U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

(X)  ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
     1934

                   For the fiscal year ended December 31, 1999

                         Commission File Number 0-20701

                                Compositech Ltd.
                 (Name of small business issuer in its charter)

         Delaware                                         11-2710467
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                         Identification No.)

                  120 Ricefield Lane, Hauppauge, New York 11788
                    (Address of principal executive offices)

                    Issuer's telephone number: (631) 436-5200

         Securities registered under Section 12(b) of the Exchange Act:

                                      None

         Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.01 par value
                        Redeemable Common Stock Warrants

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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will 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-KSB
or any amendment to this Form 10-KSB. [ ]

     Issuer's revenues for fiscal year ended December 31, 1999: $794,988

     As of March 28,  2000,  there were  19,707,215  shares of the  registrant's
Common Stock, $.01 par value  outstanding.  The aggregate market value of Common
Stock  held by  non-affiliates  of the  registrant,  as of  March  28,  2000 was
approximately $27,536,066.

Documents  Incorporated  By Reference:  Portions of the issuer's Proxy Statement
for its 2000 Annual  Meeting of  Stockholders  scheduled  to be held on June 20,
2000, are incorporated by reference into Part III of this Form 10-KSB.

     Transitional Small Business Disclosure Format (check  one): Yes    No  X
                                                                    ---    ---


<PAGE>


                                     PART I

Item 1.  Description of Business

General

     Compositech  Ltd. (the "Company" or  "Compositech")  was founded in 1984 by
Jonas Medney,  the Company's  Chairman,  and Fred Klimpl,  to develop and market
innovative superior copper-clad  fiberglass epoxy laminates used to make printed
circuit  boards  required by the  electronics  industry.  The  Company  became a
publicly owned corporation in 1996. The primary innovation of Compositech was to
replace the  fiberglass  cloth  component of the laminate with a more modern and
structurally  efficient  fiberglass core resulting from a uniform,  orthogonally
layered  construction.  Based on its own benchmark  testing and  evaluations  by
customers and other potential  users, the Company believes that it has succeeded
in developing a laminate that is superior to competitive  copper-clad fiberglass
epoxy laminates.

     On December 3, 1999, the Company suspended its manufacturing operations due
to a lack of adequate financing and refocused its resources on locating suitable
licensees,  joint venture partners or purchasers for its technology. The Company
is  also  exploring  potential  mergers  and  acquisitions  or  other  strategic
transactions. As a result, the Company's staff was reduced from 124 employees to
seven.

     As of December 31, 1999,  Christopher F. Johnson resigned from his position
as  President  and Chief  Executive  Officer and from the Board of  Directors to
accept a position with Park Electrochemical Corp., a manufacturer of laminates.

     In January and February  2000, the Company had licensing  discussions  with
several  potential  licensees  and hired  International  Licensing  Network as a
consultant.  In March 2000, the Company formally  launched its licensing program
by sending  proposals  to a limited  number of select  candidates  supported  by
recommendation letters from several original equipment  manufacturers  ("OEM's")
and printed circuit board customers of the Company.

Technology History

     The Company's innovative laminates are produced using proprietary processes
and  machinery,  designed by the Company's  engineering  staff.  The Company has
received  grants of 30 patents  covering its products,  processes and apparatus,
including five in the United States,  and has submitted four  additional  patent
applications.  The most recent patents granted were a fifth one in Japan and one
in  Brazil.   The  patents  on  the  laminates,   processes  and  apparatus  are
supplemented  with other  proprietary  technology  unprotected  by  patents  and
considered by the Company to be of substantial value.

     Compositech's  laminate  construction is  structurally  more efficient than
competitive  copper-clad  fiberglass epoxy laminates designated "FR-4", which is
the industry standard,  resulting in enhanced smoothness and greater dimensional
stability.  The Company  believes,  based on results of customers'  evaluations,
that its improved products can economically  substitute for the fiberglass woven
cloth epoxy laminates currently used in the electronics  industry.  According to
the Institute for Interconnecting and Packaging Electronic Circuits (the "IPC"),
this market  exceeded  $2.4  billion in 1998,  the latest year for which data is
available.

     The Company successfully constructed, debugged and operated its first pilot
plant production equipment for laminates with a panel size of 24" x 24" in 1991.
In 1991 and 1992,  Compositech  recruited an initial  sales staff to develop the
market  potential of its product,  continued  refining its product and designing
its production equipment to manufacture laminates with a panel size of 36" x 48"
and initiated a sampling program targeted at major potential customers. In 1994,
the  Company  started  up and began  debugging  its first  production  module to
manufacture  36" x 48" laminates  and, in 1995 and 1996,  produced  laminates on
this equipment in limited quantities for the purpose of making  modifications to
the production processes and equipment constituting the module and reformulating
the laminates produced by the module. In 1996, the Company began installation of
advanced production  equipment which was completed in 1997.  Throughout 1997 and
1998, the Company worked on adjusting and enhancing its production equipment and
its  manufacturing  processes.  In 1998 and 1999,  the Company added  production
equipment  and  expanded  its labor  force.  The Company  also worked on solving
problems  with  incoming raw  materials  and interior  environment  which affect
manufacturing  yields.  In June  1999,  the  Company  signed a supply  and



                                       2
<PAGE>


joint product development agreement with Teradyne, Inc. The necessary production
ramp up to meet  this and other  customer  demands  was  adversely  affected  by
difficulties in hiring and training skilled operators due to a labor shortage in
the Long Island,  New York area where the Company operates.  Because of this and
the inability to obtain adequate financing,  as of December 3, 1999, the Company
suspended manufacturing operations and refocused its efforts on finding suitable
licensees, joint venture partners or purchasers for its technology.

Joint Ventures

     On October 16,  1997,  the Company  closed a  transaction  with four Quebec
institutional investors  (collectively,  the "Quebec Investors") to form a 50/50
joint venture for the  establishment  of a plant in the greater Montreal area to
manufacture  Compositech's  laminates.  The investor group was comprised of four
institutional  investors:  Societe  generale de financement du Quebec,  Fonds de
solidarite des  travailleurs  du Quebec  (F.T.Q.),  Societe  Innovatech du Grand
Montreal  and Fonds  regional  de  solidarite  Ile de  Montreal.  The  Company's
approximately $5.4 million capital investment in the joint venture was funded by
the Quebec Investors purchasing 1,066,192 shares of the Company's Common Stock.

     On November 26, 1999,  Pierre LaFlamme,  a member of our board of directors
who was appointed by the Quebec  Investors  resigned from the Company's board of
directors.  In December of 1999,  the  Company  received  notice from the Quebec
Investors that they intended to begin the process of liquidation and dissolution
of the Canadian  joint venture due  principally  to the  Company's  inability to
finance itself  adequately  which  resulted in an inability to obtain  necessary
financing  for the  joint  venture  in the  required  time  periods.  Under  the
liquidation  terms of the joint venture  agreement,  the Quebec  Investors  will
receive the proceeds of the  liquidation  of the assets of the joint venture and
the Company will  receive back  approximately  951,000  shares of the  1,066,192
shares  of the  Company's  common  stock  originally  purchased  by  the  Quebec
Investors.

     On February 9, 1998, the Company entered into a joint venture agreement and
patent,  information and trademark  agreement with a Taiwanese investor group to
establish a joint venture to manufacture the Company's  laminates in Taiwan. The
Company  received  $1  million  as a license  down  payment  and was to  receive
additional  up-front  license  payments of $1 million  upon the  achievement  of
certain  milestones.  As part of the  transaction,  the joint  venture  acquired
587,372 shares of the Company's  common stock for $1 million and agreed to buy a
like amount of shares for another $1 million within 30 days  following  approval
of the joint  venture  license by the science  park where the joint  venture was
proposed to be located. During 1998, the Company received an advance of $500,000
against the latter purchase of shares, substantially all of which it invested in
the joint venture in accordance with the joint venture agreement.

     In October 1999,  the joint venture  partner  informed the Company that the
earthquake in Taiwan had affected  their ability to raise capital and proposed a
settlement of the joint venture  agreement and license.  As of February 7, 2000,
the   Company   reached  a   settlement   agreement   with  its  joint   venture
partner/licensee which terminates the joint venture agreement and the license to
use the proprietary technology of Compositech Ltd. in Taiwan. Under the terms of
the  settlement,  in exchange  for the  issuance of 587,372  shares of it common
stock,  the Company will retain the $1 million  license down payment it received
in 1998.  Additionally,  in  exchange  for the  return of the  Company's  equity
interest in the joint venture,  the Company will retain the $500,000  advance it
received to make the investment.


                                      3

<PAGE>


Industry Overview

     Initially,  most circuit boards had circuits  (traces) on one or two sides.
In the last ten years, rapid technological advances in both semiconductor design
and fabrication techniques have placed significant demands on the performance of
printed circuit boards. Greater circuit density,  complexity and miniaturization
have increased demand for more sophisticated printed circuit boards. In response
to  this  demand,   multilayer  printed  circuit  boards  were  developed  which
incorporate  multiple layers of metallic traces. The several layers of circuitry
are aligned and bonded together in a stack to form a multilayer  board with both
horizontal  and vertical  electrical  interconnections.  Further  circuit  board
sophistication  is currently  being  achieved by increasing the number of layers
and by decreasing the width and  separation of the traces,  drilling and plating
smaller holes to connect the internal  trace layers and precisely  situating the
traces and pads on the board surface to accommodate surface mount components.

     These trends in the printed circuit board industry have placed increasingly
rigorous demands on the electrical,  thermal, chemical and mechanical properties
of  laminates.  Mechanical  properties  must be  increasingly  more  uniform and
tightly  controlled in order to align the various layers in a multilayer printed
circuit board.  Electrical properties of laminates must be highly consistent and
predictable in order to avoid circuit timing malfunctions.  Thermal stability is
also critical for attaching the  components  and for dense,  high speed systems,
because of the heat generated.


Products

     Printed  Circuit  Board  Laminates.  Printed  circuit  boards are the basic
platforms used to  interconnect  the  microprocessors,  integrated  circuits and
other  components  essential to the  functioning  of electronic  products.  They
consist of a pattern of electrical  circuitry resulting from etching copper foil
laminated  to a composite  made of  insulating  materials  usually  comprised of
fiberglass  and epoxy.  The  laminate  itself,  therefore,  is the  copper-clad,
fiberglass and epoxy core from which printed circuit boards are produced.

     Compositech's  Laminates.  CL200+ is the first Compositech  laminate.  This
laminate uses the same basic raw materials as conventional laminates: fiberglass
yarn,  epoxy resin and copper  foil.  Compositech's  technology  combines  these
materials into a unique,  more efficient  laminate.  Conventional  laminates are
made from woven fiberglass cloth in which the yarn is twisted and crimped in the
weaving process.  The resultant weave pattern is impressed into the copper foil,
thereby  roughening  the  surface  of  the  laminate.  In  the  construction  of
Compositech's  laminates,  the filaments of  fiberglass  are wound in orthogonal
layers of flat,  continuous  parallel filaments.  This construction  creates the
enhanced  smoothness  and  improved   dimensional   stability  of  Compositech's
laminates.

     High processing temperature tolerance is necessary for soldering components
to circuit  boards.  CL200+ uses a  proprietary  epoxy resin  formulation  that,
according  to Company  tests,  results in a thermal  rating  over  200(degree)C,
principally  because  of the  formulation,  which is  generally  20(degree)C  to
80(degree)C  higher than other copper-clad  fiberglass epoxy laminates.  Certain
laminates  produced from materials  other than  fiberglass  epoxy,  addressing a
small, higher cost end of the market, have thermal ratings which equal or exceed
those of the Company's introductory CL200+ laminates.

     Management  believes that the benefits of  Compositech's  laminates  should
enable the printed circuit board industry to:

o    Decrease costs through reducing waste in the manufacture of existing boards
     because the improved  dimensional  stability,  temperature  tolerances  and
     enhanced smoothness increase manufacturers' yields.

o    Economically  produce large printed  circuit  boards with high layer counts
     because of the improved dimensional stability.

o    Accelerate the development of new products  requiring  denser  circuitry by
     permitting finer lines and smaller pads. A pad is a portion of a conductive
     pattern  which is usually,  but not  exclusively,  used for the  connection
     and/or attachment of components.



                                        4
<PAGE>


Compositech's Strategy

     Until December 3, 1999,  Compositech had focused its resources on utilizing
its  technology to  manufacture  laminates for the  multilayer/high  performance
laminate segment of the market.  In 1998, this market was $2.4 billion worldwide
according  to IPC, a trade  organization  and the United  States'  share of this
market was $852 million.  In the second half of 1999, the Company  experienced a
demand for product that was greater than its  production  capability and was not
able to obtain  adequate  financing  to  maintain  or expand  its  manufacturing
capabilities.   On  December  3,  1999,  the  Company  suspended   manufacturing
operations  and refocused its resources on locating  suitable  licensees,  joint
venture  partners or purchasers for its technology.  As a result,  the staff was
reduced from 124  employees to seven.  The Company  expects to achieve its goals
through the  effective  exploitation  of its patented and  proprietary  products
through licensing or strategic partnerships.

     On December 27, 1999,  the Company signed a letter of intent with Netdirect
International  Corporation regarding a potential merger of the two companies. On
March 6, 2000, the parties terminated their merger discussions.

     The  Company  has  begun  licensing   discussions  with  several  potential
licensees and hired  International  Licensing Network as a consultant.  In March
2000, the Company formally  launched its licensing  program by sending proposals
to a limited number of select  candidates  supported by  recommendation  letters
from several  original  equipment  manufacturers  ("OEM's") and printed  circuit
board customers of the Company. The Company has received responses from a few of
these candidates,  indicating their interest in pursuing  discussions to explore
this opportunity.

     Management  believes that the Company's  technology  has global  potential.
According to IPC data,  approximately  65% of the 1998 world laminate market for
the multilayer/high performance segment was outside of North America.

     The foregoing strategic  objectives represent  anticipated  accomplishments
dependent on future events.  As in the case of all forward  looking  statements,
the Company can not ensure that it will achieve these goals.

Marketing and Customers

     The Company's  marketing efforts were directed to establishing good working
relations with  leading-edge  producers of printed circuit boards.  According to
the IPC, in 1998 there were over 690  manufacturers of printed circuit boards in
North America with ten companies comprising approximately 44% of the market. The
Company has sold its laminates  principally on a test basis to a select group of
these companies which were considered to be the key companies for  Compositech's
growth.  During the past  three  years,  Compositech  has  encouraged  benchmark
comparisons  of  its  laminates  with  current  laminates  which  have  included
qualities such as dimensional  stability,  electrical  performance,  smoothness,
flatness and thermal processing.  In virtually all of these evaluations,  CL200+
has proven  superior to current  laminates.  Customers  benefit  from  increased
production  yield primarily by reducing waste caused by circuitry  misalignment.
These  results  led  several  manufacturers  to begin to use CL200+ for  current
production applications.

     During 1998 and 1999, the Company  received orders from Teradyne,  Inc. for
its CL200+  copper-clad  laminates.  The orders enabled Teradyne to do extensive
material  testing and product  evaluation  in backplane  programs  that included
circuit boards with as many as 48 circuit layers. This led to a supply and joint
product  development  agreement in June of 1999. The CL200+  laminates were used
for  production  runs  and  customer  qualification  of  complex  backplanes.  A
backplane,  sometimes known as a motherboard or backpanel,  is a type of printed
circuit board which serves as the backbone of large electronic  equipment,  such
as internet servers and telecommunication switching equipment and often utilizes
20-, 30- and even 60-layer  boards to which smaller  printed  circuit boards are
connected.  The Teradyne joint  development  agreement was  terminated  when the
Company  suspended  manufacturing  operations  in  December  of 1999.  Since the
Company did not meet the minimum  commitment  under the agreement,  Teradyne has
the  option  of  obtaining  a  non-exclusive  royalty  bearing  license  for the
manufacture  of CL200+  for  their  own  internal  use and to  purchase  certain
production  equipment.  To date, Teradyne has not exercised the option to obtain
this license.

     Compositech's  laminates  are designed to be and have proven to be directly
substitutable for



                                       5
<PAGE>


conventional  laminates in the circuit board production  process as demonstrated
by their use in production by customers.  This compatibility enables the circuit
board  manufacturer to substitute  Compositech's  laminates with minimal process
changes and without the need for additional equipment or new process technology.

Competition

     The  laminate  manufacturing  business is highly  competitive.  Competitors
include  major  corporations,  such as  General  Electric  Company,  which  have
substantial financial,  marketing and technical resources.  In 1994, the Company
granted  patent  immunity  on its  product  patents to AMP and Akzo  Electronics
Products  NV,  which,  at the time,  were  operating a joint  venture  which was
developing a new process to make linear laminates.

     The  future  success  of  Compositech  will  depend on its  ability  or its
licensees or joint venture partners' ability to effectively market products made
using  Compositech'  technology  against  competitors with  potentially  greater
resources.  There is no assurance that the Company or its licensees will be able
to compete successfully in the future.

Manufacturing

     The Company  occupies a leased building at 120 Ricefield  Lane,  Hauppauge,
New York,  which  includes its  corporate  offices,  laboratory,  machine  shop,
engineering  offices and manufacturing  operations.  The lease expires in August
2000.

     Compositech's   manufacturing   process   is  unique  and   patented.   The
manufacturing  equipment has been designed by the Company's  engineering  staff.
Much of the equipment  incorporates  proprietary  designs including hardware and
software.   Management  believes  that  the  Company's   manufacturing   process
eliminates many manufacturing  steps compared to the conventional  manufacturing
process, including weaving fiberglass cloth.

