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

                                   FORM 10-KSB

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

For the fiscal year ended June 30, 1999

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

For the transition period from ___________________ to __________________

                         Commission file number: 0-29624

                             SCNV ACQUISITION CORP.
                 (Name of small business issuer in its charter)

         Delaware                                               90-0194786
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

          Omer Industrial Park, P.O.B. 3026, Omer, Israel         84965
          (Address of principal executive offices)              (Zip Code)

Issuer's telephone number: (972) 7-690-0950

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

          Title of each class:        Name of each exchange on which registered:
          None                                    Not Applicable

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

Units,  each  consisting of one share of Common Stock and one Class A Redeemable
                                    Warrant
                                (Title of class)

                                  Common Stock
                                (Title of class)

                           Class A Redeemable Warrants
                                (Title of class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  Exchange Act 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 is not  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. [_].

The Issuer's revenues for the fiscal year ended June 30, 1999 were $67,693.

The  aggregate  market value of the voting and  non-voting  Common Stock held by
non-affiliates was approximately $650,652 as at the close of business on October
12, 1999.

The number of shares of Common Stock  outstanding  as at October 12,  1999,  was
2,082,088.

Documents incorporated by reference: None


<PAGE>

                              SCV Acquisition Corp.

                                   Form 10-KSB

                                Table of Contents



<TABLE>
<S>                                                                                    <C>
Part I

   ITEM 1.  Description of the Business ............................................    3

   ITEM 2.  Description of Property ................................................   11

   ITEM 3.  Legal Proceedings ......................................................   11

   ITEM 4.  Submissions of Matters to a Vote of Security Holders ...................   11


Part II

   ITEM 5.  Market for Common Equity and Related Stockholder Matters ...............   11

   ITEM 6.  Management's Discussion and Analysis or Plan of Operation ..............   12

   ITEM 7.  Financial Statements ...................................................   16

   ITEM 8.  Changes in and Disagreements With Accountants on Accounting and
            Financial Disclosure ...................................................   16


Part III

   ITEM 9.  Directors, Executive Officers, Promoters and Control Persons; Compliance
            with Section 16(a) of the Exchange Act .................................   17

   ITEM 10.  Executive Compensation ................................................   18

   ITEM 11. Security Ownership of Certain Beneficial Owners and Management .........   21

   ITEM 12. Certain Relationships and Related Transactions .........................   22

   ITEM 13.  Exhibits, Lists and Reports on Form 8-K ...............................   22
</TABLE>


                                      -2-
<PAGE>


Part I.

ITEM 1.  Description of the Business

     The  Private  Securities  Litigation  Reform  Act of 1995  provides a "safe
harbor" for forward-looking  statements.  Certain  information  included in this
Report contains statements that are forward-looking, such as statements relating
to plans for future activities.  Such forward-looking information involves known
and unknown  risks,  uncertainties  and other factors which may cause the actual
results,  performance or achievements of the Company to be materially  different
from any future  results,  performance or  achievements  expressed or implied by
such forward-looking  statements made by or on the behalf of the Company.  These
risks, uncertainties and factors include, but are not limited to, those relating
to the  uncertainty  regarding  the  Company's  ability to  continue  as a going
concern and the qualification of the auditor's report on the Company's financial
statements  to  that  effect,   uncertainties  regarding  the  Company's  growth
strategy, uncertainty of the availability of additional financing, uncertainties
regarding the Company's ability to fulfill its commitments under the acquisition
agreements  relating to a subsidiary and to commercialize the technology of such
subsidiary,  the  ability  to hire and  retain  key  personnel,  uncertainty  of
feasibility of the Company's  technologies and product development,  uncertainty
of market  acceptance  of the  Company's  technologies,  relationships  with and
dependence on third-party equipment  manufacturers and suppliers,  uncertainties
relating to government and  regulatory  policies and other  political  risks and
other risks  detailed in the Company's  filings with the Securities and Exchange
Commission. The words "believe", "expect", "anticipate", "intend" and "plan" and
similar expressions identify forward-looking  statements.  Readers are cautioned
not to place undue  reliance on these  forward-looking  statements,  which speak
only as of the date the statement was made.

General

     SCNV Acquisition Corp., a Delaware corporation (the "Company") incorporated
on May 19, 1997,  was  organized  to select,  develop and  commercially  exploit
proprietary technologies,  in various stages of development,  invented primarily
by scientists who have recently immigrated to Israel from, and by scientists and
institutions  in, Russia and other countries that formerly  comprised the Soviet
Union.  Since  its  inception  the  Company  has  been  engaged  principally  in
organizational  activities,   including  developing  a  business  plan,  matters
directly  related to the  initial  public  offering  of its  securities  and the
acquisition of an Israel based company (as described  below) and the acquisition
of identified technologies or manufacturing  facilities for certain technologies
for further development,  production and commercialization.  The Company intends
to continue to identify,  select and develop technologies invented by scientists
from the former Soviet Union as well as from other  countries with potential for
commercialization.

Initial Public Offering and Acquisition of Solmecs Corporation N.V.

     On July 8, 1998, the Company  consummated  an initial public  offering (the
"Public  Offering") of 1,041,044 units (the "Units") each Unit consisting of one
share of common  stock,  $.01 par value per share,  of the Company  (the "Common
Stock")  and  one  Class  A  redeemable   Common  Stock  purchase  warrant  (the
"Warrants")  for  net  proceeds  to the  Company  of  approximately  $4,600,000.
Contemporaneous  with the  consummation  of the  Public  Offering,  the  Company
acquired, in a tax free stock-for-stock transaction (the "Acquisition"),  all of
the  issued  and  outstanding  capital  stock  of  Solmecs   Corporation,   N.V.
("Solmecs"),  a Netherlands  Antilles company,  and its wholly-owned  subsidiary
Solmecs  (Israel) Ltd.  ("SIL"),  the operations of which are located in Israel.
(Unless the  context  otherwise  requires,  Solmecs and SIL shall be referred to
herein as the "Company" or "SCNV").

     Solmecs was  organized in 1980 to engage in the research,  development  and
commercialization   of  high  energy,  low  pollution  products  in  the  energy
conversion and conservation  fields.  From 1980 until the mid-1990's Solmecs was
primarily  engaged  in the  development  of  Liquid  Metal  Magnetohydrodynamics
("LMMHD") energy conversion  technology,  a process  developed  approximately 20
years ago by Professor  Herman  Branover,  a Soviet  emigre to Israel who is the
President and a director of the Company.

     Solmecs  owns  certain   technologies   identified  for  future  commercial
exploitation which have been developed by scientists in and scientists that have
emigrated from the former Soviet Union. The  technologies  identified by Solmecs
for exploitation  are in various stages of development and include  technologies
that have begun to be  commercialized  as well as technologies  that the Company
believes may be ready for commercialization in the near future.


                                      -3-
<PAGE>


Strategy

     The  Company's  strategy  is to  commercially  exploit  those  technologies
identified by Solmecs to be viable for  development  and to identify and develop
innovative  technologies  which  represent  advances over existing  products and
technologies with potential commercial viability.

     The strategy employed by the Company in commercially developing proprietary
technologies varies depending on the state of the identified technology. In some
cases the  third-party  technology  identified  by the Company may have  already
reached an advanced  stage,  such as the manufacture of prototypes or production
of testing  samples.  In such cases the Company would forego the early  analysis
and development  processes and acquire the production  facilities or third-party
distribution rights. Generally,  however, the Company will implement a four-step
process with respect to the identification, development and commercialization of
early-stage  proprietary  technologies.   Initially  the  Company,  through  its
scientific,  engineering and administrative personnel, will seek to identify and
analyze a number of proposed  advanced  technologies  with potential  commercial
viability.  The  Company  will then  assess  the costs of further  research  and
development (including the building and testing of prototypes,  if required) and
seek to obtain  intellectual  property rights in viable  technologies.  Upon the
establishment of the commercial viability of certain  technologies,  the Company
will develop a business plan  detailing the  exploitation  of such  technologies
from the research  and  development  phase  through  product  commercialization,
develop and, in some instances,  implement financing  strategies to further such
business plan, and suggest and, in some cases, assemble a team of scientists and
engineers  most  suitable  for   implementation  of  such  business  plan.  Upon
completion of the business  development  plan for each project,  the Company may
seek to manufacture  (directly or through  contractors)  and market (directly or
through  distributors)  the project itself,  enter into strategic  alliances for
such  commercialization,  or sell or license  the  proprietary  information  and
know-how to a third party in  consideration  of  technology  transfer or license
fees.

     The Company's  capital  requirements  will be  significant.  The Company is
dependent  upon the  remaining  proceeds  of the Public  Offering to finance the
operations of the Company,  including the costs of market research and marketing
activities,   continued   research   and   development   efforts,   establishing
manufacturing  capabilities and the acquisition of intellectual property rights.
Completion  of  the  commercialization  of  the  Company's  technologies  or any
potential application of such technologies,  including,  without limitation, the
technology of Elecmatec,  in which the Company  acquired a 90.4% interest in May
1999, will require significant additional effort,  resources and time, including
funding substantially greater than the remaining proceeds of the Public Offering
or  otherwise  currently  available  to the  Company.  Moreover,  the  remaining
proceeds of the Public  Offering will be  insufficient  to satisfy the scheduled
projects, requiring the Company to seek additional financing. The Company has no
current arrangements with respect to, or sources of, additional  financing,  and
it is not anticipated that existing shareholders will provide any portion of the
Company's  future  financing  requirements.  There  can  be  no  assurance  that
additional   financing  will  be  available  to  the  Company  when  needed,  on
commercially reasonable terms, or at all.

     The Company has incurred substantial operating losses and at June 30, 1999,
has an  accumulated  deficit of  approximately  $5,740,000.  The  Company is not
generating  sufficient  revenues from its  operations to fund its activities and
anticipates  that it will continue to incur losses for some time. The Company is
continuing  its  efforts  in  research  and   development   which  will  require
substantial additional expenditures.  As such, the Company is dependent upon its
ability  to  raise  resources  to  finance  its  operations.  This  fact  raises
substantial doubt about the Company's ability to continue as a going concern.

     The Company  plans to finance its  operations  and capital  expenditure  by
receiving   additional  credit  lines  and  bank  loans.  The  Company  is  also
negotiating with potential investors/partners who would provide bridge financing
until the  Company  will begin to  produce  and sell its  products.  There is no
assurance  that  such  credit  lines,  bank  loans or bridge  financing  will be
available to the Company when needed,  on  commercially  reasonable  terms or at
all.

Products and Technologies Commercially Distributed by the Company

     The Company is presently engaged in limited commercial  distribution of the
products  set forth below.  In addition,  the Company is involved in the further
development or enhancement of each of the following technologies through a joint
venture  with a third party  manufacturer  or through  direct  ownership  of the
development and production process.

     o    Advanced   Bi-Facial    Photovoltaic   Panels.    Advanced   bi-facial
          photovoltaic  panels were  developed  by Solmecs in  conjunction  with
          Russian scientists working in the space and military industries of the


                                      -4-
<PAGE>

          former  Soviet  Union and are  considered  by the  Company  to be more
          reliable  and  more  efficient  than  one-sided   photovoltaic  panels
          currently available in the market.  These panels are made of bi-facial
          cells which allow more surface area to absorb solar energy,  including
          solar  energy that is  reflected  back from the ground,  resulting  in
          approximately  30% more  power.  Each  unit  occupies  less  space and
          requires fewer panels than currently available technology. Pursuant to
          an  arrangement  with a Russian  manufacturer,  the  Company,  through
          Solmecs, acts as the distributor of such manufacturer's  one-sided and
          advanced bi-facial photovoltaic panels.

               In September  1998,  Solmecs  acquired the rights to photovoltaic
          technology  developed  by  the  Association  for  the  Development  of
          International   Energy  Projects  (the   "Association"),   located  in
          Beersheba, Israel. Pursuant to the acquisition,  Solmecs agreed to pay
          certain  royalties  to the  Association  from  revenues  generated  by
          Solmecs from sales of photovoltaic  panels  manufactured by Solmecs or
          from  licensing of the  photovoltaic  technology.  In November,  1998,
          Solmecs acquired  materials,  equipment and engineering  services from
          the  Russian  entity  in  order  to  establish  its own  manufacturing
          facilities for the production of both one-sided and advanced bi-facial
          photovoltaic  panels.  The  Company is  establishing  a  manufacturing
          facility for  photovoltaic  panels at its principal office location in
          Omer, Israel, and expects to have the facility completed by late 1999.
          The Company will require additional funds, not currently  available to
          the  Company,  to commence  and maintain  production  of  photovoltaic
          panels  from these  facilities.  Provided  that the Company is able to
          obtain, on a timely basis, the additional funds necessary, the Company
          anticipates  production  of  commercial  panels during the 2000 fiscal
          year. The Company further expects to continue to act as distributor of
          the Russian  entity's  photovoltaic  panels.  Moreover,  the  Company,
          through a joint effort with the Russian entity, has developed a patent
          for the  bi-facial  panel  technology  and  expects to file the patent
          initially in Israel by late 1999.  The patent will name Solmecs as the
          sole owner of the technology addressed therein.

          Solmecs had limited sales of photovoltaic  panels, based solely on its
          distribution  arrangement  with the Russian entity,  during the fiscal
          year ended June 30, 1999.

     o    Electronic  Pocket  Dictionaries.   Pursuant  to  an  agreement  dated
          February 4, 1999,  Solmecs acquired the worldwide rights (exclusive of
          Israel)  to  develop,  produce,  market  and  distribute  an  advanced
          electronic  pocket  dictionary  developed by Text-On  Ltd., an Israeli
          company.  The  electronic  dictionary  is a hand-held  battery-powered
          device  roughly  the size of a  calculator,  that  enables the user to
          quickly and accurately obtain  translations of words from one language
          into another  language  and vice versa as well as obtain  definitions,
          synonyms  and  related  information  for each  word.  The  Company  is
          currently engaged in marketing and distribution of the  Hebrew/English
          and Russian/English  pocket dictionaries in the United States. Solmecs
          recently completed development of a Spanish/English  pocket dictionary
          which incorporates the  electronically  formatted data of a recognized
          Spanish/English  Dictionary and expects to complete  manufacturing  of
          the  first  2,000  commercial  units in  November,  1999.  Solmecs  is
          negotiating  promotional and marketing  arrangements with two entities
          including  one of  the  largest  catalogue  marketing  and  promotions
          companies   associated  with  the  worldwide  airline  industry,   for
          marketing of the Spanish/English  electronic dictionary.  Depending on
          the success of the Spanish/English  dictionary, the Company may pursue
          development of alternative  language  dictionaries  or enhanced models
          capable of being programmed for multiple languages.

