SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 1998

|_|   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 333-26673

                      -----------------------------------

                                 EUROTECH, LTD.
                                 --------------
        (Exact name of small business issuer as specified in its charter)

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

                              1101 30th Street, NW
                                    Suite 500
                            Washington, DC 20007-3772
                    (Address of principal executive offices)

                                 (202) 625-4382
                           (Issuer's telephone number)

               ---------------------------------------------------
               (Former name, former address and former fiscal year
                          if changed since last report)

Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                           Yes |X|             No |_|

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 19,399,822 shares of Common Stock,
$0.00025 par value, were outstanding as of September 30, 1998.

Transitional Small Business Disclosure Forms (check one):

                           Yes |_|             No |X|
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                                INDEX TO FORM 10Q

                               SEPTEMBER 30, 1998

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

PART I - FINANCIAL INFORMATION:

      ITEM I - FINANCIAL STATEMENTS

      BALANCE SHEETS                                                      F-1
            At December 31, 1997 and September 30, 1998                   

      STATEMENTS OF OPERATIONS                                            F-2
            For the Nine Months Ended September 30, 1997
            For the Nine Months Ended September 30, 1998
            For the Period from Inception (May 26, 1995) to 
              September 30, 1998

      STATEMENTS OF OPERATIONS                                            F-3
            For the Three Months Ended September 30, 1997
            For the Three Months Ended September 30, 1998

      STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY                  F-4 - F-6
            For the Period from Inception (May 26, 1995) to 
              December 31,
            1997 For the Nine Months Ended September 30, 1998

      STATEMENTS OF CASH FLOWS                                            F-7
            For the Nine Months Ended September 30, 1997
            For the Nine Months Ended September 30, 1998
            For the Period from Inception (May 26, 1995) to 
              September 30, 1998

      NOTES TO FINANCIAL STATEMENTS                                   F-8 - F-15

      ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS

PART II - OTHER INFORMATION
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS
                                    (Note 2)
                                                                   At December 31,   At Sept. 30, 1998
                                                                        1997             (Unaudited)
                                                                    ------------        ------------
<S>                                                                 <C>                 <C>         
CURRENT ASSETS:
  Cash                                                              $    617,756        $    349,132
  Receivable from related parties                                          5,918               5,918
  Prepaid expenses and other current assets                               21,539              26,247
                                                                    ------------        ------------
      TOTAL CURRENT ASSETS                                               645,213             381,297

PROPERTY AND EQUIPMENT - net of accumulated depreciation                  14,050              32,180

OTHER ASSETS:
  Organization and patent costs - net of accumulated amortization         28,651              27,103
  Deferred financing costs                                               261,178              14,861
  Other assets                                                             3,151               7,551
                                                                    ------------        ------------
      TOTAL ASSETS                                                  $    952,243        $    462,992
                                                                    ============        ============

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
  Notes payable                                                     $  2,000,000        $         --
  Accrued liabilities                                                    576,966           1,531,991
  Deferred revenue                                                       225,000             225,000
                                                                    ------------        ------------
                                                                                      
      TOTAL CURRENT LIABILITIES                                        2,801,966           1,756,991
                                                                                      
CONVERTIBLE DEBENTURES                                                 3,000,000           6,990,000
                                                                                      
CONTINGENCIES AND OTHER MATTERS (Notes 1, 2, 5 and 6)                                 
                                                                                      
STOCKHOLDERS' DEFICIENCY:                                                             
  Preferred stock - $0.01 par value; 1,000,000 shares                                 
    authorized; -0- shares issued and outstanding                             --                  --
  Common stock - $0.00025 par value; 50,000,000 shares authorized;                    
     18,928,836 and 19,399,822 shares issued and outstanding at                       
     December 31,1997 and September 30, 1998, respectively                 4,732               4,849
  Additional paid-in capital                                          12,892,313          15,349,739
  Unearned financing costs                                            (1,315,317)           (285,000)
  Deficit accumulated during the development stage                   (16,431,451)        (23,353,587)
                                                                    ------------        ------------
      TOTAL STOCKHOLDERS' DEFICIENCY                                  (4,849,723)         (8,283,999)
                                                                    ------------        ------------
      TOTAL LIABILITIES AND STOCKHOLDERS'                                             
          DEFICIENCY                                                $    952,243        $    462,992
                                                                    ============        ============
</TABLE>

See notes to financial statements.


                                       F-1
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       For the Period
                                               For the Nine Months Ended Sept. 30,     from Inception
                                               -----------------------------------    (May 26, 1995) to
                                                    1997                1998           Sept. 30, 1998
                                                ------------        ------------      ----------------
<S>                                             <C>                 <C>                 <C>          
REVENUES                                        $         --        $         --        $         --
                                                ------------        ------------        ------------
OPERATING EXPENSES:
  Research and development                           276,186             875,416           3,265,930
  Consulting fees                                  1,085,705             589,133           3,735,708
  Other general and administrative expenses          730,615           1,182,433           3,026,212
                                                ------------        ------------        ------------
    TOTAL OPERATING EXPENSES                       2,092,506           2,646,982          10,027,850
                                                ------------        ------------        ------------
OPERATING LOSS                                    (2,092,506)         (2,646,982)        (10,027,850)
                                                ------------        ------------        ------------
OTHER EXPENSES:                                                                        
  Interest expense                                   185,475             632,270             946,432
  Amortization of deferred and unearned                                                
      financing costs                              3,419,018           3,642,884          12,379,305
                                                ------------        ------------        ------------
    TOTAL OTHER EXPENSES                           3,604,493           4,275,154          13,325,737
                                                ------------        ------------        ------------
NET LOSS                                        $ (5,696,999)       $ (6,922,136)       $(23,353,587)
                                                ============        ============        ============
NET LOSS PER COMMON SHARE                       $      (0.32)       $      (0.36)   
                                                ============        ============    
WEIGHTED AVERAGE NUMBER OF                                                          
  COMMON SHARES OUTSTANDING                       17,553,000          19,288,291    
                                                ============        ============    
</TABLE>

See notes to financial statements.


                                       F-2
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          For the Three Months Ended Sept. 30,
                                                          ------------------------------------
                                                                  1997            1998
                                                              ------------    ------------
<S>                                                           <C>             <C>         
REVENUES                                                      $         --    $         --
                                                              ------------    ------------
OPERATING EXPENSES:
  Research and development                                           5,571         314,905
  Consulting fees                                                  432,821          83,786
  Other general and administrative expenses                        139,160         300,764
                                                              ------------    ------------
    TOTAL OPERATING EXPENSES                                       577,552         699,455
                                                              ------------    ------------
OPERATING LOSS                                                    (577,552)       (699,455)
                                                              ------------    ------------
OTHER EXPENSES:
  Interest expense                                                  64,096         202,550
  Amortization of deferred and unearned financing costs          2,048,006         593,223
                                                              ------------    ------------
    TOTAL OTHER EXPENSES                                         2,112,102         795,773
                                                              ------------    ------------
NET LOSS                                                      $ (2,689,654)   $ (1,495,228)
                                                              ============    ============
NET LOSS PER COMMON SHARE                                     $      (0.15)   $      (0.08)
                                                              ============    ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
    OUTSTANDING                                                 17,827,000      19,371,206
                                                              ============    ============
</TABLE>

See notes to financial statements.