     The Company's manufacturing process enables the manufacturer to control the
consistency  of mechanical,  thermal and  electrical  properties of laminates in
various  thicknesses.  In addition,  the Company's process eliminates the use of
solvents as an integral part of the manufacturing process although it uses small
amounts of  solvents  for the sole  purpose of cleaning  some of its  equipment.
Compositech's  CL200+  laminate is  comprised of copper,  fiberglass  and epoxy.
Other  combinations  of materials  usable in this process include aramid fibers,
quartz fibers, carbon fibers,  cyanate ester resins,  polyimide resins and other
conductive metal foils.


Materials and Sources of Supplies

         The  principal  materials  used  in the  manufacture  of the  Company's
laminates are copper foil,  fiberglass yarn and specially  formulated resins and
chemicals.  Prior to December 3, 1999, the Company's  policy was to identify and
concentrate  on a limited  number  of  chosen  suppliers.  The  Company's  major
suppliers  were Yates Foil,  USA,  Inc. and Gould  Electronics  for copper foil;
Advanced  Glassfiber Yarns LLC (successor to Owens Corning) for fiberglass yarn;
John C. Dolph  Company and Eastech  Chemicals  for  resins;  and Lonza Inc.  for
certain  chemicals.  The Company attempted to develop and maintain close working
relationships  with  those  chosen  suppliers  who  comply  with  the  Company's
stringent technical requirements and specifications.  The Company has identified
alternative sources of supply for each of the required materials. However, there
exists a limited number of qualified  suppliers of these materials.  Substitutes
for some of these  materials  are not readily  available,  and an  inability  to
obtain essential materials, if prolonged,  could materially adversely affect the
business of the Company including its licensing program.

Patents and Proprietary Information

     The Company  continues to build a patent estate to protect its  technology.
To date, 30 patents have been granted in the United States and  internationally.
The U.S. patents granted expire from 2007 to 2011. The foreign patents generally
have expiration  dates from 2004 to 2009.  Four patent  applications in the U.S.
and internationally are currently pending.  These patents and applications cover
the unique laminate product and the process and equipment used for producing the
laminates.  The patents also cover a precision


                                       6
<PAGE>


multilayer  process and a circuit transfer process.  Additional  inventions have
been  disclosed  to the  Company's  patent  attorneys  and may be the subject of
future patent applications.

     In addition,  the Company has developed extensive  proprietary  information
considered  to be of  substantial  value.  The  Company  has no patents for this
proprietary  information.  The Company believes that, although such information,
techniques  and  expertise  are  subject to  misappropriation  or  obsolescence,
development  of improved  methods,  processes and techniques by the Company will
continue on an ongoing basis.

     The Company expended  approximately  $173,000 and $283,000 for research and
development  during the years ended  December  31, 1999 and 1998,  respectively,
reflecting the Company's development efforts on new processes to manufacture its
patented laminates.


Environmental Matters

     Unlike  other  laminate  manufacturing  operations,  solvents  are  not  an
integral  part  of  the  Company's  manufacturing  process.  However,  when  the
manufacturing facility of the Company was operating, the Company used copper and
chemicals in its  manufacturing  process and limited amounts of solvents for the
sole purpose of cleaning  some of its  equipment  and as a result the Company is
subject to a variety of applicable environmental laws. The Company believes that
its facilities  comply in all material respects with applicable  federal,  state
and local  environmental  laws and believes that costs  arising from  compliance
with existing  environmental laws will not have a material adverse effect on the
Company's  ongoing  operations.  However,  environmental  laws could become more
stringent over time,  imposing greater compliance costs and increasing risks and
penalties associated with a violation.


Employees

     The Company  currently has 5 full-time and 2 part time  employees.  None of
the employees is subject to collective bargaining agreements.



                                       7
<PAGE>


Important Factors Regarding Future Results

     Information  provided by the Company,  including  information  contained in
this  Annual  Report,  or by its  spokespersons  from  time to time may  contain
forward-looking  statements concerning projected financial  performance,  market
and industry segment growth,  product development and commercialization or other
aspects of future operations.  Such statements, made pursuant to the safe harbor
established by recent securities  legislation,  are based on the assumptions and
expectations  of the Company's  management at the time such statements are made.
The  Company  cautions  investors  that its  performance  (and,  therefore,  any
forward-looking  statement)  is  subject  to risks  and  uncertainties.  Various
important  factors,  including but not limited to the  following,  may cause the
Company's  future  results  to differ  materially  from those  projected  in any
forward-looking statement.

Limited  Revenues;  Ability to Continue as Going Concern;  Uncertainty of Future
Results

     Compositech was a development  stage company through December 31, 1996, has
had limited revenues from the sale of laminates, has incurred significant losses
and has had substantial negative cash flow since its inception.

     As of  December  31,  1999,  the  Company  had an  accumulated  deficit  of
$50,349,052 and a capital  deficiency of $6,556,238.  The Company's  independent
auditors have  included an  explanatory  paragraph in their report  covering the
December 31, 1999 financial statements,  which expresses substantial doubt about
the Company's  ability to continue as a going  concern.  As of December 3, 1999,
the Company suspended manufacturing laminates due to a lack of skilled employees
and adequate  financing  and has  refocused  its  resources on finding  suitable
licensees, joint venture partners or purchasers for its technology.

     The Company requires  additional funding to cover past due accounts payable
and operating expenses until revenues either from manufacturing  operations,  if
any, or royalties  from licensing or joint venture  arrangements  are sufficient
for these purposes.  The Company expect that  significant  operating losses will
continue  in  2000.  The  Company  cannot  assure  you  that  it will be able to
successfully  license or realize on its  technology  or that the  Company or any
licensee will successfully achieve broad commercial  acceptance of the Company's
products or that the Company  will be able to  generate  sufficient  revenues to
achieve profitable operations.

Need for Additional Financing; Requirement of Settlement of Debts; Going Concern

     Compositech's available funds, without giving effect to alternative sources
of funding,  are not sufficient to continue as a going concern. The Company will
need additional  funding to pay past due accounts  payable and for operations in
2000 which may be raised through sources including:

     o    license fees;

     o    sales of equipment in connection with licensing operations;

     o    joint ventures or other collaborative relationships;

     o    mergers; or

     o    equity or debt financing.

     The Company  cannot assure you that  additional  funding will be sufficient
and available  or, if it is  available,  that it will be available on acceptable
terms.  Our funding  sources may require that our trade  creditors,  stockholder
note holders and deferred  salary payees  receive less than the full amounts due
them in cash and receive some amount in common stock.  Although discussions have
been started with certain  creditors in this regard,  there is no assurance that
the creditors will accept the proposals. If additional funds are raised or debts
are settled through the issuance of equity securities or securities  convertible
into equity securities, the percentage ownership of then current stockholders of
Compositech will be reduced and such securities may have rights,  preferences or
privileges  senior to those of the holders of common stock. If additional  funds
are not available to satisfy our past due accounts payable and our short-term or
long-term  capital  requirements,  Compositech  may not be able to continue as a
going concern.

Liens on Assets and Patents

     Compositech's  patents  and  certain  other  assets  are  subject  to liens
securing  outstanding  debt as follows:



                                       8
<PAGE>



     o    notes  payable to  stockholders  in the amount of  $100,000  and notes
          payable to  stockholders/directors/officers  in the amount of $733,333
          are  collateralized  by a  second  lien on  U.S.  Patents  and  Patent
          Applications;

     o    notes  payable  to  stockholders/directors/officers  in the  amount of
          $745,000 are collateralized by a first lien on Compositech's  patents,
          patent applications and certain production equipment; and

     o    term notes of  $2,322,972  issued in October  1999 (to  replace  those
          issued in  March,  April and July  1999) are  collateralized  by seven
          pieces of production equipment.

     If the  Company  defaults  on the  notes,  it could lose all or most of its
patents and certain  production  equipment.  The potential  loss of these assets
could force the Company to negotiate new and disadvantageous terms to extend the
due dates of such notes.

The Company May Not Obtain Suitable Licensees or Joint Venture Partners

     The Company is  currently  seeking  licensees,  joint  venture  partners or
purchasers for its technology.  There can be no assurances that the Company will
be able to find suitable licensees, joint venture partners or purchasers for its
technology or that the Company will be able to negotiate  acceptable  terms with
such entities if found. If Compositech is unable to find a suitable  licensee or
joint venture partner, it may not be able to continue as a going concern.

Competition

     The laminate  manufacturing  business is highly competitive.  Compositech's
competitors include major corporations,  such as General Electric Company, which
have  substantial  financial,  marketing and technical  resources.  In 1994, the
Company  granted  patent  immunity  on  its  product  patents  to AMP  and  Akzo
Electronics  Products NV,  which,  at the time,  were  operating a joint venture
which was developing a new process to make linear laminates.

     The  future  success  of  Compositech  will  depend on its  ability  or its
licensees or joint venture partners' ability to effectively market products made
using  Compositech's  technology  against  competitors with potentially  greater
resources.  The  Company  cannot  assure you that it or its  licensees  or joint
venture partners will be able to compete successfully in the future.

Management of Growth

     If Compositech is able to resume its manufacturing operations, it will need
to expand  significantly  its overall level of operations.  Any such  expansion,
however, is expected to strain the Company's  management,  technical,  financial
and other resources. To manage growth effectively, the Company must:

     o    add manufacturing capacity;

     o    add personnel;

     o    maintain a high level of quality;

     o    achieve good manufacturing efficiency; and

     o    expand, train and manage its employee base.

     Compositech's  failure to add capacity and manage growth  effectively could
have a material adverse effect on its business,  financial condition and results
of operations.




                                       9
<PAGE>


Reliance on Key Personnel

     The Company  believes that its success will depend to a significant  extent
upon the efforts of its executive  officers and senior management as well as the
Company's ability to attract and retain highly qualified  managerial,  technical
and  sales   personnel.   On  December  3,  1999,  the  Company   suspended  its
manufacturing operations and reduced its staff to nine and subsequently to seven
employees.  All manufacturing  and most of its engineers were terminated.  As of
December  31,  1999,  Christopher  F.  Johnson  resigned  from his  position  as
President and Chief Executive  Officer and from the Board of Directors to accept
a position with Park Electrochemical Corp., a manufacturer of laminates.

     The loss or  unavailability  of our  executive  officers  or  other  senior
management or the inability to attract,  assimilate or retain such  personnel in
the future  could  have a material  adverse  effect on  Compositech's  business,
financial  condition and results of operations.  In addition,  if the Company is
able to resume  manufacturing  operations,  it will  need to hire a  substantial
number of  skilled  employees  which  may be  difficult  due to the tight  labor
market.  The  Company  can  give no  assurance  that it will be able to hire the
required employees.

Dependence on a Single Manufacturing Facility; Process Disruptions

     The Company's current laminate manufacturing operations are in one building
in  Hauppauge,  New York.  If  Compositech  is able to resume its  manufacturing
operations,  the fact that it does not operate multiple  facilities in different
geographic  areas,  may affect its ability to obtain and service large orders or
time sensitive  orders.  Further,  a disruption of  Compositech's  manufacturing
operations  resulting  from  sustained  process   abnormalities,   human  error,
government  intervention or a natural disaster such as fire, earthquake or flood
could cause  Compositech to cease or limit its  manufacturing  operations.  This
could  have a  material  adverse  effect on  Compositech's  business,  financial
condition and results of operations.

Uncertainty of Production Quality and Production Costs ; Process Disruptions

     Compositech   has  limited   experience  in  producing   laminates  on  its
production-scale modules. In 1998 and 1999, the Company added production modules
to increase production levels and achieve economies of scale. This expansion was
the first production-scale expansion undertaken by Compositech, and consequently
no assurance can be given,  if Compositech  is able to resume its  manufacturing
operations,  and  Compositech's  production  facilities will meet its production
targets  in a  timely  way or that  the  resultant  product  will  meet the high
commercial standard needed for successful market penetration.  Furthermore,  the
expanded production  facilities may not be able to provide adequate efficiencies
or produce high yields.  In addition,  the costs of production may not be as low
as  management  expects,  in which case the Company  may not achieve  profitable
operations.

     The  Company  cannot  assure  you that  disruptions  will not  occur in the
future. If the Company is able to resume its manufacturing operations,  the loss
of revenue and earnings from such  disruptions  could have a materially  adverse
effect on its results of operations.

Dependence on Significant Customers

     Due to insufficient productive capacity,  Compositech had been focusing its
marketing efforts on a number of select accounts.  During 1998,  Teradyne,  Inc.
and HADCO Corporation accounted for 48% and 37%, respectively,  of sales. During
1999,  Teradyne,  Inc. and Tyco  International  Ltd. accounted for 53% and 31 %,
respectively,  of sales. The Company's business and finances would be negatively
affected if it resumed manufacturing and lost both of these customers. There can
be no assurances that Compositech's current inability to maintain  manufacturing
operations will not have a negative  impact on the Company's  relations with its
principal customers.

Dependence on Licensees or Joint Venture Partners

     If Compositech is able to find suitable licensees or joint venture partners
for its technology and negotiate a license or transaction with them, the Company
may be dependent on the manufacturing and machinery  capability of companies who
have  limited  experience  with  products  like the  Company's.  There



                                       10
<PAGE>



can  be no  assurance  that  such  licensees  or  joint  venture  partners  will
successfully utilize the Company's technology and achieve a level of sales which
will generate  royalty  income to the Company  sufficient to achieve  profitable
operations.

Technological Change

     Compositech's  laminates are used in the electronic  printed  circuit board
industry which could encounter  competition  from new technologies in the future
and reduce the number of circuit  boards  required in  electronic  equipment  or
render existing interconnect technology less competitive or obsolete.

Shortages or Poor Quality of Raw Materials or Price Increases  Could  Negatively
Impact Business

     If the Company is able to resume manufacturing operations, the Company will
purchase raw materials  used to produce  laminates and in certain  circumstances
would bear the risk of price fluctuations. In addition, shortages of and defects
in certain  types of  materials  have  occurred in the past and may occur in the
future.  During 1997 and 1999, the Company  experienced  defects in incoming raw
materials used to make  laminates.  Compositech  obtained  alternate  sources of
supply and also has  explored  solutions  with the  previous  suppliers.  Future
shortages,  defects or price fluctuations in raw materials could have a material
negative effect on the Company's  business,  financial  condition and results of
operations.

     Advanced  Glassfiber  Yarns  LLC,  a  major  fiberglass  manufacturer,  has
developed  products to meet the Company's  processing and product  requirements.
Should this  manufacturer  not  continue  supplying  the  Company's  quality and
quantity needs, it would have to secure another supplier. Such event could:

     o    have a material adverse effect on the ability to supply customers;

     o    reduce expected sales; and

     o    increase the costs of manufacturing products.

     No  assurance  can be given  that an  alternative  supplier  could meet the
Company's quality and quantity needs on satisfactory terms.

Patents and Intellectual Property Protections

     Compositech  believes that its patent estate and its know-how are important
for the  protection of its  technology.  Compositech  cannot assure you that any
patents  issued  to  the  Company  will  not  be   challenged,   invalidated  or
circumvented  or that such  patents  will provide  substantial  protection  with
respect to its product,  process or competitive position.  In addition,  certain
proprietary  information  which is considered to be of substantial  value is not
covered by patents and, along with the Company's other intellectual property, is
subject to misappropriation or obsolescence.

     In addition,  the Company granted certain immunities on its product patents
to AMP and Akzo  Electronics  Products NV which were  potential  competitors  of
Compositech.   The  Company  granted  HT  Troplast  AG  ("HT"),   a  significant
stockholder of Compositech,  the exclusive right under a license, to produce and
market  Compositech's  laminates in Europe,  the  countries of the former Soviet
Union and Turkey.  Although HT exited the laminate business, the license remains
in effect.  Pursuant to the  agreement,  Compositech  is  obligated to sell only
through HT in such territories.



                                       11
<PAGE>


Environmental Regulations

     If the Company is able to resume manufacturing operations, the Company will
use copper and  chemicals in its  manufacturing  process and limited  amounts of
solvents  for the sole  purpose of  cleaning  equipment.  Although  the  Company
believes  that its facility  complies in all  material  respects  with  existing
environmental  laws and  regulations,  no assurance can be given that violations
will not occur. In the event of any future  violations of environmental  law and
regulations,  the  Company  could be held liable for damages and for the cost of
remedial actions.  In addition,  environmental  laws could become more stringent
over  time,  imposing  greater  compliance  costs and  increasing  the risks and
penalties associated with a violation.

Control by Existing Stockholders and Possible Replacement of Shares

     As of December 31, 1999, officers,  directors and certain other significant
stockholders  of  Compositech   beneficially   owned   approximately   16.4%  of
Compositech's  common stock and voting preferred stock,  including stock options
and warrants  exercisable within 60 days. It is expected that these stockholders
will continue to control the management and policies of Compositech. Included in
the  beneficial  ownership of officers and  directors  are  1,702,467  shares of
common stock that were lent to the Company to use as collateral  for a loan from
CreditBancorp.  The SEC has  commenced an action  against  Credit  Bancorp,  its
principals  and  trustee,   claiming   violations  of  the  securities  laws  by
misappropriating  securities  placed  as  collateral  and  has  had  a  receiver
appointed.  To date,  the receiver has only located  1,122,967 of the  Company's
shares and some or all of them are or may be in margin accounts. It is not known
when and how many shares may be returned to the stockholders. In accordance with
agreements  with the two  directors  who  lent the  shares  of  common  stock in
question to the  Company,  the  Company  may have to replace  part or all of the
aforementioned shares which would dilute stockholders' ownership percentages. In
addition,  some  of  these  officers,  directors  and  other  stockholders,   in
connection with certain  outstanding  loans, have a security interest in some of
Compositech's  manufacturing  equipment and either all of Compositech's  patents
and  patent   applications  or  in   Compositech's   U.S.   patents  and  patent
applications.