          In accordance with the terms of the acquisition agreement, Solmecs has
          entered into an employment  arrangement with the founder of the pocket
          dictionary  technology to oversee the marketing  and  distribution  of
          existing electronic dictionaries and the development and production of
          new electronic  dictionaries such as the  Spanish/English  dictionary.
          Additionally,  Solmecs has agreed to pay  royalties  from sales of the
          electronic dictionaries to Text-On Ltd., for a period of fifteen years
          from the date of the  agreement.  See  "Royalties  and  Licensing  Fee
          Obligations."

          During the fiscal  year ended June 30,  1999,  the Company had limited
          sales of Hebrew/English and Russian/English electronic dictionaries in
          the United States.

     There can be no  assurance  that the  Company's  efforts will result in the
successful commercialization of any of the Company's current technologies.


                                      -5-
<PAGE>


Product and Technologies Developed by the Company for Commercial Production

     The Company  intends to concentrate on the further  development of a number
of   technologies   identified  or  acquired  by  the  Company  for   commercial
exploitation,  including:  (i) micro-gravity  production of metal alloys for the
manufacture  of bearings and other  metal-based  parts for use by the automotive
industry,  (ii) enhanced silicon monocrystals for use in the electronic chip and
photovoltaics industries,  and (iii) carbon dioxide absorption plants for use by
industrial energy generation facilities.

     o    Micro  Gravity  Produced  Metal  Alloys.  In May,  1999,  the  Company
          acquired a 90.4% interest in Elecmatec Electro-Magnetic  Technologies,
          Ltd.   ("Elecmatec"),   an  Israeli   company   engaged  in   advanced
          engineering,  testing and production of metal alloys under  conditions
          that  simulate  zero  gravity.  "Micro-gravity"  production  of alloys
          provides   for  better   control  of  the  amount,   combination   and
          distribution  of various metal and non-metal  components in the alloy,
          which  might not be possible  through  standard  means of  production.
          These  combinations have been shown to produce more durable alloys for
          production of engine bearings for use by the automotive industry.

          The Company  has  completed  the  development  of the  "micro-gravity"
          manufacturing  process and has  produced  limited  quantities  of test
          alloys which have been used in preliminary  tests performed by a major
          automobile  manufacturer.   A  third  party  is  proceeding  with  the
          construction of a manufacturing  facility in Kiryat Gat, Israel, which
          it will lease to Elecmatec for commercial  production of metal alloys.
          Construction of such facility is dependent upon Elecmatec  meeting its
          obligation to provide certain  financing  which, in turn, is dependent
          on the Company  providing  certain  financing  to  Elecmatec.  If such
          financing is obtained,  on a timely basis, it is anticipated  that the
          production  facility will be completed and  operational  by the end of
          2000.

     o    Monocrystals.  Solmecs, in cooperation with a scientist in Russia, has
          identified  a  potential  use of  LMMHD  phenomena  in the  growth  of
          monocrystals,   which  are  among  the  critical   components  of  the
          electronic chip and photovoltaic industries. The Company believes that
          the   application   of  LMMHD  methods  in  the  production  of  these
          monocrystals  will  result in  monocrystals  of larger size with fewer
          imperfections,  and thus a  greater  yield  of  usable  material  than
          standard  monocrystals.  It is believed  that this will  substantially
          increase  the  commercial  value  of such  monocrystals.  The  Company
          intends to apply this method  initially to monocrystals of silicon and
          subsequently    to    monocrystals     of     gallium-arsenide     and
          cadmium-telluride,   which   the   Company   believes   may  serve  as
          alternatives to silicon chips (chips based on monocrystals of silicon)
          in the computer and electronics industries.

          In November,  1998, the Company acquired equipment to be used in three
          production  facilities  currently  being  set up for  growing  silicon
          monocrystals.  Two  of  these  facilities  will  be  dedicated  to the
          production  of standard  size  silicon  monocrystals  with the quality
          necessary for use in both sophisticated electronics and photovoltaics.
          The  Company  anticipates  that  each  of  these  facilities  will  be
          completed by early 2000.  Provided that the Company is able to obtain,
          on  a  timely  basis,  the  additional  funds  necessary  to  commence
          production,  the Company anticipates  production of commercial silicon
          monocrystals by mid-2000.  The Company further  anticipates  that when
          these  facilities are fully  operational,  they will have a production
          capacity of approximately 6,000 kilograms of silicon  monocrystals per
          year.

          The Company  intends to utilize the third  facility  for  experimental
          application  of its  proprietary  LMMHD  technology  in the  growth of
          larger silicon  monocrystals.  The Company,  in coordination  with the
          Russian  scientist  noted above developed a patent for the application
          of LMMHD  technology in monocrystal  growth which was filed in Israel,
          earlier  this  year.  The  patent  names  Solmecs  as the owner of the
          technology covered thereby. The application of LMMHD technology to the
          growth of  monocrystals is still in the early  experimental  stage and
          will not be ready for testing of prototypes  for at least one year and
          for  production of commercial  silicon  monocrystals  utilizing  LMMHD
          technology  for at least two years.  With respect to  monocrystals  of
          gallium-arsenide   and   cadmium-telluride,   the  Company   does  not
          anticipate  that a development  process  utilizing LMMHD will be ready
          for industrial application, if at all, for at least three years.


                                      -6-
<PAGE>


     o    Carbon Dioxide Absorption.  The Company is proceeding with preliminary
          development of two separate but related  technologies  for the capture
          and removal of  environmentally  hazardous  carbon  dioxide  emissions
          primarily  from  fuel  burning  power  stations.   Currently  existing
          technologies  for such emission removal are costly and consume a large
          percentage of energy produced by the power station.  The  technologies
          being  developed  by  the  Company,  which  involve  a  patent-pending
          material with certain absorption  properties,  have been shown through
          preliminary  tests  performed by the Company to be more cost efficient
          and consume  substantially  smaller  percentages of a power  station's
          energy  production.  Solmecs acquired the rights to these technologies
          from  the  Association  in  September  1998,  and,   pursuant  to  the
          acquisition,  has  agreed to pay  royalties  to the  Association  from
          revenues  generated  from  sales of the  product or  licensing  of the
          technology.

          The  Company  has  performed a  preliminary  feasibility  study of its
          absorption  technology for a large Norwegian oil production entity and
          is pursuing  negotiations  with such entity for the  construction of a
          semi-industrial pilot prototype.  While the Company believes that this
          technology has potential commercial  viability,  it does not expect to
          have a commercially  operating plant or facility  completed before the
          end of 2001.

     The Company will require  additional funds, not currently  available to the
Company,  to (i) facilitate the  construction  of the Kiryat Gat facility,  (ii)
commence and maintain  production of commercialized  silicon  monocrystals,  and
(iii)  continue the  development  of LMMHD  enhanced  monocrystals  and a carbon
dioxide  absorption  plant.  There  is no  assurance  that  such  funds  will be
available to the Company when needed,  on  commercially  reasonable  terms or at
all.

     With respect to the solar/electrical hot water tank control/display  system
developed  by  Solmecs,  which was  previously  reported  on,  the  Company  has
determined  to  delay  commercial   production  of  this  system   indefinitely.
Consequently, there have been no sales of the system through June 30, 1999.

LMMHD Energy Conversion Technology

     Since the early 1980's,  Solmecs has been  involved in further  advancement
and  perfection  of LMMHD  energy  conversion  technology.  This  technology  is
distinctive from conventional energy producing steam turbo-generator  technology
in which steam, produced in a boiler, propels a turbine which in turn forces the
rotation of an electrical generator. Although the LMMHD process also employs the
use of steam, in LMMHD power technology the steam is used to accelerate a stream
of molten  metal  across a  magnetic  field  which  leads to the  generation  of
electricity.  This  process  does not  require  the use of  moving  or  rotating
mechanical  machinery but utilizes an assembly of  hermetically  sealed pipes in
which the energy conversion process occurs. The Company believes the process and
technology to be reliable and require only a marginal amount of maintenance, and
anticipates commercially developed systems to have a long life span.

     Solmecs has  constructed and completed  several pilot plants  utilizing the
LMMHD energy conversion technology and has developed an engineering design and a
universal  computer code for the  calculation,  design and optimization for each
specific application of the LMMHD energy conversion system.

     Although the LMMHD power technology has been in development since the early
1980's  it  has  not  yet  reached   commercialization.   In  order  to  achieve
commercialization  of such  technology,  the Company will be required to build a
commercial scale  demonstration  plant, which will involve a significant capital
expenditure.  The Company will only be able to commence building such a plant if
it is able to obtain the necessary funds for such project. There is no assurance
that such funds will be available to the Company  when needed,  on  commercially
reasonable  terms or at all.  The  Company is not  currently  engaged in further
development of the LMMHD power technology.


                                      -7-
<PAGE>


     Proprietary  information  and processes  developed  from LMMHD  technology,
however,  are  currently  being applied to evolving  technologies  such as metal
alloy production to be  commercialized by Elecmatec and novel methods of silicon
monocrystal growth.  Moreover, the Company believes that LMMHD technology can be
utilized in the nuclear energy  industry in methods being  developed for cooling
of nuclear  reactors and converting  thermal  energy  generated by such reactors
into  electricity.  There is a growing trend in the nuclear  energy  industry to
develop safer and more advanced  processes for cooling nuclear reactors while at
the same time efficiently  utilizing the thermal energy produced by the reactor.
The Company has conducted  early stage research  related to a process  involving
the  introduction  of molten lead or lead bismuth alloy into the reactor cooling
process  whereby the lead based product would act as a medium for the absorption
of thermal  energy of the  reactor  while  providing  a higher  degree of safety
during the cooling  process.  The Company  believes  that the  absorbed  thermal
energy may be  converted  into  electricity  through  the  application  of LMMHD
technology.  Substantial  additional  research and  development is required with
respect to this process.

     Solmecs  recently   developed  a  pumping  system  based  on  a  conductive
magnetohydrodynamic  pump for use in magnesium handling for the Israeli Dead Sea
Works Industry ("Dead Sea Works"). The system is currently installed at Dead Sea
Works as a demonstration system and is currently in advanced stages of operation
tests. Early tests have shown the systems to operate effectively the Company may
provide  additional  systems to Dead Sea Works and use the  current  system as a
demonstration site for marketing the system to other companies.

Future Technologies

     The Company has identified  various Solmecs and  non-Solmecs  technologies,
some  of  which  involve  LMMHD  technology,   for  potential   acquisition  and
development in the future. These technologies  include,  among others, new types
of energy efficient  centrifugal  pumps for chemical and other  industries;  new
methods of  prediction  of dispersion of  contaminants  in the  atmosphere;  and
treatment of fertilizer to remove infectious bacteria.

     There can be no  assurance  that the  Company  will be able to  obtain  the
necessary  rights  to  exploit  the  foregoing  technologies  or that  any  such
technologies will prove technologically or commercially viable.

Consulting Services

     In February 1998,  Solmecs was approached by an entity  affiliated with the
Nuclear Center of United Europe ("CERN") to provide its expertise in molten lead
energy  conversion in connection  with the development by CERN of a safe nuclear
power plant which will  generate  power from the burning of nuclear  waste.  The
method  developed by CERN employs a process by which nuclear waste is destroyed,
thereby  avoiding the necessity of disposal,  and electricity is generated.  The
CERN system entails a flux of accelerated  protons  hitting a molten lead target
and causing  neutron  emission  directed  on rods made from  highly  radioactive
nuclear  waste.  Ultimately,  the  generated  thermal  energy is absorbed by the
molten lead and converted to  electricity.  Solmecs and such  affiliate  entered
into an  agreement  whereby  Solmecs  engaged in early  stage  research  on such
absorption and conversion processes and provided CERN with data on LMMHD related
technology  for possible use in connection  with the proposed  power plant.  The
Company  has had limited  discussions  with the  affiliate  of CERN for the next
stage of research and development.

Intellectual Property

     Solmecs   currently  owns  four  Israeli  patents  relating  to  the  LMMHD
technology.  All of such patents have  corresponding  patents  registered in the
United  States (one in the name of Ben-Gurion  University of the Negev  Research
and  Development  Authority),  and a number of such patents  have  corresponding
patents registered in one or more other countries,  including Australia, Canada,
France,  Germany,  Great Britain,  Italy and Japan. In addition,  Solmecs owns a
United  States  patent,  not  registered   elsewhere,   relating  to  the  LMMHD
technology,  and an Israeli  patent,  not  registered  elsewhere,  relating to a
device for voltage  conversion  which can be used in conjunction  with the LMMHD
technology.  One of  Solmecs'  patents  expired  in  April  1999  and two of the
existing  patents  will expire over the next four  years.  The Company  does not
believe that the expiration of such patents will have a material  adverse effect
on the Company's business; however, no assurance can be given in that regard.

     Solmecs currently has two patent applications pending in Israel for (i) the
application  LMMHD  phenomena  in the  growth  of  larger  and  cleaner  silicon
monocrystals and (ii) utilizing  absorption  phenomena for the removal of carbon
dioxide from combustion gases.


                                      -8-
<PAGE>


     Solmecs,  in conjunction  with certain  Russian  scientists has developed a
patent with  respect to advanced  bi-facial  photovoltaics  panels.  The Company
anticipates  that the patent will be filed,  initially in Israel,  by late 1999.
Thereafter, the Company may file for patent protection in other countries.

     Elecmatec currently owns one patent registered in Israel, the United States
and a number of other countries, as well as a patent application in Israel. Both
the patent and patent  application were assigned to Elecmatec in connection with
the  Company's  acquisition  of  Elecmatec  and  relate to  micro-gravity  alloy
production.