                                       F-3
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                   (UNAUDITED)

        FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1997
                  AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
                                                                Common Stock     Additional                 Unearned   
                                                 Date of    -------------------   Paid-in      Due from     Financing  
Period Ended December 31, 1995:                Transaction    Shares     Amount   Capital    Stockholders     Costs    
                                               -----------  ----------  -------  ----------  ------------  ----------- 
<S>                                              <C>        <C>         <C>      <C>         <C>           <C>         
                                                                (1)

Founder shares issued ($0.00025 per share)       05/26/95    4,380,800  $ 1,095  $   (1,095) $        --   $        -- 
Issuance of stock for offering consulting fees   
  ($0.0625 per share)                            08/31/95      440,000      110      27,390           --            -- 
Issuance of stock ($0.0625 and $0.25             
  per share)                                      Various    4,080,000    1,020     523,980       (3,000)           -- 
Issuance of stock for license ($0.0625 per       
  share)                                         08/31/95      600,000      150      37,350           --            -- 
Issuance of stock options for offering legal     
  and consulting fees                                               --       --      75,000           --            -- 
Offering expenses                                                   --       --    (105,398)          --            -- 
Net loss                                                            --       --          --           --            -- 
                                                            ----------  -------  ----------  -----------   ----------- 
Balance - December 31, 1995                                  9,500,800    2,375     557,227       (3,000)           -- 
                                                 
Year Ended December 31, 1996:                    
                                                 
Issuance of stock ($0.25 per share)               Various    1,278,000      320     319,180           --            -- 
Exercise of stock options                        01/18/96      600,000      150          --           --            -- 
Issuance of stock for consulting fees            
  ($0.34375 per share)                           03/22/96      160,000       40      54,960           --            -- 
Issuance of stock for consulting fees            
  ($0.0625 per share)                            05/15/96    2,628,000      657     163,593           --            -- 
Issuance of stock for consulting fees            
  ($0.590625 per share)                          06/19/96    1,500,000      375     885,563           --            -- 
Issuance of stock for consulting fees            
  ($1.82 per share)                              11/12/96       57,036       14     104,275           --            -- 
Issuance of stock pursuant to bridge financing   
  ($1.81325 per share)                              12/96    1,500,000      375   2,719,500           --    (2,719,875)
Amortization of unearned financing costs                            --       --          --           --       226,656 
Repayment by stockholders                                           --       --          --        3,000            -- 
Net loss                                                            --       --          --           --            -- 
                                                            ----------  -------  ----------  -----------   ----------- 
Balance - December 31, 1996                                 17,223,836  $ 4,306  $4,804,298  $        --   $(2,493,219)
                                                            ==========  =======  ==========  ===========   =========== 

<CAPTION>
                                                  Deficit                   
                                                Accumulated                 
                                                During the                  
                                                Development                 
Period Ended December 31, 1995:                    Stage         Total      
                                                -----------   -----------   
<S>                                             <C>           <C>           
Founder shares issued ($0.00025 per share)      $        --   $        --   
Issuance of stock for offering consulting fees                              
  ($0.0625 per share)                                    --        27,500   
Issuance of stock ($0.0625 and $0.25                                        
  per share)                                             --       522,000   
Issuance of stock for license ($0.0625 per                                  
  share)                                                 --        37,500   
Issuance of stock options for offering legal                                
  and consulting fees                                    --        75,000   
Offering expenses                                        --      (105,398)  
Net loss                                           (513,226)     (513,226)  
                                                -----------   -----------   
Balance - December 31, 1995                        (513,226)       43,376   
                                                                            
Year Ended December 31, 1996:                                               
                                                                            
Issuance of stock ($0.25 per share)                      --       319,500   
Exercise of stock options                                --           150   
Issuance of stock for consulting fees                                       
  ($0.34375 per share)                                   --        55,000   
Issuance of stock for consulting fees                                       
  ($0.0625 per share)                                    --       164,250   
Issuance of stock for consulting fees                                       
  ($0.590625 per share)                                  --       885,938   
Issuance of stock for consulting fees                                       
  ($1.82 per share)                                      --       104,289   
Issuance of stock pursuant to bridge financing                              
  ($1.81325 per share)                                   --            --   
Amortization of unearned financing costs                 --       226,656   
Repayment by stockholders                                --         3,000   
Net loss                                         (3,476,983)   (3,476,983)  
                                                -----------   -----------   
Balance - December 31, 1996                     $(3,990,209)  $(1,674,824)  
                                                ===========   ===========   
</TABLE>

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

      See notes to financial statements.


                                       F-4
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                   (UNAUDITED)

        FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1997
                  AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
                                                                  Common Stock      Additional                 Unearned    
                                                   Date of    -------------------    Paid-in      Due from     Financing   
Year Ended December 31, 1997:                    Transaction    Shares     Amount    Capital    Stockholders     Costs     
                                                 -----------  ----------  -------  -----------  ------------  -----------  
<S>                                                 <C>       <C>         <C>      <C>          <C>           <C>          
                                                                 (1)                                                       

Balance - December 31, 1996                                   17,223,836  $ 4,306  $ 4,804,298  $         --  $(2,493,219) 

Issuance of stock for consulting fees                                                               
  ($2.50 per share)                                 03/97         64,000       16      159,984            --           --  
Issuance of stock for consulting fees                                                               
  ($5.45 per share)                                 06/97         39,000        9      212,540            --           --  
Issuance of stock for consulting fees                                                               
  ($5.00 per share)                                 09/97         59,000       15      294,986            --           --  
Issuance of stock pursuant to penalty                                                               
  provision of bridge financing                                                                     
  ($5.45 per share)                                 06/97        500,000      125    2,724,875            --   (2,725,000) 
Value assigned to conversion feature of                                                             
  Convertible Debentures                            11/97             --       --    1,337,143            --   (1,337,143) 
Value assigned to issuance of 127,500 warrants                                                      
  in consideration for interest and placement                                                       
  fees in connection with Convertible                                                               
  Debentures                                        11/97             --       --      284,480            --     (284,480)
Value assigned to issuance of 35,000 warrants                                                                              
  to shareholder for consulting services            11/97             --       --       39,588            --      (39,588)  
Value assigned to issuance of 364,000 warrants                                                      
  to shareholder as additional consideration                                                        
  for financing activities                          11/97             --       --      862,680            --     (862,680) 
Issuance of stock for consulting fees                                                               
  ($4.00 per share)                                 12/97         43,000       11      171,989            --           --  
Accrual of stock issued January 1998 pursuant                                                       
  to penalty provision of bridge financing                                                          
  ($2.00 per share)                                 12/97      1,000,000      250    1,999,750            --   (2,000,000) 
Amortization of unearned financing costs                              --       --           --            --    8,426,793  
Net loss                                                              --       --           --            --           --  
                                                              ----------  -------  -----------  ------------  -----------  
Balance - December 31, 1997                                   18,928,836  $ 4,732  $12,892,313  $         --  $(1,315,317) 
                                                              ==========  =======  ===========  ============  ===========  