Quotation of the Common Stock on The Nasdaq SmallCap  Market(SM);  Possible Loss
of Quotation of the Common Stock

     The common stock is quoted on The Nasdaq  SmallCap  MarketSM.  No assurance
can given that the Company will  continue to meet the  maintenance  criteria for
continued  listing of the  common  stock on The Nasdaq  SmallCap  MarketSM.  The
minimum listing  requirements for continued listing The Nasdaq SmallCap MarketSM
include,  among other criteria:

     o    net tangible assets of at least $2.0 million, or market capitalization
          of $35 million,  or net income of $500,000 (in the latest  fiscal year
          or two of the last three fiscal years);

     o    a minimum bid price per share of $1.00;

     o    a market value of the public float of $1.0 million;

     o    300 round lot shareholders; and

     o    two market makers.

     Furthermore,  The Nasdaq SmallCap MarketSM listing and maintenance criteria
may become more  stringent  over time and thus more difficult for the Company to
meet. Failure to meet the maintenance  criteria may result in the discontinuance
of the inclusion of the common stock in The Nasdaq  SmallCap  MarketSM.  In such
event,  trading,  if any, in the common  stock may  continue to be  conducted in
non-Nasdaq  over-the-counter markets and investors may find it more difficult to
dispose  of, or to obtain  accurate  quotations  as to the price of,  the common
stock.  The common  stock would then be subject to the risk that it could become
characterized  as low-priced  or "penny  stock,"  which  characterization  could
severely affect the ability of stockholders to sell their common stock.

     The SEC has adopted  regulations which generally define "penny stock" to be
any equity  security  that has a market  price less than $5.00 per share  (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq  system,  provided  that current  price and volume  information  with
respect to  transactions  in such  securities  is  provided  by the  exchange or
system).  The penny stock



                                       12
<PAGE>


rules  require a  broker-dealer,  prior to a  transaction  in a penny  stock not
otherwise  exempt  from the rules,  to deliver a  standardized  risk  disclosure
document that provides information about penny stocks and the risks in the penny
stock market.  The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the  broker-dealer
and its salesperson in the transaction,  and monthly account  statements showing
the market value of each penny stock held in the customer's account.

     In  addition,  the penny  stock  rules  generally  require  that prior to a
transaction  in  a  penny  stock  the  broker-dealer   make  a  special  written
determination  that the penny stock is a suitable  investment  for the purchaser
and  receive  the  purchaser's  written  agreement  to  the  transaction.  These
disclosure  requirements  may have the effect of  reducing  the level of trading
activity in the secondary  market for a stock that becomes  subject to the penny
stock  rules.  If the common  stock  becomes  subject to the penny stock  rules,
investors may find it more difficult to sell their common stock.

Certain Restrictive Charter and Bylaw Provisions

     Compositech's  Restated  Certificate of Incorporation  and Bylaws allow the
Board of Directors,  without  approval of the  stockholders,  to issue shares of
preferred  stock and to fix the rights and  preferences of the preferred  stock.
The Board of  Directors  can also  prohibit  stockholders  of  Compositech  from
calling  a  special  meeting  unless  requested  by at least a  majority  of the
outstanding  voting shares.  The Restated  Certificate of Incorporation does not
provide for cumulative voting for election of directors.

     In  addition,  Compositech's  Bylaws  provide  that while the  removal of a
director  or the  entire  board of  directors,  with or  without  cause,  may be
accomplished  by the  holders of the  majority of shares  entitled to vote,  any
director  designated by HT, may only so be removed for cause.  These  provisions
could have the  effect of  deterring  unsolicited  takeovers  or other  business
combinations  or  delaying or  preventing  changes in control or  management  of
Compositech. This may prevent transactions in which stockholders might otherwise
receive a  premium  for the  securities  over  then-current  market  prices.  In
addition,  these  provisions  may limit the ability of  stockholders  to approve
transactions that they may deem to be in their best interests.

Forward-Looking Information Could be Wrong

     Information  provided by the Company,  including  information  contained in
this Annual Report, contains  forward-looking  statements that involve risks and
uncertainties.  These statements deal with Compositech's future plans and growth
strategies,  as well as trends the  Company  anticipates  in its  industry.  The
Company  bases these  forward-looking  statements  largely on its  expectations,
which are  subject to risks and  uncertainties  often  beyond its  control.  The
actual  results  could  differ   materially  from  those  anticipated  in  these
forward-looking  statements  as  a  result  of  many  factors,  including  those
described in this section and  elsewhere in this  prospectus.  In light of these
risks and  uncertainties,  there can be no  assurance  that the  forward-looking
information  contained  in this  prospectus  will in fact  occur  or prove to be
accurate.

Item 2.  Description of Property

     The Company  occupies  approximately  33,000  square feet of leased  office
space and  manufacturing  facilities in Hauppauge,  New York. The lease for such
space has a five-year term expiring August 31, 2000.




                                       13
<PAGE>


Item 3.  Legal Proceedings

     The Company is a party to the following legal proceedings:

1.   An action  commenced on January 11, 2000 in the Supreme  Court of the State
     of New York by Yates  Foil  USA,  Inc.  seeking  damages  of  approximately
     $140,000  for goods sold and  delivered.  The  Company is in the process of
     preparing an answer and is  discussing a compromise  of the amount  sought.
     The  amount  of the claim is  accrued  on the  books of the  Company  as at
     December 31, 1999.

2.   A summary  proceeding has been instituted on March 14, 2000 in the District
     Court of the County of Suffolk, NY by Reckson Operating  Partnership,  L.P.
     as landlord  seeking  damages of  approximately  $72,000 for non-payment of
     rent and eviction of the Company from the  premises.  The Company is in the
     process of preparing an answer and is  discussing a compromise  and payment
     schedule  for the amount  due.  The amount of the claim  which  principally
     applies  to  year  2000 is  accrued  on the  books  of the  Company  in the
     applicable periods.

3.   The  Company  is also a party to  several  legal  proceedings  relating  to
     creditors which are not material.

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

     No matters  were  submitted  to a vote of the  Company's  security  holders
during the fourth quarter of the Company's fiscal year.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

     The Company's Common Stock and Redeemable Warrants are traded on the Nasdaq
SmallCapSM Market under the symbols "CTEK" and "CTEKW", respectively.

     The following sets forth the range of the high and low sales prices for the
Common Stock, as reported on the Nasdaq SmallCap Market :

                                                    1998
                                                    ----
                                              High        Low
                                              ----        ---
                   First quarter             2 19/32     1 3/8
                   Second quarter            2 5/8       1 5/8
                   Third quarter             1 7/8          1
                   Fourth quarter            1 3/4          1

                                                    1999
                                                    ----
                                              High        Low
                                              ----        ---
                   First quarter             3 1/4       1 1/32
                   Second quarter            4 1/16      1 9/32
                   Third quarter             2 1/2        31/32
                   Fourth quarter            2 7/16         1

     There were approximately 216 holders of record of shares of Common Stock as
of March 14, 2000.

     The Company has never paid cash dividends on its Common Stock.  The Company
does not intend to pay cash  dividends  on its Common  Stock in the  foreseeable
future.

     The following presents information  concerning  securities issuances of the
Company during the last fiscal year not previously  reported by the Company in a
quarterly  report  on Form  10-QSB.  See also  Notes 4, 5, 6, 7, 8 and 14 to the
Financial  Statements.  The  sales  of all  such  securities  were  exempt  from
registration  under the Securities Act of 1933, as amended,  pursuant to Section
4(2) thereof, as transactions not involving a public offering.

     In December  1999,  the Company sold 250,000  shares of its Common Stock to
certain accredited  investors in a private  placement,  realizing  $195,500.  In
connection with this private placement,  Trautman Wasserman, its placement agent
received  $17,000 in  commisions.  In December  1999, the Company issued 894,165
shares of its common  stock to certain  accredited  investors,  as  repayment of
promissory notes, to



                                       14
<PAGE>


satisfy  obligations  totaling $508,565,  including accrued interest,  as of the
date of the stock issuance.

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Overview

     The  Company was founded in 1984 to develop  copper-clad  fiberglass  epoxy
laminates used to manufacture printed circuit boards required by the electronics
industry.  The Company has developed and is moving to  commercialize  its unique
nonwoven  copper-clad  fiberglass  reinforced  epoxy  laminates.  As part of its
development  program,  the Company  patented the  laminate,  the process used to
manufacture  the laminate and the equipment to produce the laminates.  The first
prototype  equipment was designed and assembled to produce 24" x 24"  laminates.
In 1995,  initial  production  scale  prototype  equipment  to produce 36" x 48"
laminates was completed.  In 1997,  the Company  completed the  installation  of
advanced  36" x 48"  production  equipment  purchased  with the  proceeds of the
Company's  Initial  Public  Offering in July 1996. In 1998 and  continuing  into
1999,  the Company  completed  the  installation  of a second phase of 36" x 48"
production   equipment  purchased  with  the  proceeds  of  the  5%  Convertible
Debentures and the 7% Series B Convertible Preferred Stock.

     During  1998 and 1999,  the  Company  produced  and sold its  laminates  in
limited  quantities  through a highly  focused  sales effort to gain  production
experience  and product  performance  data.  However,  this highly focused sales
effort left the Company  vulnerable  to order  volatility.  Throughout  1998 and
1999, the Company worked on adjusting and enhancing its production equipment and
its  manufacturing  processes.  Production  ramp up issues,  coupled  with order
volatility, led to a much slower than expected expansion in production capacity.

     In the second half of 1999,  Compositech  experienced  a demand for product
that was greater than its  production  capability  and the Company was unable to
obtain adequate financing to maintain or expand its manufacturing  capabilities.
On  December 3, 1999,  the Company  suspended  manufacturing  operations  at its
facility in Long Island, New York due to inadequate  financial  resources.  As a
result of this  action,  the  Company's  staff was  ultimately  reduced from 124
employees to seven. The retained employees include the Company's Chairman, Chief
Financial  Officer,  Vice  President,  Engineering,  Vice  President,  Sales and
Controller.  Compositech  is currently in discussions  with  financial  advisors
exploring strategic opportunities including mergers and acquisitions which would
provide an infusion of capital and the ability to exploit the full  potential of
its technology.  The Company is also seeking potential licensees,  joint venture
partners or purchasers for its technology. In addition, the Company is currently
conducting  a  private  placement  of both debt and  equity  to meet  short-term
capital requirements and is negotiating for additional financing.

     In December of 1999, the Company  received notice from the Quebec Investors
that they intended to begin the process of  liquidation  and  dissolution of the
Canadian  joint venture due  principally  to the Company's  inability to finance
itself  adequately which resulted in an inability to obtain necessary  financing
for the joint venture in the required time periods.

     Effective  December 31, 1999,  Christopher F. Johnson,  President and Chief
Executive Officer, who was hired in June of 1998, resigned from his position and
as a  member  of  the  Board  of  Directors  to  accept  a  position  with  Park
Electrochemical Corp., a manufacturer of laminates.

     As  a  result  of  the  suspension  of  manufacturing  activities  and  the
termination of the Canadian joint venture,  the Company  recorded  restructuring
charges of approximately $7.4 million.  The charges include an impairment of the
value of  property  and  equipment  of  approximately  $3.3  million  due to the
suspension of  manufacturing  operations,  a $3.8 million charge relative to the
loss on the  termination of the Canadian  joint venture and provisions  totaling
approximately  $274,000  for  other  items,  including  a  writeoff  of  prepaid
manufacturing  expenses and provisions  related to the future lease costs of the
manufacturing  facility.  In  addition,  a related  writedown  of  inventory  of
approximately $153,000 was charged to manufacturing expenses. In connection with
the restructuring charges,  approximately $200,000 is expected to be paid in the
year 2000,  while all other amounts  included in the  restructuring  charge were
non-cash items.

     In  February  1998,  the  Company  entered  into joint  venture and license
agreements  with  a  Taiwanese  investor  group  to  manufacture   Compositech's
laminates in Taiwan.  See "Item 1 - Joint  Ventures" for  information  regarding
settlement agreement.





                                       15
<PAGE>


Results of Operations - Years Ended December 31, 1999 and 1998

     Sales of laminates increased to $736,889 in 1999 from $350,112 in 1998. The
increase in sales was  attributable  to the  increased  demand for the Company's
product from the Company's larger customers, including the supply agreement with
Teradyne, Inc., which was signed in June of 1999.

     Licensing  income,  net of  expenses,  decreased  to  $58,099  in 1999 from
$64,284 in 1998. The income consisted of an amortization of an upfront licensing
payment that was received  from the Taiwanese  joint  venture  partners in early
1998.

     Manufacturing  expenses increased to $5,833,951 in 1999 from $4,248,421 for
1998,  reflecting  the  higher  levels of  direct  expenditures  related  to the
increased level of sales and manufacturing  activity,  process  enhancements and
improvements  to process  reliability  as well as the recruiting and training of
additional  manufacturing  personnel and related  expenses,  in  anticipation of
increased  sales.  Included  in  this  total  is a  non-recurring  writedown  of
inventory   totaling   $153,068  related  to  the  suspension  of  manufacturing
operations. Depreciation expense, a non-cash item, increased to $758,205 in 1999
from  $679,742 in 1998,  reflecting  the higher  level of  production  equipment
placed in service during the past eighteen months.

     Selling,  general and  administrative  expenses  increased to $1,733,919 in
1999 from  $1,254,739 in 1998.  Increases in payroll related costs in connection
with the new chief executive  officer,  technical  director and West Coast sales
manager were partially offset by a decrease in recruitment  costs.  Professional
fees, consulting costs and investor relations expense increased by approximately
$325,000  due  primarily to higher legal  expenses and higher  financial  public
relations costs,  which included the  amortization of approximately  $201,000 of
the  estimated  fair market  value of  warrants  given to a  consulting  firm in
exchange for public  relations and investment  banking services for the calendar
year  1999.  Included  in the 1999 total are  non-cash  items  totaling  $45,863
representing  partial  compensation  costs  for  a  company  executive  and  for
non-employee  directors,  which the  Company  will pay in  shares of its  common
stock.   During   1999,   approximately   $465,000  of   selling,   general  and
administrative   expenses  were  charged  to  the  Canadian  joint  venture,  in
accordance with the joint venture agreements,  compared with $389,000 of charges
in 1998.

     Research  and  development  expenses  decreased  to  $173,265  in 1999 from
$282,756 in 1998, reflecting a reduced level of development of new processes and
concentration on manufacturing activities.

     The restructuring  charges of $7,357,604 consisted of $3,289,879 applicable
to an impairment in the value of property and equipment due to the suspension of
manufacturing  operations,  $3,793,596 applicable to the loss on the termination
of the Canadian joint venture,  which is to be liquidated  during  calendar year
2000,  and  $274,129  of  other   charges,   including  a  writeoff  of  prepaid
manufacturing  expenses and provisions  related to the future lease costs of the
manufacturing facility

     Interest  expense,  net of interest  capitalized,  increased to $347,868 in
1999 from  $131,693 in 1998.  The  increase  is related to the  addition of term
notes and the short term bridge notes in 1999.  The 1998 period also  included a
reduction of $101,000 due to the  capitalization  of interest on construction in
progress;  the 1999 period  included only a $23,000  reduction,  reflecting  the
reduced level of construction in progress projects during 1999.

     Amortization of debt discount and expenses  increased to $1,632,586 in 1999
from $497,603 for 1998. The expense for 1999 includes $1,319,518 of amortization
of debt discount,  expenses and warrants  granted in connection with term notes.
The 1998 period  reflected  the  amortization  of costs  associated  with the 5%
convertible  debentures,  including  accelerated  amortization  of $473,325 as a
result of debenture conversions during the four months ended April 30, 1998.

     Other income  (expense)  increased  to  ($26,035) in 1999 from  $112,415 in
1998. The increased  expense  reflects a provision for severance due to a former
officer.  The 1998 income  included  refunds  received  applicable to prior year
property taxes and adjustments of prior period professional fee charges.

     The equity in the operations of the Canadian  joint venture  decreased to a
loss of  $133,296  in 1999



                                       16
<PAGE>


from a profit of $36,831 in 1998.  These  amounts  represent  the  Company's 50%
share of the net profit or loss of the joint venture. The loss recognized in the
1999 periods reflect the higher level of pre-opening costs incurred by the joint
venture,  including the hiring of a general manager and chief financial officer.
The 1998  profit  resulted  from a  cumulative  adjustment  of  interest  income
recorded  by the  joint  venture  on its  short  term  investments  in excess of
administrative and marketing costs incurred.

     The foregoing  resulted in the Company  having a net loss of $16,394,897 in
1999, including $7,357,604 of restructuring  charges,  compared to a net loss of
$5,810,595  in 1998.  The  increased  loss  was  attributable  primarily  to the
restructuring  charges and  increases  in  manufacturing,  selling,  general and
administrative expenses, as well as the increase in non-cash amortizations.  The
net  loss  included  non-cash  items  of  $10,184,525  in  1999 as  compared  to
$1,002,185 in 1998.

Liquidity and Capital Resources

     Prior to its initial public  offering in 1996, the Company had financed its
operations  through  private  placements of debt and equity  securities and from
income from a patent  immunity  agreement.  Some of this financing had come from
officers  and  directors of the  Company.  The Company has incurred  significant
losses and has substantial negative cash flow since its inception. The Company's
independent  auditors  have  included an  explanatory  paragraph in their report
covering the December 31, 1998 and December 31, 1999 financial statements, which
express  substantial  doubt about the  Company's  ability to continue as a going
concern.  The  Company  expects  operating  losses to  continue  in 2000.  As of
December 31, 1999, the Company had  approximately  $73,000 of available cash and
cash  equivalents.  During January through March 2000, the Company  received net
proceeds  aggregating  approximately  $97,000  through the sale of shares of its
common  stock in a private  placement  and  proceeds of  approximately  $156,000
through  the  exercise  of  warrants.   At  March  30,  2000,  the  Company  had
approximately  $87,000 of cash and cash equivalents;  however,  the Company will
require   additional  funding  to  cover  current   operations,   which  require
approximately  $120,000 a month  based on current  levels of  operations,  until
revenues from licensing or technology sales are sufficient.

