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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


FORM 10-K

[X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
          OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR

[ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
          OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ............. to .............


                          Commission File No. 000-22129

                                 Eurotech, Ltd.
                                 --------------
              (exact name of registrant as specified in it charter)



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

                             1216 16th Street, N.W.
                                    Suite 200
                           Washington, DC 20036-3772
                    (address of principal executive offices)


Registrant's telephone number, including area code:            (202) 466-5448

Securities registered pursuant to Section 12(b) of the Act:
       Title of each class             Name of each exchange on which registered
             None                                         None

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

                         Common Stock, $.00025 par value
                                (Title of class)


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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the common equity was sold, or the
average bid and asked prices of such common equity, as of a specified date
within 60 days prior to the date of filing.

As of Wednesday March 15, 2000:              $173,601,740.00
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                                     PART I

ITEM 1. BUSINESS.

GENERAL


      We are a development stage technology transfer, holding marketing and
management company formed to commercialize new, existing but previously
unrecognized or classified technologies. Our current emphasis is on technologies
developed by prominent research institutes and individual researchers in the
former Soviet Union and Israel.

      Since our formation, we have acquired selected technologies through equity
investments, assignments and licensing arrangements.

      In the following sections, we will briefly describe the technologies on
which we are working and will attempt to provide you with a picture of where we
stand on each of them.

      We are not a subsidiary of another corporation, entity or other person. We
do not have any subsidiaries except to the extent that Israeli research and
development companies in which we have invested and in the equity of which we
hold a greater than 50% interest may be deemed to be subsidiaries.

      Our executive office is located at 1216 16th Street, N.W., Suite 200,
Washington, DC 20036.

EKOR - SILICON GEOPOLYMERS

      Pursuant to agreements among us, the Ukrainian State Construction Company
("Ukrstroj"), I.V. Kurchatov Institute ("Kurchatov") and the Euro-Asian Physical
Society ("EAPS"), we have provided financing for and have successfully completed
demonstration testing of EKOR for the purpose of remediating the severe
radioactive contamination problems that persist from the 1986 explosion of
Chernobyl Nuclear Power Plant Reactor 4 in Chernobyl, Ukraine. We believe the
EKOR compound is the most effective existing technology and material for
containing and facilitating the disposal of radioactive dust and waste
materials. Toward the end of 1999, we initiated a joint project with Ukrstroj to
validate application techniques by actually encapsulating a fuel containing mass
on the floor of ChNPP Reactor 4 and by radioactive dust suppression which was
completed in March 2000.

      EKOR was jointly developed by scientists at Kurchatov Institute in Moscow
and members of EAPS for the conservation and containment of ecologically
hazardous radioactive materials. EKOR is based on radiation-resistant compounds
produced from silicon elastomers. Kurchatov is a pre-eminent physics and
scientific research institute, which in the former Soviet Union enjoyed a
position of prestige, sophistication and importance roughly equivalent to that
of the Lawrence-Livermore National Laboratory in the United States. EAPS is a
professional society of over 5,000 scientists, physicists, and engineers in the
former Soviet Union. Until August 1, 2014, we are the exclusive licensee of all
right, title and interest (inclusive of all patent and other intellectual
property rights) in and to the EKOR technology in Canada, China, Japan, the
Republic of Korea, the United States of America, Ukraine, and all member
countries of the European Patent Agreement. On March 23, 1999, EAPS was issued a
patent on the process for manufacturing the EKOR compound from the U.S. Patent
and Trademark Office, Patent No. 5,886,060.

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      In testing conducted at Kurchatov, EKOR has been shown to be highly
resistant to radiation and structural degradation from exposure to radiation. It
has also proven to be highly fire-resistant, waterproof, and capable of being
formulated in densities that display considerable structural strength and
weight-bearing properties of 100 lbs. per square inch. In high-dosage radiation
tests EKOR has met or exceeded all specifications for containment materials
developed by the Chernobyl authorities. We believe that EKOR is the most
technologically advanced material for comprehensively containing both solid and
liquid radioactive materials, suppressing radioactive dust and preventing such
materials and dust from escaping into the atmosphere and from leaching into and
contaminating ground-water supplies. On November 28, 1997, the Ministry of
Health of the Russian Federation certified EKOR and its components as non-toxic,
thereby allowing for EKOR's production, delivery, sale and use in the Russian
Federation.

      As a silicon-based elastomer, EKOR has adhesive properties that allow it
to stick to a wide variety of surfaces and materials. When applied, EKOR
surrounds and "glues down" nuclear debris ranging from fine dust to broken fuel
rods and, in combination with its fire-resistant and water-proof properties,
prevents such debris from migrating by water or as air-borne particles. EKOR can
be applied by a number of methods, but most generally will be sprayed onto
contaminated areas using a hose and nozzle arrangement. The foaming rate and
curing time for the EKOR compound can be varied, thereby allowing it to
penetrate cracks and crevices before curing, and providing a seal against the
transport of radioactive particles and water-soluble radio nuclides. The
application of the EKOR compound to nuclear accident sites would constitute an
interim containment measure, pending the removal and permanent storage or other
disposal of the radioactive contaminants.

      We expect that one of the first commercial uses of EKOR will be to contain
and stabilize the extensive radioactive debris and dust that continues to
accumulate and contaminate the environment at ChNPP Reactor 4 in Ukraine, and to
help structurally support the concrete and steel "sarcophagus" that was built
over Reactor 4 as an interim containment measure. The rapid deterioration of the
sarcophagus, caused by the intense radiation persisting at Reactor 4, has
occasioned international concern that without the implementation of effective
site containment measures, a second nuclear disaster and possible meltdown may
occur. To this end, the G-7 group of industrialized nations (the United States,
United Kingdom, Italy, France, Canada, Japan and Germany) and Russia have
pledged up to U.S. $3.1 billion to assist in a multi-step project of remediating
and closing the plant, with approximately U.S. $300 million budgeted for the
project's first containment and site stabilization phase.

      Based on the properties demonstrated by the EKOR compound, Ukrstroj,
Kurchatov and the Company entered into a Memorandum of Intent that acknowledged
the successful completion of the laboratory development of EKOR compound for the
purpose of its application to the radioactive contamination remediation of ChNPP
Reactor 4, and pursuant to which Ukrstroj and EAPS entered into a co-operation
Agreement whereby we have provided financing for demonstrating the technical and
mechanical feasibility of applying the EKOR compound for ChNPP Reactor 4
remediation. In furtherance of the foregoing, Ukrstroj and ChNPP (an industrial
amalgamation of the State Committee of Ukraine on Atomic Energy) entered into an
agreement, the Ukrstroj-ChNPP Agreement, to conduct such demonstration of the
EKOR compound as is necessary to ascertain the specification requirements for
its application to the containment of ChNPP Reactor 4. The Ukrstroj-ChNPP
Agreement also provides for our participation in and financing of the first EKOR
demonstration.

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      On April 24, 1997, demonstration of equipment for synthesizing and
applying the EKOR compound was successfully conducted for officials of ChNPP and
Ukrstroj at the Sverdlosk Chimmash manufacturing facility in Ekaterinburg,
Russia. Following this demonstration, the Company, the management of the ChNPP
Reactor 4 Shelter Project, Ukrstroj and EAPS entered into a Joint Working Group
Agreement for the purpose of preparing the industrial-scale equipment, machinery
and other items that would be required to apply the EKOR compound at ChNPP
Reactor 4, if, as and when the EKOR compound is applied in connection with the
remediation project. On June 30, 1998, EUROTECH and EAPS finalized the design
specifications for the application machinery. The use of such equipment has been
approved by the management of the ChNPP Reactor 4's Shelter Project. We have
paid for the construction of industrial scale machinery for application of the
EKOR compound at ChNPP Reactor 4, based on the application machinery
successfully demonstrated on April 24, 1997, and was used in the demonstration
project mentioned above. Our receipt of revenues from the ChNPP Reactor 4
project remains subject to the selection of a general contractor for the
project, the negotiation of satisfactory arrangements for the release of funds
from the European Bank of Reconstruction and Development ("EBRD") to the general
contractor and our selection by the general contractor as a sub-contractor.

      Coordination and management of the formal selection of contractors and
technologies for studies relating to the ChNPP Reactor 4 remediation project has
been delegated to the EBRD. Contractors, as well as the technology to be used in
connection with the remediation project, will be determined on the basis of
submitted bids, to be passed on by EBRD and management of the ChNPP Reactor 4.
EBRD has appointed a consortium of Bechtel, Electricite de France and Batelle to
review the technical aspects and feasibility of the various proposals and bids
received. (Batelle is a not for profit U.S. company which operates Pacific
Northwest National Laboratories, a research entity located in the State of
Washington that is funded in part by the U.S. Department of Energy.) It is
presently expected that EBRD, with G-7 funds, will provide the financing for the
actual remediation project. Additionally, ChNPP Reactor 4 management is
authorized to initiate further, independent, studies. Management of the ChNPP
Shelter Project has designated EKOR as a preferred technology for the
remediation project.

      In addition to remediation of Reactor 4, our near- and mid-term
commercialization and marketing efforts relative to the EKOR compound
principally are directed at nuclear waste remediation projects throughout the
U.S., Europe and Japan. Separately from our contemplated ChNPP bid, we are
bidding on U.S. nuclear waste transportation, containment, storage and burial
projects utilizing the EKOR compound technology. In this connection, we have
entered into a teaming agreement with a major U.S. engineering firm with a view
to submitting a joint bid to perform a first-round demonstration project on the
U.S. Department of Energy's ("DOE") reactor decommissioning technology program
at a DOE facility, utilizing the EKOR compound. Additionally, bids are presently
being prepared for other DOE demonstration projects. In anticipation of being
awarded these projects, we have entered into negotiations with a U.S. chemical
company to arrange for the manufacture of the EKOR compound in this country.
Visas have been obtained for several of the Russian scientists to travel to the
U.S. for the purpose of assisting in this process. We also have entered into an
agreement with the Research Center Julich, a German governmental research
institution, to provide for its assistance with certifying the EKOR compound for
use in Germany.

      Also in Germany, the EKOR material is currently being tested by Research
Center Karlsruhe, which needs to dispose of a material to fill cavities that
does not develop gases as a result of corrosion and which, if EKOR passes the
tests, is planning to apply EKOR to about 4,000 final disposal containers for
radioactive waste at its central decontamination department.

      In addition, we are also in the process of identifying potential licensees
of the EKOR technology and have commenced initial licensing discussions with a
Japanese corporation. No assurance can be given that the EKOR compound will be
certified for use in Germany, that the DOE demonstration will be successful or
that, if successful, it will result in a project contract being awarded to us
and our partner, or that such licensing discussions will successfully result in
the execution of an EKOR license.

                                       4
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      On December 16, 1998, at the request of EAPS, the EKOR compound was
officially approved by the Russian authorities for use in voice recorders (known
as "black boxes") which are contained in airplanes and record relevant in-flight
voice and other in-flight data relative to the aircraft's performance. Approval
was granted based on test reports compiled by the Russian authorities. EAPS is
currently fabricating black boxes incorporating EKOR for delivery to the Russian
governmental authorities. We do not have any rights to EKOR in Russia.

HYBRID NON-ISOCYANATE POLYURETHANE ("HNIPU")

      HNIPU is a modified polyurethane that does not contain the toxic
isocyanates contained in the production of conventional polyurethane, and has
lower permeability and greater chemical resistance qualities as compared to
conventional polyurethane. We believe that these advanced characteristics make
HNIPU superior to conventional polyurethanes in connection with their use in a
number of industrial application contexts such as manufacturing automotive
bumpers, paints, plastics and truck beds; airplane and rocket sealant, interior
components and seating; construction adhesives, coatings, flooring, glues and
rooftops; industrial equipment and machinery; and consumer goods such as
appliances, footwear, furniture and plastic products. HNIPU was developed by
Prof. Oleg Figovsky, one of our consultants, and additional application uses are
being developed by Chemonol Ltd., an Israeli company. We purchased initially a
20% participation in Chemonol's equity, then an additional 16% , and are
currently committed to purchase a further 16%, making a total ownership interest
of 52% for a total investment of $630,000, with a view to Chemonol's
establishing its own research and production base in Israel for potential joint
ventures for HNIPU. Pursuant to a voting agreement with us, Chemonol's principal
shareholder has agreed to vote his remaining 40% of Chemonol's equity as
directed by us.

      In November 1998, we presented our HNIPU technology at the International
Exhibition for Ideas, Inventions and New Products ("IENA"), a conference in
Nuremberg, Germany. We were awarded the two highest awards for our HNIPU at the
exhibition.

      We are marketing and selling HNIPU through one or more license or joint
venture agreements with major chemical companies in the United States, Europe
and Japan. Several major chemical companies have requested, and have been
supplied with, sample HNIPU for evaluation and applications testing. We are
currently in the final stages of discussions regarding HNIPU with several
prospective business and joint venture partners, though of course until an
agreement is actually signed we cannot assure you that any HNIPU deals will in
fact be made.

      A patent application for HNIPU was filed with the US Patent and Trademark
Office on May 28, 1998 and is pending.

LIQUID EBONITE MATERIAL ("LEM")

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

                                       5
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      Discussions of the potential licensing of LEM are in progress with five
companies to the point where samples have been provided to three companies in
Germany and two in the U.S. for testing and evaluation.

      LEM was independently developed by Prof. Figovsky and was acquired by us
pursuant to a Technology Purchase Agreement dated January 1, 1998 for a purchase
price of $15,000, plus royalties equal to 49% of our net revenues from sales or
licenses of any products incorporating LEM, payable over a period of 15 years
commencing on January 1, 1998. To date, we have not derived any revenues from
LEM. Prof. Figovsky is one of our consultants. In March 2000, we entered into an
amended agreement with Professor Figovsky pursuant to which he surrendered his
49% royalty interest in LEM and certain other technologies, including RubCon and
AAdd described below, for a payment to him of an aggregate of $235,000 plus a
royalty of 1% of gross revenues generated by sales of products incorporating
these technologies.

      A patent application for LEM was filed with the US Patent and Trademark
Office on July 28, 1998 and is pending.

RUBCON

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

      Discussions about the manufacture and sale of RubCon are ongoing with
seven companies, five of them European. One company in Luxembourg and one in the
U.S. are studying samples while additional companies are being contacted.
Preliminary contacts in the U.S. chemical transportation industry indicate a
possible interest by the Association of American Railroads to test this material
for railroad ties. Other applications may be for pads in vibration-sensitive
machinery such as compressors and pumps.

      RubCon was independently developed by Prof. Figovsky and was acquired by
us pursuant to a Technology Purchase Agreement dated January 1, 1998 for a
purchase price of $35,000, plus royalties equal to 49% of our net revenues from
sales or licenses of any products incorporating RubCon, payable for a period of
15 years commencing on January 1, 1998. As described above, Professor Figovsky's
remaining interest has been reduced to 1%. To date, we have not derived any
revenues from RubCon.

ANTICORROSIVE ADDITIVES FOR POLYMERS - Upgrades chemical resistance
characteristics of base polymers.