<CAPTION>
                                                  Deficit                   
                                                Accumulated                 
                                                During the                  
                                                Development                 
Year Ended December 31, 1997:                      Stage          Total     
                                                ------------   -----------  
<S>                                             <C>            <C>          
Balance - December 31, 1996                     $ (3,990,209)  $(1,674,824) 
                                                                            
Issuance of stock for consulting fees                                       
  ($2.50 per share)                                       --       160,000  
Issuance of stock for consulting fees                                       
  ($5.45 per share)                                       --       212,549  
Issuance of stock for consulting fees                                       
  ($5.00 per share)                                       --       295,001  
Issuance of stock pursuant to penalty                                       
  provision of bridge financing                                             
  ($5.45 per share)                                       --            --  
Value assigned to conversion feature of                                     
  Convertible Debentures                                  --            --  
Value assigned to issuance of 127,500 warrants                              
  in consideration for interest and placement                               
  fees in connection with Convertible                                       
  Debentures                                                                
Value assigned to issuance of 35,000 warrants             --            --  
  to shareholder for consulting services                                    
Value assigned to issuance of 364,000 warrants                              
  to shareholder as additional consideration                                
  for financing activities                                --            --  
Issuance of stock for consulting fees                                       
  ($4.00 per share)                                       --       172,000  
Accrual of stock issued January 1998 pursuant                               
  to penalty provision of bridge financing                                  
  ($2.00 per share)                                       --            --  
Amortization of unearned financing costs                  --     8,426,793
Net loss                                         (12,441,242)  (12,441,242) 
                                                ------------   -----------  
Balance - December 31, 1997                     $(16,431,451)  $(4,849,723) 
                                                ============   ===========  
</TABLE>

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

      See notes to financial statements. 


                                      F-5
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                   (UNAUDITED)

        FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1997
                  AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
                                                                  Common Stock      Additional                 Unearned   
                                                   Date of    -------------------    Paid-in      Due from     Financing  
Nine Months Ended September 30, 1998             Transaction    Shares     Amount    Capital    Stockholders     Costs    
                                                 -----------  ----------  -------  -----------  ------------  ----------- 
<S>                                                 <C>       <C>         <C>      <C>          <C>           <C>         
                                                                 (1)

Balance - December 31, 1997                                   18,928,836  $ 4,732  $12,892,313  $         --  $(1,315,317)
                                                                                                     
Issuance of stock for consulting fees                                                                
  ($2.58 per share)                                 03/98         43,000       11      110,930            --           -- 
Value assigned to conversion feature of                                                              
  Convertible Debentures and 60,000 warrants                                                         
  issued as additional interest                     02/98             --       --    1,100,000            --   (1,100,000)
Issuance of stock pursuant to penalty                                                                
  provision of bridge financing                                                                      
 ($1.0625 per share)                                04/98        500,000      125      531,124            --     (531,249)
Issuance of stock for consulting fees                                                                
  ($1.51 per share)                                 06/98        143,000       35      215,895            --           -- 
Cancellation of stock to consultant                 07/98       (375,000)     (94)     (93,656)           --           -- 
Issuance of stock for consulting fees                                                                
  ($0.85 per share)                                 09/98        126,617       32      107,503            --           -- 
Issuance of stock for conversion of debenture                                                        
  note payable ($0.32 per share)                    09/98         33,369        8       10,630            --           -- 
Value assigned to conversion feature of                                                              
  Convertible Debentures and 125,000 warrants                                                        
  issued as additional interest                     07/98             --       --      475,000            --     (475,000)
Amortization of unearned financing costs                              --       --           --            --    3,136,566 
Net loss                                                              --       --           --            --           -- 
                                                              ----------  -------  -----------  ------------  ----------- 
Balance - September 30, 1998                                  19,399,822  $ 4,849  $15,349,739  $         --  $  (285,000)
                                                              ==========  =======  ===========  ============  =========== 

<CAPTION>
                                                    Deficit                    
                                                  Accumulated                  
                                                  During the                   
                                                  Development                  
Nine Months Ended September 30, 1998                 Stage         Total        
                                                 -------------  -----------    
                                                                                
                                                                                
Balance - December 31, 1997                      $(16,431,451)  $(4,849,723)    
                                                                                
Issuance of stock for consulting fees                                           
  ($2.58 per share)                                        --       110,941     
Value assigned to conversion feature of                                         
  Convertible Debentures and 60,000 warrants                                    
  issued as additional interest                            --            --     
Issuance of stock pursuant to penalty                                           
  provision of bridge financing                                                 
 ($1.0625 per share)                                       --            --     
Issuance of stock for consulting fees                                           
  ($1.51 per share)                                        --       215,930     
Cancellation of stock to consultant                        --       (93,750)    
Issuance of stock for consulting fees                                           
  ($0.85 per share)                                        --       107,535     
Issuance of stock for conversion of debenture                                   
  note payable ($0.32 per share)                           --        10,638     
Value assigned to conversion feature of                                         
  Convertible Debentures and 125,000 warrants                                   
  issued as additional interest                            --            --     
Amortization of unearned financing costs                   --     3,136,566     
Net loss                                           (6,922,136)   (6,922,136)    
                                                 ------------   -----------     
Balance - September 30, 1998                     $(23,353,587)  $(8,283,999)    
                                                 ============   ===========     
</TABLE>

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

      See notes to financial statements.