     Net cash and cash  equivalents  used in operating  activities  increased to
$4,350,205  for  1999  from  $3,505,961  for  1998.  The net  loss  for 1999 was
partially offset by the non-cash charges for restructuring charges, depreciation
and amortization of debt discount and expenses,  totaling $10,005,366 as well as
the increase in accounts  payable,  accrued interest and accrued  liabilities of
$1,595,881.  The net  licensing  fees  received from the Taiwan joint venture of
$930,000 was the primary  source of funds  provided by operating  activities for
1998, with $777,249 deferred to future periods for financial reporting purposes.
Decreases in accounts  receivable  from joint venture and in inventories as well
as  increases  in deferred  salaries,  accrued  interest  and  accounts  payable
accounted for the balance of the significant 1998 sources of cash.

     Net cash and cash  equivalents  used in investing  activities  decreased to
$363,045 in 1999 from $1,190,988 for 1998.  Capital  expenditures  for equipment
and advance  payments for equipment  decreased to $332,946 in 1999 from $694,297
for 1998. The decrease is  attributable to the completion of the plant expansion
that was begun in 1997.  Investments in joint ventures totaled $467,487 in 1998,
reflecting the Taiwan joint venture investment.

     Cash flows from financing  activities  increased to $4,684,161 in 1999 from
$4,174,981  for 1998.  The  significant  sources of funds  provided by financing
activities  for 1999,  net of expenses,  were:  (i) the sale of 54,000 shares of
Series C Preferred Stock,  totaling $434,570;  (ii) Net proceeds from promissory
notes and Term  Notes  totaling  $2,088,981  and (iii) the sale of Common  Stock
through a number of private  placements during 1999,  totaling  $2,464,944.  The
principal  financing  activities in the 1998 period, net of expenses,  were: (i)
the sale of Common Stock to the Taiwanese  joint  venture,  totaling  $952,500 ;
(ii) the sale of the Series B Stock which  provided  $1,900,000 ; (iii) the sale
of Common  Stock  through a private  placement  during  November and December of
1998,  totaling  $435,525 ; (iv) the advance  received from the Taiwanese  joint
venture on the second half of their stock purchase obligation, totaling $500,000
and (v) the loan through an insured credit facility, totaling $395,025.

     The Company is negotiating for additional funding.  Such additional funding
may be raised  through  sources  including  license fees,  sales of equipment in
connection  with licensing  operations,  joint  ventures or other  collaborative
relationships,  as well as equity or debt  financing.  No assurance can be given
that funding will be sufficient  and  available or, if it is available,  that it
will be available on acceptable  terms.  If



                                       17
<PAGE>


adequate  funds are not  available  to satisfy  either  short-term  or long-term
capital  requirements,  the  Company  may be  required  to limit its  operations
significantly. No assurance can be given that management has identified and made
appropriate  assumptions  regarding  all factors  that may affect the  Company's
business in the future.

Year 2000

     The Company recognized the need to ensure its operations were not adversely
impacted by the inability of the Company's  systems to process data having dates
on or after  January 1, 2000 ("Year  2000").  Processing  errors due to software
failure arising from  calculations  using the Year 2000 date are recognized as a
risk. Prior to the 1999 year end, the Company has received  favorable  responses
from most of the third  parties  it  communicated  with,  indicating  that their
companies  were either Year 2000  compliant or planned to be compliant  prior to
year end.

     The Company's information technology ("IT") systems consists of a series of
personal  computers,  linked via a network,  which process data using  purchased
software programs produced and maintained by large software vendors. The Company
exposure to any material  Year 2000  problems was  relatively  small because its
financial and operating  software  systems have been produced and  maintained by
large  software  vendors,  who have made updates  available or updated  versions
available  that are Year 2000  compliant,  at a nominal  cost.  The Company's IT
equipment was evaluated for its Year 2000 capabilities and repair or renovation,
if necessary,  was completed prior to the end of the fourth quarter of 1999. The
vast majority of the Company's  production related non-IT systems use processors
that have no date  related  functionality,  and  accordingly,  have no Year 2000
issues. The cost of the Company's Year 2000 initiatives were not material to the
Company's results of operations or financial position.  Following year end 1999,
the Company's  information systems suffered no significant  problems or downtime
as a result of Year 2000 issues.

Item 7.  Financial Statements

     The required Financial  Statements and the notes thereto are contained in a
separate  section of this report beginning with the page following the signature
page.


Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

     None.



                                       18
<PAGE>


PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act

The  following  table  lists  the  Company's  current  directors  and  executive
officers.

Name                        Age  Position(s) With the Company
----                        ---  ----------------------------
Jonas Medney                71   Director, President and Chairman
Samuel S. Gross             73   Director, Executive Vice President, Secretary,
                                 Treasurer and Chief Financial Officer
Willard T. Jackson(1)(2)    72   Director
Fred E. Klimpl              65   Director
Robert W. Middleton (2)     61   Director
Heinz-Gerd Reinkemeyer (1)  62   Director
James W. Taylor (1) (2)     81   Director


----------
    (1)   Member of Compensation Committee
    (2)   Member of Audit Committee

         The following table lists other management personnel:

Name                        Age  Position(s) With the Company
----                        ---  ----------------------------
Richard Lucier              66   Vice President, Sales
Ralph W. Segalowitz         41   Vice President, Engineering
Kenneth J. Thompson         42   Controller


Management and Directors

     Jonas  Medney,  Director,  President  and  Chairman,  has  over 40 years of
experience in the composites  industry and has more than 50 patents.  Mr. Medney
has been a director and Chairman of the Company  since its inception in 1984. He
co-founded  Lamtex  Industries,   a  public  company  which  was  a  pioneer  in
filament-wound  composites,  which was acquired by Koppers  Company in 1963.  He
co-founded  Fiberglass Resources  Corporation,  a manufacturer of filament wound
epoxy pipes and  conduits,  with Mr.  Klimpl.  This company was acquired by Koch
Industries in 1983. Mr. Medney is a graduate of the  Massachusetts  Institute of
Technology (B.S. Mechanical Engineering).

     Samuel S. Gross, Director, Executive Vice President,  Secretary,  Treasurer
and Chief  Financial  Officer,  is a certified  public  accountant  and has been
Executive  Vice President and Treasurer of the Company since 1990. He had been a
consultant to the Company and a director since 1987. He was previously a partner
at Ernst & Young  LLP  where he was  responsible  for the  Fiberglass  Resources
Corporation  account.  Mr. Gross was  affiliated  with Ernst & Young LLP and its
predecessors  for 39 years.  He is a  director  and  Secretary/Treasurer  of the
National Mental Health Association, Honorary Director and former Chairman of the
Board of Directors of the Mental Health Association in New York State, Inc., and
a director and former president of Long Island Transportation  Management,  Inc.
Mr. Gross is a graduate of City College of New York (B.B.A.).

     Richard  Lucier,  Vice  President,  Sales,  has been with the Company since
1992. He was Corporate Accounts Manager with Polyclad  Laminates,  Inc. (Cookson
Group) from 1989 to 1992 and Senior Vice President with Fortin-Westinghouse from
1980 to 1989.  Prior to that time,  he was employed at  Honeywell,  Raytheon and
GTE. He is a graduate of Northeastern University (B.S. Mechanical Engineering).

     Ralph W. Segalowitz, Vice President, Engineering, has been with the Company
since 1990.  From 1985 to 1990, he was with Robotic Vision  Systems Inc.,  where
his  final  position  was  as  a  project  manager   responsible  for  automated
manufacturing  systems.  From  1981 to  1985,  he was a  product  engineer  with
Databit, Inc., a manufacturer of data transmission  equipment.  He is a graduate
of the State University of New York at Stony Brook (B.S. Mechanical  Engineering
and M.S. in Industrial Management).

     Kenneth J. Thompson, Controller, has been with the Company since 1996. From
1995 to 1996 he was Controller of Cameron Engineering, P.C. From 1991 to 1995 he
was with Loveshaw Corporation, most recently as Vice President, Finance. He is a
graduate of Adelphi University (B.B.A. Accounting).


                                       19
<PAGE>



     Board of Directors.  The Board of Directors consists of Messrs.  Medney and
Gross and five outside directors:  Willard T. Jackson, Fred E. Klimpl, Robert W.
Middleton, Heinz-Gerd Reinkemeyer and James W. Taylor.

     Willard  T.  Jackson,  private  investor,  retired  in 1988 as a partner of
Brundage,  Story and Rose,  a New York  investment  counseling  firm in which he
became a partner in 1969. He has been a director since January 1988. Mr. Jackson
is a graduate of Middlebury College (A.B.) and Columbia University (M.B.A.).  He
is a trustee emeritus of Middlebury College.

     Fred E. Klimpl, Director, has over 35 years of experience in the composites
industry and has over 25 patents.  Mr. Klimpl has been a director of the Company
since  its  inception  in 1984.  He was  co-inventor  and a key  manager  in the
development  and marketing of the fiberglass  underground  gasoline tank program
for  Owens-Corning  Fiberglas  Corp.  He was  subsequently  responsible  for the
start-up and marketing of a fiberglass pipe business for Ciba-Geigy Corporation.
Mr. Klimpl is a graduate of Lowell  University  (B.S.  Textile  Engineering) and
Stevens Institute of Technology (M.S. Industrial Management).

     Robert W.  Middleton  was elected as a director in March 1996 and has acted
as an investment  banker to the Company in its prior financings and with respect
to the Company's initial public offering.  He has been Chairman of The Middleton
Group,  LLC, a firm of  investment  bankers  associated  with  Gemini  Financial
Corporation,  since October 1998. He was Managing  Director-Corporate Finance of
Trautman Wasserman & Company Incorporated, an investment banking firm, from 1993
to October 1998.  From 1985 to October 1993, Mr.  Middleton  was,  successively,
Director of Corporate Finance of Barclay Investments, Inc., and a Vice President
at C.L.  King & Associates,  Inc.  Prior to that time,  he was  associated  with
Fahnestock & Company from 1983 to 1985 and was a general partner from 1984-1985.
From 1974 to 1983, Mr.  Middleton  held various  positions with Burgess & Leith,
Inc., including Senior Vice President and Director,  while serving as Manager of
the New York office.  He attended  Princeton  University.  Mr.  Middleton is the
designee of. Trautman Wasserman & Company  Incorporated to the Board pursuant to
the terms of a financing agreement.

     Heinz-Gerd Reinkemeyer has been a director since 1990. He had been Director
of the Industrial  Plastics Division of HT, a German manufacturer and subsidiary
of the Rutgers Group, which is an affiliate of the Veba Group.  Currently, he is
a consultant for the Rutgers Group.  Mr.  Reinkemeyer has a degree in mechanical
engineering  and from 1961 he had been with Dynamit  Nobel,  a  manufacturer  of
laminates,  until it was acquired by HT in 1988. Mr. Reinkemeyer is the designee
of HT to the Board.

     James W. Taylor has been a director  since 1987. He is the former  Chairman
of the Board of Reuter  Manufacturing  Inc., where he was President from 1992 to
1998. He is a certified  management  consultant.  He was a director from 1967 to
1973 and President from 1970 to 1973 of the international  management consulting
firm, Booz Allen & Hamilton. Mr. Taylor was President and a director of Bradford
Trust from 1973 to 1975.  He has served as a  director  of Insilco  Corporation,
Times Fiber  Communications,  Inc., The Enterprise Companies,  Techalloy,  Inc.,
Amphenol  Inc. and Knogo  Corporation.  He is a life trustee of Carnegie  Mellon
University.  He was a trustee of Beaver  College  and was a vice  president  and
director  of the  Association  of  Consulting  Management  Engineers  and of the
Institute  of  Management  Consultants.  He holds a B.S.  from  Carnegie  Mellon
University.

     On November 26, 1999, Pierre Laflamme,  a director who was appointed by the
Quebec Investors, resigned from the Board of Directors.

     As of December 31, 1999,  Christopher F. Johnson resigned from his position
as  President  and Chief  Executive  Officer and from the Board of  Directors to
accept a position with Park Electrochemical Corp., a manufacturer of laminates.

     Other  information  required  by this  item is  included  in the  Company's
definitive  Proxy Statement to be filed in connection with the Company's  Annual
Meeting  of  Stockholders,  and  such  information  is  incorporated  herein  by
reference.



                                       20
<PAGE>


Item 10.  Executive Compensation

     The  information  required  by  this  item  is  included  in the  Company's
definitive  Proxy Statement to be filed in connection with the Company's  Annual
Meeting  of  Stockholders,  and  such  information  is  incorporated  herein  by
reference.


Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The  information  required  by  this  item  is  included  in the  Company's
definitive  Proxy Statement to be filed in connection with the Company's  Annual
Meeting  of  Stockholders,  and  such  information  is  incorporated  herein  by
reference.


Item 12.  Certain Relationships and Related Transactions

     The  information  required  by  this  item  is  included  in the  Company's
definitive  Proxy Statement to be filed in connection with the Company's  Annual
Meeting  of  Stockholders,  and  such  information  is  incorporated  herein  by
reference.





                                       21
<PAGE>


     Item 13. Exhibits and Reports on Form 8K

     (a)  Exhibits:

<TABLE>
<CAPTION>
 Exhibit                                                                                                     Note
  Number                                              Exhibit                                               Number
-------------------------------------------------------------------------------------------------------------------------------
<S>      <C>                                                                                                    <C>
     3.1 Restated Certificate of Incorporation of the Company.                                                  (3)
     3.2 Amendment to the Restated Certificate of Incorporation of the Company                                  (1)
     3.3 By-Laws, As Amended, of the Company.                                                                   (2)
     3.4 Certificate of Designations for 7% Series B Convertible Preferred Stock dated as of May 29, 1998       (8)
     3.5 Certificate of Designation for the Company's  Series C 8% Convertible  Preferred  Stock,  filed on
         November 1, 1999.                                                                                      (12)
     3.6 Certificate of Correction of Certificate of Designation for the Company's  Series C 8% Convertible
         Preferred Stock, filed on November 8, 1999.                                                            (12)
     4.1 Specimen Common Stock Certificate.                                                                     (2)
     4.2 Specimen Warrant Certificate.                                                                          (2)
     4.3 Representative's Unit Purchase Option dated as of July 9, 1996.                                        (2)
     4.4 Warrant  Agreement dated as of July 9, 1996 between the Company and  Continental  Stock Transfer &
         Trust Company.                                                                                         (2)
     4.5 Form of 10% Secured Note.                                                                              (2)
   4.5.1 Security Agreement dated August 3, 1995 among the Company and certain secured parties.                 (2)
     4.6 Form of Secured Note.                                                                                  (2)
   4.6.1 Security and  Intercreditor  Agreement dated as of October 30,  1992 among the Company and certain
         secured parties covering listed patent collateral.                                                     (2)
     4.7 Notes issued by the Company between May 28, 1992 and February 16,  1993 in the aggregate amount of
         $550,000 payable to Willard Jackson.                                                                   (2)
     4.8 Form of agreements between the Company and certain officers,  directors and  stockholder/creditors
         to defer maturity of Secured Notes, 10% Secured Notes, and certain other notes.                        (1)
    10.1 Lease Agreement dated August 29, 1990 between the Company and Ricefield Number Six.                    (2)
  10.1.1 First Amendment of Lease dated June 30, 1995 between the Company and Ricefield Number Six.             (2)
    10.2 Patent  Immunity  Agreement dated March 15, 1994,  among the Company and AKZO Electronic  Products
         B.V. and AMP Incorporated.                                                                             (2)
    10.3 Stock Purchase Agreement dated as of June 22, 1990, between the Company and HT Troplast AG.            (2)
  10.3.1 Amendment  No. 1 to Stock  Purchase  Agreement  dated June 22,  1990  between  the  Company and HT
         Troplast AG (Amendment No. 1 dated January 10, 1996).                                                  (2)
    10.4 Technical Cooperation Agreement between the Company and HT Troplast AG dated as of June 22, 1990.      (2)
    10.5 License Agreement between the Company and HT Troplast AG dated as of June 22, 1990.                    (2)
  10.5.1 Amendment to the License Agreement dated May 18, 1994 between the Company and HT Troplast AG.          (2)
    10.6 Consent  to the  transfer  of  rights of Huls  Troisdorf  AG in  respect  of the  Company  to Mora
         Beteiligungs AG (now HT Troplast AG) dated February 4, 1994.                                           (2)
  10.6.1 Acknowledgment  of assumption  of  obligations  of Huls  Troisdorf AG in respect of the Company by
         HT Troplast AG dated August 19, 1994.                                                                  (2)
    10.7 Form of Warrants issued on May 28, 1992.                                                               (2)
    10.8 Form of Warrants issued on November 16, 1993.                                                          (2)
    10.9 Form of Subscription Agreement for Series A Convertible Preferred Stock issued in 1994.                (2)
   10.10 Form of Warrants issued or amended between August 3, 1995 and March 12, 1996.                          (2)
   10.11 Common Stock Purchase Agreement between the Company and Win Win Venture Capital  Corporation dated
         as of April 1, 1996.                                                                                   (2)
   10.12 Agreements to defer salary between the Company and certain employees of the Company.                   (2)
  *10.13 Nonqualified Stock Option Plan dated April 12, 1988.                                                   (2)
  *10.14 Stock Award Plan.                                                                                      (2)
*10.14.1 Compositech Ltd. Amended and Restated Stock Award Plan.                                                (9)
</TABLE>



