension
            agreement, if by April 1, 1998 a registration statement, which shall
    include all shares issued to holders of bridge notes, is not
         declared effective by the Securities and Exchange Commission (the
       "SEC"), then the Company will issue to each Unit holder, 12,500
         shares of the Company's common stock. Effective on April 2, 1998,
 and for each of the three-month period thereafter, if the
        registration statement is not declared effective by the SEC, the
            Company and unit holders will negotiate the number of penalty shares
to be issued.                                           

            The 3,000,000 common shares issued under the December 1996 agreement
           and December 1997 extension agreement are detachable shares and are
            accounted for separately from the promissory notes as an addition to
            paid-in capital for the value of the stock issued and as a charge to
    stockholders' deficiency for the unearned portion. The value
    assigned to the 3,000,000 shares was based on fair value and
        amounted to $7,444,875, of which $2,719,875 was recorded in 1996
        attributable to 1,500,000 shares, and $4,725,000 was recorded in
   1997 attributable 1,500,000 shares. These amounts are being
           amortized on the interest method over a 12-month period and charged
         to financing costs. The amount charged to financing costs for the
       years ended December 31, 1996 and 1997 amounted to $226,656 and
$7,218,219, respectively.                               

       Costs associated with this offering allocated to the promissory
       notes, which amounted to $22,150, have been capitalized and are
          being amortized as financing costs over the life of the notes. For
           the years ended December 31, 1996 and 1997, amortization related to
 the promissory note costs amounted to $1,846 and $20,304,
respectively.                                           

Fourth Offering/8% Convertible Debentures               

          On November 27, 1997, the Company sold through a private placement
          $3,000,000, 8% convertible debenture notes, due November 27, 2000.
            As additional consideration, the Company issued separate warrants to
        the purchasers to purchase 60,000 shares of the Company's common
        stock at 110% of the market price, determined over the last five
        trading days prior to November 27, 1997, or $4.73 per share. The
warrants are exercisable over two years.                

        The debenture agreement permits the holders of the debentures to
  convert the debt into shares of common stock at beneficial
    conversion rates based on the timing of the conversions. The
        conversion feature commences at the earlier of: (i) the date the
          underlying shares to the convertible debentures are registered and
       declared effected by the SEC; (ii) February 25, 1998. Shares of
          common stock to be issued at the conversion date shall be equal to
        the outstanding principal and accrued interest at the conversion
          date, divided by the conversion price. The conversion price is the
          lower of $5.38 or the average bid price per share of the Company's
common stock for five trading days immediately          

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 10 - STOCKHOLDERS' DEFICIENCY (Continued)                                  

           preceding the conversion date, multiplied by (i) 80% in the case of
           conversions effected prior to May 29, 1998, (ii) 75% in the case of
            conversions effected on or after May 29, 1998, but prior to November
         25, 1998, and (iii) 70% in the case of conversions effected on or
          after November 25, 1998. Furthermore, the conversion price may not
           be less than a specified "floor" initially set at $2.00. Commencing
          on November 27, 1999, all or any portion of the remaining debt, at
           the option of Eurotech, is convertible into common stock at the 70%
conversion rate.                                        

    The Convertible Debenture agreement obligates the Company to
          register a number of common shares equal to the sum of (i) 200% of
          the number of shares of common stock into which the debentures are
      convertible, (ii) interest thereon and (iii) 127,500 shares of
      common stock related to the warrants. Further, the Company has
       agreed that if a registration statement covering the underlying
            shares of the Convertible Debenture is either not filed with the SEC
      on or prior to January 15, 1998, or, if filed, is not declared
          effective by the SEC on or prior to February 16, 1998, the Company
            will be obligated to pay to the debenture holders liquidated damages
 equal to 1% of the aggregate principal amount of the then
          outstanding notes on the first day of each month until such filing
        or effectiveness deficiency is cured. As of March 12, 1998, such
          registration statement has not been declared effective by the SEC.
       Accordingly, the Company will be liable for such damages to the
purchasers of the Convertible Debentures.               