Royalties and Licensing Fee Obligations

     Pursuant  to  an  agreement  dated  November  5,  1981,   between  Solmecs,
Ben-Gurion  University and B.G. Negev Technology and Applications  Ltd. ("BGU"),
Solmecs  conducted  research  and  development  projects  related to LMMHD power
generation on the campus of Ben-Gurion University in consideration for a fee for
the use of the  facilities.  Solmecs  owns  the  patents  connected  with  these
projects  and agreed to pay  royalties  to BGU at the rate of 1.725% on sales of
products and at the rate of 11.5% on income from  licensing  fees.  Solmecs also
agreed to assume the  obligation  of BGU to pay  royalties  to the  Ministry  of
National  Infrastructure of the State of Israel on products developed from these
research  and  development  projects for its  participation  in the research and
development  costs  of BGU.  The  royalties  are to be paid at the rate of 1% on
sales of products  and at the rate of 5% on income from  licensing  fees.  As of
June 30, 1999,  this liability  amounted to  approximately  $324,000  (including
linkage to the Consumer Price Index and interest at 4% per annum). Subsequent to
the  repayment  of the  liability,  Solmecs is required to pay  royalties to the
Ministry  of  National  Infrastructure  at a  reduced  rate of .3% on  sales  of
products  and at the rate of 2% on income from  licensing  fees.  As of June 30,
1999,  there were no sales or income on which  royalties  were payable to BGU or
the Ministry of National Infrastructure.

     From 1981 to 1991,  Solmecs received from the Office of the Chief Scientist
of the  Ministry  of Industry  and  Commerce  of the  Government  of Israel (the
"OCS"),  $2,274,420  in grants  towards the cost of a research  and  development
project  relating  to LMMHD  energy  conversion  technology.  Under the terms of
Israeli Government participation,  a royalty of 2% to 3% of the net sales of, or
licensing  revenues  from,  products  developed from a project funded by the OCS
must be paid,  beginning with  commencement of sales of products  developed with
grant  funds and ending  when 100% to 150% of the grant is repaid.  The terms of
Israeli Government participation also require that the manufacturing of products
developed  with  Government  grants be  performed  in  Israel,  unless a special
approval has been granted. Such approval, if given, is generally made subject to
an increase in the maximum  amount of  royalties  that must be repaid.  Separate
Israeli Government consent is required to transfer to third parties technologies
developed   through  projects  in  which  the  Government   participates.   Such
restrictions do not apply to exports from Israel of products developed with such
technologies.  Solmecs has not yet  commenced  marketing  of products  developed
through  funds  granted by the OCS.  Accordingly,  no  royalties  have been paid
through June 30, 1999.

     In March 1991,  Solmecs entered into an agreement with  International  Lead
Zinc  Research  Organization,  Inc.  ("ILZRO")  pursuant to which  ILZRO  funded
certain  research  of  Solmecs  and  Solmecs  agreed to pay a fee to ILZRO  with
respect to any lead used in future  production  by  Solmecs,  up to a maximum of
$1,864,000.  As of June 30, 1999,  Solmecs has not used any lead with respect to
which it is required to pay such fee.

     In connection with the acquisition of the rights to the advanced electronic
pocket  dictionary  in February  1999,  Solmecs has agreed to pay  royalties  to
Text-On Ltd., as follows: (i) 10% of sales of electronic  dictionaries  produced
and developed by Solmecs  after  February  1999,  up to aggregate  sales of $2.5
million,  (ii)  thereafter,  3% of sales by Solmecs up to aggregate  sales of $3
million, and (iii) 1% of sales thereafter. The royalty payment period expires in
February 2014 regardless of the amount of royalties paid by Solmecs. To date the
Company  has paid  royalties  to  Text-On  Ltd.  from the  limited  sales of the
Hebrew/English and Russian/English dictionaries in the United States.

     In  connection  with the  acquisition  by Solmecs from the  Association  in
September  1998 of the  rights  to the  photovoltaic  panel and  carbon  dioxide
absorption technologies,  Solmecs has agreed to pay to the Association royalties
of .25% of revenues  generated  from the sales of products or  licensing  of the
technologies.  The maximum  amount of royalties to be paid by the Company  under
the  Agreement  is  $35,000  per  technology.  The  Company  has not  yet  begun
commercial  distribution  of  products  manufactured  based upon either of these
technologies.  Consequently,  no royalties  have been paid by the Company to the
Association.

     Elecmatec  obtained the approval from the office of the Chief  Scientist to
purchase from a third party all rights and interest in the metal alloy  research
and development project.  Elecmatec has undertaken to pay royalties, at the rate
of 3% of sales derived from the project,  up to the amount of the participations
($459,000) received by the third party.


                                      -9-
<PAGE>


Competition

     The  products  that are and will be  based  on the  Company's  technologies
including,  but not  limited to,  photovoltaic  cells,  metal  alloys for engine
bearings,  silicon  monocrystals and carbon dioxide  absorption,  as well as the
Company's  electronic  dictionaries,  will likely be used in highly  competitive
industries.  Numerous  domestic and foreign  companies  are seeking to research,
develop and commercialize  technologies similar to those of the Company, many of
which  have  greater  name  recognition  and  financial,  technical,  marketing,
personnel and research capabilities than the Company.  There can be no assurance
that the Company's  competitors will not succeed in developing  technologies and
applications  that are more cost effective,  or have fewer  limitations than, or
have other  advantages as compared to, the Company's  technologies.  The markets
for the technologies and products to be developed or acquired by the Company are
characterized by rapid changes and evolving  industry  standards often resulting
in product obsolescence or short product lifecycles. Accordingly, the ability of
the Company to compete  will depend on its ability to complete  development  and
introduce  to the  marketplace,  directly or through  strategic  partners,  in a
timely manner its proposed products and technologies, to continually enhance and
improve such  products  and  technology,  to adapt its  proposed  products to be
compatible with specific  products  manufactured by others,  and to successfully
develop and market new products and technologies. There can be no assurance that
the Company will be able to compete successfully, that its competitors or future
competitors will not develop  technologies or products that render the Company's
products and  technologies  obsolete or less marketable or that the Company will
be able to successfully  enhance its proposed  products or technologies or adapt
them satisfactorily.

     There  can be no  assurance  that  other  companies  are not  dedicated  to
identifying,  obtaining and developing  technologies  of Russian  scientists and
engineers  currently  residing in Israel.  Any such competitors may have greater
financial, technical, marketing, personnel and other resources than the Company.

Employees

     As of June 30, 1999,  the Company had  seventeen  full-time  employees  and
eight part-time employees, including six administrative and executive personnel,
three of whom are part-time,  twelve senior  scientists and engineers,  three of
whom are part-time, and seven technicians, two of whom are part-time.  Elecmatec
currently has six  employees,  two of whom are part-time.  The Company  believes
that it has  satisfactory  labor  relations  with its  employees  and has  never
experienced work stoppage.

     Certain  provisions of the  collective  bargaining  agreements  between the
Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of
Economic   Organizations   (including  the  Industrialists'   Associations)  are
applicable  to Solmecs'  employees  by order of the  Israeli  Ministry of Labor.
These provisions  concern  principally the length of the work day, minimum daily
wages for professional workers, insurance for work-related accidents, procedures
for dismissing  employees,  determination of severance pay, and other conditions
of  employment.  Solmecs  generally  provides its  employees  with  benefits and
working conditions beyond the required minimums.

     Israeli  law  generally  requires  severance  pay,  which  may be funded by
Managers' Insurance described below, upon the retirement or death of an employee
or termination of employment without cause (as defined in the law). The payments
pursuant thereto amount to approximately  8.33% of wages.  Furthermore,  Israeli
employees and employers are required to pay  predetermined  sums to the National
Insurance  Institute,  which is  similar to the United  states  Social  Security
Administration.  Such amounts also include payments by the employee for national
health  insurance.  The total payments to the National  Insurance  Institute are
equal to approximately  14.6% of the wages (up to a specified amount),  of which
the  employee  contributes   approximately  66%  and  the  employer  contributes
approximately 34%.

     A general practice followed by the Company,  although not legally required,
is the  contribution of funds on behalf of most of its employees to a fund known
as "Managers'  Insurance."  This fund  provides a  combination  of savings plan,
insurance  and  severance  pay  benefits to the  employee,  giving the  employee
payments upon  retirement  or death and securing the  severance  pay, if legally
entitled,


                                      -10-
<PAGE>


upon  termination of employment.  The employer  decides whether each employee is
entitled to participate in the plan, and each employee who agrees to participate
contributes  5% of his salary and the  employer  contributes  an amount equal to
between 13.3% and 15.8% of the employee's salary.

     The Company's success will be dependent to a large degree on its ability to
retain  the  services  of key  personnel  and to  attract  additional  qualified
personnel in the future. Competition for such personnel is intense. There can be
no assurance that the Company will be able to attract,  assimilate or retain key
personnel  in the  future and the  failure of the  Company to do so would have a
material  adverse  affect on the  Company's  business,  financial  condition and
results of operations.

ITEM 2.  Description of Property

     Solmecs  no longer  maintains  office  space on the  campus  of Ben  Gurion
University.  Solmecs,  however,  has been  permitted  to utilize the  laboratory
facilities  and to access the LMMHD pilot  plants,  which are  maintained on the
campus of Ben Gurion University, for a marginal charge.

     Solmecs occupies space in Omer Industrial Park,  Israel (near  Beer-Sheva).
Solmecs  expects to exercise its option to extend the term of its current  lease
of  approximately  500 square  meters of  laboratory  and office  space  through
November  2002.  This extended  lease will provide for a renewal option of three
years upon  expiration of the extended  lease period.  In April,  1999,  Solmecs
entered into a lease for  approximately  500 square meters of space  adjacent to
its current premises. The lease term is through April 2001 with a renewal option
for an  additional  four  years.  The  annual  rent for the  premises  currently
reoccupied by Solmecs is approximately $80,000.

ITEM 3.  Legal Proceedings

     No legal proceedings are currently pending against the Company.

ITEM 4. Submissions of Matters to a Vote of Security Holders.

     No matters  were  submitted  to a vote of the  Company's  security  holders
during the quarter ended June 30, 1999.

Part II

ITEM 5. Market for Common Equity and Related Stockholder Matters

     The  Company's  Units,  Common  Stock and  Warrants  are  traded on the OTC
Electronic Bulletin Board under the symbols SAQCU, SAQC and SAQCW, respectively.
Trading in the Units  commenced on June 30, 1998, the final day of the Company's
1998 fiscal year. The Common Stock and Warrants were detached from the Units and
became  separately  transferrable  on September 29, 1998. The Units were offered
and sold to the public in the Public  Offering at $5.75 per Unit.  The following
table sets forth the high and low closing bid prices for the Company's Units for
the one day (June 30, 1998) on which  trading in the Units took place during the
Company's  1998 fiscal year.  As noted  above,  trading in the Common Stock as a
separate  security was not possible until the Common Stock was detached from the
Units in September 29, 1998.  Therefore,  the following  table presents the high
and low high (ask) and low (bid)  prices for the Units  comprised  of the Common
Stock and  Warrants  during the periods in the 1999 fiscal year and  thereafter,
the high and low bid prices for the  Common  Stock for the  periods in which the
Common Stock was  separately  tradeable and for which  information is available.
The following  constitutes  quotations among dealers and does not reflect retail
mark-ups,  markdowns,  or  commissions,  and may  not  represent  actual  retail
transactions:

Fiscal Year Ended June 30, 1998                   Units
-------------------------------                   -----
                                                   High              Low
                                                   ----              ---
Fourth Quarter                                     $6.00             $6.00

Fiscal Year Ended June 30, 1999                   Units
-------------------------------                   -----
                                                   High              Low
                                                   ----              ---
First Quarter                                      $6.50             $5.75
Second Quarter                                     $6.50              $.63
                                               Common Stock
                                               ------------
Third Quarter                                       $.31              $.06
Fourth Quarter                                      $.63              $.19



                                      -11-
<PAGE>


     As of  September  30,  1999 there  were  2,082,088  shares of Common  Stock
outstanding and held of record by  approximately  13  stockholders.  The Company
believes that there are many beneficial  owners of its Common Stock whose shares
are held in "street name."

     The  payment  of  dividends  on the  Company's  common  stock is within the
discretion of the Company's  Board of  Directors.  To date,  the Company has not
paid any dividends on its common stock, and does not expect to pay any dividends
in the foreseeable future. The Company intends to retain all earnings for use in
the Company's operations.

     The  securities  (1,041,044  Units,  each Unit  consisting  of one share of
Common Stock and one Warrant  exercisable to purchase one share of Common Stock)
registered in the Public Offering were offered and sold on behalf of the Company
by  Patterson  Travis,  Inc.,  the  underwriter  ("Underwriter")  of the  Public
Offering,   resulting  in  gross  proceeds  to  the  Company  of   approximately
$5,986,000.  The Company incurred the following  expenses in connection with the
Public  Offering:  (i)  underwriting  discounts and commissions of approximately
$598,600;  (ii)  non-accountable  expenses to the  Underwriter of  approximately
$179,600;  and (iii)  other  expenses  including,  but not  limited  to,  legal,
accounting and printing expenses of approximately $640,000.

     On July 8, 1998 (the  closing  date of the  Public  Offering)  the  Company
applied  approximately   $391,000  of  net  proceeds  toward  the  repayment  of
indebtedness of Solmecs to a stockholder of the Company. The Company also repaid
approximately  $110,000  owed  to  such  stockholder  for  monies  advanced  for
pre-offering  expenses.  As of June 30, 1999 the Company has applied the balance
of net proceeds from the Public Offering as follows: (i) approximately  $190,000
to market  research and marketing  activities;  (ii)  approximately  $715,000 to
research and development;  (iii)  approximately  $60,000 to repayment of a short
term,  non   interest-bearing   loan  incurred   after  March  31,  1998;   (iv)
approximately  $182,000  to  repayment  of an  existing  credit  line  facility,
approximately  $90,000 of which was  incurred  after March 31,  1998,  and which
allows for future borrowing by the Company;  (v) approximately  $812,000 for the
purchase of equipment and machinery;  and (vi) approximately $900,000 to working
capital and general corporate purposes.