                                       22
<PAGE>


<TABLE>
<CAPTION>
 Exhibit                                                                                                     Note
  Number                                              Exhibit                                               Number
-------------------------------------------------------------------------------------------------------------------------------
<S>      <C>                                                                                                    <C>
  *10.15 Employment Agreement dated as of January 1, 1996 between the Company and Samuel S. Gross.              (2)
  *10.16 Employment Agreement dated as of January 1, 1996 between the Company and Fred E. Klimpl.               (2)
  *10.17 Employment  Agreement  dated as of January 1, 1996 between the
         Company and Jonas Medney.                                                                              (2)
  *10.18 Common Stock Purchase Agreement between the Company and Win Win Venture Capital  Corporation dated
         as of June 26, 1996.                                                                                   (2)
   10.19 Form of Securities Purchase Agreement between the Company and certain investors.                       (5)
   10.20 Form of 5% Convertible Debenture between the Company and certain investors.                            (5)
   10.21 Form of Registration Rights Agreement between the Company and certain investors.                       (5)
   10.22 Form of Security Agreement between the Company and certain investors.                                  (5)
   10.23 Form of License Security Agreement between the Company and certain investors.                          (5)
   10.24 Technology Licensing Agreement dated October 16, 1997, by and between the Company and Lamines          (6)
         CTEK Inc.
   10.25 Subscription Agreement dated October 16, 1997, by and among:  Societe Innovatech du Grand              (6)
         Montreal, Industries Devma Inc. (a subsidiary of Societe generale de financement du Quebec),
         Fonds de solidarite des travailleurs du Quebec (F.T.Q.), Fonds regional de solidarite Ile de
         Montreal and the Company.
   10.26 Registration Rights Agreement dated October 16, 1997, by and among:  Societe Innovatech du Grand       (6)
         Montreal, Industries Devma Inc., Fonds de solidarite des travailleurs du Quebec (F.T.Q.), Fonds
         regional de solidarite Ile de Montreal and the Company.
   10.27 Subscription Agreement dated October 16, 1997, by and between the Company and Lamines CTEK Inc.        (6)
   10.28 Shareholders Agreement dated October 16, 1997, among the Shareholders of Lamines CTEK Inc.             (6)
   10.29 Stock Exchange Agreement dated October 16, 1997, by and among:  Societe Innovatech du Grand            (6)
         Montreal, Industries Devma Inc., Fonds de solidarite des travailleurs du Quebec (F.T.Q.), Fonds
         regional de solidarite Ile de Montreal and the Company.
   10.30 Sales Agency and Marketing Agreement dated October 16, 1997, by and between Lamines CTEK Inc. and      (6)
         the Company.
   10.31 Agreement with respect to electing a nominee of the Quebec Investors to the Board of Directors of      (6)
         Compositech Ltd. dated October 16, 1997, by and among:  Societe Innovatech du Grand Montreal,
         Industries Devma Inc., Fonds de solidarite des travailleurs du Quebec (F.T.Q.), Fonds regional de
         solidarite Ile de Montreal and the Company and certain of its principal shareholders.
   10.32 Agreement to Form a Joint Venture by and between the Company and Fidelity Venture Capital Corp.        (7)
         and Fidelity Investors, dated February 9, 1998.
   10.33 Patent,  Information and Trademark Agreement by and between the Company and Compositech Taiwan (or     (7)
         Compositech  Technologies,  Inc.). Portions of the Exhibit have been omitted pursuant to a request
         for confidential treatment.
 10.33.1 Patent,  Information  and  Trademark  Agreement -  Amendment  No. 1 by and between the Company and     (7)
         Compositech Taiwan (or Compositech Technologies, Inc.).
   10.34 Purchase   Agreement  by  and  between  the  Company  and   Compositech   Taiwan  (or  Compositech     (7)
         Technologies, Inc.).
   10.35 Convertible  Preferred Stock Purchase  Agreement dated as of May 29, 1998, between the Company and     (8)
         JNC Opportunity Fund Ltd.
   10.36 Registration  Rights  Agreement dated as of May 29, 1998,  between the Company and JNC Opportunity     (8)
         Fund Ltd.
   10.37 Bridge  Note  Purchase  Agreement  dated March 16,  1999  between  the  Company and SovCap  Equity     (10)
         Partners, Ltd.
   10.38 Bridge Note dated March 16, 1999 between the Company and SovCap Equity Partners, Ltd.                  (10)
   10.39 Attached  Repricing  Warrant dated March 16, 1999 between the Company and SovCap Equity  Partners,     (10)
         Ltd.
   10.40 Common  Stock  Purchase  Warrant  dated  March 16, 1999  between  the  Company  and SovCap  Equity     (10)
         Partners, Ltd.
</TABLE>


                                       23
<PAGE>

<TABLE>
<CAPTION>
 Exhibit                                                                                                     Note
  Number                                              Exhibit                                               Number
-------------------------------------------------------------------------------------------------------------------------------
<S>      <C>                                                                                                    <C>
   10.41 Registration  Rights  Agreement  dated  March 16,  1999  between  the  Company  and SovCap  Equity     (10)
         Partners, Ltd.
   10.42 Placement  Agency  Agreement  dated March 16, 1999  between  the  Company  and  Sovereign  Capital     (10)
         Advisors LLC.
   10.43 Sovereign  Warrant  Agreement  dated March 16, 1999  between  the  Company and  Sovereign  Capital     (10)
         Advisors LLC.
   10.44 Sovereign  Warrant  Certificate  dated March 16, 1999  between the Company and  Sovereign  Capital     (10)
         Advisors LLC.
   10.45 First Amendment to Bridge Note Purchase  Agreement,  dated April 21, 1999, between the Company and     (11)
         Purchasers of the Second Closing Bridge Notes
   10.46 Second Amendment to Bridge Note Purchase  Agreement,  dated July 28, 1999, between the Company and     (11)
         Purchasers of the Third Closing Bridge Notes
   10.47 Second Amendment to the Registration  Rights  Agreement,  dated
         July 28, 1999,  between the Company (11) and the  Purchasers of
         the First, Second and Third Closing Bridge Notes
   10.48 Retirement and Consulting Agreement, dated May 28, 1999, between the Company and Fred E. Klimpl        (11)
   10.49 Supply and Joint  Product  Development  Agreement,  dated June 1, 1999,  between  the  Company and     (11)
         Teradyne, Inc.
   10.50 Form of  Promissory  Note  between  the  Company  and  certain investors in connection with a private
         placement of short term bridge  notes which had its most recent  closing on October 22, 1999.          (12)
   10.51 Convertible Preferred Stock Purchase Agreement, dated as of November 5, 1999 between the Company
         and The Shaar Fund Ltd.                                                                                (12)
   10.52 Registration Rights Agreement dated as of November 5, 1999, between the Company and The Shaar
         Fund Ltd.                                                                                              (12)
   10.53 Common Stock Purchase Warrant dated November 5, 1999 between the Company and The Shaar Fund Ltd.       (12)
   10.54 Letter agreement, dated October 27, 1999 concerning the Bridge Note Purchase Agreement between
         Compositech and SovCap Equity Partners, Ltd.                                                           (12)
   10.55 Form of Investor Subscription Agreement between Compositech and certain investors in connection
         with a private placement of Compositech's common stock which had its final closing on July 27,
         1999.                                                                                                  (12)
   10.56 Form of Common Stock Purchase Warrant issued in connection with Compositech's private placement,
         which had its final closing on July 27, 1999.                                                          (12)
   10.57 Letter agreement, dated November 22, 1999, concerning the Series 1 Bridge Note Purchase and
         Security Agreement, as amended, between Compositech and certain Purchasers                             (1)
   10.58 Form of Series 1 Bridge Financing Note dated October 4, 1999 between Compositech and SovCap
         Equity Partners, Ltd.                                                                                  (1)
   10.59 Form of Common Stock Purchase Warrant dated October 4, 1999 between Compositech and SovCap Equity
         Partners, Ltd.                                                                                         (1)
   10.60 Form of Attached Repricing Warrant dated October 4, 1999 between Compositech and SovCap Equity
         Partners, Ltd.                                                                                         (1)
   10.61 Secured Convertible Bridge Financing Note dated October 4, 1999 between Compositech and Sovereign
         Capital Advisors, LLC                                                                                  (1)
   10.62 Sovereign Warrant Agreement dated October 4, 1999 between Compositech and Sovereign Capital
         Advisors LLC.                                                                                          (1)
   10.63 Form of Promissory Note between Compositech and certain qualified investors with a term of 14
         days                                                                                                   (1)
   10.64 Form of Promissory Note between Compositech and certain qualified investors with a term of 30
         days                                                                                                   (1)
   10.65 Form of Promissory Note between Compositech and certain qualified investors with a term of 30
         days and time-dependent warrant coverage                                                               (1)
   10.66 Form of Common Stock Purchase Warrant issued in connection with
         Compositech's private placements.
   10.67 Form of Convertible Promissory Note between the Company and certain investors in
</TABLE>




                                       24
<PAGE>


<TABLE>
<CAPTION>
 Exhibit                                                                                                     Note
  Number                                              Exhibit                                               Number
-------------------------------------------------------------------------------------------------------------------------------
<S>      <C>                                                                                                    <C>

         connection with a private placement of short term bridge notes which had its most recent closing
         on January 16, 2000.                                                                                   (1)
   10.68 Form of Investor Subscription Agreement between Compositech and certain investors in connection
         with a private placement of Compositech's common stock which had its most recent closing on March
         3, 2000.                                                                                               (1)
   10.69 Settlement Agreement dated February 17, 2000, by and between Compositech Ltd.,
         Cheng Xin  Technology  Development  Corporation  (as  successor  in interest  to Fidelity  Venture
         Capital Corp.), Composite Technologies. Inc. and investors in Composite Technologies, Inc.             (13)
    23.1 Consent of Ernst & Young LLP                                                                           (1)
    27.1 Financial Data Schedules (Edgar version only)                                                          (1)
</TABLE>

----------
     *    Management contract, compensatory plan or arrangement.

     (1)  Filed herewith.

     (2)  Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's Registration Statement on Form SB-2, Reg. No. 333-3564-NY.

     (3)  Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's Form 10-KSB for the year ended December 31, 1996.

     (4)  Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's Form 10-QSB for the quarterly period ended June 30, 1997.

     (5)  Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's  Registration  Statement on Form S-3, Reg. No.  333-32241-NY
          filed on July 28, 1997.

     (6)  Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's Form 8-K dated October 27, 1997.

     (7)  Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's Form 10-KSB for the year ended December 31, 1997.

     (8)  Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's Form 8-K dated May 29, 1998.

     (9)  Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's  Form 10-QSB for the  quarterly  period ended June 30, 1998.
          (10)  Incorporated  by reference to a previously  filed Exhibit to the
          Company's Form 10-KSB for the year ended December 31, 1998.

     (11) Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's Form 10-QSB for the quarterly period ended June 30, 1999.

     (12) Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's  Form 10-QSB for the  quarterly  period ended  September 30,
          1999.

     (13) Incorporated  by  reference  to a  previously  filed  Exhibit  to  the
          Company's Form 8-K dated March 7, 2000.


         (b) Form 8-K Reports:


<TABLE>
<CAPTION>
                                                                                             Financial
       Date of Report                               Item Reported                         Statements Filed
------------------------------     ------------------------------------------------    ----------------------

<S>                                <C>                                                          <C>
        June 29, 1999              Item 5 - Other Events                                        No
                                   (Press release announcing signing of supply
                                   and joint product development agreement with
                                   Teradyne, Inc.)

      December 16, 1999            Item 5 - Other Events                                        No
                                   (Press release confirming merger and
                                   acquisition talks and plans to identify
                                   strategic partners; Company awaits closing of
                                   private placement and substantially reduces
                                   expenses.)
</TABLE>


                                       25

<PAGE>




     In  accordance  with Section 13 or 15(d) of the  Exchange  Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                                     COMPOSITECH LTD.

Date:  March 30, 2000                                By:  /S/ Jonas Medney
                                                          ---------------------
                                                          Jonas Medney
                                                          Chairman


     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the Company and in the capacities and on the
dates indicated.

       /S/ Jonas Medney                                 March 30, 2000
 --------------------------------------------
 Jonas Medney
 Chairman of the Board, Director
 (Principal Executive Officer)

       /S/ Samuel S. Gross                              March 30, 2000
 --------------------------------------------
 Samuel S. Gross
 Executive Vice President, Secretary,
 Treasurer and Director
 (Principal Financial and Accounting Officer)

       /S/ Willard T. Jackson                           March 30, 2000
 --------------------------------------------
 Willard T. Jackson, Director

       /S/ Fred E. Klimpl                               March 30, 2000
 --------------------------------------------
 Fred E. Klimpl, Director

       /S/ Robert W. Middleton                          March 30, 2000
 --------------------------------------------
 Robert W. Middleton, Director

       /S/ Heinz-Gerd Reinkemeyer                       March 30, 2000
 --------------------------------------------
 Heinz-Gerd Reinkemeyer, Director

       /S/ James W. Taylor                              March 30, 2000
 --------------------------------------------
 James W. Taylor, Director



                                    26


<PAGE>

                          Index to Financial Statements


                                                                           Pages
                                                                           -----

Report of Independent Auditors............................................. F2

Balance Sheets as of December 31, 1999 and 1998............................ F3

Statements of Operations for the years ended
 December 31, 1999 and 1998................................................ F4

Statements of Stockholders' Equity (Deficiency) for the years
  ended December 31, 1999 and 1998......................................... F5

Statements of Cash Flows for the years ended
 December 31, 1999 and 1998................................................ F6

Notes to Financial Statements.............................................. F7



                                       F1

<PAGE>


                         Report of Independent Auditors


The Board of Directors and Stockholders
Compositech Ltd.


We have  audited  the  accompanying  balance  sheets of  Compositech  Ltd.  (the
"Company")  as of December  31, 1999 and 1998,  and the  related  statements  of
operations, stockholders' equity (deficiency), and cash flows for the years then
ended.  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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
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  provide 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 Compositech Ltd. at December
31, 1999 and 1998,  and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States.

The accompanying  financial  statements have been prepared  assuming the Company
will continue as a going concern. As more fully described in Note 1, the Company
suspended  its  manufacturing  operations  on  December  3,  1999  due a lack of
financing  and refocused its  resources on locating  suitable  licensees,  joint
venture partners or purchasers for its patented technology and equipment design.
Further,  the Company has incurred recurring  operating losses and has a working
capital  deficiency.  The Company  requires,  and is currently  negotiating for,
additional  funding  from  financing  or other  sources to satisfy its  existing
liabilities and cover future operating  expenses until  sufficient  revenues are
generated.  These conditions raise substantial doubt about the Company's ability
to continue as a going  concern.  The  financial  statements  do not include any
adjustments  to reflect the possible  future effects on the  recoverability  and
classification of assets or the amounts and  classifications of liabilities that
may result from the outcome of this uncertainty.


                                                        /s/ Ernst & Young LLP

Melville, New York
March 3, 2000






                                       F2
<PAGE>


                                 COMPOSITECH LTD.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                      December 31     December 31
                                                                                                         1999            1998
                                                                                                     ------------    ------------
<S>                                                                                                       <C>            <C>
ASSETS                                                                                                 (Note 1)
Current assets:
  Cash and cash equivalents                                                                               $73,197        $102,286
  Accounts receivable trade - net                                                                          82,783          27,273
  Accounts receivable from joint venture                                                                                  103,696
  Inventories                                                                                              15,000         254,784
  Prepaid expenses and other                                                                               48,412         165,827
                                                                                                     ------------    ------------
        Total current assets                                                                              219,392         653,866

Property and equipment held for sale                                                                    2,000,000
Property and equipment at cost - net                                                                                    5,721,215
Investment in joint ventures - net of accumulated amortization
         of $21,750 (1998)                                                                                466,000       5,562,090
Advance payments on construction-in-progress                                                                               16,753
Deferred debt expense - net of accumulated amortization of $461,078 (1999)                                 49,163         133,728
Other assets and other deferred charges, net of accumulated amortization
       of $658,375 (1999) and $19,256 (1998)                                                              401,894         151,110
                                                                                                     ------------    ------------
Total assets                                                                                           $3,136,449     $12,238,762
                                                                                                     ============    ============
LIABILITIES AND STOCKHOLDERS'  EQUITY (DEFICIENCY)
Current liabilities:
  Accounts payable                                                                                     $1,814,421        $637,861
  Deferred salaries                                                                                       152,362         194,739
  Accrued interest - $44,276 (1999) and all (1998) to stockholders                                        104,423           5,880
  Other accrued liabilities                                                                               642,762         413,982
  Deferred licensing income                                                                                                64,248
  Loans and notes payable                                                                               2,976,935         438,917
  Notes payable to directors/stockholders                                                                 158,333
                                                                                                     ------------    ------------
        Total current liabilities                                                                       5,849,236       1,755,627

Non-current liabilities:
  Notes payable to directors/stockholders                                                               1,420,000       1,595,000
  Deferred salaries - officers/directors                                                                  913,135         814,481
  Accrued interest - directors/stockholders                                                               366,476         248,948
  Capital lease obligations                                                                                                 9,235
  Deferred licensing income                                                                               643,840         713,001
  Advances received                                                                                       500,000         500,000
                                                                                                     ------------    ------------
        Total non-current liabilities                                                                   3,843,451       3,880,665


7% Series B convertible preferred stock, par value $0.01 ; stated value $10,000 per share ;
    authorized shares - 220, issued and outstanding shares - 220 (1998)                                                 2,200,000

Commitments

Stockholders'  equity (deficiency) :
  Undesignated preferred stock; authorized 3,799,780 shares, none issued and outstanding
  Series A convertible preferred stock, par value $3.00 per share; authorized shares - 714,161,
    issued and outstanding shares - 393,997 (1999) and 550,995 (1998)                                   1,181,991       1,652,985
  Series C 8% convertible preferred stock, par value $0.01 per share; authorized shares - 200,000
    issued and outstanding shares - 54,000 (1999)                                                         540,000
  Common stock, par value $.01 per share; authorized shares - 50,000,000,
    issued and outstanding shares - 18,023,613 (1999) and 13,150,128 (1998)                               180,236         131,502
  Additional paid-in capital                                                                           44,449,398      37,436,677
  Cumulative foreign currency translation adjustment                                                                     (552,039)
  Deficit                                                                                             (50,349,052)    (33,954,155)
                                                                                                     ------------    ------------
                                                                                                       (3,997,427)      4,714,970
  Less treasury stock to be received                                                                   (1,746,987)
  Less notes receivable received for issuance of common stock                                            (811,824)       (312,500)
                                                                                                     ------------    ------------
    Total stockholders' equity (deficiency)                                                            (6,556,238)      4,402,470
                                                                                                     ------------    ------------
Total liabilities and stockholders' equity (deficiency)                                                $3,136,449     $12,238,762
                                                                                                     ============    ============
</TABLE>

See accompanying notes.