        The Company has assigned a value of $1,337,143 to the beneficial
       conversion feature of the debentures and $134,400 to the 60,000
           warrants issued the purchasers of the Convertible Debentures. These
            amounts are accounted for separately from the Convertible Debentures
as an addition to paid-in capital and as a reduction of 
           stockholders' equity for the unearned portion. The unearned portion
         is being amortized on the interest method over the 180-day period
           commencing November 27, 1997 and is charged to financing costs. For
       the year ended December 31, 1997, amortization of such unearned
financing cost amounted to $277,958.                    

     Costs in connection with the $3,000,000 Convertible Debenture
     offering allocated to the Convertible Debentures, amounted to
          $472,080. Such costs were comprised of: (i) legal and professional
       fees amounting to $22,000, (ii) a placement fee to an unrelated
          party amounting to $300,000 and (iii) the placement agent received
           non-cash consideration valued at $150,080 consisting of warrants to
         purchase 67,500 shares of the Company's common stock at $4.73 per
          share, or 110% of Company's average closing price, determined over
          the last five trading days prior to November 27, 1997. The Company
     is amortizing such costs over 180 days as a financing expense
           commencing November 27, 1997. For the year ended December 31, 1997,
amortization related to such costs amounted to $89,170. 

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 10 - STOCKHOLDERS' DEFICIENCY (Continued)                                  

Other Issuances                                         

           During 1996, the Company issued 4,345,036 shares of common stock as
            consideration for consulting services performed by various employees
        and consultants, including related parties, through December 31,
   1996. Shares issued under these arrangements were valued at
            $1,209,477, which was all charged to operations during 1996. Of such
           shares issued in 1996, 2,628,000 shares of common stock were issued
           for start-up services rendered principally during 1995. Such shares
            were assigned a value of $164,250, which represented the fair market
value for these services rendered at such time.         

         During 1997, the Company issued 205,000 shares of common stock as
  consideration for consulting services performed by various
     consultants, including related parties, during the year ended
      December 31, 1997. Shares issued under these arrangements were
            valued at $839,550, which was all charged to operations during 1997.

General                                                 

           Shares of common stock and stock options issued for other than cash
            have been assigned amounts equal to the fair value of the underlying
            service or assets received in the exchange. The fair market value of
      the shares issued were determined by taking into consideration
            restrictions on future sale, risks associated with start-up of a new
          business, lack of revenues, lack of working capital and equity and
other various economic risks.                           

      Compensation to related parities paid in the form of shares of
          common stock or stock options, materially approximate amounts that
would have been paid by unrelated parties.              

Warrants                                                

     At December 31, 1997, the Company had outstanding warrants to
         purchase 1,426,500 shares of the Company's common stock at prices
ranging from $1 to $5.02 as described below.            

            Pursuant to a financial consulting agreements, in April of 1996, the
      Company agreed to issue warrants to purchase 600,000 shares of
       common stock. The warrants are exercisable for a period of four
       years commencing May 22, 1997 at an exercise price of $1.00 per
           share. To date, the Company has issued warrants to purchase 130,000
        shares of common stock. The Company has not issued the remaining
       470,000 warrants due to the non-performance of services and for
other business reasons (see Note 12).                   

     In October 1996, the Company entered into two-year consulting
         agreements with two individuals for certain advisory services. As
        full compensation for services to be rendered to the term of the
          agreements, the Company issued warrants to purchase 150,000 shares
   of common stock each exercisable for a period of five years
           commencing October 1, 1996 at an exercise price of $1.50 per share.
        For the years ended December 31, 1996 and 1997, no warrants were
exercised.                                              

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 10 - STOCKHOLDERS' EQUITY (Continued)                                      

          As additional consideration for monies advanced the Company during
          1997 (Note 6), a shareholder received warrants to purchase 364,000
         common shares at a price of 110% of the average market price over
         the five-day period ending November 20, 1997, or $5.02 per share.
           The warrants may be exercised commencing January 1, 1998 and expire
            on December 31, 2000. The warrants were assigned a value of $862,680
         which was all charged to operations as a financing expense during
1997.                                                   

           Pursuant to a financial consulting agreement in December of 1997, a
          consultant was issued warrants to purchase 35,000 shares of common
          stock at $4.73 per share. The warrants may be exercised commencing
          January 1, 1998 and expire on December 31, 2000. The warrants were
            assigned a value of $39,588 which was all charged to operations as a
financing expense during 1997.                          