                                       F-6
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             For the Nine Months Ended     For the Period
                                                                                    September 30,          from Inception
                                                                            ---------------------------  (May 26, 1995) to
                                                                                1997           1998        Sept. 30, 1998
                                                                            ------------   ------------   ----------------
<S>                                                                         <C>            <C>              <C>          
CASH FLOWS FROM OPERATING ACTIVITIES                                                                     
    Net loss                                                                $ (5,696,999)  $ (6,922,136)    $(23,353,587)
    Adjustments to reconcile net loss to net cash provided by (used                                        
        in) operating activities:                                                                          
          Depreciation and amortization                                            3,526          7,046           13,047
          Amortization of deferred and unearned financing costs                3,419,018      3,642,884       12,379,305
          Accrued interest                                                       185,475        632,907          632,907
          Stock issued for license                                                    --             --           37,500
          Consulting fees and other compensation satisfied by stock                                        
              issuances                                                          677,550        340,656        2,389,683
          Cash provided by (used in) the change in assets and liabilities:                                 
                (Decrease) increase in advances to related parties                84,000             --           (5,918)
                Increase in prepaid expenses                                      (1,327)        (4,708)         (26,247)
                Increase in other assets                                              --         (4,400)          (7,551)
                Increase in deferred revenue                                     225,000             --          225,000
                Increase in accrued liabilities                                  546,973        322,755          899,721
                                                                            ------------   ------------     ------------
        NET CASH USED IN OPERATING ACTIVITIES                                   (556,784)    (1,984,996)      (6,816,140)
                                                                            ------------   ------------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES                                                                       
    Organization and patent costs                                                 (5,162)            --          (31,358)
    Investment in joint venture                                                  (87,000)            --               --
    Capital expenditures                                                          (3,391)       (23,628)         (40,972)
                                                                            ------------   ------------     ------------
       NET CASH USED IN INVESTING ACTIVITIES                                     (95,553)       (23,628)         (72,330)
                                                                            ------------   ------------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES                                                                       
    Proceeds from exercise of stock options                                           --             --              150
    Proceeds from issuance of common stock                                            --             --          841,500
    Offering costs                                                                    --             --           (2,898)
    Repayment by stockholders                                                         --             --            3,000
    Net proceeds from notes payable                                              193,140             --               --
    Proceeds from convertible debentures                                              --      4,000,000        7,000,000
    Proceeds from bridge notes                                                        --             --        2,000,000
    Repayment of bridge notes                                                         --     (2,000,000)      (2,000,000)
    Borrowings from stockholders                                                      --             --          561,140
    Repayment to stockholders                                                         --             --         (561,140)
    Deferred financing costs                                                      75,000       (260,000)        (604,150)
                                                                            ------------   ------------     ------------
       NET CASH PROVIDED BY FINANCING ACTIVITIES                                 268,140      1,740,000        7,237,602
                                                                            ------------   ------------     ------------
(DECREASE) INCREASE IN CASH                                                     (384,197)      (268,624)         349,132
                                                                                                           
CASH - BEGINNING                                                                 380,183        617,756               --
                                                                            ------------   ------------     ------------
CASH - ENDING                                                               $     (4,014)  $    349,132     $    349,132
                                                                            ============   ============     ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                          

Cash paid during the period for:                                                                           
    Interest                                                                $         --   $     36,630     $    351,561
                                                                            ============   ============     ============
    Income taxes                                                            $         --   $         --     $         --
                                                                            ============   ============     ============
</TABLE>

See notes to financial statements.


                                       F-7
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                               SEPTEMBER 30, 1998

NOTE 1 - BASIS OF PRESENTATION

            The accompanying financial statements are unaudited. These
            statements have been prepared in accordance with the rules and
            regulations of the Securities and Exchange Commission ( the "SEC").
            Certain information and footnote disclosures normally included in
            the financial statements prepared in accordance with generally
            accepted accounting principles have been condensed or omitted
            pursuant to such rules and regulations. In the opinion of
            management, the financial statements reflect all adjustments (which
            include only normal recurring adjustments) necessary to state fairly
            the financial position and results of operations as of and for the
            periods indicated. These financial statements should be read in
            conjunction with the Company's financial statements and notes
            thereto for year ended December 31, 1997, included in the Company's
            Form 10 and Form S-1 as filed with the Securities and Exchange
            Commission.

            The preparation of financial statements in conformity with general
            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 statement and the reported amounts of
            revenues and expenses during the reporting period. Actual results
            could differ from those estimates.

NOTE 2 - BUSINESS AND CONTINUED OPERATIONS

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


                                       F-8
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                               SEPTEMBER 30, 1998

NOTE 2 - BUSINESS AND CONTINUED OPERATIONS (Continued)

            The accompanying unaudited financial statements have been prepared
            in conformity with generally accepted accounting principles, which
            contemplate continuation of the Company as a going concern. However,
            as shown in the accompanying financial statements, the Company has
            incurred losses from operations from inception. As of September 30,
            1998, the Company has a stockholders' deficiency of $8,283,999, a
            working capital deficiency of $1,375,694 and an accumulated deficit
            since inception of $23,353,587. The Company requires additional
            funds to commercialize its technologies and continue research and
            development efforts. Until the commencement of sales, the Company
            will have no operating revenues, but will continue to incur
            substantial expenses and operating losses. No assurances can be
            given that the Company can complete development of any technology,
            not yet completely developed, or that with respect to any technology
            that is fully developed, it can be manufactured on a large scale
            basis or at a feasible cost. Further, no assurance can be given that
            any technology will receive market acceptance. Being a start-up
            stage entity, the Company is subject to all the risks inherent in
            the establishment of a new enterprise and the marketing and
            manufacturing of a new product, many of which risks are beyond the
            control of the Company. These factors raise substantial doubt about
            the Company's ability to continue as a going concern.

            Since inception, the Company has financed its operations through
            sale of its securities, shareholder loans, a bridge financing
            totalling $2,000,000 completed in December of 1996, a Convertible
            Debenture financing of $3,000,000 completed in November of 1997 and
            a Convertible Debenture financing of $3,000,000 completed in
            February of 1998 and a Convertible Debenture financing of $1,000,000
            completed July 20, 1998. Proceeds from the February 1998 Convertible
            Debenture financing were used to retire the $2,000,000 bridge notes.
            The Company is exploring additional sources of working capital,
            which include a private offering of common stock, private borrowings
            and joint ventures.

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

            These financial statements do not include any adjustments relating
            to the recoverability of recorded asset amounts that might be
            necessary as a result of the above uncertainty.


                                       F-9
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                               SEPTEMBER 30, 1998

NOTE 3 - NOTES PAYABLE

            Convertible Debenture Offering

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

            The debenture agreements permit the holders of the debentures to
            convert the debt into shares of common stock at beneficial
            conversion rates based on the timing of the conversion. The notes
            conversion feature commences at the earlier of: (I) the date the
            underlying shares to the Convertible Debenture notes are registered
            and declared effected by the SEC; (ii) 90 days after February 23,
            1998. Shares of common stock to be issued at the conversion date
            shall be equal to the outstanding principal and accrued interest at
            the conversion date, divided by the conversion price. The conversion
            price is the lower of $2.62 or the average bid price per share of
            the Company's common stock for five trading days immediately
            preceding the conversion date, multiplied by (I) 80% for any
            conversion honored prior to the 180th day after February 23, 1998,
            (ii) 75% for any conversion honored on or after the 180th day after
            February 23, 1998, and prior to the 360th after February 23, 1998,
            and (iii) 70% for any conversion honored after the 360th day after
            February 23, 1998. Commencing on February 23, 2000, all or any
            portion of the remaining debt due under this financing at the option
            of Eurotech is convertible into shares of common stock at the 70%
            conversion rate.