                                       F3
<PAGE>


                                 COMPOSITECH LTD.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                            Year ended
                                                                                                           December 31
                                                                                                 ----------------------------------
                                                                                                     1999                  1998
                                                                                                 ------------          ------------
<S>                                                                                                  <C>                   <C>
Revenues:
  Sales                                                                                              $736,889              $350,112
  Licensing                                                                                            58,099                64,284
                                                                                                 ------------          ------------
       Total revenues                                                                                 794,988               414,396

Costs and expenses:
  Manufacturing                                                                                     5,833,951             4,248,421
  Selling, general and administrative                                                               1,733,919             1,254,739
  Research and development                                                                            173,265               282,756
  Restructuring charges                                                                             7,357,604
                                                                                                 ------------          ------------
      Total operating expenses                                                                     15,098,739             5,785,916
                                                                                                 ------------          ------------
(Loss) from operations                                                                            (14,303,751)           (5,371,520)

Other income (expenses):
  Interest income                                                                                      48,639                49,335
  Interest expense
    (net of interest capitalized of $23,000 (1999) and $101,000 (1998)                               (347,868)             (131,693)
  Amortization of debt discount and expenses                                                       (1,632,586)             (497,603)
  Loss on disposal of property and equipment                                                                                 (8,360)
  Other income (expense)                                                                              (26,035)              112,415
                                                                                                 ------------          ------------
                                                                                                   (1,957,850)             (475,906)
                                                                                                 ------------          ------------
 (Loss) from operations before equity in operations of joint venture                              (16,261,601)           (5,847,426)

Equity in operations of joint venture                                                                (133,296)               36,831
                                                                                                 ------------          ------------
   Net (loss)                                                                                     (16,394,897)           (5,810,595)
Preferred stock dividends                                                                              22,892               406,686
                                                                                                ------------          ------------
   (Loss) attributable to common stockholders                                                    ($16,417,789)          ($6,217,281)
                                                                                                 ============          ============
(Loss) per common share - basic and diluted                                                            ($1.03)               ($0.54)
                                                                                                 ============          ============
Shares used in computing (loss) per common share                                                   15,986,153            11,612,001
                                                                                                 ============          ============
</TABLE>

See accompanying notes.



                                       F4
<PAGE>



                                COMPOSITECH LTD.
                 STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY)
                     Years ended December 31, 1998 and 1999


<TABLE>
<CAPTION>
                                                                                                                Series C  8%
                                                                                      Series A convertible      convertible
                                                                                        preferred stock       preferred stock
                                                                                   ------------------------ -------------------
                                                                                      Shares      Amount      Shares   Amount
                                                                                   --------------------------------------------
<S>                                                                                <C>         <C>          <C>      <C>
Balance at December 31, 1997                                                        614,161    $1,842,483

Conversion of Series A convertible preferred stock to common stock                  (63,166)     (189,498)
Issuance of common stock upon conversion of 5% convertible debentures
Issuance of common stock through private placements, net of
   related costs of $83,097
Expenses related to the issuance of 7% Series B convertible preferred stock
   through a private placement
Dividends declared on 7% Series B convertible preferred stock
Exercise of a warrant for notes receivable
Issuance of common stock as compensation for loan financing

Foreign currency translation adjustment
Net (loss) for the year ended December 31, 1998

Comprehensive (loss)

                                                                                   --------------------------------------------
Balance at December 31, 1998                                                        550,995     1,652,985

Conversion of Series A convertible preferred stock to common stock                 (156,998)     (470,994)
Conversion of 7% Series B convertible preferred stock to common stock
Issuance of common stock through private placements, net of
   related costs of $201,989
Proceeds from the exercise of a stock purchase option of common
   stock, net of related costs of $43,200
Dividends declared on 7% Series B convertible preferred stock
Dividends paid in common stock on 7% Series B convertible preferred stock
Compensation for short term bridge financing
Exercise of a warrant for notes receivable
Issuance of common stock upon exercise of warrants
Issuance of common stock as compensation to directors
Issuance of common stock as repayment for a loan financing
Issuance of common stock award as compensation to officer
Fair market value of warrant issued in exchange for services rendered
Fair market value of warrant issued in exchange for deferral of interest
Fair market value of warrants issued in connection with term notes
Fair market value of warrants issued in connection with promissory bridge notes
Issuance of Series C 8% convertible preferred stock in a private placement,
    net of related costs of $105,430                                                                         54,000  $ 540,000
Dividends declared on Series C 8% convertible preferred stock
Record treasury stock to be received in connection with joint venture liquidation

Foreign currency translation adjustment
Net (loss) for the year ended December 31, 1999

Comprehensive (loss)

                                                                                   --------------------------------------------
Balance at December 31, 1999                                                        393,997   $ 1,181,991    54,000  $ 540,000
                                                                                   ============================================
<CAPTION>
                                                                                                                        Cumulative
                                                                                                                         Foriegn
                                                                                       Common stock        Addtional     Currency
                                                                                    -------------------     Paid-in     Translation
                                                                                       Shares   Amount      Capital     Adjustment
                                                                                  -------------------------------------------------
<S>                                                                                <C>           <C>       <C>          <C>
Balance at December 31, 1997                                                        7,767,921    $77,679   $30,075,100

Conversion of Series A convertible preferred stock to common stock                     31,583        316       189,182
Issuance of common stock upon conversion of 5% convertible debentures               4,055,667     40,557     5,795,064
Issuance of common stock through private placements, net of
   related costs of $83,097                                                         1,090,601     10,906     1,377,119
Expenses related to the issuance of 7% Series B convertible preferred stock
   through a private placement                                                                                (300,000)
Dividends declared on 7% Series B convertible preferred stock                                                  (92,400)
Exercise of a warrant for notes receivable                                            125,000      1,250       311,250
Issuance of common stock as compensation for loan financing                            79,356        794        81,362

Foreign currency translation adjustment                                                                                 $(552,039)
Net (loss) for the year ended December 31, 1998

Comprehensive (loss)

                                                                                  -------------------------------------------------
Balance at December 31, 1998                                                       13,150,128    131,502   37,436,677   (552,039)

Conversion of Series A convertible preferred stock to common stock                     78,498        785      470,209
Conversion of 7% Series B convertible preferred stock to common stock               1,500,142     15,001    2,184,999
Issuance of common stock through private placements, net of
   related costs of $201,989                                                        1,294,088     12,940    1,949,204
Proceeds from the exercise of a stock purchase option of common
   stock, net of related costs of $43,200                                             600,000      6,000      496,800
Dividends declared on 7% Series B convertible preferred stock                                                 (15,692)
Dividends paid in common stock on 7% Series B convertible preferred stock              73,797        738      107,354
Compensation for short term bridge financing
Exercise of a warrant for notes receivable                                            371,991      3,720      525,604
Issuance of common stock upon exercise of warrants                                      2,250         23        1,259
Issuance of common stock as compensation to directors                                  18,554        185       30,570
Issuance of common stock as repayment for a loan financing                            894,165      8,942      499,623
Issuance of common stock award as compensation to officer                              40,000        400       72,120
Fair market value of warrant issued in exchange for services rendered                                         330,995
Fair market value of warrant issued in exchange for deferral of interest                                       21,405
Fair market value of warrants issued in connection with term notes                                            363,655
Fair market value of warrants issued in connection with promissory bridge notes                                87,246
Issuance of Series C 8% convertible preferred stock in a private placement,
    net of related costs of $105,430                                                                         (105,430)
Dividends declared on Series C 8% convertible preferred stock                                                  (7,200)
Record treasury stock to be received in connection with joint venture liquidation

Foreign currency translation adjustment                                                                                  552,039
Net (loss) for the year ended December 31, 1999

Comprehensive (loss)

                                                                                  -------------------------------------------------
Balance at December 31, 1999                                                       18,023,613   $180,236  $44,449,398        $ --
                                                                                  =================================================
<CAPTION>
                                                                                                                          Total
                                                                                             Treasury                  Stockholders
                                                                                            stock to be      Notes        Equity
                                                                                 Deficit      Received    Receivable   (Deficiency)
                                                                              -----------------------------------------------------
<S>                                                                           <C>             <C>           <C>        <C>
Balance at December 31, 1997                                                  $(28,143,560)                            $3,851,702

Conversion of Series A convertible preferred stock to common stock
Issuance of common stock upon conversion of 5% convertible debentures                                                   5,835,621
Issuance of common stock through private placements, net of
   related costs of $83,097                                                                                             1,388,025
Expenses related to the issuance of 7% Series B convertible preferred stock
   through a private placement                                                                                           (300,000)
Dividends declared on 7% Series B convertible preferred stock                                                             (92,400)
Exercise of a warrant for notes receivable                                                                  (312,500)
Issuance of common stock as compensation for loan financing                                                                82,156

Foreign currency translation adjustment                                                                                  (552,039)
Net (loss) for the year ended December 31, 1998                                 (5,810,595)                            (5,810,595)
                                                                                                                     -------------
Comprehensive (loss)                                                                                                   (6,362,634)

                                                                              ----------------------------------------------------
Balance at December 31, 1998                                                   (33,954,155)                 (312,500)   4,402,470

Conversion of Series A convertible preferred stock to common stock
Conversion of 7% Series B convertible preferred stock to common stock                                                   2,200,000
Issuance of common stock through private placements, net of
   related costs of $201,989                                                                                            1,962,144
Proceeds from the exercise of a stock purchase option of common
   stock, net of related costs of $43,200                                                                                 502,800
Dividends declared on 7% Series B convertible preferred stock                                                             (15,692)
Dividends paid in common stock on 7% Series B convertible preferred stock                                                 108,092
Compensation for short term bridge financing                                                                  30,000       30,000
Exercise of a warrant for notes receivable                                                                  (529,324)
Issuance of common stock upon exercise of warrants                                                                          1,282
Issuance of common stock as compensation to directors                                                                      30,755
Issuance of common stock as repayment for a loan financing                                                                508,565
Issuance of common stock award as compensation to officer                                                                  72,520
Fair market value of warrant issued in exchange for services rendered                                                     330,995
Fair market value of warrant issued in exchange for deferral of interest                                                   21,405
Fair market value of warrants issued in connection with term notes                                                        363,655
Fair market value of warrants issued in connection with promissory bridge notes                                            87,246
Issuance of Series C 8% convertible preferred stock in a private placement,
    net of related costs of $105,430                                                                                      434,570
Dividends declared on Series C 8% convertible preferred stock                                                              (7,200)
Record treasury stock to be received in connection with joint venture
    liquidation                                                                               $(1,746,987)             (1,746,987)

Foreign currency translation adjustment                                                                                   552,039
Net (loss) for the year ended December 31, 1999                                (16,394,897)                           (16,394,897)
                                                                                                                     -------------
Comprehensive (loss)                                                                                                  (15,842,858)

                                                                              ----------------------------------------------------
Balance at December 31, 1999                                                  $(50,349,052)  $(1,746,987) $ (811,824)$ (6,556,238)
                                                                              ====================================================
</TABLE>


See accompanying notes.


                                       F5


<PAGE>

                                COMPOSITECH LTD.
                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                    Year Ended
                                                                                                    December 31
                                                                                          ----------------------------
                                                                                             1999             1998
                                                                                          ------------    ------------
<S>                                                                                       <C>              <C>
Cash Flows from Operating Activities
Net (loss)                                                                                ($16,394,897)    ($5,810,595)
Adjustments to reconcile net (loss) to net cash and
  cash equivalents used in operating activities:
    Depreciation and amortization, including capital leases                                  1,015,176         533,053
    Restructuring charges                                                                    7,357,604
    Loss on disposal of property and equipment                                                                   8,360
    Amortization of debt discount and expenses                                               1,632,586         497,603
    Issuance of common stock as compensation to directors                                       45,863
    Equity in net (income) loss of joint venture                                               133,296         (36,831)
    Changes in operating assets and liabilities:
       Accounts receivable trade - net                                                         (55,510)         17,452
       Accounts receivable from joint venture                                                   59,946          97,686
       Inventories                                                                             239,784         147,138
       Prepaid expenses and other                                                               43,785         (68,456)
       Other assets and other deferred charges                                                  53,413          (7,200)
       Accounts payable                                                                      1,176,560          28,583
       Deferred salaries                                                                        56,277         265,091
       Accrued interest                                                                        275,627         128,652
       Deferred licensing income                                                              (133,409)        777,249
       Other accrued liabilities                                                               143,694         (83,746)
                                                                                          ------------    ------------
          Net cash and cash equivalents (used) in operating activities                      (4,350,205)     (3,505,961)

Cash Flows from Investing Activities
Purchase of property and equipment - net                                                      (332,946)       (694,297)
Investment in joint ventures                                                                                  (467,487)
Patent costs deferred                                                                          (30,099)        (29,204)
                                                                                          ------------    ------------
          Net cash and cash equivalents (used in) investing activities                        (363,045)     (1,190,988)

Cash Flows from Financing Activities
Net proceeds from issuance of common stock                                                   2,464,944       1,393,647
Net proceeds from issuance of Series C convertible preferred stock                             434,570
Net proceeds from exercise of warrants                                                           1,282
Net proceeds from issuance of 5% convertible debentures                                                         29,000
Net proceeds from issuance of 7% Series B convertible preferred stock                                        1,900,000
Net proceeds from loans and notes payable                                                    2,088,981         395,025
Advance received on sale of common stock                                                                       500,000
Payment of capital lease obligations                                                           (38,949)        (42,691)
Payment of loans and notes payable                                                            (266,667)

                                                                                          ------------    ------------
        Net cash and cash equivalents provided by financing activities                       4,684,161       4,174,981
                                                                                          ------------    ------------
        (Decrease) in cash and cash equivalents                                                (29,089)       (521,968)
        Cash and cash equivalents at beginning of period                                       102,286         624,254
                                                                                          ------------    ------------
        Cash and cash equivalents at end of period                                             $73,197        $102,286
                                                                                          ============    ============
Supplemental disclosures of cash flow information
Noncash financing activities:
  Preferred Stock dividends on 7% Series B convertible preferred stock                         $15,692        $406,686
  Preferred Stock dividends on Series C 8% convertible preferred stock                         121,745
  Issuance of common stock for notes receivable                                                529,324         312,500
  Issuance of common stock in repayment of promissory notes, including accrued interest        508,565
  Issuance of common stock as compensation for bridge financing                                 30,000
  Issuance of common stock as compensation to an officer and to directors                      103,275

Cash paid for:
  Interest                                                                                      95,243         104,039
</TABLE>

See accompanying notes.



                                       F6
<PAGE>


                                COMPOSITECH LTD.

                          Notes to Financial Statements

                                December 31, 1999


1.   Organization,  Basis of Presentation  and Significant  Accounting  Policies

Organization and Basis of Presentation

Compositech  Ltd.  (the  "Company"),  a Delaware  corporation,  has  developed a
proprietary   technology   for  the   manufacture  of  innovative  and  superior
copper-clad fiberglass epoxy laminates used to make printed circuit boards.

On December 3, 1999, the Company suspended its manufacturing operations due to a
lack of adequate  financing and  refocused  its  resources on locating  suitable
licensees,  joint venture partners or purchasers for its patented technology and
equipment  design.   The  Company  is  also  exploring   potential  mergers  and
acquisitions  or other strategic  transactions.  The Company has begun licensing
discussions with several potential licensees and hired  International  Licensing
Network as a  consultant.  In March 2000,  the  Company  formally  launched  its
licensing  program by sending proposals to a limited number of select candidates
supported   by   recommendation   letters  from   several   original   equipment
manufacturers and printed circuit board customers of the Company.

The accompanying  financial  statements have been prepared  assuming the Company
will continue as a going concern.  In addition to the matters  discussed  above,
the Company has incurred  recurring  operating  losses and has a working capital
deficiency.  The Company requires,  and is negotiating for,  additional  funding
from  financing or other sources to satisfy its existing  liabilities  and cover
future  operating  expenses  until  sufficient  revenues  are  generated.  Since
December 31, 1999, the Company has received  limited private  placement  funding
(See Note 14). In addition,  the Company has initiated  discussions with certain
creditors  to provide  accommodations  with regard to  outstanding  liabilities.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern.  The financial  statements do not include any adjustments to
reflect the possible future effects on the  recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.


Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash  equivalents  are  comprised  of cash in banks and  highly  liquid
investments with maturities of three months or less.



                                       F7
<PAGE>



Inventories

Inventories  include raw  materials,  finished  goods and  inventories  of spare
parts.  Raw materials and finished goods  inventories are stated at the lower of
cost or market based on the first-in,  first-out  method.  Inventories  of spare
parts are stated at the lower of cost or market based on specific  item cost. In
connection with the decision by the Company to suspend manufacturing  operations
on  December  3,  1999,  the  Company  has  reduced  the  carrying  value of its
inventories  to  estimated  net  realizable  value  by  recording  a  charge  to
manufacturing expense of $153,068.