     On July 8, 1998,  contemporaneous  with the closing of the Public Offering,
the  Company  acquired  in a tax free  stock-for-stock  transaction,  all of the
issued and  outstanding  capital  stock of Solmecs and its  subsidiary  SIL from
Bayou  International  Ltd.  ("Bayou")  and  issued  to Bayou  499,701  shares of
unregistered Common Stock of the Company.  Other than the foregoing transaction,
the Company did not issue or sell any unregistered shares of Common Stock during
the fiscal year ended June 30, 1999.

ITEM 6.  Management's Discussion and Analysis or Plan of Operation

General

     The Company was organized in May 1997 to select,  develop and  commercially
exploit  proprietary  technologies,  in various stages of development,  invented
primarily by  scientists  who have recently  immigrated  to Israel from,  and by
scientists  and  institutions  in,  Russia  and other  countries  that  formerly
comprised the Soviet Union.  Since its  inception,  the Company has been engaged
principally in organizational activities,  including developing a business plan,
matters  directly  related to the Public Offering and the acquisition of Solmecs
and  its  wholly  owned   subsidiary  SIL  and  the  acquisition  of  identified
technologies or  manufacturing  facilities for certain  technologies for further
development, production and commercialization.

     The  Company is  actively  engaged  in the  commercial  development  of two
technologies  previously  identified by Solmecs,  namely (i) advanced  bi-facial
photovoltaic  panels and (ii) monocrystals of silicon. In November 1998, Solmecs
acquired materials,  equipment and engineering  services in order to establish a
manufacturing  facility  in Israel for both  one-sided  and  advanced  bi-facial
photovoltaic  panels.  The  Company  anticipates  that a  commercial  production
facility  will be completed by late 1999.  The  Company,  however,  will require
additional  funds,  not  currently  available  to the  Company,  to operate  the
production  facility and acquire raw materials for the  production of commercial
quantities.  If the Company is able to obtain such additional funds, on a timely
basis, it anticipates  commercial  production of photovoltaic  panels during the
2000 fiscal year.  During the 1999 fiscal  year,  the Company  received  limited
purchase  orders  for  photovoltaic  panels,  which were  filled by the  Company
through its distribution arrangement with a Russian manufacturer.

     Also in  November,  1998,  Solmecs  acquired  equipment to be used in three
production  facilities currently being set up for growing silicon  monocrystals.
Two of the facilities are nearing completion and will be dedicated to


                                      -12-
<PAGE>


production of standard size silicon  monocrystals  with the qualities  necessary
for use in both sophisticated electronics and photovoltaics.  The third facility
will be modified for experimental  production of silicon monocrystals  utilizing
LMMHD   technology.   The  Company  did  not  produce  any  commercial   silicon
monocrystals  during the 1999 fiscal year.  The Company  expects to have the two
production  facilities  completed  by early 2000.  The  Company,  however,  will
require additional funds, not currently available to the Company, to operate the
production  facilities  and  acquire  the raw  materials  necessary  to  produce
commercial  quantities.  If the Company is able to obtain additional funds, on a
timely  basis,  it  anticipates  commercial  production of standard size silicon
monocrystals by mid-2000.  Development of LMMHD enhanced  silicon  monocrystals,
however,  is still in the  preliminary  testing  stage and the Company  does not
anticipate  that this  technology will be ready for production of prototypes for
at least one year,  and for production of commercial  monocrystals  for at least
two years.  Further  development of this technology will also require additional
funds not currently available to the Company.

     In February,  1999,  the Company  acquired  world-wide  rights  (except for
Israel) to develop,  produce,  market and distribute  advanced electronic pocket
dictionaries manufactured by an Israeli company. During fiscal 1999, the Company
had limited sales of the Hebrew/English and Russian/English  dictionaries in the
United   States.   The  Company  is  now  focusing  on  the   development  of  a
Spanish/English  dictionary  which  is  expected  to  be  ready  for  commercial
production  in  November,  1999.  The  Company is  negotiating  promotional  and
marketing  arrangements  with  two  marketing  and  distribution  companies  for
promotion and distribution of the dictionaries.

     In May 1999,  the Company  acquired a 90.4%  interest in  Elecmatec,  which
employs  "micro-gravity"  conditions  to the  production  of  alloys  for use in
production of metal based  products such as engine  bearings for the  automotive
industry. Elecmatec has completed the development and preliminary testing of its
manufacturing process. A third party has commenced construction of a facility in
Kiryat Gat, Israel, which it will lease to Elecmatec for the production of metal
alloys.  Construction  of such facility is dependent upon Elecmatec  meeting its
obligation  to provide  certain  financing  which,  in turn, is dependent on the
Company providing certain financing to Elecmatec.  If such financing is obtained
on a timely  basis,  it is  anticipated  that the  production  facility  will be
completed and  operational  for production of commercial  quantities of alloy by
the end of 2000.

     The Company further  intends to offer its engineering  services to industry
and research  institutions  in the fields of LMMHD power  technology  and liquid
metal  engineering.  Although the LMMHD power technology has been in development
since  1980's,  it has not yet  reached  commercialization.  In order to achieve
commercialization  of such  technology,  the Company will be required to build a
commercial scale  demonstration  plant, which will require a significant capital
expenditure.  The Company is not currently engaged in further development of the
LMMHD power technology.

     Completion  of  the  research,  development  and  commercialization  of the
Company's  technologies or any potential  application of such  technologies will
require  significant  additional effort,  resources and time,  including funding
substantially  greater than the proceeds  otherwise  currently  available to the
Company.  Such research and  development  efforts  remain  subject to all of the
risks  associated  with the  development  of new products  based on emerging and
innovative technologies,  including, without limitation, unanticipated technical
or other  problems  and the  possible  insufficiency  of the funds  allocated to
complete  such  development,   which  could  result  in  delay  of  research  or
development  or substantial  change or  abandonment of research and  development
activities.

     To date,  the  Company  has not  generated  significant  revenues  from its
marketable  products.  The Company  does not expect to generate  any  meaningful
revenues  until such time, if ever,  as it  successfully  produces,  markets and
distributes  its commercial  products on a broad scale or until it  successfully
commercializes or sells  proprietary  rights relating to one or more of Solmecs'
technologies currently in development.

     The Company has incurred substantial operating losses and at June 30, 1999,
has an  accumulated  deficit of  approximately  $5,740,000.  The  Company is not
generating  sufficient  revenues from its  operations to fund its activities and
anticipates  that it will continue to incur losses for some time. The Company is
continuing  its  efforts  in  research  and   development   which  will  require
substantial additional expenditures.  As such, the Company is dependent upon its
ability to raise resources to finance  operations.  This fact raises substantial
doubt that the Company's ability to continue as a going concern.

     The Company plans to finance its  operations  and capital  expenditures  by
receiving   additional  credit  lines  and  bank  loans.  The  Company  is  also
negotiating with potential investors/partners who would provide bridge


                                      -13-
<PAGE>


financing  until the Company will begin to produce and sell its products.  There
is no assurance that additional  financing will be available to the Company when
needed, on commercially reasonable terms or at all.

Results of Operations of the Company

     The  consolidated  statements  of income and other  financial and operating
data contained elsewhere herein and the consolidated balance sheet and financial
results  have been  reflected  in U.S.  dollars  unless  otherwise  stated.  The
unaudited pro forma  consolidated  statement of  operations  for the fiscal year
ended  June 30,  1998,  contained  in the  notes to the  Company's  consolidated
financial statements included herein, represents the adjustments made to present
the combined financial position of the Company and Solmecs as if the Acquisition
had been effective as of July 1, 1997. Such pro forma  information  gives effect
to (i) the forgiveness by Bayou International,  Ltd. ("Bayou"),  the then parent
company  of  Solmecs,  of a loan of  $5,082,897  owed by  Solmecs  to Bayou,  in
connection with the Acquisition,  and (ii) the payment of approximately $120,000
to officers in  accordance  with  employment  agreements  during the fiscal year
ended June 30, 1998. The pro forma consolidated statement of operations does not
include the one-time  charge of  $3,772,054 of excess  purchase  price over fair
value of the assets acquired in connection with the Acquisition.

Fiscal Year Ended June 30, 1999  Compared  with Pro Forma Fiscal Year Ended June
30, 1998

     Sales.  Sales  increased  by $42,711,  to $49,282 for the fiscal year ended
June 30, 1999 ("fiscal  1999"),  as compared to $6,571 for the fiscal year ended
June 30,  1998  ("fiscal  1998").  The  increase  was  attributable  to sales of
photovoltaic  panels  and,  to a  lesser  extent,  sales  of  electronic  pocket
dictionaries in the United States.

     Contract Services.  Contract services decreased by $32,928,  to $18,411 for
fiscal 1999 as compared to $51,339 for fiscal 1998.  This decrease was primarily
attributable  to the completion of work related to the Dead Sea Works project in
the first quarter of fiscal 1999.

     Research  and  Development  Costs.   Research  and  development  and  costs
increased by $446,410,  to $715,334 for fiscal 1999, as compared to $268,924 for
fiscal 1998.  the increase is primarily  due to (i) the increase in salaries due
to the  employment  of  additional  scientific  personnel,  (ii) the  hiring  of
additional  consultants for new projects feasibility testing, (iii) the increase
in rent fees  associated  with the leasing of new facilities in Omer  Industrial
Park , (iv) the  acquisition  of Elecmatec  and (v) the  acquisition  of certain
proprietary technologies from a third party.

     Cost of Merchandise Purchased.  Costs of merchandise purchased increased by
$40,584,  to $48,774 for fiscal 1999, as compared to $8,190 for fiscal 1998. The
increase is attributable to the increase in sales of photovoltaic panels and, to
a lesser extent, sales of electronic pocket dictionaries.

     Cost of Services Provided by  Subcontractors.  Cost of services provided by
subcontractors  decreased by $7,625, to $19,172 for fiscal 1999 from $26,797 for
fiscal 1998. The decrease is attributable to reduced services resulting from the
completion of the "Dead Sea Works" project.

     Marketing Expenses.  Marketing expenses increased by $103,570,  to $189,828
for fiscal  1999,  as  compared  to $86,258 for fiscal  1998.  This  increase is
primarily  attributable to (i) salaries and related expenses  resulting from the
hiring of additional  marketing  personnel,  (ii) foreign  travel related to the
marketing,  promotion  and  implementation  of new  technologies  and  (iii) the
acquisition of Elecmatec.

     General and Administrative  Expenses.  General and administrative  expenses
increased by $434,219,  to $871,999 for fiscal 1999, as compared to $437,780 for
fiscal 1998. This increase is primarily attributable to (i) salaries and related
expenses  resulting from the hiring of additional  personnel,  (ii) professional
fees  associated  with services  rendered to the Company and Solmecs,  (iii) the
increase in rent fees associated with the Company's  principal  office space and
(iv) costs and expenses related to the acquisition of Elecmatec by the Company.

     One-Time  Charge of  Acquired  Research  and  Development  In-Process.  The
acquisition  of  Solmecs  by the  Company  in July 1998 and the  acquisition  of
Elecmatec by the Company in May 1999, have each been accounted for as a purchase
and the excess  purchase price over fair value of assets acquired of each of the
acquired  companies,  an  aggregate  of  $4,060,111,  has been  reflected in the
Company's  consolidated  statement  of  operations  for fiscal  1999 as acquired
research and  development in process.  The Company  recorded,  as of the date of
each  acquisition,  a one-time charge for the write-off in full of such research
and  development  in process of $3,772,054  for the  acquisition  of Solmecs and
$288,057 for the acquisition of Elecmatec.


                                      -14-
<PAGE>


     Operating Loss.  Operating Loss increased by $5,067,486,  to $5,837,525 for
fiscal 1999, as compared to $770,039 for fiscal 1998.  The increase in operating
loss is  attributable  to (i) the one-time  charge of $4,060,111  reflecting the
write-off of acquired research and development in process,  and (ii) an increase
in expenses as set forth above.

     Financing  Income,  Net.  Financing  income was $97,263 for fiscal 1999, as
compared to financing expenses of $15,093 for fiscal 1998, primarily as a result
of interest  earned by the  Company on  deposits  of net  proceeds of the Public
Offering not immediately used in the operation of the Company.

     Net Loss and Net Loss Per  Share.  As a result of the  foregoing,  net loss
increased to $5,740,262  ($2.76 per share) for fiscal 1999 from  $785,132  ($.75
per share) for fiscal 1998.

Liquidity and Capital Resources

     As  of  June  30,  1999,   Solmecs  had  working   capital  of  $1,034,318,
stockholders' equity of $1,797,892 and an accumulated deficit of $5,740,262.

     During the  period  from  inception  through  June 30,  1998,  Batei  Sefer
Limlacha, a principal stockholder of the Company, loaned to the Company $110,108
for working  capital  purposes and agreed that such loans were to become due and
payable on the earlier of December 31, 1998 or the consummation of certain types
of transactions,  including the Public  Offering.  Such loans were unsecured and
were interest free except in the event of default by Solmecs.

     During the period from  September  1997 through June 30, 1998,  Batei Sefer
Limlacha loaned to Solmecs $375,000 for working capital purposes and agreed with
Solmecs  that such loans  were to become due and  payable on earlier of June 30,
1998 or the  consummation  of  certain  types  of  transactions,  including  the
Acquisition.  Such loans were  unsecured and bore interest at the rate of 8% per
annum.  On June 23, 1998 Batei Sefer  Limlacha  agreed to extend the term of the
loans through the earlier of July 31, 1998 or the  consummation of certain types
of transactions, including the Public Offering.

     The loans from Batei Sefer  Limlacha  were repaid in full by the Company on
July 8, 1998.

     In April,  1998,  SIL obtained a line of credit  facility of  approximately
$270,000  from an Israeli  bank  allowing  for  overdraft  for  working  capital
purposes  of which  approximately  $182,000  had been  drawn by SIL  under  such
facility as of June 30, 1998. The Company repaid the line of credit  facility in
full on July 9, 1998.

     In April,  1998, Solmecs obtained a loan of $60,000 from an unrelated third
party.  The loan did not bear interest and was repaid on the consummation of the
Public Offering.

     On July 8, 1998 the Company  consummated  the Public  Offering of 1,041,044
Units consisting of Common Stock and Warrants for net proceeds to the Company of
approximately $4,600,000 after expenses of the offering.