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

            The Company has assigned a value to the debentures' beneficial
            conversion feature and warrants amounting to $1,100,000, and such
            amount is being amortized over 180 days commencing February 23,
            1998.

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


                                      F-10
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                               SEPTEMBER 30, 1998

NOTE 3 - NOTES PAYABLE (Continued)

            Repayment of $2,000,000 Bridge Notes

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

            Convertible Debenture Offering

            On July 20, 1998, the Company sold through a private placement
            $1,000,000, 8% Convertible Debenture notes, due July 20, 2001. As
            additional consideration, the Company issued separate warrants to
            purchase 125,000 shares of the Company's common stock at $1.06 per
            share. The warrants are exercisable over two years.

            The debenture agreements permit the holders of the debentures to
            convert the debt into shares of common stock at beneficial
            conversion rates based on the timing of the conversion. The notes
            conversion feature commences at the earlier of: (i) the date the
            underlying shares to the Convertible Debenture notes are registered
            and declared effected by the SEC; (ii) 90 days after July 20, 1998.
            Shares of common stock to be issued at the conversion date shall be
            equal to the outstanding principal and accrued interest at the
            conversion date, divided by the conversion price. The conversion
            price is the lower of $1.06, or the average bid price per share of
            the Company's common stock for five trading days immediately
            preceding the conversion date, multiplied by (i) 75% for any
            conversion honored prior to the 180th day after July 20, 1998 and
            (ii) 70% for any conversion honored after the 180th day after July
            20, 1998. Commencing on July 20, 2001, all or any portion of the
            remaining debt due under this financing at the option of Eurotech is
            convertible into shares of common stock at the 70% conversion rate.

            The Company has assigned a value to the debentures' beneficial
            conversion feature and warrants amounting to $475,000, and such
            amount will be amortized over 180 days commencing July 20, 1998.

            Proceeds from the sale of the 1,000,000, 8% Convertible Debenture
            notes, amounted to $975,000, net of legal and professional fees
            amounting to $25,000. The legal and professional fees of $25,000
            have been recorded as deferred financing costs and will be amortized
            over 180 days commencing July 20, 1998.

            As part of this agreement, the Company modified its two prior
            Convertible Debenture agreements to eliminate the moving floor
            conversion prices.


                                      F-11
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                               SEPTEMBER 30, 1998

NOTE 4 - STOCKHOLDERS' DEFICIENCY

            Significant Common Stock Issuances During 1998

            During the quarter ended June 30, 1998, the Company issued 500,000
            shares of common stock to the unit holders of the bridge financing
            in connection with the Company's failure to have its S-1
            Registration Statement declared effective by the Securities and
            Exchange Commission by April 1, 1998. The value assigned to the
            500,000 shares was based on fair value and amounted to $531,000, all
            of which was charged to operations during the quarter ended June 30,
            1998.

            Earnings Per Share

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

            Warrants to purchase common stock                         1,551,500
            Convertible Debentures (assumed conversion at market 
                value at November 12, 1998 and at largest discount)  22,190,476
            Options to purchase common stock                             75,000
                                                                     ----------
            Total as of September 30, 1998                           23,816,976
                                                                     ==========


                                      F-12
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                               SEPTEMBER 30, 1998

NOTE 5 - TECHNOLOGY INVESTMENTS AND LICENSING AGREEMENT

            Technologies Acquired

            Pursuant to three Technology Purchase Agreements each dated January
            1, 1998, the Company has acquired from Oleg L. Figovsky, Ph.D. , a
            consultant to the Company, all right, title and interest in and to
            the following three unpatented technologies developed by him,
            inclusive of future improvements thereto: (i) a group of related
            technologies, collectively known as "Interpenetrated Network
            Polymers" ("INPs"), (ii) "Liquid Ebonite Material" ("LEM") and (iii)
            "Rubber Concrete" ("RubCon") for purchase prices of $75,000, $15,000
            and $35,000, respectively (each, a "Purchase Price"). Pursuant to
            each such Technology Purchase Agreement, during 15-year period
            commencing on January 1, 1998, the Company is obligated to pay to
            Dr. Figovsky royalties equal to 49% of the Company's net revenues
            from the sale or licensing of any products incorporating the
            applicable technology, subject to the Company's right to deduct from
            the first royalties payable under each agreement an aggregate sum
            equal to the Purchase Price paid thereunder. The Company has
            accounted for this technology license fee as acquired research and
            development and, in accordance with FASB Interpretation No. 4, has
            charged the license fee of $125,000 research and development
            expenses during the nine months ended September 30, 1998.

            In the quarter ended June 30, 1998, the Company acquired the rights
            to certain anticorrosive additives technology from Israeli
            scientists for a purchase price of $40,000. The Company has charged
            the $40,000 expenditure to research and development expenses during
            the quarter ended June 30, 1998.

            Investments in Israeli Technology Companies

            During 1997 and 1998, the Company agreed to acquire a 20% interest
            in seven separate Israeli technology, research and development
            companies ("incubators"). The Company's share of losses incurred by
            these companies has been accounted for on the equity basis and
            included in research and development expenses. The amount charged to
            research and development for 1997 approximated $102,000, which
            reduced the carrying value of the Company's investment in these four
            companies to $-0- at December 31, 1997.

            During the nine months ended September 30, 1998, an additional
            $110,000 was invested in these incubators. The amount charged to
            research and development expenses for the nine months ended
            September 30, 1998 approximated $110,000, which reduced the carrying
            value of the Company's investment in these seven companies to $-0-
            at September 30, 1998.


                                      F-13
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                               SEPTEMBER 30, 1998

NOTE 6 - CONTINGENCIES AND OTHER MATTERS

            International Operations

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

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

            Risk of Environmental Liability; Present Lack of Environmental
            Liability Insurance

            The Company's radioactive contaminant technology is subject to
            numerous national and local laws and regulations relating to the
            storage, handling, emission, transportation and discharge of such
            materials, and the use of specialized technical equipment in the
            processing of such materials. There is always the risk that such
            materials might be mishandled, or that there might be equipment or
            technology failures, which could result in significant claims for
            personal injury, property damage, and clean-up or remediation. Any
            such claims against the Company could have a material adverse effect
            on the Company. The Company does not presently carry any
            environmental liability insurance, and may be required to obtain
            such insurance in the future in amounts that are not presently
            predictable. There can be no assurance that such insurance will
            provide coverage against all claims, and claims may be made against
            the Company (even if covered by insurance policies) for amounts
            substantially in excess of applicable policy limits. Any such event
            could have a material adverse effect on the Company.