                                                         December 31
                                              ----------------------------------
                                                   1999               1998
                                              ---------------    ---------------
              Raw Materials                          $ 5,000          $ 122,577
              Finished Goods                          10,000             86,800
              Spare Parts                                                45,407
                                              ---------------    ---------------
                   Total                             $15,000          $ 254,784
                                              ===============    ===============


Property and Equipment

Property and  equipment  were  depreciated  using the straight  line method over
their estimated  lives,  which ranged from five to ten years,  until December 3,
1999,  when the  Company  suspended  manufacturing  operations  and  reduced the
carrying value of such assets to estimated net realizable value. See Note 2.

Patents

The Company has obtained  patents in the United States and  internationally  and
has filed additional patent applications.  Such patent rights are of significant
importance  to  the  Company  to  protect  products,   processes  and  equipment
developed.  Costs incurred in connection with patents are being deferred and are
amortized over the life of the patents  beginning  upon issue.  Costs related to
unsuccessful patent applications will be expensed.

(Loss) Per Share

Basic and diluted loss per share are calculated in accordance with SFAS No. 128,
"Earnings per Share." Loss per share is based on the weighted  average number of
shares of common stock  outstanding.  The conversion of the Series A Convertible
Preferred Stock, par value $3.00 per share (the "Series A Stock"), the 7% Series
B  Convertible  Preferred  Stock,  par value $0.01 (the  "Series B Stock"),  the
Series C 8% Convertible Preferred Stock, par value $0.01 (the "Series C Stock"),
the 5% Convertible  Debentures (the  "Debentures")  and outstanding  options and
warrants  into common stock has not been assumed in the  calculation  of diluted
loss per share, as such conversion would be anti-dilutive.

Accounting Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from these estimates.


                                       F8
<PAGE>


2.  Property and Equipment

     In  connection  with  the  suspension  of  manufacturing  activities  which
occurred  on December 3, 1999 and the  pursuit of  potential  licensees  for the
Company's patented  technology and equipment design, the Company has reduced the
carrying value of its property and equipment to $2,000,000,  which represents an
estimate by  management of its net  realizable  value by recording an impairment
loss of $3,289,879. Property and equipment is classified as held for sale in the
accompanying balance sheet as of December 31, 1999.

Property and equipment at December 31, 1998 consisted of the following :

     Production equipment                              $5,774,374
     Laboratory equipment                                 160,535
     Furniture, fixtures and equipment                    424,464
     Leasehold improvements                               469,555
     Construction-in-progress                             862,099
     Equipment under capital leases                       212,106
                                                      ------------
                                                        7,903,133
     Less accumulated depreciation and amortization     2,181,918
                                                      ------------
                                                       $5,721,215
                                                      ============

3. Investment in Joint Ventures

Canada

On October 16, 1997,  the Company  formed a 50/50 joint venture with four Quebec
institutional   investors   (collectively,   the  "Quebec  Investors")  for  the
establishment   of  a  plant  in  the  greater   Montreal  area  to  manufacture
Compositech's   laminates.   The  Quebec  Investors  are:  Societe  generale  de
financement du Quebec,  Fonds de solidarite des travailleurs du Quebec (F.T.Q.),
Societe  Innovatech du Grand  Montreal and Fonds  regional de solidarite  Ile de
Montreal.  The Company's  $5,426,917 capital investment in the joint venture was
funded by the Quebec  Investors  purchasing  1,066,192  shares of the  Company's
common stock at $5.09 per share.

The  investment  in joint  venture at  December  31, 1998  included  $269,853 in
commission  and legal  costs  incurred  by the  Company in  connection  with the
negotiation and  preparation of the various joint venture  agreements as well as
unreimbursed  expenses related to the joint venture which was being amortized on
a  straight-line  basis  over  fifteen  years.  The  Company  accounted  for its
investment in the joint venture  using the equity method of  accounting.  During
the years ended  December  31, 1999 and 1998,  the joint  venture had net (loss)
income  of  ($266,593)  and  $73,663,  respectively.  The  1998 net  income  was
attributed to the excess of interest  income earned on cash balances over actual
costs incurred.

During 1999 and 1998,  $534,000  and  $389,000,  respectively,  of  engineering,
selling,  general and administrative expenses were charged to the Canadian joint
venture in  accordance  with the joint  venture  agreements.  As of December 31,
1998,  the total assets and total  liabilities  (unaudited) of the joint venture
were approximately $9,835,000 and $139,000, respectively.




                                       F9
<PAGE>


In December 1999, the Company received notice from the Quebec Investors of their
decision to proceed with the  liquidation  and  dissolution of the joint venture
due principally to the Company's  inability to finance itself adequately,  which
resulted in an inability to obtain  necessary  financing  for the project in the
required  time  periods.  The  effect  of the  liquidation  is that  the  Quebec
Investors  will  receive the  proceeds of the  liquidation  of the assets of the
joint venture and the Company will receive back approximately  951,000 shares of
the Company's common stock originally  purchased by the Quebec Investors.  These
shares have been  recorded at $1.837 per share,  representing  the fair value of
the Company's common stock during the notice period, and have been classified as
treasury stock to be received in the accompanying  balance sheet at December 31,
1999. The $3,793,596 balance of the investment has been written off and included
in the  statement of  operations  as a  restructuring  charge for the year ended
December 31, 1999.

Taiwan

On February 9, 1998,  the Company  entered into a joint  venture  agreement  and
patent,  information and trademark agreement with a Taiwanese investor group led
by Cheng Xin Venture  Capital Corp.  (formerly  Fidelity  Venture Capital Corp.)
("Cheng  Xin") to  manufacture  the Company's  laminates in Taiwan.  The Company
received  $1 million as a license  down  payment  and was to receive  additional
up-front  license  payments  of $1  million  upon  the  achievement  of  certain
milestones.  The Company recorded the license income,  net of expenses incurred,
as deferred  licensing  income  which was being  amortized  over the life of the
contract.  As  part  of the  transaction,  the  Company  received  approximately
$952,500,  net of expenses,  in a private placement with the joint venture,  and
issued 610,868 shares of the Company's common stock, including commissions,  and
was to issue a like amount of shares to the joint venture for  $960,000,  net of
expenses,  within 30 days following  approval of the joint venture  license by a
governmental authority. The Company received an advance payment of $500,000 from
the  joint  venture  which was to be  applied  to the  second  half of the stock
purchase and reinvested substantially all the proceeds as part of its investment
in the joint  venture.  Licensing  income of $58,099 for the year ended December
31, 1999 and $64,284 recorded during the year ended December 31, 1998 relates to
the joint venture.

In  October  1999,  the  Company   received  a   communication   from  Composite
Technologies,  its joint venture/licensee in Taiwan, stating that the earthquake
in Taiwan had affected the venture capital group behind Compositech Technologies
to the extent that they have decided not to proceed  with the joint  venture and
proposed a settlement. As of February 17, 2000, the Company reached a settlement
agreement with its joint venture  partner/licensee  in Taiwan,  which terminates
the  joint  venture  agreement  and  their  license  for  use of  the  Company's
proprietary technology in Taiwan. Under the terms of the settlement, in exchange
for the  issuance of 587,372  shares of its common  stock to the  licensee,  the
Company  retained  the $1 million  license  down  payment it  received  in 1998.
Additionally,  in  exchange  for the equity in the joint  venture,  the  Company
retained the $500,000  advance it received to make the  investment.  The Company
incurred no loss as a result of this settlement agreement.




                                      F10
<PAGE>


4.  Loans Payable

In January  1999,  the  Company  borrowed  $17,500,  bringing  the total  amount
borrowed to $456,417 under the credit facility through Credit Bancorp.  The loan
is  collateralized  by approximately  1.7 million shares of the Company's common
stock loaned to the Company by two of the Company's  stockholder/directors.  The
loan is due on December  29, 2000 and bears  interest at the rate of one percent
above  the  one  year  LIBOR  rate  (currently   approximately  7.29%),  payable
quarterly.  A  default  would  occur  if the  Company  fails to  supplement  the
collateral  or  partially  repay the loan in the event the  collateral  falls in
value by 25% or more from the value as of the loan date.  The Company has agreed
with the two directors to issue  replacement  shares to them in the event of any
liquidation of the  collateral by the lender and provide them with  registration
rights, where necessary.

In November  1999,  the SEC  commenced an action  against  Credit  Bancorp,  its
principals  and  trustee   claiming   violations  of  the  securities   laws  by
misappropriating  stock placed as  collateral.  A receiver was appointed and the
receiver  reported to the Company that to date only  1,122,967 of the  1,702,467
shares of the  Company's  stock has been located that some or all of them may be
in margin  accounts.  It is not known whether and to what extent the shares will
be returned.  The Company  believes that any loss of shares should be covered by
the insurance policies of Credit Bancorp and if the shares were misappropriated,
the  principal  amount  of the  loan  may be  reduced  or may  not be  due.  The
litigation  may not be settled for some time and the Company may have to replace
the shares if they are not ultimately returned.


During 1999, the Company borrowed $1,380,000 under a term note series (the "Term
Notes") as a bridge to a future  financing.  The notes,  which were due 180 days
after  issuance,  are  collateralized  by certain  production  equipment and are
payable at maturity in cash or common stock at the  Company's  option.  Warrants
issued in connection  with the financing  were priced at 110% of the closing bid
price of the  Company's  common  stock  on the  dates  of the  closings  and are
exercisable for five years. The estimated fair market value of the warrants were
amortized over the term of the notes.

     Details of the individual original closings are as follows :


                                       March 16,   April 21,       July 28,
                                         1999         1999          1999
                                   -------------- ------------- ------------
    Principal                          $ 500,000   $ 430,000      $ 450,000
    Number of warrants                   125,000     107,500        112,500
    Exercise price of warrants           $ 2.372     $ 2.647        $ 2.131
    Fair market value of warrants       $ 73,267    $ 88,688       $ 62,635


In October  1999,  the Company  agreed  with the  holders of the Term Notes,  to
extend the due dates of all the Term Notes to March 31,  2000,  and the  holders
and the  placement  agent have agreed not to  exercise  any  warrants  issued in
connection  with this  transaction  until  that  date.  In  connection  with the
extension, the Company issued new term notes with terms similar to the old notes
in an aggregate amount of approximately $2,065,000, representing the face amount
of the original term notes, plus the redemption premium, accrued interest, a 20%
premium in lieu of repricing  rights and related fees.  The notes are payable at
maturity  in cash or common  stock,  at the  option of the  holders  of the Term
Notes. The Company is currently  negotiating an extension



                                      F11
<PAGE>


of the due date of the Term Notes.  In  connection  with this  refinancing,  the
Company  issued  warrants,  including  placement  agent  warrants,  to  purchase
approximately  316,871  shares of common stock at $1.20 per share,  representing
110%  of the  closing  bid  price  of the  stock  on the  date  of  negotiation,
exercisable until October 2004. The estimated fair market value of the warrants,
totaling $99,656, is being amortized over the term of the notes.

In August 1999, the Company  obtained  extensions on the due dates,  to April 2,
2001,  on  $1,420,000   of  loans  and  notes   payable  to   stockholders   and
officers/directors,  $879,385 of deferred  salaries due to officers and $362,169
(as of December 31, 1999) in accrued interest due to officers,  stockholders and
directors. In exchange for the extension of the due dates on the notes and loans
payable and the accrued  interest as of December  31, 1999,  the Company  issued
warrants to purchase  182,252  shares of common  stock at an exercise  price per
share of $1.272,  equaling  the price of warrants  issued in  connection  with a
recently  concluded  financing  transaction.  The warrants are exercisable until
August 2004.

In the five months ended  December 1999, the Company sold a total of $792,167 of
convertible short term promissory notes, realizing $728,794, net of commissions,
in a private placement.  The promissory notes are convertible into shares of the
Company's common stock, at an agreed upon conversion price, at the option of the
noteholder. Through December 31, 1999, the noteholders of $493,000 of promissory
notes  elected  repayment in shares of common  stock.  In  connection  with this
transaction,  the Company  issued  warrants to  purchase  115,750  shares of its
common  stock at prices  ranging  from  $1.188  per share to $1.563  per  share,
exercisable for two years after the date of the notes.

As part of a Retirement and Consulting  Agreement  entered into on May 28, 1999,
between the Company and Fred E. Klimpl, the Company's former Vice-Chairman,  the
Company  agreed to make  payments at the rate of $50,000 per annum to Mr. Klimpl
which will initially repay the $150,000 in loans due to Mr. Klimpl,  followed in
order by an agreed upon severance payment and deferred  compensation owed to Mr.
Klimpl.

5.  Long-Term Debt

<TABLE>
<CAPTION>
                                                                  December 31
                                                           ------------------------
                                                              1999        1998
                                                           ------------ -----------
<S>                                                           <C>          <C>
     Notes  payable to  stockholders  due
       April 2, 2001,  as  amended,  interest
       payable  semi-annually
       at prime rate plus 1 1/2% (10.0% at December
       31, 1999 and 9.25% at December 31,
       1998);  $700,000 collateralized by a second lien
       on U.S. patents and patent applications.               $750,000     $850,000

     10% Secured Notes, to stockholders, due
       April 2, 2001, as amended, interest
       payable  annually,  collateralized  by patents,
       patent  applications and certain
       production equipment.                                   670,000      745,000

                                                           ------------ ------------
                                                             1,420,000    1,595,000
                                                           ============ ============
</TABLE>




                                      F12
<PAGE>


Interest  and debt  expense  includes  interest of $155,924  (1999) and $219,548
(1998) applicable to related parties.

6.  7% Series B Convertible Preferred Stock

On May 29, 1998,  the Company  issued 220 shares of 7% Series B Stock at $10,000
per share in a private  placement,  resulting in net  proceeds of  approximately
$1.9 million.

Based  on  a  SEC  pronouncement,  a  portion  of  the  proceeds  of  the  issue
representing  the  discounted  conversion  feature as measured by the difference
between  the fair  market  value of the  common  stock on the dates the Series B
Stock was sold and the earliest  discounted  conversion price has been allocated
to additional  paid-in-capital.  The discount  resulting  from the allocation of
proceeds  has been  recorded as an  additional  dividend  of $314,286  which was
amortized  over the period from issuance to July 8, 1998,  the date on which the
Series B Stock first became convertible.


7.  Stockholders' Equity (Deficiency)

The  shares of the Series A Stock are  convertible  at any time at the option of
the stockholder into shares of common stock at the rate (subject to antidilution
adjustment)  of one-half share of common stock for each share of Series A Stock.
Each share will  automatically  be converted into shares of common stock (at the
then applicable conversion rate) upon the consummation of an underwritten public
offering  covering the sale of common stock with  aggregate  net proceeds of not
less than  $10,000,000 with a price per share equal to or greater than $9.00 per
share.

The common stock and Series A Stock vote as one class, with each share of common
stock being entitled to one vote.  Each holder of the Series A Stock is entitled
to the number of votes equal to the number of shares of common  stock into which
a share of the preferred  stock could have been  converted as of the record date
for voting.

In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the  Company,  the  holders of the  Series A Stock  shall be  entitled  to
receive up to $3.00 per share, as adjusted,  before any payments are made to the
holders of common  stock.  Each  one-half  share of common  stock  would then be
entitled  to  receive  $3.00,  as  adjusted,  from the  remaining  assets of the
Company.  Any remaining  assets will be distributed to the holders of all shares
of stock on a pro rata basis.

In November  1998 and December  1998,  the Company  sold  479,733  shares of its
common stock in a private placement, realizing $435,525, net of expenses.

At a special  meeting  held on March 26,  1999,  the  stockholders  approved  an
amendment of the Company's  Amended and Restated  Certificate of  Incorporation,
increasing  the number of authorized  shares of common stock of the Company from
25,000,000, $0.01 par value, to 50,000,000 shares, $0.01 par value.




                                      F13
<PAGE>

On November 5, 1999,  the  Company  sold 54,000  shares of Series C Stock for an
aggregate amount of $540,000.  In connection with this transaction,  the Company
issued  purchaser and placement  agent  warrants to purchase  129,000  shares of
common  stock at an  exercise  price of  $1.272  per  share,  exercisable  until
November 5, 2004, representing 110% of the closing bid price of the stock on the
date of the  closing.  The Series C stock is  convertible  into shares of common
stock at the lower of $1.272  per  share or :

(i)   82% of the closing bid price from date of issuance  (the "DOI") to 180
      days after DOI or
(ii)  78.5% of the  closing  bid price  from 181 days after DOI to 270 days
      after DOI or
(iii) 75% of the  closing bid price from 271 days after DOI to 360 days after
      DOI or
(iv)  70% of the closing bid price at any time after 360 days after issuance.

In the event the  Company is  delisted  from  Nasdaq,  the  conversion  price is
reduced to 50% of the Market Price.

Holders of the Series C Stock are entitled to  dividends on a cumulative  basis,
payable  quarterly in cash or common stock at the option of the Company,  except
under  certain  specified  conditions  which require the payment of dividends in
cash. In the event of any voluntary or  involuntary  liquidation of the Company,
holders of the Series C Stock  shall be entitled to receive the sum of : (i) the
stated value of $10 per share,  plus (ii) 30% of such stated  value,  plus (iii)
all due but unpaid  dividends  before any  distribution  or payments are made to
holders of the Series A Stock or common stock. The holders of the Series C Stock
do not have voting rights except in certain limited circumstances in which their
rights, powers or preferences could be adversely affected.

Based  on  a  SEC  pronouncement,  a  portion  of  the  proceeds  of  the  issue
representing  the  discounted  conversion  feature as measured by the difference
between  the fair  market  value of the  common  stock on the dates the Series C
Stock was sold and the earliest  discounted  conversion price has been allocated
to additional  paid-in-capital.  The discount  resulting  from the allocation of
proceeds  has been  recorded as an  additional  dividend  of $114,545  which was
amortized  on the date of  issuance,  the date on which the Series C Stock first
became  convertible.  Management  believes  that the proceeds  received from the
Series C Stock and the discount offered on conversion of the Series C Stock is a
fair  representation  of the net proceeds the Company would otherwise  expect to
receive from an equity  offering of a like number of shares after  consideration
of all associated commissions, costs and expenses.