     In May 1998,  the  Company  acquired  a 90.4%  interest  in  Elecmatec.  In
addition to the initial acquisition price of $150,000, the Company has agreed to
loan to, or guarantee loans taken by, Elecmatec,  of up to $1,000,000,  of which
approximately  $322,000  has been loaned by the Company to  Elecmatec as of June
30, 1999,  and  approximately  $162,000 is available to Elecmatec by way of such
guarantee.  In  addition,  the  Company  has agreed to pay  $150,000  to current
shareholders  of Elecmatec,  on a  sliding-scale  basis,  in the event Elecmatec
obtains  third-party debt or equity financing of at least $500,000.  The Company
is also required,  under certain  cicumstances,  to pay former  shareholders  of
Elecmatec an amount equal to 10% of Elecmatec's  net income,  up to an aggregate
payment of $360,000.

     The Company's  capital  requirements  will be  significant.  The Company is
dependent  upon the  remaining  proceeds  of the Public  Offering to finance the
operations of the Company,  including the costs of market research and marketing
activities,   continued   research   and   development   efforts,   establishing
manufacturing  capabilities and the acquisition of intellectual property rights.
Completion  of  the  commercialization  of  the  Company's  technologies  or any
potential application of such technologies  including,  without limitation,  the
technology of Elecmatec,  in which the Company  acquired a 90.4% interest in May
1999, will require significant  additional effort,  resources and time including
funding substantially greater than the remaining proceeds of the Public Offering
or otherwise currently available to the Company.


                                      -15-
<PAGE>


Moreover,  the remaining proceeds of the Public Offering will be insufficient to
satisfy  the  scheduled  projects,  requiring  the  Company  to seek  additional
financing.  The Company has no current  arrangements with respect to, or sources
of, additional  financing,  and it is not anticipated that existing shareholders
will provide any portion of the Company's future financing  requirements.  There
can be no assurance that  additional  financing will be available to the Company
when needed, on commercially reasonable terms, or at all.

Inflation

     In recent years, until 1997, inflation in Israel has exceed the devaluation
of the NIS  against the dollar.  The rate of  inflation  in Israel for the years
1995 and 1996, was 8.1% and 10.6%,  respectively,  while the  devaluation of the
NIS against the dollar was 3.9% and 3.7%, respectively.  This trend was reversed
during the years 1997 and 1998,  as the rate of inflation in Israel was 7.0% and
8.6%, respectively,  while the rate of devaluation of the NIS against the dollar
was 8.8% and  17.6%,  respectively.  In the  first six  months  of 1999,  Israel
experienced deflation at the rate of .37% as well as a devaluation of the dollar
against the NIS at the rate of 2%.

     Israel's  economy  has been  subject  to  numerous  destabilizing  factors,
including a period of rampant inflation in the early to mid-1980's,  low foreign
exchange  reserves,  fluctuations in world commodity prices,  military conflicts
and civil unrest.  In response to these  problems,  the Israeli  Government  has
intervened  in various  sectors of the  economy,  employing,  among other means,
fiscal and monetary policies,  import duties,  foreign currency restrictions and
controls  of wages,  prices and foreign  currency  exchange  rates.  The Israeli
Government frequently has changed its policies in all these areas.

Year 2000

     The Company has evaluated  and updated its  Information  Technology  ("IT")
systems to ensure that it will have the capability to manage and manipulate data
in the year 2000 and beyond. The Company has performed "Year 2000" functionality
tests of its  computer and IT systems and such tests have been  successful.  The
Company believes that its IT systems are substantially  compliant with Year 2000
requirements.  Costs incurred by the Company to date to implement its plans have
not  been  material  and  are not  expected  to have a  material  effect  on the
Company's financial condition or results of operations.

     As the Company enters into commercial  relationships it addresses year 2000
compliance with key business partners and  sub-contractors  and anticipates that
such key business partners and sub-contractors who are not yet compliant will be
prior to year end.

ITEM 7. Financial Statements

     The  Consolidated   Financial  Statements  of  the  Company  appear  herein
following Item 13 below.

ITEM  8.  Changes  in and  Disagreements  With  Accountants  on  Accounting  and
          Financial Disclosure.

     There  were  no  changes  in  and/or   disagreements  with  accountants  on
accounting and financial disclosure during the fiscal year ended June 30, 1999.


                                      -16-
<PAGE>



Part III.

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

     The table below sets forth the name, age and certain  information as to the
Directors and executive officers of the Company.

Name                       Age   Position
----                       ---   --------

Emmanuel Althaus           53    Chairman of the Board of Directors
Professor Herman Branover  67    President, Chief Executive Officer and Director
Dr. Shaul Lesin            45    Executive Vice President and Secretary
Jacline Bavli              45    Chief Financial Officer
Joshua Levine              35    Director

     Mr. Althaus has served as Chairman of the Board of Directors of the Company
since May 1997.  He was Vice  President  and  Director  of Bayou from March 1990
through November 1996, and is a Director of Solmecs. Since 1986, Mr. Althaus has
been  principally   employed  as  Executive  Director  of  National  Diversified
Industries (Australia) Pty Ltd., a company that provides administrative services
to public  companies.  He serves on the board of  directors  of Golden  Triangle
Resources  N.L. (of which he is Chairman and Managing  Director) and  Allegiance
Mining N.L., each of which is a company engaged in mineral exploration the stock
of which is listed on the Australian Stock Exchange.

     Professor Branover has served as President,  Chief Executive and a director
of the Company  since May 1997 and as  Scientific  Director of Solmecs  (Israel)
Ltd.  since 1980.  He served as Executive  Vice  President and Director of Bayou
from May 1989 until 1993. He has been principally employed as head of the Center
for MHD  Studies  of Ben  Gurion  University  since  1981 and as the Lady  Davis
Professor of Magnetohydrodynamics at Ben Gurion University since 1978. Professor
Branover received a Ph.D in Technical Sciences from Moscow Aviation Institute in
1962 and a Doctor of Sciences Degree in Physics and  Mathematics  from Leningrad
Polytechnical  Institute in 1969. He was also, for a number of years, an Adjunct
Professor of applied  sciences at New York  University  and served as a visiting
researcher at Argonne  National  Laboratory in Chicago.  Professor  Branover has
also served as a director of the Joint  Israeli  Russian  Laboratory  for Energy
Research  since  1991.  He  currently  serves as an  Advisor to  Israel's  Prime
Minister  on  immigrant  employment  and on the use of Russian  technologies  in
Israel. Professor Branover founded two Israeli high-tech companies, Ontec, Inc.,
in 1991,  located in Beer Sheva, and Satec, Inc., in 1987, located in Jerusalem,
both of which have developed  commercially  viable  products for sale in several
foreign  countries.  Professor  Branover is no longer  affiliated with either of
those companies.  Professor Branover is an officer,  director and shareholder of
Elecmatec, which was acquired by the Company in May 1999.

     Dr. Lesin has served as Executive  Vice  President of the Company since May
1997.  Dr. Lesin has held various  positions  with Solmecs  (Israel) Ltd.  since
1980, most recently serving as Chief Executive Manager. Dr. Lesin also served as
the Deputy Director of the Joint Israeli Russian  Laboratory for Energy Research
since  1991,  and as a member of the Board of the Center for MHD  Studies of Ben
Gurion  University  since 1986. He received his Ph.D in  Mechanical  Engineering
from Ben Gurion University in 1993.

     Ms. Bavli has served as Chief  Financial  Officer of the Company  since May
1997. Prior thereto since 1996, she served as Financial and Marketing Manager of
Solmecs  (Israel)  Ltd.  From 1995 to 1996,  Ms.  Bavli  engaged in the  private
practice of accounting.  From 1990 until 1995, Ms. Bavli held various  positions
with Kibbutz Magen, Israel, most recently serving as its Deputy Treasurer.

     Mr.  Levine has served as a director of the Company  since  November  1998.
Since  November  1995,  Mr.  Levine  has been the head of  corporate  finance at
Patterson Travis Operating Account which makes proprietary


                                      -17-
<PAGE>


investments and which is an affiliate of Patterson Travis, Inc., the underwriter
of the  Company's  Public  Offering.  Prior  thereto,  from October 1988 through
November  1995,  Mr.  Levine was an  associate at the law firm of Willkie Farr &
Gallagher in New York.

     The Company's  directors are elected at the annual meeting of  stockholders
to hold office until the annual meeting of stockholders  for the ensuing year or
until their successors have been duly elected and qualified.

     Officers are elected  annually by the Board of  Directors  and serve at the
discretion of the Board.

     Pursuant to the  Underwriting  Agreement  between the Company and Patterson
Travis, Inc., as the underwriter of the Company's securities (the "Underwriter")
in the Public  Offering,  the Underwriter was granted the right to designate one
member to the Company's board of directors for a period ending June 29, 2001. In
November 1998, the Underwriter  designated  Joshua Levine to the Company's board
of directors.  Mr. Levine was elected to the  Company's  board,  by the board of
directors,  in November 1998. The acquisition  agreement  executed in connection
with the  acquisition of Solmecs (the  "Acquisition")  provided that the initial
directors of the Company after the  Acquisition  would consist of five directors
including  Professor  Branover  and Mr.  Althaus as well as a designee  of Batei
Sefer Limlacha, one of the Company's principal  stockholders,  and a designee of
the  Underwriter  as described  immediately  above.  The fifth director would be
appointed by the  Company's  board of  directors.  Batei Sefer  Limlacha did not
indicate a designee.

Compliance with Section 16(a) of the Securities Exchange Act

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
"Securities Exchange Act"),  requires the Company's officers and directors,  and
persons  who own more than 10 percent  of a  registered  class of the  Company's
equity  securities,  to file reports of ownership and changes in ownership  with
the Securities and Exchange Commission ("SEC"). Officers, directors, and greater
than 10 percent  shareholders  are  required  by SEC  regulation  to furnish the
Company with copies of all Section 16(a) forms they file.

     Based solely on the Company's  review of the copies of such forms  received
by the Company,  the Company believes that, during the year ended June 30, 1999,
all filing requirements applicable to its officers,  directors, and greater than
10 percent  beneficial owners were complied with except that a Form 4 and Form 5
for each of Dr. Shaul Lesin and Jacline Bavli are late.

ITEM 10.  Executive Compensation

Officers Salaries

     The following table sets forth the cost of  compensation  paid to Professor
Herman Branover,  the Company's President,  Chief Executive Officer, by Solmecs,
in his capacity as Scientific Director of Solmecs,  and the compensation paid to
Dr. Shaul Lesin,  the Company's  Executive Vice  President,  by Solmecs,  in his
capacity as Chief Executive Officer of Solmecs,  for the fiscal years ended June
30, 1997,  1998 and 1999.  No other  executive  officer of the Company  received
aggregate compensation and bonuses which exceeded $100,000 during such years.


                                      -18-
<PAGE>


Cost of Compensation Summary Table


<TABLE>
<CAPTION>
                                                                                                           Long-Term
                                                                 Annual Compensation               Compensation Awards($)(1)
                                                 -----------------------------------------------   -------------------------
                                                                                                   Restricted     Securities
Name and Principal Position          Fiscal      Salary                         Other Annual         Stock        Underlying
---------------------------          Year        ($)(2)            Bonus($)     Compensation ($)     Award      Options/SARs(#)
                                     ----        ------            --------     ----------------     -----      ---------------
<S>                                      <C>         <C>            <C>            <C>                 <C>          <C>
Professor Herman Branover,
Chief Executive Officer .........        1997        $62,361        $  --          $   --              --             --
                                         1998         57,780
                                         1999        125,000
Dr. Shaul Lesin
Executive Vice                           1997        $90,000
President .......................        1998        $92,998                           --                             --
                                         1999        $130,000(3)    $ 30,000                                        60,000
</TABLE>

----------

(1)  The Company did not have any long-term incentive or option plans during the
     fiscal year ended June 30, 1997. The Company  adopted its 1997 Stock Option
     Plan in December 1997.

(2)  During the fiscal  years ended June 30,  1997,  1998 and 1999,  the Company
     paid an  automobile  allowance  to  Professor  Branover  in the  amount  of
     approximately  $8,200, $6,900 and $6,000,  respectively.  During the fiscal
     years ended June 30, 1997,  1998 and 1999,  the Company paid an  automobile
     allowance to Dr. Lesin in the amount of  approximately  $3,400,  $2,800 and
     $6,000, respectively.

(3)  Includes  approximately  $5,000 of salary paid by Elecmatec pursuant to our
     employment agreement.


                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                 Number of          Percent of Total  Options/
                           Securities Underlying    SARS Granted To                Exercise or
          Name             Options/SARS Granted     Employees in Fiscal Year       Base Price     Expiration Date
          ----             --------------------     ------------------------       ----------     ---------------


<S>                             <C>                       <C>                       <C>             <C>
  Dr. Shaul Lesin               60,000(1)                 84.5%                     $1.00           12/30/08
  Jacline Bavli                  6,000(1)                  8.5%                     $1.00           12/30/08
</TABLE>

----------

(1)  The options vest as to one-third of the total amount granted on each of the
     six-month, first year and second year anniversaries of the date of grant


Employment Agreements

     On July 8, 1998 Solmecs entered into  employment  agreements with Professor
Herman Branover,  Dr. Shaul Lesin and Jacline Bavli, the Company's President and
Chief Executive  Officer,  Executive Vice President and Chief Financial Officer,
which  provide for annual base  compensation  of $98,400,  $98,400 and  $39,600,
respectively,  payable in NIS in accordance  with the rate of exchange into U.S.
dollars in effect on the date of payment. The base compensation may be increased
from time to time by the Board of Directors in its sole discretion. In addition,
Solmecs will  contribute  on behalf of each employee an amount equal to 15.8% of
such employee's salary to a fund known as "Manager's Insurance" and 7.5% of such
employee's salary to a fund known as "Education Fund." See Item 1. - Description
of Business.

     Solmecs has agreed to provide Messrs. Branover and Lesin with an automobile
and a cellular phone during the term of their employment for which Solmecs shall
pay all  expenses.  Solmecs  has also  agreed to pay the costs  associated  with
maintaining  a  telephone  line in  their  homes  during  the  course  of  their
employment with the Company.