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      Anticorrosive Additives (AAdd) are an innovative approach to creating
highly chemical resistant polymer materials. Anticorrosive Additives are
specially designed to upgrade the chemical resistance characteristics of base
polymers to achieve optimal performance capabilities of materials operating in
aggressive environments. AAdd can be mixed into a wide range of polymer
materials offering a significant increase in product life and reducing product
permeability.

      These custom-made specialty formulations are designed to meet specific
client requirements. When cured with polymer-based materials, AAdd can
dramatically improve the capabilities of poly-based materials by upgrading their
chemical resistance properties. The additives are inorganic powders that react
with aggressive environments into which they are introduced, forming a new phase
of high-strength hydrate complexes. This enhanced bonding occurs upon the
penetration of aggressive media into the AAdd-containing polymer material. The
chemical resistant properties of AAdd are activated by harsh environmental
conditions where polymer systems without additives remain defenseless to
chemical corrosion.

      AAdd can be mixed into a wide range of polymer materials such as epoxies,
polyurethanes, glues, nylons, polyolephines, synthetic rubbers and PVC offering
performance-enhancing attributes that increase the value of the end product. We
have developed an extensive product range of additives for upgrading the most
common polymers against a wide variety of aggressive media including acids, sea
water, fluorine, alkalies, and more. AAdd are an effective solution for many
applications. More than 80 products have been tested for use in the chemical
industry.

      Advantages of Anticorrosive additives provide a number of distinct
enhancements for polymers offering manufacturers products with stronger,
corrosion resistant products. Chemical resistance tests were conducted on
polymer systems over a period of one year. The results revealed that
AAdd-containing polymer systems significantly outperform those systems without
the additive. Furthermore, extensive testing has shown that AAdd can increase
product life by some 20 times. This extended life offers substantial savings for
users who can extend the life of their polymer-based products whether they are
pipes, flooring, or other materials that are exposed to specific corrosive
environments.

      Products that have been enhanced with AAdd yield a higher impact strength
than products without the additive. In addition, material permeability is
reduced significantly - say 15-20 times. The percentages of AAdd mixed with a
polymer matrix is relatively low, requiring only a small amount to obtain
upgraded resistance characteristics of polymer materials.

      AAdd was independently developed by Prof. Figovsky, and was acquired by us
pursuant to a Technology Purchase Agreement dated January 1, 1998 for a purchase
price of $15,000, plus royalties equal to 49% of our net revenues from sales or
licenses of any products incorporating AAdd, payable for a period of 15 years
commencing on January 1, 1998. To date, we have not derived any revenues from
AAdd.

ISRAELI INCUBATOR TECHNOLOGIES

      We have developed arrangements with three Israeli technology companies:
(i) Technion Entrepreneurial Incubator Co., Ltd. ("Technion"), (ii) Ofek Le-Oleh
Foundation, and (iii) Incubator for Technological Entrepreneurship-Kiryat
Weizmann, Ltd., to participate in certain technology research and development
projects sponsored by each company. Under these informal arrangements, we
provide all or a portion on the financing for, and receive a 20% or greater
equity interest in, research and development projects selected by us and the
corporations. To this end, we have opened a representative office in the
premises of Technion in Haifa, Israel. Pursuant to these arrangements, we have
made investments in the following companies:

      o     Chemonol, which has developed materials and processes for
            manufacturing hybrid non-isocyanate polyurethane industrial coatings
            ("HNIPU" , which we discussed above);

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      o     Rademate, which has developed biodegradable hydrophobic materials;

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

      o     Comsyntech, which is developing a process for the continuous
            combustion synthesis of ceramic, composite and intermetallic
            powders.

      o     Sorbtech, which has developed a new inorganic sorbent for petroleum
            product removal; and

      o     Amsil, which is developing high-thermostable organomineral polymers.

      Under those agreements, we received initially 20% of each company's common
equity, in exchange for an initial investment of U.S. $60,000. Subsequently we
made, and are committed to make, further investments in each of them. The
current status of our investment in each of these companies is discussed in
connection with our further description of the respective technologies.

POWDERED METALLURGY TECHNOLOGY

      We are participating in the further research and development of a process,
developed by Remptech, to produce extra fine cobalt and nickel powders by
recycling materials containing cobalt and nickel. Powdered metallurgy is
generally acknowledged as being capable of yielding a product with superior
structural, physical and mechanical properties. We believe that the powdered
metallurgy process developed by Remptech is technologically advanced and, based
on Remptech's research and testing data, is capable of producing cobalt and
nickel powders of 99.8% purity and a grain size of 1-2 micro-centimeters. We
believe that such purities and grain sizes are significant factors in the
manufacture of materials of high quality and internal physical integrity from
powdered cobalt and nickel. Cobalt and nickel are among the three naturally
occurring elements that display magnetic properties at room temperature and are
widely used in metal alloys. Powdered cobalt and nickel are used in a wide
variety of industrial applications, including magnetic, electrical and
electronic materials and products.

      We currently hold 45% of Remptech's common equity, which we acquired for
investments aggregating $180,000. We are committed to invest a further $120,000
in 2000, which will bring our interest in Remptech's equity to 57%.

      To market the powdered metallurgy technology, we are at this time in
technical discussions with three European companies whose combined share of the
world market in cobalt and nickel recovery exceeds 90%. Two companies in Israel
and one in Canada have received samples for testing.

      A patent application for powdered metallurgy technology was filed with the
US Patent and Trademark Office on July 30, 1998 and is pending.

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CONTINUOUS COMBUSTION SYNTHESIS ("CCS") TECHNOLOGY

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

      We currently hold a 29% share in the equity of Comsyntech, which we
acquired for our initial investment of $60,000. We are committed to invest in
2000 a further $120,000, which will bring out share of the equity to 50%.

      A patent application for continuous combustion synthesis technology was
filed with the Israeli Patent Office on November 17, 1998 and is pending.

CONTINUOUS ACTION REACTOR - Method for Continuous Combustion Synthesis of
ceramic, composite and intermetallic powders

      Generally various ceramic and composite powders are batch-manufactured
using electrical and melting furnaces, different high-temperature sprayers, and
equipment for crushing and grinding. Synthesis conventionally occurs in a closed
reactor by the cyclical technique of loading, synthesis, cooling and unloading.
While effective, this technique has limitations that negatively affect
productivity. Not only is the cyclical process time consuming, the process
requires additional grinding of the end product. Where high temperatures are
involved, a closed reactor has the added danger of an accidental pressure
increase that could ultimately result in destruction of the apparatus.

      The Continuous Action Reactor offers the competitive advantage of
increased productivity and lower production costs relative to conventional
high-temperature furnace reactors and powder production processes. One apparatus
replaces high-temperature furnaces as well as spraying and grinding equipment.
Furthermore, this method offers additional significant advantages including,
rapid production: large quantities of materials can be produced quickly; lower
manufacturing costs: expensive high-temperature furnaces, complex processing and
equipment are eliminated; reduced energy: energy consumption is greatly reduced
offering cost and environmental improvements; unique materials: materials with
new technological properties may be generated as a result of high-temperature
and shorter synthesis time; improved properties: purification of admixtures
during synthesis enables high purity materials to be obtained; various
materials: the synthesis process enables the direct production of different
multicomponent materials, nonstoichiometric compounds, solid solutions, etc.;
smaller clearance limits: the synthesizing process involves small clearance
limits; and reduced treatments: final powder products are produced without
additional treatments such as crushing and grinding.

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      Applications for materials produced from the continuous reaction reactor
exhibit excellent high-thermomechanical properties such as high strength, thermo
and wear resistance and good corrosion stability that can be used in a broad
range of applications. The following highlights only a fraction of the powder
applications possible in several different industries: metal working industry -
metal-cutting tools and abrasives; metallurgy industry - alloying additions;
aircraft and automotive construction industry - parts of combustors, nozzles,
turbines, etc.; energy industry - turbine blade coatings; electronics industry -
piezo- and ferro- electronics, etc.

      The continuous action reactor method is another product of Comsymtech.

RAPIDLY BIODEGRADABLE HYDROPHOBIC MATERIAL (RHBM)

      Rademate Ltd has developed cellulose-based a rapid biodegradable
hydrophobic material (RBHM). RBHM is a new, hydrophobic, strong, cheap and
completely biodegradable composite material that is environmentally friendly.
RBHM has shown great promise in improving the properties of both paper and
plastics packaging materials. Due to its biodegradable nature, Rapid
Biodegradable Hydrophobic Material is ideal to be applied for the disposable
loose fill bags and packages. The material can be used as a commodity in trade,
industry and agriculture for a wide range of applications.

      To date, most attempts to produce biodegradable products for consumers
focused on developing plastics that could biodegrade. RBHM approaches
biodegradable products from the other direction - making cellulose-based
material with the same physical properties as plastic, except the material
biodegrades completely in the same time as regular paper bags.

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

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

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

      o     Full Degradation in the Environment - Enzymes begin breaking down
            RBHM in the presence of moisture in natural environments such as
            soil. Then microorganisms decompose the material with rapidly
            occurring metabolic reactions. RBHM is completely converted into
            carbon dioxide, water and biomass in 2 - 3 months in wet soil. Thus
            this process completely coincides with the definition of
            biodegradability given by most experts.

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

      o     Relatively Low Cost -- The main obstacle to widespread use of
            biodegradable polymers is cost. Biodegradable polymers are
            significantly more expensive ($10 - $1000) than commodity polymers
            ($2 -$5). The high costs involved in the production of biodegradable
            polymers means that they cannot compete favorably with conventional
            polymers. RBHM has no such cost barriers, characteristic of all the
            other biodegradable plastics. This high cost blocked the widespread
            adoption of biodegradable plastics in major consumer application. As
            RBHM is a cellulose-based material, it can be manufactured with the
            existing paper and pulp industry equipment using existing
            technologies. This means that it is only insignificantly more
            expensive to produce than paper itself. Currently available
            degradable materials on the other hand can cost twice as much.

                                       10
<PAGE>

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

      o     Everyday items such as trash bags, grocery bags, cups, plates,
            tablecloths and other household goods;

      o     Packaging materials such as carton boxes, disposable containers for
            food processing, bags for industrial products;

      o     Agricultural use such as mulch material, pots, composting bags for
            agriculture wastes;

      o     Textile and other industry such as biodegradable textile materials,
            synthetic leather, biodegradable membranes;

      o     Sanitary products such as protection layers for disposable hygienic
            materials - diapers, sanitary napkins, panties, towels, etc.

      We have performed an in-plant demonstration of RHBM at a large paper
company and are engaged in discussions with a paper coatings manufacturer for
production of the material in the U.S. Samples have been sent to more than 30
companies worldwide that have indicated an interest in RHBM.

      We currently hold a 40% interest in Rademate, the Israeli company that
developed RHBM.

SORBTECH SB-1 - High Capacity Mineral Composite Sorbent for Oil Spill Removal

      Many oil spill sorbents are already on the market. Sorbtech is an
innovative new product that can be used to sorb oil from oil spills, harbors,
industries and storage areas.

      Sorbtech is composed of basalt non-woven fabric -- an ultra-fine basalt
filament. The special thermal vacuum and chemical treatment creates the
extremely high sorption capacity as compared to products currently on the
market. The mineral fiber material has a low production cost and thus it has a
good market price.

The major advantages of Sorbtech SB-1 are:


      o     The extremely high sorption capacity - Regular sorption capacity for
            products currently on the market is in the range of 0.8 - 30.0 grams
            of petroleum products per gram of sorbent weight (gr/gr). The new
            SB-1 sorption capacity is in the range of 40.0 - 70.0 gr/gr,
            depending on oil viscosity.

      o     Reuse - Extracted petroleum products may be reused. SB-1 may be used
            for multiple oil extractions.

                                       11
<PAGE>

      o     Low market price - Because material manufacturing costs are low,
            SB-1 is highly competitive with products already on the market.

      o     Low cost / non-hazardous waste disposal - SB-1 can be used as an
            auxiliary component in roads construction after multiple uses as an
            oil spill sorbent.

      o     Naturally-occurring mineral - SB-1 is an environmentally clean
            material.

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

      Applications of SB-1 can be easily machined into different forms to
facilitate the clean-up of petroleum products for different types of oil spills:
sea water open surfaces, soil contamination, industrial areas, machinery, gas
stations, etc.

      Manufactured SB-1 takes many forms: pillows, booms, sleeves, and mats -
according to the specific user requirements. Mats with dimensions of 1.0 x 1.0 x
0.007m are possible for large spill areas.

      When the SB-1 is applied over polluted water, oil is sorbed, but no water
is incorporated into the SB-1 bulk, thus improving the sorbent floating ability.
SB-1 will absorb only oil from emulsions - eliminating the need for detergents
or other chemicals to break the emulsion.

      Oil release from saturated SB-1 uses simple mechanical treatment such as
wringers, centrifuges, etc. The extracted oil products can be reused with little
if any reprocessing.

      Extracted SB-1 is used as a foundation for asphalt roads for noise
reduction. This reuse is more economical than if it were recycled as sorbent.
Because the material and the petroleum product residual on the sorbent is
totally compatible with asphalt, there is no additional environmental stress
added by the reused material.

      To date we have invested $114,000 in Sorbtech and are committed to invest
additional $150,000, for an eventual 50% of Sorbtech's equity. A manufacturer in
the U.S. has already indicated an interest in Sorbtech.

HIGHLY STABLE ORGANOMINERAL POLYMERS - QUATERNARY AMMONIUM SILICATES (QAS)

      Organomineral polymers based on quaternary ammonium silicates (QAS) are a
new kind of silicate material with excellent adhesion properties to hydrophilic
and hydrophobic surfaces, high chemical resistance against water and acids and
fire resistance, and are environmentally compatible.

      QAS have superior properties in comparison to epoxy resins and traditional
silicates, including: high adhesion to metallic and concrete surfaces; extreme
stability in water; thermostability to 2000(degree) K; resistance to corrosion
and erosion; and excellent mechanical characteristics.

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

                                       12
<PAGE>

      To date we have invested $114,000 in Amsil, the Israeli entity that is
developing QMS, and are committed to invest additional $150,000, for an eventual
50% of Amsil's equity.

EMPLOYEES

      As of December 31, 1999, we had three full-time officers and one clerical
employee in our office in Washington, DC. Since then, two more full time officer
have joined us, one of whom works in our Washington, DC office and the other of
whom, previously a consultant, works out of his own office in La Jolla, CA. We
also have various consulting arrangements with seventeen persons in the United
States, Germany, Russia and Israel.