    Pursuant to the Convertible Debenture financing completed in
     November of 1997, the Company issued to the purchasers of the
         debentures warrants to purchase 60,000 shares of common stock and
           issued to the placement agent warrants to purchase 67,500 shares of
           common stock at $4.73 per share. The warrants may be exercised over
       the two-year period ending November 27, 1999. The warrants were
           valued at $284,480 and said amount will be charged to operations as
        a financing cost over the 180-day period commencing November 27,
1997.                                                   

      In estimating the value of warrants pursuant to the accounting
        provisions SFAS 123, the Company used the following assumptions:

                                    December 31, 1996    December 31, 1997
                                    -----------------    -----------------

  Risk-free interest rate             6%                  5%
    Expected life                    3 years             2 years
    Expected volatility                30%                99.61%
 Dividend yield                      0                   0

        If such accounting provisions of SFAS 123 were applied, then the
     Company's net loss and the net loss per share would have been
          $3,764,983 and $.25, respectively, for the year ended December 31,
       1996. There is no proforma effect for 1997 because the warrants
       issued during 1997 were to non-employees and were for financing
          services. The value assigned to these warrants is being charged to
operations over the expectant life of the related debt. 

Earnings Per Share                                      

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

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 10 - STOCKHOLDERS' EQUITY (Continued)                                      

            Warrants to purchase common stock                          1,426,500
Convertible Debentures (assumed conversion at initial   
             floor price and at largest discount)                      2,142,857
            Options to purchase common stock                              75,000
                                                                       ---------

            Total as of December 31, 1997                              3,644,357
                                                                       =========

Substantial issuance after December 31, 1997 through    
March 12, 1998:                                       
Convertible Debentures issued February 1998 (assumed  
conversion at initial floor price and at largest    
              discount)                                                2,900,000
                                                                       =========

NOTE 11 - 1995 STOCK OPTION PLAN                                                

            The Company's 1995 Stock Option Plan (the "Option Plan") was adopted
    by the Board of Directors and stockholders of the Company on
       November 12, 1995. Under the Option Plan, 500,000 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 Plan 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 Plan to
     employees (including officers) of the Company or a subsidiary
         corporation (or any director of, or consultant or advisor to, the
        Corporation, as may be selected by the committee) thereof on the
 date of grant. Nonqualified options may be granted to (i)
           non-employees of the Company or a subsidiary thereof on the date of
      the grant, and (ii) consultants of 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 Plan is 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 Plan, 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 Plan 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 Plan will expire not more than ten years from the date of the
            grant subject to earlier termination under the Option Plan. 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 Option Plan
will terminate on November 12, 2005.                    

         As of December 31, 1997, no options were granted under the Option
Plan.                                                   

NOTE 12 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS                          

Lease Obligations                                       

        In August 1996, the Company entered into a sublease agreement to
         rent office space for a period of fourteen months. On November 1,
         1997, the Company renewed its lease for a five-year period. Under
        the lease agreement, annual rent will amount to $48,000 for each
     year, commencing November 1, 1997, subject to certain expense
adjustments.                                            

     Commencing March 1997, the Company rented office space at the
       premises of Technion Entrepreneurial Incubator, Ltd., in Haifa,
         Israel, on a month-to-month tenancy basis at the rate of $300 per
month.                                                  

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 12 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)              

       Rent expense for all premise operating leases was approximately
         $-0-, $11,000 and $42,000 for the period ended December 31, 1995,
     and the years ended December 31, 1996 and 1997, respectively.

Employment Agreement                                    

       The Company terminated the employment agreement with the former
            President of the Company effective on February 28, 1998. Pursuant to
           the employment agreement, the former President received: (i) a base
        salary of $77,374 per year; (ii) 255,000 shares of the Company's
            common stock. The 255,000 shares issued pursuant to the contract was
     valued at $152,000 and was charged to operations during 1996.