                                      -19-
<PAGE>


         Each of the employment agreements contains a confidentiality  provision
preventing the employees from  disclosing,  during the terms of their respective
employment  agreements  and at any  time  following  the  termination  of  their
employment,  any  proprietary  information of the Company  without the Company's
consent.  Further,  each of the employment  agreements contains a provision that
such employee  will not directly or  indirectly  compete or engage in a business
competitive  with the Company or solicit the  employees  or  consultants  of the
Company for employment in a business in competition with the Company, during the
term of the employment agreement and for a period of one year thereafter.

     Pursuant to the terms of the  employment  agreements the Company has agreed
to  indemnify  the  employee  for any  claim  or  liability  arising  from  such
employee's good faith  fulfillment of his employment  obligations  provided that
the employee:  (i) provides the Company with timely  written notice of the claim
or liability;  (ii)  cooperates with the Company in the defense of the claim and
(iii) allows the Company to control defense of the claim.

     The employment  agreements  for Messrs.  Branover and Lesin provide that in
the event of  termination  other than "for cause" or as a result of a continuing
disability  (as defined in the  employment  agreements)  the  employee  shall be
entitled to: (i) an adjustment  grant equal to three months base salary  payable
in three  equal  monthly  installments  beginning  on the first day of the month
following the date of  termination;  (ii) an  additional  payment of one month's
base salary for each year in which  employee was employed;  and (iii) the use of
an  automobile  and  cellular  phone  for a  period  of three  months  following
termination. The Company may not terminate an employee "for cause" unless it has
given the employee (i) written notice of the basis for termination,  and (ii) at
least 30 days to cure the basis for such cause.

Liability Insurance

     The Company  maintains a policy of insurance  under which the directors and
officers  of the Company  will be insured,  subject to the limits of the policy,
against  certain  losses  arising from claims made against  such  directors  and
officers by reason of any acts or omissions  covered  under such policy in their
respective capacities as directors or officers,  including liabilities under the
Securities Act.

1997 Stock Option Plan

     In December  1997, the Board of Directors and  stockholders  of the Company
adopted  the 1997 Stock  Option  Plan (the  "Option  Plan"),  pursuant  to which
200,000  shares of Common  Stock are  reserved  for  issuance  upon  exercise of
options.  The Option  Plan is designed to serve as an  incentive  for  retaining
qualified and competent employees, directors and consultants.

     The Company's Board of Directors,  or a committee thereof,  administers the
Option Plan and is authorized, in its discretion, to grant options thereunder to
all eligible employees of the Company, including officers and directors (whether
or not employees) of, and consultants to, the Company.  The Option Plan provides
for the granting of both "incentive stock options" (as defined in Section 422 of
the Internal Revenue Code of 1986, as amended) and non-qualified  stock options.
Options can be granted under the Option Plan on such terms and at such prices as
determined by the Board of Directors,  or a committee  thereof,  except that the
per share  exercise price of options will not be less than the fair market value
of the  Common  Stock on the date of grant.  In the case of an  incentive  stock
option granted to a stockholder  who owns stock of the Company  possessing  more
than 10% of the  total  combined  voting  power of all  classes  of stock  ("10%
stockholder"),  the per share  exercise price will not be less than 110% of such
fair market value.  The aggregate  fair market value  (determined on the date of
grant) of the shares covered by incentive stock options granted under the Option
Plan that become  exercisable  by a grantee  for the first time in any  calendar
year is subject to a $100,000 limit.

     Options granted under the Option Plan will be exercisable during the period
or periods specified in each option agreement.  Options granted under the Option
Plan are not  exercisable  after the  expiration  of ten years  from the date of
grant  (five  years in the case of  incentive  stock  options  granted  to a 10%
stockholder)  and  are not  transferable  other  than by will or by the  laws of
descent and distribution.

     As of June 30,  1999,  the  Company  has  granted  an  aggregate  of 86,000
non-qualified  options  under its Option  Plan,  of which an aggregate of 66,000
were granted to executive  officers of the Company.  The options are exercisable
at $1.00 per share and vest in  increments  of  one-third  of the  amount of the
grant on each of the six-month, one year and



                                      -20-
<PAGE>


two year anniversaries of the date of grant.

ITEM 11. Security Ownership of Certain Beneficial Owners and Management

     The following  table sets forth,  as of September  30, 1999,  the number of
shares of the Company's  outstanding Common Stock beneficially owned by (i) each
director  of the  Company;  (ii)  each  person  who is known by the  Company  to
beneficially own 5% or more of the outstanding  Common Stock;  (iii) each of the
persons named in the Summary  Compensation Table (the "Named  Executives");  and
(iv) all of the Company's  directors and executive officers as a group (based on
information  furnished  by  such  persons).   Unless  otherwise  indicated,  the
beneficial  owners  exercise  sole  voting  and/or  investment  power over their
shares.

                                            Amount and Nature of   Percentage of
                                                Beneficial         Outstanding
Name and Address of Beneficial Owner(1)        Ownership(2)           Shares
---------------------------------------        ------------           ------


Bayou International, Ltd.                        499,701              24%
Level 8
580 St. Kilda Road
Melbourne, Victoria, 3004 Australia

Batei Sefer Limlacha(3)                          312,313              15%
766 Montgomery Street
Brooklyn, New York 11213

H.B. Capital Ltd.(4)                             145,746               7%

Emmanuel Althaus(5)                               83,284               4%

All executive officers and directors as a
group (five persons)                             251,030(6)           12%

----------

(1)  The  address of HB Capital  Ltd.  and Mr.  Althaus is c/o SCNV  Acquisition
     Corp., Omer Industrial Park, P.O.B. 3026, Omer, Israel 84965.

(2)  Unless otherwise indicated,  the Company believes that all persons named in
     the table have sole voting and investment  power with respect to all shares
     of Common  Stock  beneficially  owned by them. A person is deemed to be the
     beneficial  owner of securities  that can be acquired by such person within
     60 days  from the date of this  Report  upon the  exercise  of  options  or
     warrants.  Each beneficial  owner's  percentage  ownership is determined by
     assuming  that  options that are held by such person (but not those held by
     any other person) and that are exercisable  within 60 days from the date of
     this Report have been exercised. Except as otherwise indicated, the Company
     believes  that each of the  persons  named has sole  voting and  investment
     power with respect to the shares shown as beneficially owned by him.

(3)  Batei Sefer  Limlacha is a religious  corporation  organized  under the New
     York  Religious  Corporation  Law. David Laine is President and trustee and
     Joseph Kazin and Benzion  Raskin are the  remaining  trustees.  Batei Sefer
     Limlacha  may be deemed to be a  "promoter"  of the Company as such term is
     defined under the Federal Securities Laws.

(4)  Professor  Herman Branover is the sole shareholder of H.B. Capital Ltd., an
     Irish  corporation.   Professor  Branover  and  Shmuel  Gurfinkel  are  the
     directors.  H.B.  Capital  Ltd.  may be  deemed to be a  "promoter"  of the
     Company, as such term is defined under the federal securities laws.

(5)  Mr.  Althaus may be deemed to be a "promoter" of the Company,  as such term
     is defined under the federal securities laws.

(6)  Includes 22,000 shares of Common Stock issuable upon exercisable of options
     granted to two executive officers,  which are currently  exercisable.  Does
     not include 44,000 shares of Common Stock issuable upon exercise of options
     granted to such executive officers, which are not currently exercisable.



                                      -21-
<PAGE>


ITEM 12. Certain Relationships and Related Transactions

     In May 1997,  the Company  issued  145,746  shares of Common Stock,  83,284
shares of Common Stock and 312,313 shares of Common Stock to H.B.  Capital Ltd.,
Emmanuel   Althaus  and  Batei  Sefer   Limlacha,   respectively,   for  nominal
consideration.  Emmanuel Althaus,  the Chairman of the Board of Directors of the
Company,  is a Director of Solmecs and was the Vice  President  and  Director of
Bayou from March 1990 through November 1996.

     Simultaneously  with the consummation of the Public  Offering,  the Company
acquired all of the issued and outstanding capital stock of Solmecs.  Bayou, the
current parent of Solmecs, received 499,701 shares of the Company's Common Stock
in connection with the Acquisition.  In connection with the  Acquisition,  Bayou
forgave  indebtedness  of  Solmecs  in the  amount,  as of  June  30,  1998,  of
$5,082,897 as a capital  contribution.  The 499,701  shares issued to Bayou were
not registered in the Offering but are subject to certain registration rights to
be granted by the Company.

     During the  period  from  inception  through  June 30,  1998,  Batei  Sefer
Limlacha, a principal stockholder of the Company, loaned to the Company $110,108
for working  capital  purposes and agreed that such loans were to become due and
payable on the earlier of December 31, 1998 or the consummation of certain types
of transactions,  including the Public  Offering.  Such loans were unsecured and
were interest free except in an event of default.

     During the period from  September  1997 through June 30, 1998,  Batei Sefer
Limlacha loaned to Solmecs $375,000 for working capital purposes and agreed with
Solmecs  that such loans were to become due and  payable on the  earlier of June
30, 1998 or the  consummation  of certain types of  transactions,  including the
Acquisition.  Such loans were  unsecured and bore interest at the rate of 8% per
annum.  On June 23, 1998,  Batei Sefer Limlacha agreed to extend the term of the
loans through the earlier of July 31, 1998 or the  consummation of certain types
of transactions, including the Public Offering.

     The loans from Batei Sefer  Limlacha  were repaid in full by the Company on
July 8, 1998.

     In May 1999,  the  Company  acquired  Elecmatec.  Professor  Branover,  the
President,  Chief  Executive  Officer  and a director  of the Company is also an
officer,  director and  shareholder  of Elecmatec.  Pursuant to the terms of the
acquisition, the Company is required to pay shareholders of Elecmatec, including
Professor Branover, an aggregate of $150,000 upon the completion by Elecmatec of
third-party  debt or equity  financing of at least $500,000.  In connection with
the acquisition,  Professor  Branover entered into an employment  agreement with
Elecmatec with a base salary of approximately $30,000 per year and bonuses equal
to 5% of Elecmatec's net income up to an aggregate bonus amount of $180,000.

ITEM 13.  Exhibits, Lists and Reports on Form 8-K

     (a)  Exhibits

     See Exhibit List below.

     (b)  Reports on Forms 8-K and 8-K/A

     The Company  did not file any  reports  with the  Securities  and  Exchange
     Commission on Form 8-K for the quarter ended June 30, 1999.

     (c)  Exhibits

     3.1    Certificate of Incorporation of the Registrant.(1)

     3.3    Bylaws of the Registrant.(1)

     4.1    Form of Registrant's Common Stock Certificate.(1)

     4.3    Form of Registrant's Public Warrant Certificate.(1)

     4.4    Form of Registrants Unit Certificate.(1)

     10.1   Form of Stock Purchase  Agreement  between SCNV  Acquisition  Corp.,
            Solmecs Corporation, N.V. and Bayou International Ltd.(1)

     10.2   Agreement, dated as of June 4, 1980 by and between Advanced Products
            Beer Sheva Ltd. (AP) and the Ben Gurion University of the Negar (The
            Research and Development Authority) and Solmecs Corporation N.V.(1)

     10.3   Agreement, dated as of March 31, 1981, by and between the Government
            of Israel  Ministry  of Energy  and  Infrastructure,  the Ben Gurion
            University  of the Negev (The Research and  Development



                                      -22-
<PAGE>

            Authority - RDA) and Advanced  Products  Beer Sheva Ltd. and Solmecs
            (Israel) Ltd. and Solmecs Corporation N.V.(1)

     10.4   Agreement,  dated as of  November  5, 1981 by and  between  Advanced
            Products Beer Sheva Ltd.  (AP) and the Ben Gurion  University of the
            Negev  (The  Research  and  Development  Authority)  (RDA),  Solmecs
            Corporation N.V. and Solmecs Corporation (U.K) Limited.(1)

     10.5   Agreement, dated as of January 25, 1990 by and between International
            Lead Zinc Research Organization, Inc. and Solmecs (Israel) Ltd.(1)

     10.6   Agreement,  dated as of March 7, 1991 by and  between  International
            Lead Zinc Research Organization, Inc. and Solmecs (Israel) Ltd.(1)

     10.7   Agreement,  dated as of June 9, 1997 by and between the Institute of
            Physics in Riga, Latvia and Solmecs (Israel) Ltd.(1)

     10.8   Agreement,  effective  as of  September  30,  1997,  by and  between
            Solmecs Corporation N.V. and Batei Sefer Limlacha.(1)

     10.9   Agreement,  effective  as of  September  30,  1997,  by and  between
            Registrant and Batei Sefer Limlacha.(1)

     10.10  Agreement,  dated  as of  January  1,  1998 by and  between  Solmecs
            (Israel) Ltd. and Leon Aprimov.(1)

     10.11  Lease  by  and  between  Tefen  Entrepreneurship  Ltd.  and  Solmecs
            (Israel) Ltd. dated October 14, 1997.(1)

     10.12  Form of Employment Agreement between Registrant and Professor Herman
            Branover.(1)

     10.13  Form of  Employment  Agreement  between  Registrant  and  Dr.  Shaul
            Lesin.(1)

     10.14  Form  of  Employment   Agreement  between   Registrant  and  Jacline
            Bavli.(1)

     10.15  1997 Stock Option Plan.(1)

     10.16  Agreement  between Solmecs  (Israel) Ltd.,  Text-On,  Ltd. and Boris
            Wettelmacher, dated February 4, 1999.

     10.17  Loan  Agreement  between the Company and Elecmatec  Electro-Magnetic
            Technologies Ltd. ("Elecmatec"), dated December 30, 1998.

     10.18  Pledge Agreement  between the Company and Elecmatec,  dated December
            30, 1998.

     10.19  Share Purchase  Agreement  between the Company and Elecmatic,  dated
            May 18, 1999.

     10.20  Shareholders Agreement among the Company, Professor Herman Branover,
            Dr. Arik El-Boher and Dr. Yuri Gelfgat, dated May 18, 1999.