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

COMPETITION AND MARKETING

      The near-term primary markets for our products and technologies are
chemical manufacturing and radioactive contamination containment, remediation
and transportation. We have limited experience in marketing our products and
technologies and, other than in connection with the remediation of Reactor 4 at
Chernobyl, Ukraine, intend to rely on licenses to or joint ventures with major
international chemical, engineering or other companies for the marketing and
sale of our technologies. In the case of the EKOR compound, we have entered into
a teaming agreement with a major engineering company to submit a bid for a
remediation project to apply EKOR, and we have retained a consultant to market
EKOR to other facilities of the U.S. government and to private companies. In
contrast, other private and public sector companies and organizations have
substantially greater financial and other resources and experience than we do.
Competition in our business segments is typically based on product recognition
and acceptance, price, and marketing and sales expertise and resources. Any one
or more of our competitors or other enterprises not presently known to us may
develop technologies or products that are superior to ours, significantly
underprice our products and technologies, or more successfully market existing
or new competing products and technologies. To that extent our ability to
compete could be materially and adversely affected.

REGULATION

      We are not aware of any U.S. or foreign laws or regulations that govern
the marketing, sale or use of any of our present technologies, other than U.S.,
Russian and Western European environmental safety laws and regulations
pertaining to the containment and remediation of radioactive contamination and
the toxicity of materials used in connection therewith (in the case of the EKOR
compound). Based on the results of tests conducted at Kurchatov, we believe that
the EKOR compound meets applicable U.S. and German regulatory standards.
However, there can be no assurance that more stringent or different standards
may not in the future be adopted or applied depending on EKOR's intended use, or
that, if adopted or applied, will not materially increase the cost to us of
licensing and using the EKOR compound or prevent its use altogether. Moreover,
there can be no assurance that any or all jurisdictions in which we presently or
in the future conduct our business will not enact laws or adopt regulations that
increase the cost of or prevent us from licensing our other technologies or
otherwise doing business therein. Particularly in Russia and Ukraine, the
enactment of such laws or the adoption of such regulations may have a presently
unquantifiable, substantial adverse impact on our financial condition, business
and business prospects.

                                       13
<PAGE>

INTELLECTUAL PROPERTY

      Of our present technologies, US patent protection has been sought for the
EKOR compound material; HNIPU, a modified polyurethene; LEM, a synthetic rubber;
and a powdered metallurgy technology. Foreign patent protection has been sought
for a coatings and a continuous combustion synthesis technology. On March 23,
1999, EAPS received a patent on the EKOR compound from the US Patent and
Trademark Office, Patent No. 5,836,000. There can be no assurance that any of
our pending or future patent applications will be approved, that we will develop
additional proprietary technology that is patentable, that any patents issued to
us will provide us with competitive advantages or will not be challenged by
third parties, that the patents of others will not have an adverse effect on our
ability to conduct our business or that one or more of our technologies will not
infringe on the patents of others. Furthermore, there can be no assurance that
others will not independently develop similar or superior technologies,
duplicate any of our processes, or design around any technology that is patented
by us. It is possible that we may need to acquire licenses to, or to contest the
validity of, issued or pending patents of third parties relating to our
products. There can be no assurance that any license acquired under such patents
would be made available to us on acceptable terms, if at all, or that we would
prevail in any such contest. In addition, we could incur substantial costs in
defending suits brought against us on our patents or in bringing patent suits
against other parties.

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

ITEM 2. PROPERTIES.

      Since mid-1999 our headquarters have been located at 1216 16th Street, NW,
Washington, DC 20036 in a small office suite for which we pay monthly rent of
$2,800. We believe that our current facilities are sufficient to meet our
requirements.

      We also occupy office space in the premises of Technion Entrepreneurial
Incubator, Ltd., in Haifa, Israel, on a month-to-month tenancy basis at the rate
of $300 per month. We use that office for our contemplated Israeli technology
development and marketing activities.

ITEM 3. LEGAL PROCEEDINGS.

      In December, 1997 Raymond Dirks, Jessy Dirks, Robert Brisotti and David
Morris filed an action in the Supreme Court for the State of New York, County of
New York, against us for breach of contract, seeking injunctive relief, specific
performance and monetary damages of nearly $5 million. The Dirks litigation
arises from an agreement between us and National Securities Corporation 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. We granted National a warrant
certificate for 470,000 shares at $1.00 per share (as adjusted to reflect the
June 1, 1996, four-to-one forward split of our common stock) as a retainer for

                                       14
<PAGE>

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. This litigation was settled in October 1999 with an agreement by us
to issue to the plaintiffs 186,446 shares of our common stock in twelve equal
monthly installments. On the other hand, the warrant for 470,000 shares was
cancelled.

      In the meantime, our former President Mr. Wilkie brought an action against
us in the Superior Court of the District of Columbia, seeking monetary damages
of $360,000 plus pre-judgment interest for alleged wrongful termination under a
purported employment agreement between him and us. We took the position that
this purported employment agreement was not valid or binding and intended to
defend vigorously against this claim. Moreover, we filed a counterclaim for
breach of fiduciary duty and mismanagement. Nevertheless, to dispose of these
proceedings, in February 2000 we settled with Mr. Wilkie by issuing to him
10,000 shares of our common stock, with piggy-back registration rights, in
addition to the 50,000 shares that he had received in the previous year.

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

      No matters were put to a vote of securities holders during the fourth
quarter of 1999.

                                     PART II


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

TRADING MARKET


      Our common stock trades on the NASD Electronic Bulletin Board as EURO.


PRINCIPAL MARKET MAKERS

      The principal market makers of our common stock are Fahnstock & Co., USCC
Trading (a division of Fleet Securities), Wm. V. Frankel & Co., GVR Company,
Hill Thompson Magid & Co., Herzog, Heine, Geduld, Inc., Mayer & Schweitzer, M.H.
Meyerson & Co., North American Institutional Brokers, Knight Securities, Paragon
Capital Corporation, Sharpe Capital, Sherwood Securities, Starr Securities , and
Wien Securities.

NUMBER OF SHAREHOLDERS OF RECORD

      As of December 31, 1999, we had 305 shareholders of record.

DIVIDENDS.

      To date we have not declared or paid dividends on our common stock. We
presently plan to retain earnings, if any, for use in our business.

MARKET PRICE.

      The following table sets forth the quarterly high and low closing bid
prices (in U.S. dollars) for the common stock for 1998 and 1999.

                                       15
<PAGE>

                                                       CLOSING BID
                                                       -----------
                                                 High                  Low
                                                 ----                  ---

       1998
       ----
Jan 2 thru Mar 31                               3.3125                2.000
Apr. 1 thru June 30                             2.18                   .25
July 1 thru Sept. 20                            1.291                  .975
Oct. 1 thru Dec. 31                              .975                  .21375


       1999
       ----
Jan 1 thru Mar. 31                              1.125                  .30
Apr. 1 thru June 30                             1.00                   .62
July 1 thru Sept. 29                            1.56                   .75
Oct. 1 thru Dec 31                              3.20                   .96

Source: National Quotation Bureau, LLC

      The foregoing data represent prices between dealers and does not include
retail mark-ups, mark-downs or commissions, nor do such data represent actual
transactions or adjustments for stock-splits or dividends.





                                       16
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.

      The selected financial data as of December 31, 1998 and 1999 and for the
years ended December 31, 1997, 1998 and 1999 are derived from and should be read
in conjunction with our audited financial statements and accompanying notes
included in response to Item 8 below. The data presented below should also be
read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations included in response to Item 7 below.
<TABLE>
         STATEMENT OF OPERATIONS DATA:  (2)

<CAPTION>
                                                                                                                   For the Period
                                                                       For the Years Ended December 31,            from Inception
                                                  -------------------------------------------------------------- (May 26, 1995) to
                                                       1996            1997            1998           1999        December 31, 1999
                                                  --------------  --------------  --------------  --------------   --------------
<S>                                               <C>             <C>             <C>             <C>              <C>
REVENUES - Sale of technology to related party    $           -   $           -   $           -   $     150,000    $     150,000
                                                  --------------  --------------  --------------  --------------   --------------

OPERATING EXPENSES:
  Research and development                            1,170,782       1,007,671       1,039,591       1,233,158        4,663,263
  Consulting fees                                       277,353         553,295         293,323         477,746        1,868,617
  Compensatory element of stock issuances
     pursuant to consulting agreements                1,209,477         839,550         422,200       1,312,679        3,783,906
  Other general and administrative expenses             547,447       1,262,067       1,263,174       2,277,113        5,384,066
                                                  --------------  --------------  --------------  --------------   --------------

    TOTAL OPERATING EXPENSES                          3,205,059       3,662,583       3,018,288       5,300,696       15,699,852
                                                  --------------  --------------  --------------  --------------   --------------

OPERATING LOSS                                       (3,205,059)     (3,662,583)     (3,018,288)     (5,150,696)     (15,549,852)
                                                  --------------  --------------  --------------  --------------   --------------

OTHER EXPENSES:
  Interest expense                                       43,422         270,740         552,971         588,024        1,455,157
  Amortization of deferred and unearned
     financing costs                                    228,502       8,507,919       4,242,884         297,314       13,276,619
  Litigation settlement - in shares of stock                  -               -               -         456,278          456,278
                                                  --------------  --------------  --------------  --------------   --------------

    TOTAL OTHER EXPENSES                                271,924       8,778,659       4,795,855       1,341,616       15,188,054
                                                  --------------  --------------  --------------  --------------   --------------

NET LOSS                                          $  (3,476,983)  $ (12,441,242)  $  (7,814,143)  $  (6,492,312)   $ (30,737,906)
                                                  ==============  ==============  ==============  ==============   ==============

BASIC AND DILUTED LOSS PER SHARE                  $      (0.23)   $       (0.71)  $        (.40)  $        (.27)
                                                  ==============  ==============  ==============  ==============

WEIGHTED AVERAGE COMMON SHARES
   USED IN BASIC AND DILUTED LOSS
   PER SHARE                                         14,808,000      17,581,711      19,323,098      24,477,178
                                                  ==============  ==============  ==============  ==============

         BALANCE SHEET DATA:


WORKING CAPITAL (DEFICIT)                                         $  (2,156,537)  $  (1,933,751)  $  (2,926,993)
                                                                  ==============  ==============  ==============

TOTAL ASSETS                                                      $     952,243   $      76,403   $  11,519,844
                                                                  ==============  ==============  ==============

TOTAL LIABILITIES                                                 $   5,801,966   $   8,911,809   $  10,374,204
                                                                  ==============  ==============  ==============

DEFICIT ACCUMULATED DURING THE
    DEVELOPMENT STAGE                                             $ (16,431,451)  $ (24,245,594)  $ (30,737,906)
                                                                  ==============  ==============  ==============

TOTAL STOCKHOLDERS' (DEFICIENCY) EQUITY                           $  (4,849,723)  $  (8,835,406)  $   1,145,640
                                                                  ==============  ==============  ==============

(2) Through December 31, 1999, and since that date, the Company has not derived any significant sales revenues.

</TABLE>

                                       17
<PAGE>

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

      The following is a discussion of our financial condition, results of our
operations and liquidity. This discussion should be read together with our
financial statements and notes included in this report in response to Item 8
below.

       The following discussion contains certain forward-looking statements that
involve risks and uncertainties. Our actual future results could differ
materially from those foreseen in this discussion.

OVERVIEW

      The Company, incorporated in May 1995, is a development stage, technology
transfer, holding, marketing 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 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 its
present technologies.

                                       19
<PAGE>

      The Company believes that the 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 Technologies. The Company recently has initiated a marketing and sales
program for the 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.

      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.

      The Company has not been profitable since inception and expects to incur
operating losses over the next twelve months. For the period from inception to
December 31, 1999, the Company incurred a cumulative net loss of approximately
$30.737,906. 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.



                                       20
<PAGE>

OUR RESULTS OF OPERATIONS

COMPARISON OF 1999 AND 1998

      This year we recognized as revenue $150,000 that we received from the sale
of certain technology in a transaction that is discussed further below. We have
had no other revenues since inception. Consulting expenses increased from
$716,000 for the year ended December 31, 1998 to $1,790,000 for the year ended
December 31, 1999. The increase in consulting expense resulted principally from
an increase in non-cash compensation issued to consultants and members of our
Board of Directors. Other general and administrative expenses increased to
$2,277,000 for year ended December 31, 1999 from $1,263,000 for the year ended
December 31, 1998. The principal increase of expense of $770,000 related to
registration rights accounted for the majority of the variance.

      Research and development expenses increased for 1999 to $1,233,000 from
$1,040,000 for 1998. During 1998, we paid $187,500 to Professor Oleg L.
Figovsky, Ph.D., in connection with four technology purchase agreements. These
payments were charged to research and development expenses during the first
quarter of 1998. Research and development expenditures for 1999 included
$701,000 related to our continuing investment in six Israeli technology
companies and $352,000 for our Russian technologies. Included in research and
development expense for 1999 is amortization expense of $134,000 related to our
11/99 purchase of technology rights from KRHL. Amortization expense related to
this asset for the year 2000 is expected to approximate $1,600,000.

      For the 1999 and 1998 years, we incurred operating losses of $5,151,000
and $3,018,000 respectively. The losses result principally from expenses
incurred in the acquisition and development of our technologies, consulting
costs, general and administrative expenses and the absence of revenues.

      Other expenses, consisting of interest expense and amortization of
deferred and unearned financing costs, decreased from $4.796,000 for the year
ended December 31, 1998 to $1,342,000 for the year ended December 31, 1999.
Amortization of deferred and unearned financing costs decreased from $4,243,000
for 1998 to $297,000 for 1999. The decrease in the amortization of deferred and
unearned financing costs is attributable principally to our having fully
amortized most of them during 1998 and 1987. We reached a litigation settlement
in the case of the Dirks Group and National Securities which consisted of a
stock settlement valued at $456,000.

      We have reason to believe that we will begin to earn revenues in 2000, but
such revenues, if recognized, may be offset to a considerable extent by expenses
incurred by us in our continuing efforts to commercialize, sell and market our
technologies, as well as the amortization of intangible assets.

COMPARISON OF 1998 AND 1997

      We have had no revenues since our inception. Consulting expenses decreased
from $1,393,000 for the year ended December 31, 1997 to $716,000 for the year
ended December 31, 1998. The decrease in consulting expense is principally the
result of our reduction in the number of consultants engaged during the period
and the reduction in consulting fees paid by issuances of shares of our common
stock. Other general and administrative expenses for 1997 compared to 1998
remained constant.

                                       21
<PAGE>

      Research and development expenses increased during 1998 to $1,040,000 from
$1,008,000, during 1997. The increase was principally attributable to (i)
$187,500 paid by us to Professor Oleg L. Figovsky, Ph.D. in connection with the
four technology purchase agreements, dated January 1, 1998 and April 1, 1998,
and (ii) the purchase of technology from Israeli scientists in April of 1998 for
$40,000. Each of these items was charged to research and development expenses
during 1998. Further, we increased our funding for development of EKOR and our
other technologies. During 1998, development expenditures for the Israeli and
Russian technologies aggregated $408,000 and $510,000, respectively, exclusive
of consulting fees reported under operating expenses

      For 1998 and 1997, we incurred operating losses of $3,018,000 and
$3,663,000, respectively. The losses are principally due to the absence of
revenues and to our having incurred the following expenses:

      o     the acquisition and development of technologies,

      o     consulting costs, and

      o     general and administrative expenses.