                                      F-14
<PAGE>

                                 EUROTECH, LTD.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS
                                  (UNAUDITED)

                               SEPTEMBER 30, 1998

NOTE 6 - CONTINGENCIES AND OTHER MATTERS (Continued)

            Concentration of Credit Risk

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

            Litigation

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

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

            Process was served upon Eurotech at its California office in late
            January 1998. Based on the advice of its outside counsel, Eurotech
            believes that the plaintiffs' claims will be resolved favorably to
            the Company. However, it is possible that the Company will be
            adjudged liable in the Dirks Litigation, and if so, the resolution
            of the litigation could have a material adverse effect on the
            Company.


                                      F-15
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

General

The following is a discussion and analysis of the results of operations of the
Company and should be read in conjunction with the financial statements and
related notes contained in this Form 10-Q.

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

Overview

The Company, incorporated in May 1995, is a development stage, technology
transfer, holding and management company formed to commercialize new, existing
but previously unrecognized, and previously "classified" technologies, with a
particular current emphasis on technologies developed by prominent research
institutes and individual researchers in the former Soviet Union and in Israel,
and to commercialize those and other Western technologies for business and other
commercial applications principally in Europe, Ukraine, Russia and North
America.

Until recently, the Company had been principally engaged in identifying,
monitoring, reviewing and assessing technologies for their commercial
applicability and potential, and in acquiring selected technologies by equity
investment, purchase, assignment and licensing arrangements. Although the
Company intends to continue identifying, monitoring, reviewing and assessing new
technologies, its primary emphasis will be focused on commercializing four of
its present technologies ("Principal Technologies").

The Company's Principal Technologies include: (I) Silicon-organic compound
technology ("EKOR") (a silicon-based elastomer which may be used to contain
radioactive dust and waste materials); (ii) Non-isocyanate Polyurethane ("NIPU")
(a modified polyurethane that does not contain the toxic isocyanates used in the
production of conventional polyurethane); (iii) Liquid Ebonite Material ("LEM")
(a synthetic liquid rubber); and (iv) Rubcon (a rubber based concrete).

The Company believes that the Principal Technologies are presently ready for
commercialization and marketing. To that end, the Company has decided to devote
its business activities and resources principally to the marketing and sale of
the Principal Technologies. The Company recently has initiated a marketing and
sales program for the Principal Technologies, and also has initiated discussions
with a number of prominent, potential users of the technologies, with a view
towards the future negotiation and execution of licensing and/or joint venture
marketing and sales agreements.

EKOR: Nuclear

The Company is pursuing the sale/licensing of its EKOR technology in Ukraine
where Mr. Gulko, working as a consultant to the Company, recently met with
Chernobyl authorities. While no contract has been signed, the Company remains
optimistic that either EBRD and/or Ukraine government funding will become
available for EKOR application in 1999.
<PAGE>

In Germany, the Company is actively pursuing its initiative with a government
owned public utility towards applying EKOR to several thousand barrels of stored
nuclear waste. To this end, the Company has retained the services of Mr.
Schneider, a Russian speaking German nuclear waste expert, to assist in this
initiative.

EKOR: Non-nuclear

In light of recent FAA announcements, the Company has renewed contact with
Boeing towards the possible application of EKOR in commercial aircraft. In 1996,
EKOR passed a series of Boeing fire retardant tests. That initiative was not
pursued as Boeing and the Company had other priorities at that time.

Other Technologies

In November 1998, the Company presented its nonisocyanate polyurethane ("NIPU")
technology at the I.E.N.A. 1998 Conference in Nurenburg, Germany. Two gold
medals were awarded to the Company for this technology.

Regarding Liquid Ebonite Mixtures (LEM), the Company is working under a letter
of intent with a major Germany chemical company. Samples were delivered in
October and November. It is the Company's intent to begin contract negotiations
in January 1999.

The Company intends to operate its business by licensing its technologies to
end-users and through development and operating joint-ventures and strategic
alliances. To date, the Company has not generated any revenues from these
operations.

Financial

The world financial situation, prompted by the Russian default and the fallout
from the collapse of Long Term Capital, has effectively precluded the raising of
additional funds from traditional sources for development stage technology
companies. Towards conserving cash, Eurotech has temporarily ceased investing in
new or additional technologies and has temporarily curtailed all but the highest
priority marketing initiatives. It is not unlikely that further financial
constraints will be required prior to raising additional funds.

Advisory Board

In October, an Advisory Board consisting of prominent individuals in the fields
of science, finance and international business was formed to assist Eurotech's
Board of Directors. Members include Dr. Hans Christian Roglin, Mr. William
MacMillen, Mr. Pedro Matta, and Mr. Kurt Seifman.

The Company has not been profitable since inception and expects to incur
substantial operating losses over the next twelve months. For the period from
inception to September 30, 1998, the Company incurred a cumulative net loss of
approximately $23,354,000. The Company expects that it will generate losses
until at least such time as it can commercialize its technologies, if ever. No
assurance can be given that any of the Company's technologies can be
manufactured on a large scale basis or at a feasible cost. Further, no assurance
can be given that any technology will receive market acceptance. Being a
start-up stage entity, the Company is subject to all the risks inherent in the
establishment of a new enterprise and the marketing and manufacturing of a new
product, many of which risks are beyond the control of the Company.
<PAGE>

Results of Operations

For the Nine Months Ended September 30, 1998 vs. the Nine Months Ended September
30, 1997

The Company has had no revenues since inception. Consulting expenses decreased
from $1,086,000 for the nine months ended September 30, 1997 to $589,000 for the
nine months ended September 30, 1998. The decrease in consulting expense is
principally the result of the Company's reduction in the number of consultants
engaged during the period and the reduction in consulting fees paid by issuances
of common stock. Other general and administrative expenses increased from
$730,000 for the nine months ended September 30, 1997 to $1,182,000 for the nine
months ended September 30, 1998. The increase is principally a result of a
provision of $330,000 for penalties to holders of its 8% Convertible Debentures
due November 27, 2000 and February 23, 2001 for failure by the Company to have
the Registration Statement declared effective by the SEC by February 16, 1998.

Research and development expenses increased in the nine months ended September
30, 1998 to $875,000, from $276,000, for the nine months ended September 30,
1997, principally attributable to $125,000 paid by the Company to Professor Oleg
L. Figovsky, Ph.D. in connection with the three technology purchase agreements,
each dated January 1, 1998, between the Company and Professor Figovsky, and the
purchase of technology from Israeli scientists in April of 1998 for $40,000, all
of which were charged to research and development expenses during the nine
months ended September 30, 1998 (see Note 5 to the September 30, 1998 financial
statements). Further, the Company has increased its funding for development of
its Principal Technologies. During the nine months ended September 30, 1998,
development expenditures for the Israeli and Russian technology aggregated
$612,000 and $193,150, respectively, exclusive of consulting fees reported under
operating expenses.