Consulting Agreements/Commitments                       

          Commencing January 1, 1997, the Company agreed to pay a consultant
            and advisor to the Company who is also a shareholder of the Company,
     monthly consulting fees of $16,667. This agreement expired on
December 31, 1997.                                      

            The Company engages ERBC under an oral agreement to develop business
            plans, develop business opportunities in the European Union, Russian
          and Ukraine and for the evaluation of various technologies held by
        former instrumentalities in the former Soviet Union. The Company
      paid ERBC for consulting services $177,400, $16,200 and $-0- ,
        respectively, during the period from inception (May 26, 1995) to
       December 31, 1995 and for the years ended December 31, 1996 and
1997.                                                   

          On April 15, 1996, the Company entered into a consulting agreement
            with a director and, effective January 23, 1998, the Chairman of the
        Company to evaluate technologies acquired by the Company for the
            purpose of introducing such technologies to potential licensees. The
       agreement calls for a payment of $10,000 and issuance of 20,000
      shares of common stock as consideration for services performed
       through September 15, 1996. Commencing October 15, 1996 through
        April 15, 1998, the Company is obligated to pay $2,000 and issue
           4,000 shares of common stock on a monthly basis as compensation for
            the consulting services through the earlier of April 15, 1998 or the
termination date.                                       

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 12 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)              

       In July 1996, as amended, the Company entered into a consulting
           agreement to provide financial public relations services for a term
           of two years. The agreement can be terminated by the Company at the
          end of any calendar quarter by providing one week's written notice
     to the consultant. The agreement provided that the consultant
          initially receive monthly payments of $2,500, increased to $5,000,
           effective November 1996. Also, the consultant was granted an option
       to acquire up to 12,500 shares of common stock in each calendar
        quarter at an exercise price equal to the ask price per share on
            July 1 of each year as reported by National Quotation Bureau. During
       1996 and 1997, options to acquire up to 25,000 common shares at
    $2.50 per share and 50,000 common shares at $6.75 per share,
         respectively, have vested under this agreement, but have not been
        exercised by the consultant. Each option shall has a term of one
year.                                                   

         In November 1996, the Company entered into a consulting agreement
          for certain technology advisory services, including the evaluation
          of nuclear waste disposal technologies acquired by the Company for
            the purpose of introducing such technologies to potential licensees,
           for a term of two years. The Company is obligated to pay $4,000 and
          issue 20,000 shares of common stock for services performed through
          November 15, 1996. Commencing December 15, 1996, the consultant is
         obligated to receive $4,000 and 4,000 shares of common stock on a
       monthly basis as compensation during the term of the agreement.

         In December 1996, the Company entered into a consulting agreement
       for certain advisory services, including directing a technology
          development branch in Israel, for a term of two years. The advisor
        is obligated to be paid $2,000 and issued 5,000 shares of common
            stock for services performed through November 15, 1996. In addition,
        commencing January 1, 1997, on a monthly basis, the advisor will
       receive as compensation $1,000 and 2,000 shares of common stock
            during the term of the agreement. On December 1, 1997, the agreement
           was revised for a term of two years commencing on December 1, 1997.
  The revised agreement states that, on a monthly basis, the
      compensation will increase to 3,000 and 4,000 shares of common
stock.                                                  

         In December 1996, the Company entered into a consulting agreement
 for certain services, including establishing a technology
            development branch is Israel, for a period of two years. The Company
          is obligated in January 1997 to pay $2,000 and issued 5,000 shares
         of its common stock for services rendered through the date of the
            agreement. In addition, commencing January 1, 1997, the advisor will
       receive as compensation $1,000 and 1,000 shares of common stock
during the term of the agreement.                       

         In December 1996, the Company entered into a consulting agreement
         with a shareholder of the Company for certain technology advisory
           services, including establishing a technology development branch in
         Israel, for a term of two years. Under the agreement, on April 1,
          1997, the Company will pay an introductory sum of $2,000 and issue
   5,000 shares of common stock. Commencing April 1, 1997, the
          shareholder will receive $1,000 on a monthly basis as compensation
during the term of the agreement.                       