     10.21  Share Purchase Agreement among the Company,  Elecmatec, Ariel Shemer
            and Dr. Israel Weinbom, dated May 18, 1999

     10.22  Amended Loan Agreement between the Company and Elecmatec,  dated May
            18, 1999.

     10.23  Amended Pledge  Agreement  between the Company and Elecmatec,  dated
            May 18, 1999.

     10.24  Agreement  between Solmecs (Israel) Ltd. and the Association for the
            Development of  International  Energy  Projects,  dated September 8,
            1998. 21. Subsidiaries of the Registrant

     21.    Subsidiaries of the Registrant

     27.    Financial Data Schedule.


----------

(1)  Incorporated  by  reference  to  the  comparable  exhibit  filed  with  the
     Company's Registration Statement on Form SB-2, File No. 333-43955.


                                      -23-
<PAGE>


                                   SIGNATURES

     In  accordance  with  the  requirements  of  Section  13 or  15(d)  of  the
Securities  Exchange Act of 1934,  the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.

                                         SCNV ACQUISITION CORP.


                                         By: /s/ Herman Branover
                                             -----------------------------------
                                              Herman Branover
                                              President, Chief Executive Officer
                                              and Director


Dated:  October  12, 1999

     In accordance with the requirements of the Securities Exchange Act of 1934,
this  registration  statement  has been signed by the  following  persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
    Signatures                     Title(s)                                 Date
    ----------                     --------                                 ----

<S>                         <C>                                        <C>
/s/ Emmanuel Althaus        Chairman of the Board of Directors         October 12, 1999
-----------------------
Emmanuel Althaus

/s/ Herman Branover         President, Chief Executive Officer and     October 12, 1999
-----------------------     Director
Herman Branover

/s/ Shaul Lesin             Executive Vice President                   October 12, 1999
-----------------------
Shaul Lesin

/s/ Jacline Bavli           Chief Financial Officer                    October 12, 1999
-----------------------
Jacline Bavli

/s/ Joshua Levine           Director                                   October 12, 1999
-----------------------
Joshua Levine
</TABLE>

                                      -24-
<PAGE>


                                      INDEX


                                                                            Page
                                                                            ----

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                    F-2

CONSOLIDATED FINANCIAL STATEMENTS:
  Consolidated Balance Sheet as of June 30, 1999                            F-3
  Consolidated Statement of Operations for the Year Ended June 30, 1999     F-4
  Consolidated Statement of Changes in Stockholders' Equity for the
     Year Ended June 30, 1999                                               F-5
  Consolidated Statement of Cash Flows for the Year Ended June 30, 1999     F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                  F-7-
                                                                            F-16












                                      F-1
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To SCNV Acquisition Corp.:

We have audited the accompanying consolidated balance sheet of SCNV Acquisition
Corp. (a Delaware corporation) and subsidiaries as of June 30, 1999, and the
related consolidated statement of operations, changes in stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SCNV Acquisition Corp. and
subsidiaries as of June 30, 1999, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's ability to continue as a going concern is
dependent upon the ability to raise resources to finance its operations. This
fact raises substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regards to this matter are also discussed in Note
1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.


                                             Arthur Andersen LLP

New York, New York
September 30 , 1999



                                      F-2
<PAGE>


                     SCNV ACQUISITION CORP. AND SUBSIDIARIES


                           CONSOLIDATED BALANCE SHEET

                                  JUNE 30, 1999


<TABLE>
<S>                                                                                          <C>
                                     ASSETS

CURRENT ASSETS:
    Cash and cash equivalents                                                                $   525,162
    Short-term investments                                                                     1,127,166
    Trade receivables                                                                             10,931
    Inventory                                                                                     30,595
    Other receivables and prepaid expenses                                                       113,288
                                                                                             -----------
                 Total current assets                                                          1,807,142

PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $160,609           1,052,903

OTHER ASSETS, net of amortization of $5,000                                                       25,000
                                                                                             -----------
                 Total assets                                                                $ 2,885,045
                                                                                             -----------

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Short-term borrowings                                                                    $   151,898
    Trade payables                                                                               332,029
    Sundry payables and accrued expenses                                                         288,897
                                                                                             -----------
                 Total current liabilities                                                       772,824
                                                                                             -----------

NONCURRENT LIABILITIES:
    Long-term loan                                                                               200,000
    Accrued severance pay                                                                        114,329
                                                                                             -----------
                 Total noncurrent liabilities                                                    314,329
                                                                                             -----------
                 Total liabilities                                                             1,087,153
                                                                                             -----------

STOCKHOLDERS' EQUITY:
    Preferred stock $.01 par value, 1,000,000 shares authorized;
       none issued and outstanding                                                                  --
    Common stock $.01 par value, 10,000,000 shares authorized; 2,082,088 shares issued and
       outstanding                                                                                20,821
    Additional paid-in capital                                                                 7,517,333
    Accumulated deficit                                                                       (5,740,262)
                                                                                             -----------
                 Total stockholders' equity                                                    1,797,892
                                                                                             -----------
                 Total liabilities and stockholders' equity                                  $ 2,885,045
                                                                                             ===========
</TABLE>



The accompanying notes are an integral part of this consolidated balance sheet.


                                      F-3
<PAGE>

                     SCNV ACQUISITION CORP. AND SUBSIDIARIES


                      CONSOLIDATED STATEMENT OF OPERATIONS

                        FOR THE YEAR ENDED JUNE 30, 1999

<TABLE>
<S>                                                                       <C>
REVENUES:
    Sales                                                                 $    49,282
    Contract services                                                          18,411
                                                                          -----------
                 Total revenues                                                67,693
                                                                          -----------

COSTS AND EXPENSES:
    Research and development costs                                            715,334
    Cost of merchandise purchased                                              48,774
    Cost of contract services performed by subcontractors                      19,172
    Marketing expenses                                                        189,828
    General and administrative expenses                                       871,999
                                                                          -----------
                 Total costs and expenses                                   1,845,107
                                                                          -----------
                 Loss before one-time charge                               (1,777,414)

ONE-TIME CHARGE OF ACQUIRED RESEARCH AND DEVELOPMENT IN PROCESS            (4,060,111)
                                                                          -----------
                 Operating loss                                            (5,837,525)

FINANCING INCOME, net                                                          97,263

MINORITY INTEREST                                                                --
                                                                          -----------
                 Net loss                                                 $(5,740,262)
                                                                          ===========

NET LOSS PER COMMON SHARE, basic and diluted                              $     (2.76)
                                                                          ===========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, basic and diluted     2,082,088
                                                                          ===========
</TABLE>


  The accompanying notes are an integral part of this consolidated statement.



                                      F-4
<PAGE>



                     SCNV ACQUISITION CORP. AND SUBSIDIARIES


            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                        FOR THE YEAR ENDED JUNE 30, 1999


<TABLE>
<CAPTION>
                                        Number                         Additional       Accumulated
                                       of Shares      Share Capital   Paid-in Capital      Deficit           Total
                                      -----------     -------------   ---------------    -----------       -----------
<S>                                     <C>            <C>              <C>              <C>               <C>
BALANCE, July 1, 1998                     541,343      $     5,413      $     2,179      $      --         $     7,592

    Shares issued in connection
       with initial public
       offering, net of offering
       costs of $1,328,721              1,041,044           10,411        4,646,871             --           4,657,282

    Shares issued to Bayou in
       connection with the
       acquisition of subsidiary          499,701            4,997        2,868,283             --           2,873,280

    Net loss for the year ended
       June 30, 1999                         --               --               --         (5,740,262)       (5,740,262)
                                      -----------      -----------      -----------      -----------       -----------

BALANCE, June 30, 1999                  2,082,088      $    20,821      $ 7,517,333      $(5,740,262)      $ 1,797,892
                                      ===========      ===========      ===========      ===========       ===========
</TABLE>

  The accompanying notes are an integral part of this consolidated statement.



                                      F-5
<PAGE>


                     SCNV ACQUISITION CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                        FOR THE YEAR ENDED JUNE 30, 1999


<TABLE>
<S>                                                                              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                     $(5,740,262)
    Adjustments to reconcile net loss to net cash used in operating activities     4,168,342
                                                                                 -----------
                 Net cash used in operating activities                            (1,571,920)
                                                                                 -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisition of subsidiary, net of cash acquired                                 (102,824)
    Purchase of fixed assets                                                        (693,027)
    Purchase of other assets                                                         (15,000)
    Short-term investments, net                                                   (1,127,166)
    Proceeds from sale of fixed assets                                                 5,708
                                                                                 -----------
                 Net cash used in investing activities                            (1,932,309)
                                                                                 -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Short-term borrowings, net                                                      (627,891)
    Proceeds from initial public offering, net                                     4,657,282
                 Net cash provided by financing activities                         4,029,391
                 Increase in cash and cash equivalents                               525,162

CASH AND CASH EQUIVALENTS, beginning of year                                            --
                                                                                 -----------

CASH AND CASH EQUIVALENTS, end of year                                           $   525,162
                                                                                 ===========

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:
       Items not involving cash flows-
          Depreciation and amortization                                          $    41,149
          Loss on sale of equipment                                                      836
          Severance pay                                                               90,316
          Acquired research and development in process                             4,060,111
          Changes in operating assets and liabilities-
              Decrease in trade receivables                                           28,599
              Increase in inventory                                                  (30,595)
              Decrease in other receivables and prepaid expenses                     574,105
              Increase in trade payables                                              99,177
              Decrease in sundry payables and accrued expenses                      (695,355)
                                                                                 -----------
                                                                                 $ 4,168,342
                                                                                 ===========

NONCASH INVESTING AND FINANCING ACTIVITIES:
    A. Acquisition of subsidiary
       Fair value of acquired assets and research and development in process     $ 4,311,437
          Less-
              Liabilities assumed                                                 (1,331,032)
              Shares issued as consideration for acquisition of subsidiary        (2,873,280)
                                                                                 -----------
                 Cash paid                                                           107,125
          Less- Cash acquired                                                         (4,301)
                                                                                 -----------
                                                                                 $   102,824
                                                                                 ===========

    B. Purchase of fixed and other assets on credit                              $   287,526
                                                                                 ===========
</TABLE>


  The accompanying notes are an integral part of this consolidated statement.

                                      F-6
<PAGE>


                     SCNV ACQUISITION CORP. AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 1999


1.   BUSINESS

SCNV Acquisition Corp. (the "Company") was organized under the laws of the State
of Delaware on May 19, 1997, to acquire Solmecs Corporation N.V. and its wholly
owned subsidiary Solmecs (Israel) Ltd. ("Solmecs") and to select, develop and
commercially exploit proprietary technologies in various stages of development,
invented primarily by scientists who have recently immigrated to Israel from,
and by scientists and institutions in, Russia and other countries that formerly
comprised the Soviet Union.

Initial Public Offering

On July 8, 1998, the Company consummated an Initial Public Offering (the "IPO")
in which 1,041,044 Units, composed of 1,041,044 shares of Common Stock and
1,041,044 redeemable Common Stock purchase warrants ("Warrants"), were sold to
the public at $5.75 per Unit. Each Warrant entitles the holder to purchase one
share of Common Stock at a price of $7.50, subject to adjustment in certain
circumstances, at any time during the four-year period commencing June 29, 1999.
The net proceeds from the IPO were approximately $4,600,000.

In addition, the Company sold to the underwriter for an aggregate of $104,
warrants to purchase an additional 104,104 Units at an exercise price of 120% of
the IPO price per unit ($6.90) ("Underwriter's Warrants"). The Underwriter's
Warrants are exercisable at any time during the four-year period commencing June
29, 1999.

Acquisition of Solmecs

Simultaneously with the consummation of the IPO, the Company acquired all of the
issued and outstanding capital stock of Solmecs in consideration for 499,701
shares of the Company's Common Stock issued to Bayou International, Ltd.
("Bayou"), the parent of Solmecs. The acquisition has been accounted for as a
purchase. The excess of purchase price over fair value of assets acquired of
$3,772,054 was reflected as acquired research and development in process and
fully expensed at the date of the acquisition. Solmecs, the operations of which
are located in Israel, owns certain technologies developed by it in the past.
The technologies of Solmecs and certain offshoots of such technologies are in
various stages of development and include technologies that have begun to be
commercialized as well as technologies that the Company believes will be ready
for commercialization in the near future.


                                      F-7
<PAGE>


Acquisition of Elecmatec

On May 18,  1999,  the  Company  acquired  approximately  90%,  of which 35% was
purchased from a related party, of Elecmatec Electro-Magnetic  Technologies Ltd.
("Elecmatec"),  an Israeli company, for approximately $150,000, of which $50,000
was paid to existing stockholders and $100,000 was invested in Elecmatec equity.
In addition, the Company may pay up to $150,000 under certain circumstances. The
acquisition  has been accounted for as a purchase.  The excess of purchase price
over fair value of assets  acquired of  approximately  $288,000 is  reflected as
acquired  research and  development in process and fully expensed at the date of
the acquisition.  The results of operations are included for the period from the
date of acquisition until year-end.  The operations of Elecmatec are immaterial,
therefore,  pro-forma  information has not been presented.  Elecmatec  develops,
manufactures and markets metal alloys for the auto industry, mainly for export.

Going Concern

The Company has incurred substantial operating losses and at June 30, 1999, has
an accumulated deficit of approximately $5,740,000. The Company is not
generating sufficient revenues from its operations to fund its activities and
anticipates that it will continue to incur losses for some time. The Company is
continuing its efforts in research and development which will require
substantial additional expenditures. As such, the Company's ability to continue
as a going concern is dependent upon its ability to raise resources to finance
its operations. This fact raises substantial doubt about the Company's ability
to continue as a going concern.

The Company plans to finance its operations and capital expenditure by receiving
additional credit lines and bank loans. The Company is also negotiating with
potential investors/partners who would provide bridge financing until the
Company will begin to produce and sell its products.

2.   SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its subsidiaries, Solmecs and Elecmatec. Material intercompany balances and
transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Cash, Cash Equivalents and Short-Term Investments

The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Investments with an original
maturity over three months are classified as short-term investments. Short-term
investments at June 30, 1999, contain mainly short-term deposits in banks.

Inventory

Inventory is valued at lower of cost or market, cost being determined on a
specific basis.


                                      F-8
<PAGE>


Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and
amortization. Property and equipment are depreciated on a straight-line basis
over the estimated useful lives ranging between three to fifteen years.
Leasehold improvements and equipment held under capital leases are amortized
utilizing the straight-line method over the lesser of the estimated useful lives
of the assets or the lease term.