      Other expenses, consisting of interest expense and amortization of
deferred and unearned financing costs, decreased from $8,779,000 during 1997 to
$4,796,000 during 1998. However, interest expense increased during this period.
The increase in interest expense was attributable to an increase in the amount
of debt outstanding. Amortization of deferred and unearned financing costs
decreased from $8,508,000 during 1997 to $4,243,000 during 1998. The decrease in
the amortization of deferred and unearned financing costs is principally
attributable to the issuance of shares of our common stock in 1997 valued at
$4,725,000 to the unit holders of the bridge financing in connection with our
failure to have our S-1 Registration Statement declared effective by the SEC by
April 1, 1998. The S-1 Registration Statement became effective in July 1998.

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

      o     $3,000,000, $3,000,000 and $1,000,000 from private placements of our
            8% Convertible Debentures due November, 2000, February, 2001 and
            July, 2001, respectively;

      o     $500,000 from a secured financing obtained in January 1999 and
            repaid in January 2000;

      o     $975,000 from a private offering of 3,900,000 shares of our common
            stock in the third quarter of 1999; and

      o     $3,000,000 from the issuance on December 31, 1999 of 1,882,353
            shares, and of warrants to buy an additional 200,000 shares, of our
            common stock to a single investor on December 31, 1999. Another
            1,200,000 shares were issued to such investor in March 2000 for a
            further financing amounting to net proceeds of $6,000,000.

                                       22
<PAGE>

      The debentures may be converted into shares of our common stock at
beneficial conversion rates based on timing of conversions. During 1999, a
debenture holder exercised the conversion right under the November 27, 1997 and
July 20, 1998 Convertible Debenture agreement and converted principal of
$410,000 and accrued interest of $161,788 into 1,204,665 shares of our common
stock. During 1998, a debenture holder exercised the conversion right under the
November 27, 1997 Convertible Debenture agreement and converted principal of
$30,000 and accrued interest of $2,194 into 100,002 shares of our common stock.
Based on the bid price of our common stock at December 31, 1999, the debentures'
principal currently outstanding could be converted into approximately 4 million
shares of our common stock. In January 2000, we reached an agreement with the
holders of the convertible debentures pursuant to which we paid all interest
arrearages and the holders agreed to a $2.00 per share conversion price floor on
certain of these debentures.

      On January 6, 1999, our then Chairman and the majority convertible debt
holder provided $450,000 of short-term financing to us, evidenced by a $50,000
and a $400,000 secured promissory notes, respectfully. Each secured promissory
note bore interest at 13% per annum and was due January 6, 2000. The promissory
notes were collateralized by our intangible assets and could be exchanged for 8%
convertible debentures under terms similar to the current outstanding
debentures. We repaid the $400,000 note on its due date from the proceeds of the
December 31, 1999 $3,000,000 stock and warrant issue. Our former chairman has
agreed to convert his $50,000 note plus accrued interest and 9,750 warrants into
200,000 shares of our common stock.

      Around the same time as the organization of Eurotech, our organizor also
created another company Kurchatov Research Holding, Ltd. ("KRHL"). In the
organization of KRHL, one of our organizers, who is a former director of ours
and at one time our President and who continues to be one of our major
shareholder and a consultant to our company, was acting on behalf of the Russian
Scientists that have developed EKOR and whose continued collaboration in the
implementation of our EKOR program was and continues to be by us fundamentally
important. Accordingly, on August 26, 1996 we entered into an agreement with
KRHL pursuant to which we assigned to KRHL a 50% interest in the net profits
(after deducting development costs and related expenses attributable to EKOR)
derived by us from the sale or licensing of EKOR

      During 1999 our directors became increasingly concerned about the adverse
effects on management and on public investor perception of divided ownership of
our most important technology and conflicting objectives between the two
companies. We acquired from the organizer the scientists' shares, representing
an interest of about 40%, in KRHL, in exchange for which we issued to him, for
the benefit of the scientists, 4,530,000 shares of our own common stock valued
at $4,841,438. We were, however, unable to acquire privately any other KRHL
shares. We thus turned to negotiations with KRHL's Board and influential
shareholders with a view to reacquiring undivided ownership of the EKOR license.

      These negotiations resulted in an agreement, dated as of November 30,
1999, pursuant to which KRHL released to us all of its rights in EKOR. For this
release, we

      *     Released to KRHL all of our interest in the Resealable Container
            Systems and TetraPak Container technologies, for which we had
            previously received a $150,000 deposit, for additional consideration
            of $350,000 payable on or before September 1, 2000; as a result we
            recognized the $150,000 deposit as revenue;

      *     Surrendered to KRHL the shares in it that we had acquired from the
            organizer;

      *     Issued to KRHL 2,000,000 shares of our own common stock valued at
            $2,137,500.

      *     Agreed to pay to KRHL a royalty of 2% on all our sales of EKOR; and


                                       23
<PAGE>

      *     Assumed KRHL's obligations to Spinneret Financial Systems, Inc.

      Spinneret had previously lent to KRHL $750,000 against convertible notes
on which KRHL was in default and on which interest and penalties had accrued.
Spinneret expressly consented to our assumption of this liability. Subsequently
and before year-end, Spinneret agreed to release us from this liability in
exchange for the issuance to Spinneret of 1,000,000 of our common stock, valued
at $1,068,750.

      The Technology Rights item on the balance sheet, which will be amortized
over a 5 year period, results from the sum of the values attributed to these
transactions less one month's amortization.

      During 1999, our principal sources of cash were the proceeds from the
January,1999 promissory notes of $450,000, private sales of our common stock of
$5,346,000 and proceeds from exercise of warrants of $327,000..

      We have agreed in principle to fund the commercialization of certain
technologies developed in the former Soviet Union by scientists and researchers
at Kurchatov Institute (which is not related to KRHL) and members of Euro-Asian
Physical Society (EAPS). Kurchatov Institute will provide the materials,
facilities and personnel to complete the necessary work to commercialize the
technologies. We also have agreed in principle to provide funding in connection
with the marketing and sale of three of our other technologies. Total
expenditures under these programs approximated $1,200,000 during 1999. Our
principal source of funding for these expenditures during the year 1999 was the
proceeds of private sales of our stock.

      On January 20, 1999, we entered into an agreement to invest $300,000 in
exchange for an additional 16% interest in Chemonol, an Israeli research and
development company, to give us a total interest in its equity of 36%. The
agreement obligated us to make four equal payments of $75,000 on March 1,
1999,July 1, 1999, October 1, 1999 and January 1, 2000. All of these payments
have been made. Later in 1999 we agreed to invest during 2000 a further
$150,000, which would bring our interest in Chemonol's equity to 52%

      As part of the December 31, 1999 transaction pursuant to which we issued
1,882,353 shares, and a warrant to buy an additional 200,000 shares, of our
common stock for $3,000,000, the investor agreed to permit us to sell to it
additional shares of common stock, over time and subject to certain conditions,
for up to a total of an additional $22,000,000. As mentioned above, another
1,200,000 shares were issued to such investor in March 2000 for a further
financing under this commitment amounting to net proceeds of $6,000,000. We
believe that this commitment provides us with sufficient resources to launch us
on a revenue-producing track.

      As of December 31, 1999, we had a working capital deficit of $2,926,993
and stockholders' equity of $1,146,000, respectively, compared with deficits of
$1,934,000 and $8,835,000, respectively, at December 31, 1998. The change from a
stockholders deficiency at December 31, 1998 into positive stockholders equity
at December 1999 is attributable principally to the transactions that we entered
into during the latter part of 1999 and that we have summarized briefly above.
The increase in the working capital deficit was caused by the reclassification
of convertible debentures in the amount of $2,660,000 to a current liability.


                                       24
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

      As of December 31, 1999, we had no exposure to market risk associated with
activities in derivative financial instruments, other financial instruments, or
derivative commodity instruments because with did not engage in any such
activities during the past fiscal year or, indeed, since our organization.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.

      We submit below the following financial statements and supplemental data:


   1. Opinion of Tabb, Conigliaro & McGann, P.C., independent certified public
      accountants

   2. Balance sheets as of December 31, 1999 and 1998

   3. Statements of Loss for the years ended December 31, 1999, 1998 and 1997

   4. Statements of Stockholders' Deficiency for the years ended December 31,
      1999, 1998 and 1997

   5. Statements of Cash Flows for the years ended December 31, 1999, 1998 and
      1997

   6. Notes to Financial Statements


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

      Not applicable.



                                    PART III

      There is incorporated by reference in this Part III (Items 10, 11, 12 and
13) the information that will be contained in our proxy statement for our
forthcoming annual meeting, which will be filed in definitive form before April
29, 2000.



                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

      (a)   The following documents are filed as part of this report:

            1.    The financial statements listed and included above in response
                  to Item 8

            2.    The following financial statement schedules:

                  (a)   None

                                       25
<PAGE>

            3.    The following Exhibits:

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

3.1         Articles of Incorporation of the Eurotech, Ltd.(1)

3.2         Bylaws of the Eurotech, Ltd.(1)

4.1         Form of Common Stock Certificate(1)

10.1.1      License Agreement dated September 6, 1996 between Euro-Asian
            Physical Society and ERBC Holding, Ltd.(1)

10.1.2      Sub-License Agreement dated September 16, 1996 between ERBC Holding,
            Ltd. and Eurotech, Ltd.(1)

10.1.3      Agreement dated January 28, 1997 between Eurotech, Ltd. and
            Kurchatov Research Holdings, Ltd.(1)

10.1.4      Memorandum of Intent among Chernobyl Nuclear Power Plant, I. V.
            Kurchatov Institute, Ukrstroj and Eurotech, Ltd.(1)

10.1.5      Agreement dated December 6, 1996 between Ukrstoj and Chernobyl
            Nuclear Power Plant(1)

10.1.6      Agreement dated December 11, 1996 among Ukrstroj, Eurotech, Ltd. and
            Euro-Asian Physical Society(1)

10.2        Technology Purchase Agreement between the Company and Oleg L.
            Figovsky(2)

10.3        Technology Purchase Agreement between the Company and Oleg L.
            Figovsky(2)

10.4        Technology Purchase Agreement between the Company and Oleg L.
            Figovsky(2)

10.5        Acquisition of the 49% Rights to Net Profits Agreement Dated
            February 27, 2000 between the Company and Oleg L. Figovsky (8).

10.6        Form of Agreement between the Company, V. Rosenband and C.
            Sokolinsky, and Ofek Le-Oleh Foundation(2)

10.6.2      Equity Sharing Agreement between the Company, V. Rosenband and C.
            Sokolinsky(2)

10.6.3      Voting Agreement between the Company, V. Rosenband and C.
            Sokolinsky(2)

10.7.1      Investment Agreement between the Company and Chemonol, Ltd.(2)

10.7.2      Equity Sharing Agreement between the Company and Leonid
            Shapovalov(2)

10.7.3      Voting Agreement between the Company and Leonid Shapovalov(2)

10.8.1      Agreement between the Company and Separator, Ltd.(2)

10.8.2      Equity Sharing Agreement between the Company and Efim Broide(2)

10.8.3      Voting Agreement between the Company and Efim Broide(2)

10.9.1      Form of Agreement between the Company, Ofek Le-Oleh Foundation and
            Y. Kopit(2)

                                       26
<PAGE>

10.9.2      Equity Sharing Agreement between the Company, Y. Kopit and V.
            Rosenband(2)

10.9.3      Voting Agreement between the Company, Y. Kopit and V. Rosenband(2)

10.10       Form of License Agreement between the Company and ERBC Holdings,
            Ltd.(2)

10.11.1     Cooperation Agreement between the Company and Forschungszentrum
            Julich GmbH(2)

10.11.2     Four Party agreement with the three entities in Germany, for EKOR
            Germany testing(7)

10.12.1     Convertible Debenture Purchase Agreement among the Company, JNC
            Opportunity Fund, Ltd. and Diversified Strategies Fund, L.P.(2)

10.12.2     Escrow Agreement among the Company, JNC Opportunity Fund, Ltd. and
            Diversified Strategies Fund, L.P. and Robinson, Silverman, Pearce,
            Aronsohn & Berman, LLP(2)

10.12.3     Registration rights Agreement among the Company, JNC Opportunity
            Fund, Ltd. and Diversified Strategies Fund, L.P.(2)

10.12.4     Form of 8% Convertible Debenture Due November 27, 2000 between the
            Company and JNC Opportunity Fund, Ltd.(2)

10.12.5     Form of 8% Convertible Debenture Due November 27, 2000 between the
            Company and Diversified Strategies Fund, L.P.(2)

10.12.6     Warrant No. 1 between the Company and JNC Opportunity Fund, Ltd.(2)

10.12.7     Warrant No. 2 between the Company and Diversified Strategies Fund,
            L.P.(2)

10.12.8     Warrant No. 3 between the Company and Diversified Strategies Fund,
            L.P.(2)

10.13.1     Convertible Debenture Purchase Agreement between the Company and JNC
            Opportunity Fund, Ltd.(2)

10.13.2     Escrow Agreement among the Company, JNC Opportunity Fund, Ltd. and
            Robinson, Silverman, Pearce, Aronsohn and Berman, LLP(2)

10.13.3     Registration Rights Agreement between the Company and JNC
            Opportunity Fund Ltd.(2)

10.13.4     Form of 8% Convertible Debenture Due February 23, 2001 between the
            Company and JNC Opportunity Fund, Ltd.(2)

10.13.5     Warrant No. 3 between the Company and JNC Opportunity Fund Ltd.(2)

10.14.1     Debenture Purchase Agreement between the Company and JNC Strategic
            Fund Ltd.(3)

10.14.2     Form of 8% Convertible Debenture No.1 Due July 20, 2001 between the
            Company and JNC Strategic Fund Ltd.(3)

10.14.3     Form of 8% Convertible Debenture No.2 Due February 23, 2001 between
            the Company and JNC Opportunity Fund, Ltd.(3)

10.14.4     Warrant No. 4 between the Company and JNC Strategic Fund Ltd.(3)

10.14.5     Registration Rights Agreement between the Company and JNC Strategic
            Fund Ltd.(3)

10.14.6     Amended and Revised 8% Convertible Debenture No.1 Due February 23,
            2001 between the Company and JNC Opportunity Fund, Ltd.(3)

                                       27
<PAGE>

10.14.7     Amended and Revised 8% Convertible Debenture No.2 Due July 20, 2001
            between the Company and JNC Strategic Fund Ltd.(3)

10.14.8     Amended and Revised 8% Convertible Debenture No.13 Due November 27,
            2000 between the Company and JNC Opportunity Fund, Ltd.(3)

10.14.9     Amended and Revised 8% Convertible Debenture No.14 due November 27,
            2000 between the Company and Diversified Strategies Fund, L.P.(3)