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 12 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)              

         In December 1996, the Company entered into a consulting agreement
      for certain advisory services, including managing a technology
          development branch in Israel, for a term of two years. The advisor
        is obligated to be paid $2,000 and issued 5,000 shares of common
            stock for services performed through November 15, 1996. In addition,
        commencing January 1, 1997, on a monthly basis, the advisor will
       receive as compensation $1,000 and 2,000 shares of common stock
            during the term of the agreement. On December 1, 1997, the agreement
           was revised for a term of two years commencing on December 1, 1997.
  The revised agreement states that, on a monthly basis, the
       compensation will increase to $3,000 and 4,000 shares of common
stock.                                                  

   Compensation paid to related parties under the above listed
         consulting and other arrangements materially approximated amounts
which would be assessed by unrelated parties.           

International Operations                                

         The Company has strategic alliances, collaboration agreements and
        licensing agreements with entities which are based in Russia and
      Ukraine. Both of these countries have experienced volatile and
         frequently unfavorable economic, political and social conditions.
        The Russian economy and the Ukraine economy are characterized by
   declining gross domestic production, significant inflation,
      increasing rates of unemployment and underemployment, unstable
       currencies, and high levels of governmental debt as compared to
            gross domestic production. The prospects of wide-spread insolvencies
  and the collapse of various economic sectors exist in both
countries.                                              

         In view of the foregoing, the Company's business, earnings, asset
        values and prospects may be materially and adversely affected by
        developments with respect to inflation, interest rates, currency
            fluctuations, government policies, price and wage controls, exchange
         control regulations, taxation, expropriation, social instability,
      and other political, economic or diplomatic developments in or
          affecting Russia and Ukraine. The Company has no control over such
           conditions and developments, and can provide no assurance that such
           conditions and developments will not adversely affect the Company's
operations.                                             

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

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                            

      Financial instruments which potentially subject the Company to
            concentration of credit risk consist principally of cash which is at
          one bank. Future concentration of credit risk may arise from trade
     accounts receivable. Ongoing credit evaluations of customers'
           financial condition will be performed and, generally, no collateral
will be required.                                       

Litigation                                              

         In December 1997, Raymond Dirks, Jessy Dirks, Robert Brisotti and
          David Morris filed an action in the Supreme Court for the State of
          New York, County of New York, against Eurotech, Ltd. for breach of
     contract, seeking injunctive relief, specific performance and
           monetary damages of nearly $5 million (the "Dirks Litigation"). The
         Dirks Litigation arises solely from an agreement between Eurotech
    and National Securities Corporation ("National") relating to
          financial advisory services to be performed by National Securities
   Corporation, a broker/dealer with which the plaintiffs were
      affiliated and of which Raymond Dirks Research was a division.
          Eurotech granted National a warrant certificate for 470,000 shares
       at $1.00 per share as a retainer for general financial advisory
          services. In conjunction with the separation of the plaintiffs and
    Raymond Dirks Research from National Securities Corporation,
          National assigned a significant portion of the warrant certificate
to the plaintiffs.                                      

            The plaintiffs allege, among other things, that they are entitled to
            damages composed of both the value of the stock on the date of their
  purported exercise of an alleged assignment of the warrant
        certificate, and the decrease in value of the price of the stock
          since the date of their purported exercise. Eurotech believes that
          the plaintiffs have significantly overstated their monetary damage
          claim and that, having sought monetary damages, the plaintiffs are
not entitled to any type of equitable relief.           

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 12 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)              

         Process was served upon Eurotech at its California office in late
        January 1998. Eurotech intends to vigorously defend and believes
     that the plaintiffs' claims will be resolved favorably to the
 Company. If the Company were adjudged liable in the Dirks
          Litigation, the resolution of the litigation could have a material
adverse effect on the Company.                          

NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION                                    

Non-Cash Transactions                                   

1995:                                                   

       During the period from inception (May 26, 1995) to December 31,
         1995, the Company issued 440,000 shares of common stock to settle
         liabilities of $27,500 associated with stock offerings and issued
           600,000 shares of common stock for the purchase of a license valued
at $37,500.                                             

       During the period from inception (May 26, 1995) to December 31,
           1995, the Company issued stock options for 600,000 shares of common
       stock to settle legal and consulting fee liabilities of $75,000
associated with stock offerings.                        

NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION (Continued)                        

1996:                                                   

   During the year ended December 31, 1996, the Company issued
            4,440,036 shares of common stock to settle liabilities of $1,381,736
associated with consulting services and financing costs.

1997:                                                   

           During the year ended December 31, 1997, the Company issued 205,000
           shares of common stock to settle liabilities of $839,550 associated
with consulting services.                               

NOTE 14 - ABORTED PROPOSED INITIAL PUBLIC OFFERING OF PREFERRED STOCK           

         In June of 1997, the Company had determined not to proceed with a
            previously contemplated, initial public offering of 5,000,000 shares
      of cumulative convertible preferred stock. Costs in connection
         therewith, aggregating $75,000, were charged to operations during
the year ended December 31, 1997.                       

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 15 - SUBSEQUENT EVENTS                                                     

Technologies Acquired                                   

           Pursuant to three Technology Purchase Agreements each dated January
          1, 1998, the Company has acquired from Oleg L. Figovsky, Ph.D. , a
          consultant to the Company, all right, title and interest in and to
     the following three unpatented technologies developed by him,
        inclusive of future improvements thereto: (i) a group of related
   technologies collectively known as "Interpenetrated Network
            Polymers" ("INPs"), (ii) "Liquid Ebonite Material" ("LEM") and (iii)
            "Rubber Concrete" ("RubCon") for purchase prices of $75,000, $15,000
         and $35,000, respectively (each, a "Purchase Price"). Pursuant to
      each such Technology Purchase Agreement, during 15-year period
         commencing on January 1, 1998, the Company is obligated to pay to
         Dr. Figovsky royalties equal to 49% of the Company's net revenues
    from the sale or licensing of any products incorporating the
            applicable technology, subject to the Company's right to deduct from
         the first royalties payable under each agreement an aggregate sum
equal to the Purchase Price paid thereunder.            

Convertible Debenture Offering                          

          On February 23, 1998, the Company sold through a private placement
          $3,000,000, 8% convertible debenture notes, due February 23, 2001.
            As additional consideration, the Company issued separate warrants to
         purchase 60,000 shares of the Company's common stock at $2.30 per
share. The warrants are exercisable over two years.     

        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. The notes
        conversion feature commences at the earlier of: (i) the date the
           underlying shares to the convertible debenture notes are registered
         and declared effected by the SEC; (ii) 90 days after February 23,
        1998. Shares of common stock to be issued at the conversion date
           shall be equal to the outstanding principal and accrued interest at
            the conversion date, divided by the conversion price. The conversion
         price is the lower of $2.62 or the average bid price per share of
    the Company's common stock for five trading days immediately
    preceding the conversion date, multiplied by (i) 80% for any
          conversion honored prior to the 180th day after February 23, 1998,
         (ii) 75% for any conversion honored on or after the 180th day and
         prior to the 360th after February 23, 1998, and (iii) 70% for any
       conversion honored after the 360th day after February 23, 1998.
          Furthermore, the conversion price may not be less than a specified
         "floor" initially set at $1.625. Commencing on February 23, 2000,
            all or any portion of the remaining debt due under this financing at
            the option of Eurotech is convertible into shares of common stock at
the 70% conversion rate.                                

            Furthermore, the Company has agreed that if a Registration Statement
            covering the underlying shares of the convertible note is either not
            filed with the SEC on or prior to March 2, 1998 or, if filed, is not
        declared effective by the SEC on or prior to March 15, 1998, the
            Company will be obligated to pay to the debenture holders liquidated
         damages equal to 1% of the aggregate principal amount of the then
          outstanding notes on the first day of each month until such filing
or effectiveness deficiency is cured.                   