Other Assets

Other assets are stated at cost less accumulated amortization. Amortization is
computed using the straight-line method over five years, the estimated useful
lives of the assets.

Accounting for Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of."
This statement establishes financial accounting and reporting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets and
certain identifiable intangibles to be disposed of. Management has performed a
review of all long-lived assets and has determined that no impairment of the
respective carrying value has occurred as of June 30, 1999.

Revenue Recognition

Revenues from sales of merchandise are recognized upon shipment.

Revenues from contract services are recognized as the work is performed,
according to contract benchmarks.

At the end of each period presented, the balance of trade receivables is
comprised mainly of a few customers and, accordingly, no allowance for doubtful
accounts is considered necessary.

Research and Development Costs

Research and development costs are charged to operations as incurred.

Stock-Based Compensation

The Company adopted the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," and elected to continue the accounting set forth in Accounting
Principles Board ("APB") No. 25, "Accounting for Stock Issued to Employees," and
to provide the necessary pro forma disclosures as if the fair value method had
been applied.

Net Loss per Common Share

The Company computes net loss per share in accordance with SFAS No. 128,
"Earnings Per Share." Under the provisions of SFAS No. 128, basic net income
(loss) per common share ("Basic EPS") is computed by dividing net income (loss)
by the weighted average number of common shares outstanding. Diluted net income
(loss) per common share ("Diluted EPS") is computed by dividing net income
(loss) by the weighted average number of common shares and dilutive common share
equivalents then outstanding.


                                      F-9
<PAGE>


Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable,
short-term borrowings and sundry payable and accrued expenses approximate their
fair value due to the short-term maturity of these instruments.

Business Concentrations and Credit Risks

Financial instruments, which subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents. The Company maintains cash
and cash equivalents with various financial institutions. The Company performs
periodic evaluations of the relative credit standing of these institutions.

Foreign Currency Translation

Transactions and balances in other currencies are translated into U.S. dollars
in accordance with the principles set forth in SFAS No. 52, "Foreign Currency
Translation." Accordingly, items have been translated as follows:

     Monetary items - at the exchange rate in effect on the balance sheet date.

     Nonmonetary items - at historical exchange rates.

     Revenue and expense items - at the exchange rates in effect as of date of
     recognition of those items (excluding depreciation and other items derived
     from nonmonetary items).

     All exchange gains and losses from the translation mentioned above are
     reflected in the statement of operations.

Recently Issued Accounting Standard

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards of derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. This statement is effective for all quarters of fiscal years
beginning June 15, 1999. The Company does not expect the adoption of this
standard to have a material effect on the Company's results of consolidated
operations, financial position or cash flows.

3.   PRO FORMA FINANCIAL STATEMENT (Unaudited)

The following unaudited pro forma consolidated statement of operations for the
year ended June 30, 1998 has been prepared to reflect the combined results of
the Company and Solmecs as if the combination, described in Note 1, had been
effective as of July 1, 1997. Such pro forma information gives effect to:

     a.   The acquisition of Solmecs in consideration for 499,701 shares of the
          Company's common stock issued to Bayou.

     b.   The payment of approximately $120,000 to officers in accordance with
          employment agreement.

     c.   The elimination of imputed interest on the forgiven Bayou loan.

In management's opinion, all material


                                      F-10
<PAGE>


adjustments necessary to reflect the effects of the Combination have been made.
The pro forma financial statement is unaudited and not necessarily indicative of
the consolidated results which actually would have occurred if the Combination
had been consummated at the beginning of the period presented, nor does it
purport to represent the future financial position and results of operations for
future periods.

                 Pro Forma Consolidated Statement of Operations

                        For the Year Ended June 30, 1998

                                   (Unaudited)

Revenues:
    Sales                                                           $     6,571
    Contract services                                                    51,339
                                                                    -----------
                 Total revenues                                          57,910
                                                                    -----------

Costs and expenses(1):
    Research and development costs                                      268,924
    Cost of merchandise purchased                                         8,190
    Cost of contract services performed by subcontractors                26,797
    Marketing expenses                                                   86,258
    General and administrative expenses                                 437,780
                                                                    -----------
                 Total costs and expenses                               827,949
                                                                    -----------
                 Operating loss                                        (770,039)

Financing expenses, net                                                 (15,093)
                                                                    -----------
                 Net loss                                           $  (785,132)
                                                                    ===========

Pro forma net loss per share                                        $     (0.75)
                                                                    ===========

Weighted average number of common shares outstanding                  1,041,044
                                                                    ===========

(1)  The pro forma condensed consolidated statement of operations does not
     include the one-time charge of $3,772,054 of excess purchase price over
     fair value of the assets acquired. This charge was reflected in the
     consolidated statement of operations for the year ended June 30, 1999, as a
     one time charge of "acquired research and development in-process."

4.   PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

                                                     Year Ended       Annual
                                                       June 30,      Rates of
                                                        1999       Depreciation
                                                     ----------    ------------

Plants under construction                           $  799,385          --
Machinery and equipment                                 12,304          15%
Office furniture and equipment                         195,954       6-33%
Motor vehicles                                         111,107          15%
Leasehold improvements                                  94,762       10-20%
                                                    ----------
          Total property and equipment               1,213,512
Less- Accumulated depreciation and amortization        160,609
                                                    ----------
          Property and equipment, net               $1,052,903
                                                    ==========


                                      F-11
<PAGE>


5.   SHORT-TERM BORROWINGS

                                                    Interest       June 30,
                                                      Rate           1999
                                                    --------       -------

Banks in New Israeli Shekels unlinked                 16.5%       $ 16,499
Banks in U.S. dollars                                  7.0         135,399
                                                                  --------
                                                                  $151,898
                                                                  ========

6.   SUNDRY PAYABLES AND ACCRUED EXPENSES

                                                                        June 30,
                                                                          1999
                                                                        --------

Ben-Gurion University for services rendered                             $ 83,501
Payroll and related expenses                                              98,330
Other payables and accrued expenses                                      107,066
                                                                        --------
                                                                        $288,897
                                                                        ========

7.   LONG-TERM LOAN

The long-term loan is interest free. The date of repayment has not yet been
determined.

8.   SEVERANCE PAY

The Company's obligation in respect of severance pay to its Israeli subsidiaries
employees is covered by insurance policies. The amounts on deposit with the
insurance companies are not under the control or management of the subsidiaries
and, therefore, such amounts and the related liability are not reflected in the
balance sheet.

The accrual on the balance sheet represents the unfunded portion of the
severance obligation.

9.   CAPITAL STOCK

Preferred Stock

The Board of Directors has the authority, without further action by the
stockholders, to issue up to one million shares of preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series.

1997 Stock Option Plan

In December 1997, the Board of Directors and stockholders of the Company adopted
the 1997 Stock Option Plan (the "Plan"), pursuant to which 200,000 shares of
Common Stock are reserved for issuance upon exercise of options. The Plan is
designed to serve as an incentive for retaining qualified and competent
employees, directors and consultants. Options granted under the Plan will be
exercisable during the period or periods specified in each option agreement.
Options granted under the Plan are not exercisable after the expiration of ten
years from the date of grant (five years in the case of incentive stock options
granted to a 10% stockholder) and are not transferable other than by will or by
the laws of descent and distribution.

The Company accounts for the Stock Option Plan under APB Opinion No. 25 and,
accordingly, compensation expense has not been recognized in the accompanying
consolidated financial statements as



                                      F-12
<PAGE>


exercise price of the stock options granted was not exceeding fair market value
on the date of grant. Had compensation cost for the 1997 Stock Option Plan been
determined consistent with the provisions of SFAS No. 123, the effect on the
Company's net loss and net loss per share would have been changed to the
following pro forma amounts:

                                                                    Year Ended
                                                                   June 30, 1999
                                                                   -------------

         Net loss, as reported                                    $  (5,740,262)
         Net loss, pro forma                                         (5,784,338)
         Loss per share, as reported                                      (2.76)
         Loss per share, pro forma                                        (2.78)

A summary of the stock  options as of and for the year ended June 30, 1999 is as
follows:

                                                                Weighted Average
                                                     Shares      Exercise Price
                                                     ------      --------------

Options outstanding, beginning of year                  --          $--
    Options granted                                  101,000         1.00
    Options exercised                                   --           --
                                                     -------        -----
Options outstanding, end of year                     101,000        $1.00
                                                     =======        =====
Options exercisable at end of year                    23,667        $1.00
                                                     =======        =====

The weighted average fair value of options granted in fiscal year 1999 is $0.44
and the weighted average remaining contractual life is 9.3 years.

The fair market value of each option grant has been estimated on the date of
grant using the Black-Scholes Option Pricing Model with the following
assumptions for the year ended June 30, 1999:

       Expected options lives                                            5 years
       Risk-free interest rate                                             5.30%
       Expected volatility                                                  240%
       Dividend yield                                                        --

10.  COMMITMENTS AND CONTINGENCIES

Royalties - BGU

In accordance with an agreement dated November 5, 1981, between Solmecs,
Ben-Gurion University and B.G. Negev Technology and Applications Ltd. ("BGU"),
the subsidiary in Israel is conducting research and development projects on the
campus of Ben-Gurion University in consideration for a fee for the use of the
facilities. The Company owns the patents connected with these projects (related
to L.M.M.H.D. power generation) and has agreed to pay royalties to BGU at the
rate of 1.725% on sales of products and at the rate of 11.5% on income from
licensing fees.

The Company also agreed to assume the obligation of BGU to pay royalties to the
Ministry of National Infrastructure on products developed from these R&D
projects for its participation in the research and development costs of BGU.

The royalties are to be paid at the rate of 1% on sales of products and at the
rate of 5% on income from licensing fees. As of June 30, 1999, the maximum
future royalties commitment amounted to approximately


                                      F-13
<PAGE>


$324,000 (including linkage to the Israeli Consumer Price Index and interest at
4% per annum). Subsequent to the repayment of the $324,000, the Company is to
pay royalties to the Ministry of National Infrastructure at a reduced rate of
0.3% on future sales of products and at the rate of 2% on all future income from
licensing fees.

Through June 30, 1999, there were no sales or income on which royalties were
payable to BGU and the Ministry of National Infrastructure.

International Lead Zinc Research Organization (ILZRO)

In connection with a research contract with ILZRO, Solmecs agreed to pay ILZRO a
fee for any lead to be used in future production by the subsidiary. The total
fee commitment is limited to $1,864,000. Through June 30, 1999, Solmecs has not
used any lead for which it is required to pay fees.

Chief Scientist of the Government of Israel

Elecmatec obtained the approval from the office of the Chief Scientist to
purchase from a third party all rights and interests in the metal alloy research
and development project. Elecmatec has undertaken to pay royalties, at the rate
of 3% of sales derived from the project, up to the amount of the participations
($459,000) received by the third party.

For the period from 1981 to 1991, Solmecs received participations from the Chief
Scientist of approximately $2.3 million towards the cost of a research and
development project. In return, Solmecs is required to pay royalties at the rate
of 2% of sales of know-how or products derived from the project. Through June
30, 1999, there were no sales on which royalties were payable.

Royalties and Licensing Fees

In January 1998, an agreement was signed between Solmecs and a party which had
participated in the development of a certain product. In this agreement, Solmecs
undertook to pay royalties as a certain percentage of sales and a certain
percentage of revenues from licensing fees. As of June 30, 1999, no sales had
been made for which royalties would be payable.

Lease Agreement

The Company leases certain office spaces for its operations through the period
ending December 2001.

Future minimum payments for operating leases at June 30, 1999 are as follows:

                Year ending June 30:
                    2000                            $ 80,000
                    2001                              80,000
                    2002                             100,000

Purchased Technology

Solmecs purchased certain know-how and technologies for which Solmecs is
obligated to pay royalties of 0.25% on sales of products developed using these
technologies, up to a maximum amount of $70,000.


                                      F-14
<PAGE>


Letter of Intent

In September 1997, Solmecs signed a letter of intent in which it agreed to
cooperate with another party in establishing a jointly owned entity for the
development of certain technology. The other party will be responsible for
providing financing of the jointly owned entity. As of June 30, 1999, Solmecs
had received $15,505 from the other party as participation in the costs of
technology development.

Fixed Assets

At June 30, 1999, commitments to acquire fixed assets amounted to approximately
$377,000.

King Metal Strips Ltd. Agreement

Subsequent to balance sheet date, Elecmatec signed an agreement with King Metal
Strips Ltd. ("King") to provide metal alloy and rolling services. According to
the above-mentioned agreement, Elecmatec has committed to provide loans to or
invest in equity of King in the amount of $400,000 pursuant to conditions to be
agreed upon between the parties.

11.  REVENUES

                                                       For the Year Ended June
                                                               30, 1999
                                                       -----------------------
     Revenues by geographic areas:
         Greece                                                  57%
         Israel                                                  28%
         Other                                                   15%

     Sales to single customers exceeding 10%:
         Customer A                                              57%
         Customer B                                              19%
         Customer C                                              12%
         Customer D                                              12%

12.  TAXES ON INCOME

The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes," which requires recognition of deferred tax liabilities and assets for
the estimated future tax effects of events that have been recognized in the
financial statements or income tax returns. Under this method, deferred tax
liabilities and assets are determined based on (1) differences between the
financial accounting and income tax bases of assets and liabilities, and (2) net
operating loss carryforwards, using enacted tax rates in effect for the years in
which the differences and carryforwards are expected to reverse and be utilized,
respectively.



                                      F-15
<PAGE>


Tax loss carryforward at June 30, 1999 is approximately $3,790,000, as follows:

                                                            Expiration
         Country                              Amount           Year
         -------                              ------           ----

     United States                        $       20,000       2019
     Israel                                    1,370,000    Unlimited
     Dutch Antilles                            2,400,000   1999 - 2003
                                          --------------
                                          $    3,790,000
                                          ==============

In  addition,  research  and  development  costs  incurred  by  Solmecs  in  the
approximate  amount  of  $830,000  will  be  deductible  for tax  purposes  upon
recognition  of  income  derived  from  research  and  development.  Due  to the
uncertainty as to realization, a full valuation allowance has been recorded.




                                      F-16