During the four months ended April 1999, the Company issued  1,500,142 shares of
common stock upon the  conversion  of all 220 shares of the  Company's  Series B
Stock  ($2,200,000  face  amount).  The  shares  issued  included  an accrued 7%
dividend, paid in shares of common stock.

During the year ended December 31, 1999,  the Company sold  1,894,088  shares of
its common  stock,  including  600,000  shares of its common  stock  issued as a
result of the  exercise  of a stock  purchase  option,  in  private  placements,
realizing  approximately $2.4 million, net of expenses. In connection with these
private  placements,  the Company issued warrants to purchase  688,308 shares of
common  stock at prices  ranging  from  $1.125 to $2.25 per  share,  exercisable
principally two years after the purchase of the common stock.

During July 1999,  warrants to purchase  271,991 shares of the Company's  common
stock were  exercised,  at prices  ranging  from $1.125 per share to $2.6125 per
share, in exchange for notes  receivable in the amount of $404,324,  maturing on
September 1, 2000. During December 1999,



                                      F14
<PAGE>


warrants  to  purchase  100,000  shares  of  the  Company's  common  stock  were
exercised,  at a price of $1.25 per share,  in exchange for notes  receivable in
the amount of $125,000, maturing on December 31, 2000.

During the year ended December 31, 1999,  pursuant to Compositech's  Amended and
Restated Stock Award Plan (the "Award Plan"), the Company issued stock awards of
18,554 shares of its common stock to its  non-employee  directors,  vesting on a
quarterly  basis,  as payment  of the annual  $10,000,  per  director,  retainer
approved by the Board of Directors on January 22, 1999. The number of shares was
determined using a price of $2.875,  the market value of the common stock on the
date approved by the Board of Directors.

In November 1999, pursuant to the Award Plan, the Company issued stock awards of
140,000  shares of its common  stock to two of its  executive  officers,  with a
restriction  period  ending on August 1, 2001.  The awards are  rescinded if the
executive  officer  leaves the  Company  other than  because  of  disability  or
retirement, as determined in good faith by the Board of Directors. In connection
with the resignation of Christopher F. Johnson,  which was accepted by the Board
as of December 31, 1999, his stock award, totaling 100,000 shares was rescinded.

In December 1999,  894,165  shares of the Company's  common stock were issued in
connection with the repayment of $493,000 of convertible  promissory  notes plus
$15,565 in accrued  interest,  in accordance with the conversion  rights held by
various noteholders.


8.   Warrants and Options

Warrants

In April 1998,  in  connection  with the final  conversion  of the  Company's 5%
Convertible  Debentures,  the Company  issued  warrants to Trautman  Wasserman &
Company,  Incorporated.,  the  Placement  Agent,  to buy 75,000 shares of common
stock at $2.6125 per share. Management estimates the fair value of such warrants
is nominal. The warrants are exercisable until April 24, 2003.

In October 1998, the Placement  Agent  exercised a warrant to buy 125,000 shares
of common stock at $2.50 per share in exchange for notes receivable, maturing in
September 2000, as extended.

During  December  1998,  the Company issued 79,356 shares of its common stock to
certain   shareholders  as  compensation  for  advisory   services  rendered  in
connection with the arrangement of a credit facility.

During November and December 1998, in connection with a private placement of its
common stock,  the Company issued warrants to buy 318,134 shares of common stock
at $1.125 per share.  Management  estimates  the fair value of such  warrants is
nominal.  The warrants are  exercisable  until  February 15, 2001. In connection
with the same private  placement,  the Company issued a stock purchase option to
buy  600,000  shares  of  the  Company's  common  stock  for  $0.90  per  share,
exercisable until March 18, 1999.



                                      F15
<PAGE>


During the three months ended March 1999, in connection with a private placement
of its common stock, the Company issued warrants to buy 505,928 shares of common
stock at prices ranging from $1.125 per share to $2.125 per share.  The warrants
are exercisable until February 15, 2001

In March  1999,  in  connection  with the past due  accrued  interest  due as of
December 31, 1998,  the Company  issued  warrants to buy 25,483 shares of common
stock at $2.50 per share to its stockholder noteholders, exercisable until March
10, 2004.  The fair market  value of the warrants has been  estimated at $21,405
and was amortized over calendar 1999.

In June 1999, in  connection  with the loaning of their shares to the Company as
collateral for the loan from Credit Bancorp,  the Company issued warrants to buy
114,103   shares   of  common   stock  at  $1.134   per  share  to  two  of  its
officer/directors, exercisable until December 29, 2003. The fair market value of
the warrants has been estimated at $39,365 and was amortized over calendar 1999.

In June 1999, in exchange for investment  banking services to be rendered over a
two year period,  the Company  issued  warrants to buy 400,000  shares of common
stock, at $2.20 per share, exercisable until June 2, 2002. The fair market value
of the warrants has been estimated at $151,300 and are being  amortized over the
two year period ending June 2001.

In connection with the extension of due dates on stockholder loans and accruable
interest as of December 31, 1999 till April 2, 2001, the Company issued warrants
to buy 178,218 shares of common stock, at $1.272 per share, a price identical to
the warrants given in the Series C Stock financing. The warrants are exercisable
until August 2004.

During June and July 1999, in connection with a private  placement,  the Company
issued  warrants  to buy 182,380  shares of common  stock,  at  exercise  prices
ranging  from  $1.375 per share to $2.25 per share,  exercisable  until July 31,
2001.

In connection with the private placement of convertible  promissory notes issued
in the three months  ended  October  1999,  the Company  issued  warrants to buy
295,750 shares of common stock, at exercise prices ranging from $1.125 per share
to $1.563 per share, exercisable until September 30, 2001.

In October 1999, as partial  compensation  in connection  with financial  public
relations  services to be  rendered  over a six month time  period,  the Company
issued  warrants to buy 99,000  shares of common  stock,  divided  equally  into
groups of warrants to buy 33,000  shares of common  stock at exercise  prices of
$1.50, $2.50 and $3.50, respectively,  exercisable until September 30, 2001. The
fair market  value of the  warrants  has been  estimated at $33,495 and is being
amortized over the period of October 1999 through March 2000.

In connection  with the sale of the Series C Stock in November 1999, the Company
issued warrants,  including  placement agent warrants,  to buy 129,000 shares of
common  stock at an  exercise  price of  $1.272  per  share,  exercisable  until
November 5, 2004.


                                      F16
<PAGE>


Stock Option Plan

Under the Company's  1988  non-qualified  stock option plan,  150,000  shares of
common  stock  may be  issued  to  selected  key  employees  and  non-employees,
including directors, providing services to the Company. Under the Company's 1994
Stock Award Plan as amended,  2,675,000  shares of common stock may be issued as
Incentive Stock Options,  non-qualified  options or restricted stock to selected
key employees or to non-employees,  including  directors,  providing services to
the Company.  All options  granted have ten year terms and vest and become fully
exercisable between six months and three years.

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting   for  Stock   Issued  to   Employees"   ("APB   25")  and   related
Interpretations  in  accounting  for its  employee  stock  options  because,  as
discussed below,  the alternative fair value accounting  provided for under SFAS
No. 123,  "Accounting  for  Stock-Based  Compensation",  requires  use of option
valuation  models  that were not  developed  for use in valuing  employee  stock
options.  Under APB 25,  because the exercise  price of the  Company's  employee
stock  options  equals the market price of the  underlying  stock on the date of
grant, no compensation expense is recognized.

Pro forma information  regarding net loss and loss per share is required by SFAS
No. 123,  which also  requires  that the  information  be  determined  as if the
Company has  accounted  for its employee  stock  options  granted  subsequent to
December 31, 1994 under the fair value method of that statement.  The fair value
for these  options  was  estimated  at the date of grant  using a  Black-Scholes
option pricing model with the following  weighted-average  assumptions  for 1999
and 1998:  risk-free  interest rates of 6.79% and 4.72% ; dividend yields of 0%;
volatility factors of the expected market price of the Company's common stock of
 .861 and .827; and a weighted-average expected life of the option of six years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options' vesting period.

The Company's pro forma information for 1999 and 1998 are as follows:

                                        1999             1998
                                  ----------------   --------------
    Pro forma net (loss)            ($16,742,270)     ($6,802,411)
    Pro forma (loss) per share -
        basic and diluted                 ($1.05)          ($0.59)


                                      F17
<PAGE>


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

<TABLE>
<CAPTION>
                                                       1999                              1998
                                           ------------------------------    ------------------------------
                                                         Weighted-Average                  Weighted-Average
                                             Options      Exercise Price         Options    Exercise Price
                                           ------------- ----------------    ------------- ----------------
<S>                                           <C>              <C>                <C>           <C>
        Outstanding-beginning of year         1,482,670        $    2.70          770,490       $    4.16
        Granted                                 496,689        $    1.57          814,100       $    1.57
        Forfeited                               674,049        $    1.62          101,920       $    4.79
                                           ------------- ----------------    ------------- ---------------
        Outstanding - end of year             1,305,310        $    2.83        1,482,670       $    2.70
                                           ============= ================    ============= ===============
        Exercisable - end of year             1,030,477        $    3.16          611,669       $    3.63

        Weighted average fair value of
        options granted during the year                        $    1.35                        $    1.15
</TABLE>


A summary of options outstanding as of December 31, 1999 follows:


<TABLE>
<CAPTION>
                                                                                   Weighted Average
                                                                                       Remaining
                                                                                   Contractual Life
                                         Options                Options                 (Years)
           Exercise Price              Outstanding            Exercisable
           --------------------     ------------------      -----------------      ------------------
<S>                    <C>                    <C>                     <C>                       <C>
                       $ 1.188                133,334                 56,667                    8.71
                         1.219                 65,000                     --                    9.71
                         1.375                187,667                 76,334                    8.06
                         1.406                    667                    667                    8.27
                         1.813                  4,246                  4,246                    8.48
                         1.844                123,283                123,283                    8.48
                         2.000                 28,168                 25,501                    8.22
                         2.375                 46,290                 46,290                    7.93
                         2.500                377,689                377,689                    6.00
                         4.375                  2,000                  2,000                    7.35
                         4.750                  7,667                  7,334                    7.27
                         5.000                119,800                119,800                    2.88
                         5.750                209,499                190,666                    6.91
                                    ------------------      -----------------      ------------------
                                            1,305,310              1,030,477                    6.71
                                    ==================      =================      ==================
</TABLE>


Included in the total  outstanding  as of December 31, 1999 are 599,610  options
for directors.

The Company has reserved  16,232,546  shares of common stock for  conversions of
preferred stock and issuances for stock options, warrants, stock purchase option
agreements and stock exchange agreements.





                                      F18
<PAGE>


9.  Income Taxes

The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
"Accounting for Income Taxes".  Under SFAS No. 109, the liability method is used
in  accounting  for income  taxes.  Under this  method,  deferred tax assets and
liabilities are determined based on differences  between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.

Deferred income taxes reflect the net effects of temporary  differences  between
the carrying amounts of assets and liabilities for financial  reporting purposes
and the amounts used for income tax purposes.

At December 31, 1999, the Company has net operating loss  carryforwards  ("NOL")
of approximately  $38,806,000 for Federal income tax purposes,  expiring at 2003
through 2019.  In addition,  the Company has research and  development  credits,
targeted  job credits  and  alternative  minimum  tax  credits of  approximately
$1,205,000  which  generally  expire  through 2014, to offset future taxes.  The
Internal Revenue Code ("IRC")  includes  provisions  which  significantly  limit
potential use of net operating  losses and tax credits in situations where there
is a change in  ownership,  as  defined,  of more than 50%  during a  three-year
period.  Accordingly,  if a change in ownership  occurs,  the  ultimate  benefit
realized from these  carryovers may be  significantly  reduced in total, and the
amount  that may be  utilized  in any given year may be  significantly  limited.
Additionally,   because   there  is  a  limit  on  the  time  during  which  NOL
carryforwards and tax credits may be applied against future taxable income,  the
Company will not be able to take full  advantage of these NOL's when the Company
generates taxable income.

As of December 31, 1999, the maximum  utilization of the Company's $38.8 million
NOL  has  been  calculated  to  be  approximately  $28.5  million,  due  to  the
aforementioned  limitations.  As the Company has had cumulative losses and there
is no  assurance  of future  taxable  income,  a  valuation  allowance  has been
established to offset  deferred tax assets.  The components of the Company's net
deferred tax are as follows:

<TABLE>
<CAPTION>
                                                                          December 31
                                                            ----------------------------------------
                                                                  1998                  1998
                                                            -----------------      ----------------
<S>                                                              <C>                   <C>
       Deferred tax assets:
          Deferred salaries                                      $  362,000            $  343,000
          Net operating loss carryforwards                        9,683,000             7,416,000
          Research and development and other credits              1,205,000             1,140,000
                                                            -----------------      ----------------
       Total deferred tax assets                                 11,250,000             8,899,000
       Less:  valuation allowance                               (10,381,000)           (8,179,000)
                                                            -----------------      ----------------
       Net deferred tax assets                                      869,000               720,000
       Deferred tax liability:
          Tax over book depreciation                               (869,000)             (720,000)
                                                            -----------------      ----------------
       Net deferred tax                                            $   _____             $   _____
                                                            =================      ================
</TABLE>




                                      F19
<PAGE>


10.  Commitments and Contingencies

Operating Leases

At December 31, 1999,  future  minimum annual rentals for leases with initial or
remaining terms in excess of one year are as follows:

                  2000                 $152,000
                  2001                   26,000
                  2002                    4,000
                                    -----------
                                        $182,000

The Company  leases its plant under a net lease  expiring  August 31, 2000.  The
lease requires that the Company pay real estate taxes as additional rent.

Rent  expense  was  approximately  $226,310 in 1999 and  $247,000  in 1998.  The
foregoing  amounts  include  $37,000 and $38,000,  respectively,  of real estate
taxes paid as additional rent.

Capital Leases
Future minimum lease payments under capital leases for equipment with a net book
value of approximately $88,000, included in property and equipment for the years
ending December 31, are as follows:

         2000                                        $12,523
         Less: Amount representing interest              114
                                                     -------
         Present value of minimum lease  payments    $12,409
                                                     =======

Legal Proceedings

The Company is a party to the following legal proceedings:

1.   An action  commenced in January  2000 in the Supreme  Court of the State of
     New York by Yates Foil USA, Inc. seeking damages of approximately  $140,000
     for goods sold and delivered. The Company is in the process of preparing an
     answer and is discussing a compromise of the amount  sought.  The amount of
     the claim is accrued on the books of the Company as at December 31, 1999.

2.   A summary  proceeding  has been  instituted  in March 2000 in the  District
     Court of the County of Suffolk, NY by Reckson Operating  Partnership,  L.P.
     as landlord  seeking  damages of  approximately  $72,000 for non-payment of
     rent and eviction of the Company from the  premises.  The Company is in the
     process of preparing an answer and is  discussing a compromise  and payment
     schedule  for the amount  due.  The amount of the claim  which  principally
     applies  to  year  2000 is  accrued  on the  books  of the  Company  in the
     applicable periods.

3.   The  Company  is also a party to  several  legal  proceedings  relating  to
     creditors which are not material.



                                      F20
<PAGE>


11.  Significant Customers

Customers who individually represent 10% or more of net sales for the respective
years are as follows:

                                                Years Ended December 31
                                         ------------------------------------
                                               1999              1998
                                         -----------------  ----------------
        Teradyne, Inc.                         52.8%              48.2%
        Tyco International Ltd.                31.4%               2.9%
        HADCO Corporation                       0.2%              37.4%


12.  Retirement Plan

The Company established a defined contribution  retirement plan ("the Plan") for
eligible  employees under Section 401(k) of the Internal  Revenue Code effective
January 1, 1998.  Participants can make voluntary  contributions up to a maximum
of 20% of their annual salary. The Company made no matching contributions to the
Plan in 1999 or  1998.  In  connection  with  the  suspension  of  manufacturing
activities and subsequent reduction in the Company's workforce, the Company gave
notice of Plan termination on December 3, 1999.


13. Restructuring Charges

In connection  with the suspension of  manufacturing  operations and other items
discussed in Note 1 under  Organization and Basis of  Presentation,  the Company
instituted a  restructuring  program  whereby it has  refocused its resources on
locating  suitable  licensees,  joint  venture  partners or  purchasers  for its
technology.  Restructuring charges of $7,357,604 for the year ended December 31,
1999 consist of the following:

     (i)   an impairment  loss of $3,289,879  representing  the reduction in the
           carrying value of property  and  equipment  to net  realizable  value
           related to the suspension of  manufacturing  operations

     (ii)  a loss of $3,793,596  on the  termination  of the  Company's Canadian
           joint venture

     (iii) other items of $274,129 relating to the  suspension of  manufacturing
           operations,  including future lease costs and the writeoff of prepaid
           manufacturing expenses.

In  addition,  $153,068 of  inventory  writedowns  was charged to  manufacturing
expenses in connection with the suspension of manufacturing operations.

14.  Subsequent Events

During January 2000, the Company sold $20,000 of convertible  promissory  notes,
under an agreement entered into during December 1999.

Subsequent to December 31, 1999,  the Company  issued  273,442  shares of common
stock upon the  conversion  of  $169,167 of  convertible  promissory  notes,  in
accordance with the instructions of the noteholders, resulting in an increase in
common  stock of  $2,734  and an  increase  in  additional  paid-in  capital  of
$166,433.

Subsequent to December 31, 1999,  the Company sold 158,747  shares of its common
stock,  in a private  placement,  realizing  $97,265,  net of expenses  and sold
139,083 shares of its common stock in connection  with the exercise of warrants,
realizing $156,468



                                      F21