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EUROTECH, LTD.
 (A Development Stage Company)

 NOTES TO FINANCIAL STATEMENTS

 DECEMBER 31, 1997

NOTE 15 - SUBSEQUENT EVENTS (Continued)                                         

           The Company intends to assign a value to the debentures' beneficial
           conversion feature and warrants amounting to $1,100,000, which will
be amortized over 180 days commencing February 23, 1998.

         Proceeds from the sale of the 3,000,000, 8% convertible debenture
          notes amounted to $2,765,000 net of costs which were comprised of:
    (i) legal and professional fees amounting to $10,000, (ii) a
            placement fee to an unrelated party amounting to $225,000. The legal
   and placement fees of $235,000 will be recorded as deferred
      financing costs and will be amortized over 180 days commencing
February 23, 1998.                                      

Repayment of $2,000,000 Bridge Notes                    

            On March 6, 1998, the Company repaid all of the $2,000,000 principal
            due to the holders of the bridge notes from proceeds of the February
1998 Convertible Debenture offering.                    

F-34

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SIGNATURES

  Pursuant to the requirements of 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, on April 
14, 1998.                                                                       

              EUROTECH, LTD.

                  By:/s/ Peter Gulko
                                         -----------------------------------
                                          Peter Gulko, President and Secretary

            Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.                               

Signature                      Title                        Date      

/s/James D. Watkins          Director and Chairman           April 14, 1998     
----------------------                                                          
James D. Watkins                                                                

/s/Maxwell Robb              Director                        April 14, 1998     
----------------------                                                          
Maxwell Robb                                                                    

/s/Lawrence McQuade          Director                        April 14, 1998     
----------------------                                                          
Lawrence McQuade                                                                

/s/Peter Gulko               President and Secretary         April 14, 1998     
----------------------                                                          
Peter Gulko                                                                     

/s/John McNeil Wilkie       Sr. Vice President and          April 14, 1998      
----------------------       Chief Financial Officer                            
John McNeil Wilkie                                                              

F-35

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		8/1/14		5		48
		11/12/05		62
		2/23/01		18		68
		12/31/00		53		61			10-K,  5
		11/27/00		18		58
		2/23/00		24		68
		11/27/99		24		61
		11/6/99		4		50
		2/8/99		24
		2/1/99		50
		11/25/98		24		59
		11/1/98		49
		9/4/98		4
		8/31/98		14
		8/22/98		24
		8/1/98		49
		5/29/98		24		59
		5/6/98		4
		5/4/98		4
		4/15/98		63
Filed on:		4/14/98		37		70
		4/13/98		27
		4/2/98		58
		4/1/98		58					NT 10-K
		3/31/98		2		29			10-Q
		3/18/98		23		57
		3/15/98		68
		3/12/98		59		62
		3/6/98		54		69
		3/2/98		68
		3/1/98		14
		2/28/98		63
		2/26/98		23
		2/25/98		24		58
		2/23/98		24		69
		2/16/98		24		59
		2/13/98		6		31
		1/23/98		6		63
		1/15/98		24		59			S-1/A
		1/1/98		4		68
For Period End:		12/31/97		1		69			10-K/A,  NT 10-K
		12/19/97		23		57
		12/18/97		54
		12/2/97		35
		12/1/97		64		65
		11/27/97		23		61
		11/20/97		61
		11/17/97		27					8-K
		11/1/97		62
		5/22/97		60
		4/1/97		64
		3/20/97		12		51
		1/28/97		31		51
		1/1/97		25		65
		12/31/96		20		67
		12/15/96		64
		11/15/96		64		65
		10/15/96		63
		10/1/96		60
		9/18/96		32
		9/16/96		31
		9/15/96		63
		9/6/96		31
		8/31/96		30
		6/30/96		30
		6/1/96		14		47
		4/15/96		63
		1/18/96		30		57
		1/1/96		45		57
		12/31/95		20		67
		12/1/95		52
		11/30/95		52
		11/12/95		62
		10/10/95		30		57
		7/25/95		16
		5/29/95		52
		5/26/95		20		67
		5/1/95		52
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