For the nine months ended September 30, 1998 and the nine months ended September
30, 1997, the Company incurred operating losses of $2,647,000 and $2,093,000,
respectively. The losses are principally due to expenses incurred in the
acquisition and development of its technologies, financial charges and an
overall increase in general and administrative expenses.

Interest expenses and amortization of deferred and unearned finance costs
increased from $3,419,000 for the nine months ended September 30, 1997 to
$3,643,000 for the nine months ended September 30, 1998. This increase was
attributable to an increase in the amount of debt outstanding and the
amortization of the conversion discounts on the Convertible Debentures of
$2,605,000 for the nine months ended September 30, 1998. Furthermore, during the
quarter ended June 30, 1998, the Company issued 500,000 shares of common stock
to the unit holders of the bridge financing in connection with the Company's
failure to have its S-1 Registration Statement declared effective by the
Securities and Exchange Commission by April 1, 1998. The value assigned to the
500,000 shares was based on fair value and amounted to $531,249, all of which
was charged to operations during the quarter ended June 30, 1998. The S-1
Registration Statement was declared effective in July 1998.

The Company expects to incur significant losses during 1998. The Company
anticipates that any revenue recognized in 1998 will be substantially offset by
expenses incurred by the Company in its efforts to commercialize, sell and
market its Principal Technologies.

For the Three Months Ended September 30, 1998 Vs. the Three Months Ended
September 30, 1997

Consulting expenses decreased from $433,000 for the three months ended September
30, 1997 to $84,000 for the three months ended September 30, 1998. The decrease
in consulting expenses attributable to a reduction in the number of consultants
engaged by the Company during the period and the reduction in consulting fees
paid by issuances of common stock.
<PAGE>

Research and development expenses increased in the three months ended September
30, 1998 to $315,000, from $6,000, for the three months ended September 30,
1997, principally attributable to continued development costs related to its
Principal Technologies. During the three months ended September 30, 1998,
expenditures for the Israeli and Russian technology aggregated $255,000 and
$105,150, respectively, exclusive of consulting fees reported under operating
expenses.

For the three months ended September 30, 1998 and the three months ended
September 30, 1997, the Company incurred operating losses of $699,000 and
$578,000, respectively. The losses are principally due to expenses incurred in
the acquisition and development of its technologies, including an overall
increase in general and administrative expenses.

Interest expenses and amortization of deferred and unearned finance costs
decreased from $2,112,000 for the three months ended September 30, 1997 to
$796,000 for the three months ended September 30, 1998. The overall decrease is
attributable to the Company, during 1997, issuance of shares of common stock to
the unit holders of the bridge financing in connection with the Company's
failure to have its S-1 Registration Statement declared effective by the
Securities and Exchange Commission. Accordingly, the Company recognized during
the third quarter of 1997 approximately $2,041,000 of additional amortization
related to the issuance of said shares. Interest expense has increased from
$64,000 for the three months ended September 30, 1997 to $203,000 for the three
months ended September 30, 1998. The increase in interest expense is principally
attributable to an increase in long-term debt discussed below.

Liquidity and Capital Resources

The Company's principal sources of working capital from inception have been net
proceeds of $842,000 from the offering of common stock under Rule 504 of
Regulation D, shareholder advances aggregating $761,440, the bridge financing
completed in December 1996 of $2,000,000, and from the private placement of
$3,000,000 principal amount of 8% Convertible Debentures completed in November
1997, $3,000,000 principal amount of 8% Convertible Debentures completed in
February 1998 and $1,000,000 principal amount of 8% Convertible Debentures
completed in July of 1998.

In November 1997 and February 1998, the Company completed two private
placements, each of $3,000,000 principal amount of its 8% Convertible Debentures
due November 27, 2000 and February 23, 2001, respectively (the "Debentures"). In
each such private placement, warrants (the "Warrants") to purchase up to 60,000
shares of common stock (the Debentures and Warrants, collectively, the
"Securities", each offering of the Securities, a "Debenture Offering", and the
offering of the Securities the "Debenture Offerings") were also issued. The
Securities were offered and sold only to accredited investors as defined by Rule
501 of Regulation D under the Act, in reliance on an exemption from registration
under Rule 506 of Regulation D.

The terms and conditions under which the Debentures may be converted into shares
of the Company's common stock and the manner in which the Warrants may be
exercised were set forth in the Company's Annual Report on Form 10-K (see Note 3
to financial statements).

During the nine months ended September 30, 1998, the Company's principal source
of cash was the February 1998 and July 1998 Debenture Offerings (Note 3) from
which it derived net proceeds of approximately $3,750,000. Of this amount,
$2,000,000 was used to satisfy the Bridge Notes and $125,000 was applied to the
acquisition of three technologies and the remaining funds are being used for
working capital.
<PAGE>

The Company has agreed in principle to fund the commercialization of certain
technologies developed in the former Soviet Union by scientists and researchers
at Kurchatov, other institutes associated therewith, and EAPS, collectively the
"Scientists". Kurchatov will provide the materials, facilities and personnel to
complete the necessary work to commercialize such technologies. The Company also
has agreed in principle to provide funding in connection with the marketing and
sale of three of its Principal Technologies. Total planned expenditures under
these programs are expected to approximate $1,200,000 during fiscal year 1998,
of which $875,000 was incurred through September 30, 1998. The Company's
principal source of funding for these expenditures during fiscal year 1998 will
be the remaining proceeds of the Debenture Offerings, which approximated
$215,000 as of October 31, 1998.

The Company will require additional financing to continue to fund research and
development efforts, operating costs and complete necessary work to
commercialize its technologies. The report of the Company's independent
certified public accountants contain an explanatory paragraph which expresses
substantial doubt as to the Company's ability to continue as a going concern.

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

The Company had a working capital deficiency and stockholders' deficiency of
$1,719,000 and $8,284,000, respectively, as of September 30, 1998.

Year 2000 Compliance

In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use", which revises the accounting
for software development costs and will require the capitalization of certain
costs. The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Software failures due to
processing errors potentially arising from calculations using the Year 2000 date
are a known risk. The Company is addressing this risk to the availability and
integrity of financial systems and the reliability of operational systems. The
Company has established processes for evaluating and managing the risks and
costs associated with this problem. The computing portfolio was identified and
an initial assessment has been completed. The cost of achieving Year 2000
compliance will not have a material impact on the accompanying financial
statements.