10.14.10    Agreement Dated February 25, 2000 regarding conversion price. (8)

10.15.1     Agreement between the Company and David Wilkes(3)

10.15.2     Secured Promissory Note between the Company as Maker and JNC
            Strategic Fund Ltd. as Payee(3)

10.15.3     Secured Promissory Note between the Company as Maker and David
            Wilkes as Payee(3)

10.15.4     Secured Promissory Note between the Company as Maker and David
            Wilkes as Payee(3)

10.15.5     Escrow Agreement among the Company, JNC Strategic Fund Ltd. and
            Encore Capital Management, L.L.C.(3)

10.15.6     Security Agreement by the Company in favor of JNC Strategic Fund
            Ltd. and David Wilkes(3)

10.15.7     Warrant between the Company and JNC Strategic Fund Ltd.(3)

10.15.7     Warrant issued by the Company to David Wilkes(3)

10.15.8     Form of 8% Convertible Debenture Due Three Years from Original Issue
            Date between the Company and JNC Strategic Fund Ltd.(3)

10.15.9     Employment Agreement between the Company and Frank Fawcett(4)

10.15.10    Disengagement Agreement between the Company and Frank Fawcett(4)

10.16.1     Letter Agreement between the Company and Don V. Hahnfeldt(4)

10.16.2     Revised employment agreement between the Company and Don V.
            Hahnfeldt(7)

10.17       Agreement dated September 9, 1999 between the Company and Peter
            Gulko(5)

10.18       Agreement dated as of November 30, 1999 between the Company and
            Kurchatov Research Holdings, Ltd.(6)

10.19       Agreement dated as of December 15, 1999 between the Company and
            Spinneret Financial Systems, Inc.(7)

10.20.1     Common Stock Purchase Agreement dated December 31, 1999 between the
            Company and Woodward LLC(7)

10.20.2     Warrant issued by the Company to Woodward LLC(7)

10.20.3     Registration Rights Agreement between the Company and Woodward
            LLC(7)

                                       28
<PAGE>

10.20.4     Commitment Agreement ($22,000,000) between the Company and Woodward
            LLC(7)

10.20.5     Escrows Agreement among the Company, Woodward LLC and Krieger &
            Prager(7)

23.1        Consent of Tabb, Conigliaro & McGann(8)

27          Financial Data Schedule(8)

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

      (1)   Incorporated by reference to such Exhibits filed with our
            registration statement on Form 10 on file with the Commission, file
            number 000-22129

      (2)   Incorporated by reference to such Exhibits filed with Pre-effective
            Amendment No. 2 to the Company's Registration Statement on Form S-1,
            File No. 333-26673.

      (3)   Incorporated by reference to such Exhibits filed with the Company's
            Current Report on Form 8-K as of August 3, 1998 under the Securities
            Exchange Act of 1934, on file with the Commission

      (4)   Incorporated by reference to such Exhibit filed with Post-Effective
            Amendment No. 1 to the Company's Registration Statement on Form S-1,
            File No. 333-26673

      (5)   Incorporated by reference to such Exhibit filed by Peter Gulko with
            his Statement on Schedule 13D

      (6)   Incorporated by reference to such Exhibit filed with the Company's
            Current Report on Form 8-K as of November 30, 1999 under the
            Securities Exchange Act of 1934, on file with the Commission

      (7)   Incorporated by reference to such Exhibit filed with Post-Effective
            Amendment No. 2 to the Company's Registration Statement on Form S-1,
            File No. 333-26673

      (8)   Filed herewith.

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

            (b)   We filed one Current Report on Form 8-K during the fourth
                  quarter of 1999. Such Current Report reported the Agreement
                  dated as of November 15, 1999 with Kurchatov Research Holdings
                  Ltd. (KRHL) pursuant to which we reacquired right to 50% of
                  Ekor net profits. Such Current Report did not include any
                  financial statements.

                                       29
<PAGE>



                                   SIGNATURES

      Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Act Exchange of 1934, the registrant has duly caused this Annual
Report be signed on its behalf by the undersigned thereunto duly authorized.



                                               EUROTECH, LTD.



                                               By: /s/ Don V. Hahnfeldt
                                                  -----------------------------
                                                  Don V. Hahnfeldt
                                                  President and CEO

Date:  March 28, 2000



                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Don V. Hahnfeldt his true and lawful attorney-in-fact
and agent, with full power of substitution and re-substitution, for him and in
his place and stead, in any and all capacities, to sign any and all further
amendments to this Annual Report and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

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

<TABLE>
<CAPTION>
        Person                        Capacity                         Date
        ------                        --------                         ----
<S>                           <C>                                   <C>

/s/ Chad A. Verdi             Chairman of the Board of Directors    March 28, 2000
---------------------------
    Chad A. Verdi


/s/ Randolph A. Graves, Jr.   Director, Executive Vice President    March 28, 2000
---------------------------
    Randolph A. Graves, Jr.


/s/ Don V. Hanhfeldt          Director, President, Chief Executive  March 28, 2000
---------------------------   Officer
    Don V. Hahnfeldt


/s/ Jon W. Dowie              Chief Financial and                   March 28, 2000
---------------------------   Accounting Officer
    Jon W. Dowie

</TABLE>


                                       30
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          INDEX TO FINANCIAL STATEMENTS




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

INDEPENDENT AUDITORS' REPORT                                             F-2


BALANCE SHEETS                                                           F-3
         At December 31, 1998 and December 31, 1999


STATEMENTS OF OPERATIONS                                                 F-4
         For the Years Ended December 31, 1997, 1998
         and 1999 For the Period from Inception
         (May 26, 1995) to December 31, 1999


STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY                        F-5 - F-9
         For the Period from Inception (May 26, 1995)
         to December 31, 1995 For the Years Ended
         December 31, 1996, 1997, 1998 and 1999


STATEMENTS OF CASH FLOWS                                                 F-10
         For the Years Ended December 31, 1997, 1998
         and 1999 For the Period from Inception
         (May 26, 1995) to December 31, 1999


NOTES TO FINANCIAL STATEMENTS                                         F-11- F-47

                                       F-1


<PAGE>


Board of Directors and Stockholders
Eurotech, Ltd.


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


We have audited the accompanying balance sheets of Eurotech, Ltd. (the "
Company") (a development stage company) as of December 31, 1998 and 1999 and the
related statements of operations, stockholders' equity (deficiency), and cash
flows for the years ended December 31, 1997, 1998 and 1999 and for the period
from inception (May 26, 1995) to December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eurotech, Ltd. (a development
stage company) at December 31, 1998 and 1999 and the results of its operations
and its cash flows for the years ended December 31, 1997, 1998 and 1999 and for
the period from inception (May 26, 1995) to December 31, 1999 in conformity with
generally accepted accounting principles.

The Company is classified as a development-stage company and, to-date, the
Company has not generated any substantial revenues from operations (see Note
13).



                                             /s/ TABB, CONIGLIARO & McGANN, P.C.


New York, New York
March 27, 2000

                                       F-2


<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)
                                 BALANCE SHEETS


                                     ASSETS
                                     ------

                                                           At December 31,
                                                    ----------------------------
                                                         1998           1999
                                                    -------------  -------------

CURRENT ASSETS:
  Cash                                              $      1,940   $  3,547,011
  Receivable from related parties                          5,918              -
  Prepaid expenses and other current assets                  200            200
                                                    -------------  -------------

      TOTAL CURRENT ASSETS                                 8,058      3,547,211

PROPERTY AND EQUIPMENT - net of accumulated
  depreciation                                            31,846         24,750

OTHER ASSETS:
  Technology rights - net of accumulated
    amortization of $134,128 at December 31,
    1999                                                       -      7,913,559
  Organization and patent costs - net of
    accumulated amortization                              26,587         24,573
  Deferred financing costs                                 2,361              -
  Other assets                                             7,551          9,751
                                                    -------------  -------------

      TOTAL ASSETS                                  $     76,403   $ 11,519,844
                                                    =============  =============


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

CURRENT LIABILITIES:
  Notes payable                                     $          -   $    450,000
  Accounts payable and accrued liabilities             1,716,809      3,139,204
  Deferred revenue                                       225,000        225,000
  Current portion of convertible debentures                    -      2,660,000
                                                    -------------  -------------

      TOTAL CURRENT LIABILITIES                        1,941,809      6,474,204
                                                    -------------  -------------

CONVERTIBLE DEBENTURES - Less current
  maturities                                           6,970,000      3,900,000
                                                    -------------  -------------

      TOTAL LIABILITIES                                 8,911,80     10,374,204
                                                    -------------  -------------

COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
  (Notes 1, 3, 4, 7, 8, 11, 13, and 16)

STOCKHOLDERS' (DEFICIENCY) EQUITY:
  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; 19,621,882
    and 39,399,343 shares issued and outstanding
    at December 31, 1998 and December 31, 1999,
    respectively                                           4,905          9,850
  Additional paid-in capital                          15,452,783     31,873,696
  Unearned financing costs                               (47,500)             -
  Deficit accumulated during the development stage   (24,245,594)   (30,737,906)
                                                    -------------  -------------

      TOTAL STOCKHOLDERS' (DEFICIENCY) EQUITY         (8,835,406)     1,145,640
                                                    -------------  -------------

      TOTAL LIABILITIES AND STOCKHOLDERS'
        (DEFICIENCY) EQUITY                         $     76,403   $ 11,519,844
                                                    =============  =============


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

                                       F-3


<PAGE>

<TABLE>

                                                   EUROTECH, LTD.
                                           (A Development Stage Company)

                                              STATEMENTS OF OPERATIONS
<CAPTION>

                                                                                                      For the Period
                                                                                                      from Inception
                                                               For the Years Ended December 31,       (May 26, 1995)
                                                         -------------------------------------------  to December 31,
                                                              1997           1998          1999            1999
                                                         -------------  -------------  -------------  -------------
<S>                                                      <C>            <C>            <C>            <C>
REVENUES - Sale of technology to related party           $          -   $          -   $    150,000   $    150,000
                                                         -------------  -------------  -------------  -------------
OPERATING EXPENSES:
  Research and development                                  1,007,671      1,039,591      1,233,158      4,663,263
  Consulting fees                                             553,295        293,323        477,746      1,868,617
  Compensatory element of stock issuances pursuant
     to consulting and other agreements                       839,550        422,200      1,312,679      3,783,906
   Other general and administrative expenses                1,262,067      1,263,174      2,277,113      5,384,066
                                                         -------------  -------------  -------------  -------------
     TOTAL OPERATING EXPENSES                               3,662,583      3,018,288      5,300,696     15,699,852
                                                         -------------  -------------  -------------  -------------

     OPERATING LOSS                                        (3,662,583)    (3,018,288)    (5,150,696)   (15,549,852)
                                                         -------------  -------------  -------------  -------------

OTHER EXPENSES:
  Interest expense                                            270,740        552,971        588,024      1,455,157
  Amortization of deferred and unearned financing
     costs                                                  8,507,919      4,242,884        297,314     13,276,619
  Litigation settlement  - in shares of stock                  -                   -        456,278        456,278
                                                         -------------  -------------  -------------  -------------

    TOTAL OTHER EXPENSES                                    8,778,659      4,795,855      1,341,616     15,188,054
                                                         -------------  -------------  -------------  -------------

NET LOSS                                                 $(12,441,242)  $ (7,814,143)  $ (6,492,312)  $ (30,737,906)
                                                         =============  =============  =============  =============
BASIC AND DILUTED LOSS PER SHARE
  (Notes 2 and 11)                                       $      (0.71)  $       (.40)  $       (.27)
                                                         =============  =============  =============

WEIGHTED AVERAGE COMMON SHARES
   USED IN BASIC AND DILUTED LOSS
   PER SHARE (Notes 2 and 11)                               17,581,711    19,323,098     24,477,178
                                                         =============  =============  =============

</TABLE>

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

                                                        F-4
<PAGE>

<TABLE>
                                                     EUROTECH, LTD.
                                             (A Development Stage Company)

                                     STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY

                            FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1995
                               AND THE YEARS ENDED DECEMBER 31, 1996, 1997, 1998 AND 1999
<CAPTION>
                                                                                               Common Stock             Additional
                                                                         Date of      ------------------------------     Paid-in
Period Ended December 31, 1995:                                        Transaction        Shares         Amount          Capital
-------------------------------                                       --------------  --------------  --------------  --------------
                                                                                            (1)
<S>                                                                        <C>           <C>          <C>             <C>
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
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

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

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

<TABLE>
<CAPTION>
                                                                                                         Deficit
                                                                                                       Accumulated
                                                                                        Unearned       During the
                                                                         Due from       Financing      Development
Period Ended December 31, 1995:                                        Stockholders       Costs           Stage           Total
-------------------------------                                       --------------  --------------  --------------  --------------
<S>                                                                   <C>             <C>             <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)                              (3,000)              -               -         552,000
Issuance of stock for license ($0.0625 per share)                                 -               -               -          37,500
Issuance of stock options for offering legal and consulting fees                  -               -               -          75,000
Offering expenses                                                                 -               -               -        (105,398)
Net loss                                                                          -               -        (513,226)       (513,226)
                                                                      --------------  --------------  --------------  --------------
Balance - December 31, 1995                                                  (3,000)              -        (513,226)         43,376

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

Issuance of stock ($0.25 per share)                                               -               -               -         319,500
Exercise of stock options                                                         -               -               -             150
Issuance of stock for consulting fees ($0.34375 per share)                        -               -               -          55,000
Issuance of stock for consulting fees ($0.0625 per share)                         -               -               -         164,250
Issuance of stock for consulting fees ($0.590625 per share)                       -               -               -         885,938
Issuance of stock for consulting fees ($1.82 per share)                           -               -               -         104,289
Issuance of stock pursuant to bridge financing ($1.81325 per share)               -      (2,719,875)              -               -
Amortization of unearned financing costs                                          -         226,656               -         226,656
Repayment by stockholders                                                     3,000               -               -           3,000
Net loss                                                                          -               -      (3,476,983)     (3,476,983)
                                                                      --------------  --------------  --------------  --------------
Balance - December 31, 1996                                           $           -   $  (2,493,219)  $  (3,990,209)  $  (1,674,824)
                                                                      ==============  ==============  ==============  ==============

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

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

                                                               F-5
</TABLE>

<PAGE>

<TABLE>
                                                     EUROTECH, LTD.
                                             (A Development Stage Company)

                                     STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY

                            FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1995
                               AND THE YEARS ENDED DECEMBER 31, 1996, 1997, 1998 AND 1999
<CAPTION>
                                                                                               Common Stock             Additional
                                                                         Date of      ------------------------------     Paid-in
Year Ended December 31, 1997:                                          Transaction        Shares         Amount          Capital
-----------------------------                                         --------------  --------------  --------------  --------------
                                                                                            (1)
<S>                                                                        <C>        <C>             <C>             <C>
Balance - December 31, 1996                                                              17,223,836   $       4,306   $   4,804,298

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

                                                                                                                         (continued)
</TABLE>

<TABLE>
<CAPTION>
                                                                                                         Deficit
                                                                                                       Accumulated
                                                                                        Unearned       During the
                                                                         Due from       Financing      Development
Year Ended December 31, 1997:                                          Stockholders       Costs           Stage           Total
-----------------------------                                         --------------  --------------  --------------  --------------
<S>                                                                   <C>             <C>             <C>             <C>
Balance - December 31, 1996                                           $           -   $  (2,493,219)  $  (3,990,209)  $  (1,674,824)