Impact of Recently Issued Accounting Standards

Statement of Financial Accounting Standards No. 130, "Comprehensive Income"
(SFAS 130), was issued in June 1997. SFAS 130 becomes effective for the
Company's fiscal year 1999 and requires reclassification of earlier financial
statements for comparative purposes. SFAS 130 requires that all items defined as
comprehensive income, including changes in the amounts of certain items, foreign
currency translation adjustments and gains and losses on certain securities, be
shown in a financial statement SFAS 130 does not require a specific format for
the financial statement in which comprehensive income is reported, but does
require that an amount representing total comprehensive income be reported in
that statement. The Company believes that the adoption of SFAS 130 will not have
a material effect on the consolidated financial statements.
<PAGE>

Statement of Financial Accounting Standards No. 131, "Disclosures About Segments
of an Enterprise and Related Information" ("SFAS 131"), was issued in June 1997.
SFAS 131 becomes effective for the Company's fiscal year 1999 and requires
restatement of disclosures for earlier periods presented for comparative
purposes. This new standard requires companies to disclose segment data based on
how management makes decisions about allocating resources to segments and how it
measures segment performance. SFAS 131 requires companies to disclose a measure
of segment profit or loss, segment assets, and reconciliations to consolidated
totals. It also requires entity-wide disclosures about a company's products and
services, its major customers and the material countries in which it holds
assets and reports revenues. The Company believes that the adoption of SFAS 131
will not have a material effect on the consolidated financial statements.

Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits" ("SFAS 132"), was issued in
February 1998. SFAS 132 becomes effective for 1999 and requires restatement of
disclosures for earlier periods presented for comparative purposes. SFAS 132
revises employers' disclosure about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans, but
rather standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate analysis, and eliminates certain disclosures that are no
longer useful. The Company believes that the adoption of SFAS 132 will not have
a material effect on the consolidated financial statements.
<PAGE>

      Pursuant to the requirements 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.

Dated: November 16, 1998

                                           EUROTECH, LTD.
                                           (Registrant)


                                           /s/ John McNeil Wilkie

                                           /s/ John McNeil Wilkie
                                           -------------------------------------
                                           President and Chief Financial Officer

------------------
(2) Filed herewith
<PAGE>

                          PART II -- OTHER INFORMATION.

Item 1. Legal Proceedings.

            There have been no material legal proceedings to which the Company
            is a party which have not been disclosed in previous filings with
            the Securities and Exchange Commission. There are no material
            developments to be reported in any previously reported legal
            proceedings.

Item 2. Changes in Securities and Use of Proceeds.

            Not applicable.

Item 3. Defaults Upon Senior Securities.

            Not applicable.

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

            Not applicable.

Item 5. Other Information.

            On July 20, 1998 Eurotech, Ltd. (the "Company") sold to JNC Strategy
            Fund Ltd. 8% Convertible Debentures (the "Debentures") in the
            principal amount of $1,000,000 (the sale of the Debentures and
            certain other material information relating to the transaction was
            reported by the Company in a Current Report on Form 8-K filed with
            the SEC on August 25, 1998 which included as exhibits all of the
            agreements executed by the Company in connection with that
            transaction including the agreement governing the sale and purchase
            of the Debentures, the Debenture and the registration rights
            agreement relating to the shares of common stock issuable upon
            conversion of the Debentures). Pursuant to the terms of the various
            agreements executed by the Company in connection with the sale of
            the Debentures, the Company agreed to file a registration statement
            with the SEC covering the shares of common stock issuable upon the
            conversion of the Debentures by August 3, 1998. The Company agreed
            that this registration statement would be declared effective by the
            SEC by October 3, 1998. These agreements also obligated the Company
            to file an amendment the Company's registration statement on Form
            S-1 declared effective by the SEC on June 18, 1998 which covered
            shares of common stock registered in behalf of certain selling
            shareholders of the Company and shares of common stock issuable upon
            the conversion of $6 million of principal amount of 8% Convertible
            Debentures issued by the Company during November 1997 and February
            1998. The Company agreed to file the amendment to such registration
            statement in order to include information about the $1 million
            financing completed on July 20, 1998 and changes to the $6,000,000
            of 8% Convertible Debentures issued by the Company prior to the sale
            of the
<PAGE>

            Debentures on July 20, 1998. The agreements governing the sale of
            the Debentures granted to the holders of the Debentures and the
            holders of the debentures issued during November 1997 and February
            1998 the right to compel the Company to make such filings on the
            dates agreed upon by the Company. As of the date hereof, the Company
            has not filed the registration statement covering the shares of
            common stock issuable upon conversion of the Debentures nor has it
            filed the amendment to its the registration statement declared
            effective by the SEC on June 18, 1998.

            Pursuant to the terms of the Debentures, the Company's failure to
            file the registration statement covering the shares of common stock
            issuable upon conversion of the Debentures by September 3, 1998
            (forty five (45) days from the closing of the sale of the
            Debentures) gave rise to liquidated damages in favor of the holders
            of the Debentures equal to one percent (1%) of the aggregate
            principal amount of Debentures then outstanding. In addition, the
            Company is liable for liquidated damages of a like amount on the
            first day of each month thereafter until the registration statement
            covering the shares of common stock issuable upon conversion of the
            Debentures was filed. Also pursuant to the terms of the Debentures,
            the failure of the Company to have the registration statement
            covering the shares of common stock issuable upon conversion of the
            Debentures declared effective by the SEC on or before October 19,
            1998 (ninety (90) days from the closing of the sale of the
            Debentures) would give rise to liquidated damages in favor of the
            holders of the Debentures in an amount equal to one percent (1%) of
            the aggregate principal amount of Debentures then outstanding. In
            addition, the Company is liable for liquidated damages in favor of
            the holders of the Debentures of a like amount on the first day of
            each month thereafter until the registration statement covering the
            shares of common stock was declared effective by the SEC. As of the
            date hereof, the Company owes liquidated damages to the holders of
            the Debentures in the total amount of $20,000 for the two separate
            defaults under the Debentures, which sum has been accrued by the
            Company. The Company is in negotiations with its SEC counsel towards
            effecting the required filings.

Item 6. Exhibits and Reports on Form 8-K.

            (a) Exhibits.

                  Not applicable.

            (b) Reports on Form 8-K.

            On August 25, 1998, the Company filed a Current Report on Form 8-K
            to disclose certain material information relating to the sale of
            $1,000,000 of 8% Convertible Debentures by the Company and to
            amendments to the documents governing the sale of $6,000,000 of 8%
            Convertible Debentures issued during November 1997 and February
            1998. The filing included the following exhibits:

            1.    Debenture Purchase Agreement between the registrant and JNC
                  Strategy Fund Ltd. dated July 20, 1998.

            2.    8% Convertible Debenture #1 dated July 20, 1998.

            3.    8% Convertible Debenture #2 dated July 20, 1998.

            4.    Warrant dated July 20, 1998.
<PAGE>

            5.    Registration Rights Agreement between the registrant and JNC
                  Strategy Fund Ltd. dated July 20, 1998.

            6.    Amended and revised Debenture #1 dated February 23, 1998.

            7.    Amended and revised Debenture #2 dated February 23, 1998.

            8.    Amended and revised Debenture #13 dated November 27, 1997.

            9.    Amended and revised Debenture #14 dated November 27, 1997.

Item 27. Financial Data Schedule (2)