Issuance of stock for consulting fees ($2.50 per share)                           -               -               -         160,000
Issuance of stock for consulting fees ($5.45 per share)                           -               -               -         212,549
Issuance of stock for consulting fees ($5.00 per share)                           -               -               -         295,001
Issuance of stock pursuant to penalty provision of bridge
  financing ($5.45 per share)                                                     -      (2,725,000)              -               -
Value assigned to conversion feature of Convertible Debentures                    -      (1,337,143)              -               -
Value assigned to issuance of 127,500 warrants in consideration
  for interest and placement fees in connection with
  Convertible Debentures                                                          -        (284,480)              -               -
Value assigned to issuance of 35,000 warrants to shareholder
  for consulting services                                                         -         (39,588)              -               -
Value assigned to issuance of 364,000 warrants to shareholder
  as additional consideration for financing activities                            -        (862,680)              -               -
Issuance of stock for consulting fees ($4.00 per share)                           -               -               -         172,000
Accrual of stock issued January 1998 pursuant to penalty
  provision of bridge financing ($2.00 per share)                                 -      (2,000,000)              -               -
Amortization of unearned financing costs                                          -       8,426,793               -       8,426,793
Net loss                                                                          -               -     (12,441,242)    (12,441,242)
                                                                      --------------  --------------  --------------  --------------
Balance - December 31, 1997                                           $           -   $  (1,315,317)  $ (16,431,451)  $  (4,849,723)
                                                                      ==============  ==============  ==============  ==============

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

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

                                                               F-6

</TABLE>

<PAGE>

<TABLE>
                                                     EUROTECH, LTD.
                                             (A Development Stage Company)

                                     STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY

                            FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1995
                               AND THE YEARS ENDED DECEMBER 31, 1996, 1997, 1998 AND 1999
<CAPTION>
                                                                                               Common Stock             Additional
                                                                         Date of      ------------------------------     Paid-in
Year Ended December 31, 1998:                                          Transaction        Shares         Amount          Capital
-----------------------------                                         --------------  --------------  --------------  --------------
                                                                                            (1)
<S>                                                                    <C>               <C>          <C>             <C>
Balance - December 31, 1997                                                              18,928,836   $       4,732   $  12,892,313
Issuance of stock for consulting fees ($2.58 per share)                    03/98             43,000              11         110,930
Issuance of stock for consulting fees ($0.85 per share)                    06/98            143,000              35         215,895
Issuance of stock for consulting fees ($0.32 per share)                    09/98            126,617              32         107,503
Issuance of stock for consulting fees                                      12/98            155,427              39          81,505
Issuance of stock pursuant to penalty provision of
  bridge financing ($1.0625 per share)                                     04/98            500,000             125         531,124
Value assigned to conversion feature of Convertible Debentures
  and 60,000 warrants issued as additional interest                        02/98                  -               -       1,100,000
Value assigned to conversion feature of Convertible Debentures
  and 125,000 warrants issued as additional interest                       07/98                  -               -         475,000
Cancellation of stock issued for consulting fees                           07/98           (375,000)            (94)        (93,656)
Issuance of stock for conversion of debenture note payable
  ($0.32 per share)                                                    09/98, 11/98         100,002              25          32,169
Amortization of unearned financing costs                                                          -               -               -
Net loss                                                                                          -               -               -
                                                                                      --------------  --------------  --------------
Balance - December 31, 1998                                                              19,621,882   $       4,905   $  15,452,783
                                                                                      ==============  ==============  ==============

                                                                                                                         (continued)
</TABLE>

<TABLE>
<CAPTION>
                                                                                                         Deficit
                                                                                                       Accumulated
                                                                                        Unearned       During the
                                                                         Due from       Financing      Development
Year Ended December 31, 1998:                                          Stockholders       Costs           Stage           Total
-----------------------------                                         --------------  --------------  --------------  --------------
<S>                                                                   <C>             <C>             <C>             <C>
Balance - December 31, 1997                                           $           -   $  (1,315,317)  $ (16,431,451)  $  (4,849,723)
Issuance of stock for consulting fees ($2.58 per share)                           -               -               -         110,941
Issuance of stock for consulting fees ($0.85 per share)                           -               -               -         215,930
Issuance of stock for consulting fees ($0.32 per share)                           -               -               -         107,535
Issuance of stock for consulting fees                                             -               -               -          81,544
Issuance of stock pursuant to penalty provision of
  bridge financing ($1.0625 per share)                                            -        (531,249)              -               -
Value assigned to conversion feature of Convertible Debentures
  and 60,000 warrants issued as additional interest                               -      (1,100,000)              -               -
Value assigned to conversion feature of Convertible Debentures
  and 125,000 warrants issued as additional interest                              -        (475,000)              -               -
Cancellation of stock issued for consulting fees                                  -               -               -         (93,750)
Issuance of stock for conversion of debenture note payable
  ($0.32 per share)                                                               -               -               -          32,194
Amortization of unearned financing costs                                          -       3,374,066               -       3,374,066
Net loss                                                                          -               -      (7,814,143)     (7,814,143)
                                                                      --------------  --------------  --------------  --------------
Balance - December 31, 1998                                           $           -   $     (47,500)  $ (24,245,594)  $  (8,835,406)
                                                                      ==============  ==============  ==============  ==============

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

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

                                                               F-7

</TABLE>
<PAGE>

<TABLE>
                                                     EUROTECH, LTD.
                                             (A Development Stage Company)

                                     STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY

                            FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1995
                               AND THE YEARS ENDED DECEMBER 31, 1996, 1997, 1998 AND 1999
<CAPTION>
                                                                                               Common Stock             Additional
                                                                         Date of      ------------------------------     Paid-in
Year Ended December 31, 1999:                                          Transaction        Shares         Amount          Capital
-----------------------------                                         --------------  --------------  --------------  --------------
                                                                                            (1)
<S>                                                                        <C>           <C>          <C>             <C>
Balance - December 31, 1998                                                              19,621,882   $       4,905   $  15,452,783
Issuance of stock for consulting fees ($0.77 per share)                    03/99             78,613              20          62,381
Issuance of stock for consulting fees ($0.72 per share)                    06/99            611,572             153         429,035
Issuance of stock for consulting fees ($0.98 per share)                    09/99            496,002             124         520,116
Issuance of stock for conversion of debenture note payable
  ($0.35 per share)                                                        02/99            987,201             247         341,029
Issuance of stock for finder's fee ($1.94 per share)                       12/99             29,518               7          46,302
Issuance of stock for finder's fee ($0.77 per share)                       09/99             82,580              20          63,727
Issuance of stock for consulting fees ($2.04 per share)                    12/99            100,374              25         190,769
Value assigned to conversion feature of Convertible Debentures
  and 84,750 warrants issued as additional interest                        01/99                  -               -         175,425
Value assigned to additional consideration for financing activities
  ($0.72 per share)                                                        05/99            100,000              25          71,975
Issuance of stock ($0.25 per share)                                        06/99          1,000,000             250         474,750
Issuance of stock ($0.25 per share)                                        09/99          2,000,000             500         499,500
Issuance of stock ($0.38 per share)                                        12/99          3,035,000             759       1,179,241
Issuance of stock ($0.25 per share)                                        12/99            930,000             233         232,267
Issuance of stock ($0.50 per share)                                        12/99            240,000              60         119,940
Issuance of stock for settlement of litigation ($2.51 per share)           11/99            181,784              45         456,233

                                                                                                                         (continued)
</TABLE>

<TABLE>
<CAPTION>
                                                                                                         Deficit
                                                                                                       Accumulated
                                                                                        Unearned       During the
                                                                         Due from       Financing      Development
Year Ended December 31, 1999:                                          Stockholders       Costs           Stage           Total
-----------------------------                                         --------------  --------------  --------------  --------------
<S>                                                                   <C>             <C>             <C>             <C>
Balance - December 31, 1998                                           $           -   $     (47,500)  $ (24,245,594)  $  (8,835,406)
Issuance of stock for consulting fees ($0.77 per share)                           -               -               -          62,401
Issuance of stock for consulting fees ($0.72 per share)                           -               -               -         429,188
Issuance of stock for consulting fees ($0.98 per share)                           -               -               -         520,240
Issuance of stock for conversion of debenture note payable
  ($0.35 per share)                                                               -               -               -         341,276
Issuance of stock for finder's fee ($1.94 per share)                              -               -               -          46,309
Issuance of stock for finder's fee ($0.77 per share)                              -               -               -          63,747
Issuance of stock for consulting fees ($2.04 per share)                           -               -               -         190,794
Value assigned to conversion feature of Convertible Debentures
  and 84,750 warrants issued as additional interest                               -        (175,425)              -               -
Value assigned to additional consideration for financing activities
  ($0.72 per share)                                                               -         (72,000)              -               -
Issuance of stock ($0.25 per share)                                               -               -               -         475,000
Issuance of stock ($0.25 per share)                                               -               -               -         500,000
Issuance of stock ($0.38 per share)                                               -               -               -       1,180,000
Issuance of stock ($0.25 per share)                                               -               -               -         232,500
Issuance of stock ($0.50 per share)                                               -               -               -         120,000
Issuance of stock for settlement of litigation ($2.51 per share)                  -               -               -         456,278

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

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

                                                               F-8
</TABLE>

<PAGE>

<TABLE>
                                                     EUROTECH, LTD.
                                             (A Development Stage Company)
                                     STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY

                            FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1995
                               AND THE YEARS ENDED DECEMBER 31, 1996, 1997, 1998 AND 1999
<CAPTION>

                                                                                               Common Stock             Additional
                                                                         Date of      ------------------------------     Paid-in
Year Ended December 31, 1999:(Continued)                               Transaction        Shares         Amount          Capital
-----------------------------                                         --------------  --------------  --------------  --------------
                                                                                            (1)
<S>                                                                    <C>               <C>          <C>             <C>
Issuance of stock for exercise of warrants ($1.50 per share)           11/99  12/99         200,000              50   $     299,950
Acquisition of 6,795,000 shares of Kurchatov Research Holdings,
  Ltd. ($1.07 per share)                                                   09/99          4,530,000           1,133       4,840,305
Acquisition from KRHL for Ekor Technology interest ($1.069 per share)      11/99          2,000,000             500       2,137,000
Issuance of stock to retire debt of KRHL assumed with purchase of
  Ekor Technology interest ($1.06 per share)                               11/99          1,000,000             250       1,068,500
Issuance of stock for exercise of warrants ($0.36 per share)               11/99             75,000              19          26,981
Issuance of stock for conversion of debenture note payable,
  interest and penalties ($0.36 per share)                                 11/99            217,464              54         230,458
Issuance of stock in private sale ($1.59 per share)                        12/99          1,882,353             471       2,831,529
Modification of warrants issued                                                                   -               -         123,500
Amortization of unearned financing costs                                                          -               -               -
Net loss                                                                                          -               -               -
                                                                                      --------------  --------------  --------------
Balance - December 31, 1999                                                              39,399,343   $       9,850   $  31,873,696
                                                                                      ==============  ==============  ==============

                                                                                                                         (continued)
</TABLE>

<TABLE>
<CAPTION>
                                                                                                         Deficit
                                                                                                       Accumulated
                                                                                        Unearned       During the
                                                                         Due from       Financing      Development
Year Ended December 31, 1999:(Continued)                               Stockholders       Costs           Stage           Total
-----------------------------                                         --------------  --------------  --------------  --------------
<S>                                                                   <C>             <C>             <C>             <C>
Issuance of stock for exercise of warrants ($1.50 per share)          $           -   $           -   $           -   $     300,000
Acquisition of 6,795,000 shares of Kurchatov Research Holdings,
  Ltd. ($1.07 per share)                                                          -               -               -       4,841,438
Acquisition from KRHL for Ekor Technology interest ($1.069 per share)             -               -               -       2,137,500
Issuance of stock to retire debt of KRHL assumed with purchase of
  Ekor Technology interest ($1.06 per share)                                      -               -               -       1,068,750
Issuance of stock for exercise of warrants ($0.36 per share)                      -               -               -          27,000
Issuance of stock for conversion of debenture note payable,
  interest and penalties ($0.36 per share)                                        -               -               -         230,512
Issuance of stock in private sale ($1.59 per share)                               -               -               -       2,832,000
Modification of warrants issued                                                   -               -               -         123,500
Amortization of unearned financing costs                                          -         294,925               -         294,925
Net loss                                                                          -               -      (6,492,312)     (6,492,312)
                                                                      --------------  --------------  --------------  --------------
Balance - December 31, 1999                                           $           -   $           -   $ (30,737,906)  $   1,145,640
                                                                      ==============  ==============  ==============  ==============

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

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

                                                               F-9

</TABLE>
<PAGE>
<TABLE>
                                                EUROTECH, LTD.
                                         (A Development Stage Company)

                                           STATEMENTS OF CASH FLOWS

<CAPTION>
                                                                                                                     For the Period
                                                                          For the Years Ended December 31,           from Inception
                                                                   ----------------------------------------------  (May 26, 1995) to
                                                                        1997            1998            1999       December 31, 1999
                                                                   --------------  --------------  --------------  -----------------
<S>                                                                <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                        $ (12,441,242)  $  (7,814,143)  $  (6,492,312)  $    (30,737,906)
   Adjustments to reconcile net loss to net cash used by
      operating activities:
          Depreciation and amortization                                    4,810           7,896         144,459            158,356
          Amortization of deferred and unearned financing costs        8,507,919       4,242,884         297,314         13,276,619
          Stock issued for license                                             -               -               -             37,500
          Consulting fees satisfied by stock issuances                   839,550         442,200       1,312,679          3,783,906
          Modification of warrants issued                                      -               -         123,500            123,500
          Issuance of stock in settlement of litigation                        -               -         456,278            456,278

    Cash provided by (used in) the change in assets and
      liabilities:
          (Increase) decrease in advances to related parties              84,000               -           5,918                  -
          (Increase) decrease in prepaid expenses                         (8,561)         21,339               -               (200)
          Increase in other assets                                             -          (4,400)         (2,200)            (9,751)
          Increase in accrued liabilities                                284,650         792,036       1,578,155          2,947,157
          Increase in deferred revenue                                   225,000               -               -            225,000
                                                                   --------------  --------------  --------------  -----------------

     NET CASH USED IN OPERATING ACTIVITIES                            (2,503,874)     (2,332,188)     (2,576,209)        (9,739,541)
                                                                   --------------  --------------  --------------  -----------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Organization and patent costs                                         (5,162)              -               -            (31,358)
    Capital expenditures                                                  (6,391)        (23,628)         (1,200)           (42,192)
                                                                   --------------  --------------  --------------  -----------------
     NET CASH USED IN INVESTING ACTIVITIES                               (11,553)        (23,628)         (1,200)           (73,550)
                                                                   --------------  --------------  --------------  -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from exercise of stock options                                    -               -               -                150
    Net proceeds from issuance of common stock                                 -               -       5,345,500          6,187,000
    Net proceeds from notes payable                                            -               -         450,000            450,000
    Proceeds from exercise of warrants                                         -               -         327,000            327,000
    Offering costs                                                        75,000               -               -             (2,898)
    Repayment by stockholders                                                  -               -               -              3,000
    Proceeds from bridge notes                                                 -               -               -          2,000,000
    Repayment of bridge notes                                                  -      (2,000,000)              -         (2,000,000)
    Proceeds from Convertible Debentures                               3,000,000       4,000,000               -          7,000,000
    Borrowings from stockholders                                         420,140               -               -            561,140
    Repayment to stockholders                                           (420,140)              -               -           (561,140)
    Deferred financing costs                                            (322,000)       (260,000)              -           (604,150)
                                                                   --------------  --------------  --------------  -----------------
     NET CASH PROVIDED BY FINANCING ACTIVITIES                         2,753,000       1,740,000       6,122,500         13,360,102
                                                                   --------------  --------------  --------------  -----------------

INCREASE (DECREASE) IN CASH                                              237,573        (615,816)      3,545,071          3,547,011

CASH - BEGINNING                                                         380,183         617,756           1,940                  -
                                                                   --------------  --------------  --------------  -----------------

CASH - ENDING                                                      $     617,756   $       1,940   $   3,547,011   $      3,547,011
                                                                   ==============  ==============  ==============  =================


Supplemental Disclosure of Cash Flow Information:
-------------------------------------------------

Cash paid during the period for:

    Interest                                                       $     270,804   $      36,990   $         526   $        316,447
                                                                   ==============  ==============  ==============  =================

    Income taxes                                                   $           -   $           -   $           -   $              -
                                                                   ==============  ==============  ==============  =================
</TABLE>

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

                                                              F-10


<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE  1 -         BUSINESS

                  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, marketing 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 technologies for business and
                  other commercial applications principally in Western and
                  Central Europe, Ukraine, Russia and North America. Since the
                  Company's formation, it has acquired development and marketing
                  rights to a number of technologies by purchase, assignments,
                  and licensing arrangements. The Company intends to operate its
                  business by licensing its technologies to end-users and
                  through development and operating joint ventures and strategic
                  alliances. To date, the Company has not generated any
                  substantial revenues from operations.

NOTE  2 -         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

                  At December 31, 1999, investments in companies accounted for
                  under the equity method consist of the following foreign
                  companies which are located in Israel:

                     Chemonol, Ltd. ("Chemonol")                    35%
                     Rademate, Ltd. ("Rademate")                    40%
                     Comsyntech, Ltd. ("Comsyntech")                29%
                     Remptech, Ltd. ("Remptech")                    45%
                     Sorbtech, Ltd. ("Sorbtech")                    24%
                     Amsil, Ltd. ("Amsil")                          29%

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

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

                                      F-11


<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE  2 -         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

                  Organization and Patent Costs
                  -----------------------------

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

                  Impairment of Assets
                  --------------------

                  In March 1995, the Financial Accounting Standards Board issued
                  Statement of Financial Accounting Standards No. 121,
                  "Accounting for the Impairment of Long-Lived Assets and for
                  Long-Lived Assets to be Disposed of", which requires
                  impairment losses to be recorded on long-lived assets used in
                  operations when indicators of impairment are present and the
                  undiscounted cash flows estimated to be generated by those
                  assets are less than the assets' carrying amount. Statement
                  121 also addresses the accounting for long-lived assets that
                  are expected to be disposed of. The Company adopted Statement
                  121 on January 1, 1996 and the adoption did not have an effect
                  on the Company's financial position or results of operations.

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

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

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

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

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

                  Research and development expenditures are charged to expense
                  as incurred, unless they are reimbursed under specific
                  contracts. Losses incurred on the equity basis in the
                  Company's interest in six Israeli research and development
                  companies are included in research and development. In
                  addition, expenditures in connection with a technology
                  licensing agreements concluded during December 31, 1997, 1998
                  and 1999, aggregating $495,000, $227,500 and $236,000,
                  respectively, were charged to research and development (see
                  Note 3).


                                      F-12


<PAGE>


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


NOTE  2 -         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

                  Deferred and Unearned Financing Costs
                  -------------------------------------

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

                  Financing costs in connection with the November 1997, February
                  1998 and July 1998 Convertible Debenture offerings are being
                  amortized over the expectant life (180 days) of the
                  obligation. The expectant life was determined to be the
                  conversion date that was most beneficial to the note holder,
                  in accordance with Emerging Issues Task Force ("EITF") topic
                  number D-60.

                  Stock Split
                  -----------

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

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

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

                  Basic net loss per common share has been computed based on the
                  weighted average number of shares of common stock outstanding
                  during the periods presented, which were retroactively
                  adjusted to give recognition to the stock split on June 1,
                  1996. Common stock equivalents, consisting of options,
                  warrants and Convertible Debentures, discussed in Notes 11 and
                  12, were not included in the calculation of diluted loss per
                  share because their inclusion would have had the effect of
                  decreasing the loss per share otherwise computed.


                                      F-13


<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE  2 -         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

                  The financial statements include various estimated fair value
                  information at December 31, 1998 and 1999, as required by
                  Statement of Financial Accounting Standards 107, "Disclosures
                  about Fair Value of Financial Instruments". Such information,
                  which pertains to the Company's financial instruments, is
                  based on the requirements set forth in that Statement and does
                  not purport to represent the aggregate net fair value to the
                  Company.

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

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

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

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

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

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

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

                  Impact of Recently Issued Accounting Standards

                  Comprehensive Income
                  --------------------

                  Effective January 1, 1998, the Company adopted the provisions
                  of SFAS No. 130, "Reporting Comprehensive Income". SFAS No.
                  130 establishes standards for reporting comprehensive income,
                  defined as all changes in equity from non-owner sources.
                  Adoption of SFAS No. 130 did not have a material effect on the
                  Company's financial position or results of operations.


                                      F-14


<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE  2 -         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

                  Effective January 1, 1998, the Company adopted the provisions
                  of SFAS No. 131, "Disclosures About Segments of an Enterprise
                  and Related Information". SFAS No. 131 establishes standards
                  for the way public enterprises report information about
                  operating segments in annual financial statements and requires
                  those enterprises to report selected information about
                  operating segments in interim financial reports issued to
                  stockholders. Adoption of SFAS No. 131 did not have a material
                  effect on the Company's financial position or results of
                  operations.

                  Pensions and Postretirement Benefits
                  ------------------------------------

                  Effective December 29, 1997, the Company adopted Statement of
                  Financial Accounting Standards (SFAS) No. 132, "Employers'
                  Disclosures About Pensions and Postretirement Benefits", which
                  standardizes the disclosure requirements for pensions and
                  other postretirement benefits. The Statement addresses
                  disclosure only. It does not address liability measurement or
                  expense recognition. There was no effect on financial position
                  or results of operations as a result of adopting SFAS No. 132.

                  Computerized Software Development
                  ---------------------------------

                  In March 1998, the American Institute of Certified Public
                  Accountants 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
                  adoption of SOP 98-1 did not have an effect on the Company's
                  financial position or results of operations.

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

         a)       Collaboration Agreements With Russian Organizations
                  ---------------------------------------------------

                  Under various agreements, the Company has agreed to fund the
                  commercialization of certain technologies developed in the
                  former Soviet Union by scientists and researchers at the I.V.
                  Kurchatov Institute ("Kurchatov"), other institutes associated
                  therewith, and the Euro-Asian Physical Society ("EAPS"),
                  collectively the "Scientists". Kurchatov will provide the
                  materials, facilities and personnel to complete the necessary
                  work to commercialize such technologies. Disbursements made by
                  the Company related to the Kurchatov arrangement were charged
                  to research and development expenses and amounted to $408,000,
                  $236,000 and $352,000, respectively, during the years ended
                  December 31, 1997, 1998 and 1999.


                                      F-15
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS



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

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

                  In connection with the collaboration agreement discussed
                  above, in September 1996, the Company entered into a licensing
                  agreement with ERBC, whereby ERBC sublicensed its license to
                  use and exploit certain technologies and inventions relating
                  to a silicon geopolymer ("EKOR") compound technology in the
                  United States, Ukraine, Canada, China, Japan, Republic of
                  Korea and all European countries who are members of the
                  European Patent Agreement. The term of the license expires on
                  August 1, 2014. Under the agreement, the Company shall pay to
                  ERBC a royalty equal to 3% of the cost of contracts made by
                  the Company on which the Company would have any income. In
                  addition to the royalty payment, on August 26, 1996, the
                  Company entered into an agreement with KRHL pursuant to which
                  it assigned to KRHL a 50% interest in the net profits (after
                  deducting development costs and related expenses attributable
                  to EKOR) derived by the Company from the sale or licensing of
                  EKOR. On November 30, 1999, this 50% profit interest was
                  acquired by the Company (see Note 4).

         b)       Investments in Israeli Technology Companies
                  -------------------------------------------

                  During 1997, the Company initially acquired a 20% interest in
                  four separate Israeli technology, research and development
                  companies. In 1998, the Company initially acquired a 20%
                  interest in two separate Israeli technology, research and
                  development companies. The Company has made additional
                  investments in these entities during 1998 and 1999 and has
                  accordingly increased its ownership interest. The Company's
                  share of losses incurred from these research companies has
                  been accounted for on the equity basis and is included in
                  research and development expenses. The amount charged to
                  research and development for the years ended December 31,
                  1997, 1998 and 1999 approximated $102,000, $172,000 and
                  $701,000, respectively, which reduced the Company's investment
                  in these six companies to zero.


                                      F-16


<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS



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

                  Technion Entrepreneurial Incubator, Ltd.
                  ----------------------------------------

                  During April 1997, the Company entered into an informal
                  agreement in principle with the Technion Entrepreneurial
                  Incubator, Ltd. ("TEI"), an Israeli corporation, to
                  participate in certain technology research and development
                  projects sponsored by the TEI, whereby the Company will
                  provide 15%-20% of the financing required for, and will
                  receive a 20% equity interest in, research and development
                  projects selected by the Company. In furtherance of this
                  venture, the Company has opened an office at the premises of
                  TEI in Haifa, Israel, has identified three technology
                  development projects for investment, and has agreed to invest
                  in a fourth such project, involving certain polyurethane
                  technology with potential use in paints and coatings. Pursuant
                  to that agreement, the Company has invested $60,000 in
                  Chemonol, Ltd. ("Chemonol"), an Israeli corporation
                  established to own and develop that technology, in exchange
                  for 20% of Chemonol's voting equity. For each of the years
                  ended December 31, 1997 and 1998, the Company has made a
                  $30,000 payment, totalling $60,000 to Chemonol.

                  On January 20, 1999, the Company entered into an agreement to
                  invest $300,000 in exchange for an additional 16% of
                  Chemonol's voting stock. The agreement provides for the
                  Company to make four (4) equal payments of $75,000, commencing
                  March 1, 1999, July 1, 1999, October 1, 1999 and January 1,
                  2000. At the completion of the transaction, the Company will
                  own 35% of Chemonol.

                  On October 20, 1999, the Company entered into an agreement to
                  invest $120,000 in exchange for additional Chemonol's voting
                  stock. The agreement provides for the Company to make three
                  (3) equal payments of $40,000, commencing November 1, 1999,
                  December 1, 1999 and December 29, 1999. In addition, the
                  Company has an option to acquire additional voting stock for
                  $30,000 and if the Company does not exercise this option by
                  March 1, 2000, it will expire.

                  For the year ended December 31, 1999, the Company has made
                  payments of $305,000.

                  On March 2, 1998, the Company entered into an agreement to
                  invest $60,000 in Rademate, Ltd. for its voting stock.
                  Rademate, Ltd. is involved with the research and development
                  of rapid biodegradable composite materials. The agreement
                  provides for the Company to make four (4) equal payments of
                  $15,000 commencing March 1, 1998, September 1, 1998, March 1,
                  1999 and September 1, 1999.

                  On November 14, 1999, the Company entered into an additional
                  agreement to invest $150,000 in exchange for additional
                  Rademate's voting stock. The agreement provides for the
                  Company to make three (3) equal payments commencing November
                  25, 1999 for $30,000 and April 1, 2000 and October 1, 2000 for
                  $60,000, respectively. For the year ended December 31, 1998
                  and 1999, the Company had made payments of $30,000 and
                  $60,000, respectively.


                                      F-17


<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS



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

                  Incubator for Technological Entrepreneurship - Kiryat
                  -----------------------------------------------------
                  Weizmann, Ltd.
                  --------------

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

                  Pursuant to that informal agreement, the Company agreed to
                  invest, pursuant to a written agreement, up to $60,000 in
                  Separator, Ltd. ("Separator"), an Israeli corporation
                  established to own and develop technology, in exchange for 20%
                  of Separator's voting equity. For each of the years ended
                  December 31, 1997 and 1998, the Company has made a payment of
                  $30,000 to Separator. The Company elected to discontinue its
                  investment in Separator at the conclusion of its initial
                  investment in 1998.

                  Ofek Le-Oleh Foundation
                  -----------------------

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

                  Pursuant to that informal agreement, the Company agreed to
                  invest, pursuant to written agreements, up to $60,000 per
                  company in Comsyntech, Ltd. ("Comsyntech") and Remptech, Ltd.
                  ("Remptech"), Israeli corporations established to own and
                  develop technology, in exchange for 20% of Comsyntech's and
                  Remptech's voting equity. For the years ended December 31,
                  1997, 1998 and 1999, the Company has made payments of $21,000,
                  $26,000 and $73,000, respectively, per company, to Comsyntech
                  and Remptech. On February 25 and May 19, 1998, the Company
                  entered into two additional written agreements to invest
                  $60,000 per company in Sorbtech Ltd. ("Sorbtech") and Amsil
                  Ltd. ("Amsil"), Israeli corporations established to own and
                  develop technology in exchange for 20% of Sorbtech and Amsil
                  voting stock. For the years ended December 31, 1998 and 1999,
                  the Company has made aggregate payments of $60,000 and $-0-,
                  respectively, to each company.

                  On August 8, 1999, the Company entered into an agreement to
                  invest $120,000 in exchange for additional Remptech voting
                  stock. The agreement provides for the Company to make two (2)
                  equal payments of $60,000. For the year ended December 31,
                  1999, the Company has made payments of $120,000.

                  On November 22, 1999, the Company entered into an additional
                  written agreement to invest $450,000, in total, in the
                  following four companies: Remptech, Ltd., Comsyntech, Ltd.,
                  Amsil, Ltd. and Sorbtech, Ltd. in exchange for additional
                  voting equity. As of December 31, 1999, the Company has made
                  payments of $210,000 in total.


                                      F-18
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


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

                  Equity Transfer Consents for Israeli Companies

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

         c)       Pursuant to three Technology Purchase Agreements each dated
                  January 1, 1998 and a fourth agreement dated April of 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 four 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"), (iii) "Rubber Concrete" ("RubCon") and (iv)
                  Electronic Glues for operations in extreme environments for
                  purchase prices of $75,000, $15,000, $35,000 and $62,500,
                  respectively (each, a "Purchase Price"). Pursuant to each such
                  Technology Purchase Agreement, during 15-year period, 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 $187,500 research and
                  development expenses during the year ended December 31, 1998.

         d)       During June 1998, the Company purchased for $40,000 the rights
                  to certain anticorrosive additive technology from Israeli
                  scientists. The Company has charged the $40,000 expenditure to
                  research and development expenses for the year ended December
                  31, 1998.


                                      F-19
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


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

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

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

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

                  During 1999, the Company entered into an agreement to sell
                  these sub-licensing rights to the re-sealable container
                  technology to KRHL for $500,000 and a royalty equal to 6% of
                  the gross revenue from this technology. The Company received a
                  deposit on such sale of $150,000 during 1999. Included in
                  revenue is the $150,000 deposit related to the sale. The
                  balance of the revenue related to the sale of these rights was
                  not recognized as of December 31, 1999 due to the fact that
                  there has been no revenue to-date from such technology and due
                  to the operating losses of KRHL experienced over the last few
                  years.

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

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


                                      F-20


<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE  4 -         TECHNOLOGY INTEREST ACQUIRED

                  On August 26, 1996, the Company entered into an agreement with
                  KRHL pursuant to which it assigned to KRHL a 50% interest in
                  the net profits (after deducting development costs and related
                  expenses attributable to EKOR) derived by the Company from the
                  sale or licensing of EKOR.

                  During 1999, the Company acquired from a former member of the
                  Company's board of directors doing business as CIS Development
                  Corp. ("CIS") 6,795,000 shares, representing approximately 40%
                  of interest of the voting stock of KRHL. In exchange for the
                  KRHL shares, the Company issued 4,530,000 shares of its own
                  common stock valued at $4,841,438. The beneficial owners of
                  the exchanged KRHL shares consist of various Russian
                  scientists and researchers.

                  In an agreement, dated as of November 30, 1999, KRHL released
                  to the Company all of its rights in EKOR for the following
                  consideration provided by the Company:

                  o        Released to KRHL all of the Company's royalty rights
                           in the Re-sealable Container Systems and TetraPak
                           Container technologies.

                  o        Surrendered to KRHL the shares the Company had
                           acquired from CIS valued at $4,841,438 (Note 11).

                  o        Issued to KRHL 2,000,000 shares of Eurotech's common
                           stock valued at $2,137,500.

                  o        Agreed to pay to KRHL a royalty of 2% of gross sales,
                           as defined, received by Eurotech from all products
                           and services of EKOR by Eurotech, and

                  o        Assumed KRHL's obligations to Spinneret Financial
                           Systems, Inc. Spinneret had previously loaned to KRHL
                           $750,000 pursuant to convertible notes on which KRHL
                           was in default and on which interest and penalties
                           had accrued. Spinneret expressly consented to the
                           assumption of this liability. Subsequently, and
                           before year-end, Spinneret converted this liability
                           into 1,000,000 shares of Eurotech common stock valued
                           at $1,068,750.

                  The total consideration provided to KRHL for the acquired
                  technology interest in EKOR totalled $8,047,688 and is being
                  amortized over a 5-year period commencing November 30, 1999.
                  Amortization expense related to this intangible asset was
                  $134,128 for the period ended December 31, 1999.


                                      F-21
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE  5 -         MACHINERY AND EQUIPMENT

                  Machinery and equipment consisted of the following:

                                                              December 31,
                                                      --------------------------
                                                          1998          1999
                                                      ------------  ------------
                    Cost                              $    40,972   $    42,192
                    Less:  Accumulated depreciation         9,126        17,443
                                                      ------------  ------------

                                                      $    31,846   $    24,749
                                                      ============  ============

                  Depreciation expense for the years ended December 31, 1997,
                  1998 and 1999 amounted to $2,897, $5,832 and $8,316,
                  respectively.

NOTE  6 -         ORGANIZATION AND PATENT COSTS

                  Organization and patent costs consisted of the following:


                                                              December 31,
                                                      --------------------------
                                                          1998          1999
                                                      ------------  ------------
                    Organization cost                 $     1,557   $     1,557
                    Cost of patents                        29,801        29,801
                                                      ------------  ------------
                                                           31,358        31,358
                    Less:  Accumulated amortization         4,771         6,785
                                                      ------------  ------------

                                                      $    26,587   $    24,573
                                                      ============  ============

                  Patent costs capitalized during 1997 and 1998 represent legal
                  and other costs related to filing of patent applications in
                  various countries.

                  Amortization expense for the years ended December 31, 1997,
                  1998 and 1999 amounted to $1,913, $2,064 and $2,014,
                  respectively.


                                      F-22
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE  7 -         NOTES PAYABLE - BRIDGE LOAN

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

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

                  In December of 1997, the Company and the promissory note
                  holders agreed to extend the original maturity date from
                  December 18, 1997 to March 18, 1998 and increase the interest
                  rate from 12% to 15% per annum effective on December 19, 1997.
                  On March 6, 1998, the promissory notes were satisfied by the
                  Company from proceeds of a Convertible Debenture financing
                  completed on February 23, 1998 (Note 8).

                  See Note 11 for further discussion of this financing.

NOTE  8 -         8% CONVERTIBLE DEBENTURES

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

                  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.

                  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.

                  During the year ended December 31, 1998, a debenture holder
                  converted $30,000 of principal and $2,169 of accrued interest
                  into 100,002 shares of common stock.

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

                  See Note 11 for further discussion of the 8% Convertible
                  Debentures.


                                      F-23
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE  8 -         8% CONVERTIBLE DEBENTURES (Continued)

                  Convertible debentures consist of the following:

                                                              December 31,
                                                      --------------------------
                                                          1998          1999
                                                      ------------  ------------
                       November 27, 1997 8%
                         Convertible Debentures       $ 2,970,000   $ 2,660,000

                       February 23, 1998 8%
                         Convertible Debentures         3,000,000     3,000,000

                       July 20, 1998 8%
                         Convertible Debentures         1,000,000       900,000
                                                      ------------  ------------

                              Total                     6,970,000     6,560,000

                       Less: Current maturities                 -     2,660,000
                                                      ------------  ------------

                             Long-term Portion        $ 6,970,000   $ 3,900,000
                                                      ============  ============


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

                  On January 6, 1999, the Company's Chairman and the majority
                  convertible debt holder provided $450,000 of short-term
                  financing to the Company evidenced by two secured promissory
                  notes. Each secured promissory note bears interest at 13% per
                  annum and is due January 6, 2000. The promissory notes are
                  collateralized by the Company's intangible assets and can be
                  exchanged for 8% Convertible Debentures under terms similar to
                  the current outstanding debentures discussed above. These
                  notes were satisfied in full in January 2000 (see Note 14).

                  As additional consideration for the financing, the Company
                  issued to the secured promissory note holders warrants to
                  purchase 84,750 shares of the Company's common stock at the
                  average market value for five trading days immediately
                  preceding the issuance date at $0.36. The warrants expire five
                  years from January 6, 1999.

                  The Company assigned a value to the debt's beneficial
                  conversion feature and warrants amounting to $175,425, and
                  such amount was amortized over 180 days commencing January 6,
                  1999.


                                      F-24
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE  9 -         ACCRUED LIABILITIES

                  Accrued liabilities consist of the following:

                                                              December 31,
                                                      --------------------------
                                                          1998          1999
                                                      ------------  ------------

                    Interest                          $   549,479   $ 1,087,490

                    Penalties related to
                      registration rights                 350,000     1,120,000

                    Professional fees                     352,234       471,119

                    Consulting fees                       375,950       272,894

                    Other                                  89,146       187,701
                                                      ------------  ------------
                                                      $ 1,716,809   $ 3,139,204
                                                      ===========   ============
NOTE 10 -         INCOME TAXES

                  The Company was not required to provide for a provision for
                  income taxes for the years ended December 31, 1997, 1998 and
                  1999 as a result of net operating losses incurred during those
                  years.

                  The components of deferred tax assets and liabilities at
                  December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>

                                                                                  1998             1999
                                                                              --------------  -------------
                       <S>                                                    <C>             <C>
                       Deferred Tax Assets:
                          Net operating losses carryforwards                  $   2,885,000   $  5,003,000
                          Start-up costs                                             70,000         59,800
                          Research and development costs                            246,000        246,000
                          Compensatory element of stock issuances                 4,003,000      4,071,000
                                                                              --------------  -------------


                                 Total Gross Deferred Tax Assets                  7,204,000      9,379,800

                          Less:  Valuation allowance                             (7,204,000)    (9,379,800)
                                                                              --------------  -------------

                                 Net Deferred Tax Assets                      $           -   $          -
                                                                              ==============  =============
</TABLE>

                  The net change in the valuation allowance for deferred tax
                  assets was an increase of approximately $2,175,800.


                                      F-25
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 10 -         INCOME TAXES (Continued)

                  As of December 31, 1999, the Company had available
                  approximately $14,715,000 of net operating losses ("NOL") for
                  income tax purposes that may be carried forward to offset
                  future taxable income, if any. The NOL carryforwards from
                  December 31, 1997 and prior expire during the year 2010
                  through 2013, and the December 31, 1998 and 1999 NOL expire in
                  the years 2018 and 2019, respectively. Pursuant to Section 382
                  of the Internal Revenue Code, substantial restrictions are
                  imposed on the utilization of net operating loss carryforwards
                  in the event of an ownership change.

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

<TABLE>
<CAPTION>

                                                                           1997          1998         1999
                                                                       ------------  -----------  -----------
                         <S>                                               <C>          <C>          <C>
                         Federal statutory rate                            (34.0)%      (34.0)%      (34.0)%
                         Non-deductible expenses and losses                    1.0         11.8          1.0
                         Increase in valuation allowance                      33.0         22.2         33.0
                                                                       ------------  -----------  -----------
                           Effective rate                                      -0-%         -0-%         -0-%
                                                                       ============  ===========  ===========
</TABLE>

NOTE 11 -         STOCKHOLDERS' DEFICIENCY

                  Common Stock Transactions
                  -------------------------

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

                  Since inception (May 26, 1995) through December 31, 1999, the
                  Company completed two offerings of common stock under Rule 504
                  and four offerings under 506 of the Securities Act of 1933
                  (the "Act") as follows:

                  First Offering
                  --------------

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

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

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


                                      F-26
<PAGE>


                                 EUROTECH, LTD.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS


NOTE 11 -         STOCKHOLDERS' DEFICIENCY (Continued)

                  First Offering (Continued)
                  --------------

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

                  Second Offering
                  ---------------

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

                  Third Offering/Bridge Financing
                  -------------------------------

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

                  Under the agreement, the notes were due one year from the
                  issuance date. Holders of the shares of common stock issued
                  pursuant to this agreement have, among other things, demand
                  and mandatory registration rights, including penalties, which
                  require the Company to issue to the Unit holders up to
                  1,000,000 additional shares of common stock if such shares
                  were not registered under the Act within the specified time
                  frame. As of December 31, 1996, the Company recorded an
                  additional 500,000 shares of common stock to be issued under
                  the offering based on the Company's belief that it would not
                  meet one of the two filing deadlines. The Company did not meet
                  either filing deadline and, accordingly, the 500,000
                  additional common shares recorded as of December 31, 1996,
                  were issued to such holders in April 1997, and a further
                  500,000 common shares were issued to such holders in August
                  1997.


                                      F-27
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11 -         STOCKHOLDERS' DEFICIENCY (Continued)

                  Third Offering/Bridge Financing (Continued)
                  -------------------------------

                  As of their maturity in December 1997, the Company had
                  insufficient funds to repay such notes and also had not yet
                  registered the shares of common stock as required under the
                  agreement. Accordingly, the Company obtained the agreement of
                  the noteholders to extend the notes' maturity until March 18,
                  1998, in consideration of the issuance to the noteholders of
                  an aggregate of 1,000,000 additional shares of the Company's
                  common stock. The Company agreed to register such shares of
                  common stock under the Act by April 1, 1998. Pursuant to the
                  terms of the notes, as of December 19, 1997, their interest
                  rate has been increased to 15% per annum.

                  The Company failed to complete the registration statement by
                  April 1, 1998 and, accordingly, under the terms of the
                  December 1997 extension agreement, the Company issued to the
                  holders of the Bridge Units an additional 500,000 shares of
                  the Company's common stock.

                  On March 6, 1998, the Company paid all of the $2,000,000
                  principal due to the holders of the bridge notes from proceeds
                  of the February 23, 1998 Convertible Debenture offering.

                  The common shares issued under the December 1996 agreement and
                  December 1997 extension agreement totalled 3,500,000 and have
                  been accounted for separately from the promissory notes as an
                  addition to paid-in capital for the value of the stock issued
                  and as a charge to stockholders' deficiency for the unearned
                  portion. The value assigned to the 3,500,000 shares was based
                  on fair value and amounted to $7,976,124, of which $2,719,875
                  was recorded in 1996 attributable to 1,500,000 shares, and
                  $4,725,000 was recorded in 1997 attributable 1,500,000 shares
                  and $531,249 was recorded in 1998 attributable to 500,000
                  shares. These amounts are being amortized on the interest
                  method over a 12-month period and charged to financing costs.
                  The amount charged to financing costs for the years ended
                  December 31, 1997, 1998 and 1999 amounted to $7,218,219,
                  $531,249 and $-0-, respectively.

                  Costs associated with this offering allocated to the
                  promissory notes, which amounted to $22,150, have been
                  capitalized and are being amortized as financing costs over
                  the life of the notes. For the years ended December 31, 1997,
                  1998 and 1999, amortization related to the promissory note
                  costs amounted to $20,304, $-0- and $-0-, respectively.


                                      F-28
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11 -         STOCKHOLDERS' DEFICIENCY (Continued)

                  Fourth Offering/November 27, 1997 8% Convertible Debentures
                  -----------------------------------------------------------

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

                  The debenture agreement permits the holders of the debentures
                  to convert the debt into shares of common stock at beneficial
                  conversion rates based on the timing of the conversions. The
                  conversion feature commences at the earlier of: (i) the date
                  the underlying shares to the convertible debentures are
                  registered and declared effected by the SEC; (ii) 90 days
                  after February 25, 1998. Shares of common stock to be issued
                  at the conversion date shall be equal to the outstanding
                  principal and accrued interest at the conversion date, divided
                  by the conversion price. The conversion price is the lower of
                  $5.38 or the average bid price per share of the Company's
                  common stock for five trading days immediately preceding the
                  conversion date, multiplied by (i) 80% in the case of
                  conversions effected prior to May 29, 1998, (ii) 75% in the
                  case of conversions effected on or after May 29, 1998, but
                  prior to November 25, 1998, and (iii) 70% in the case of
                  conversions effected on or after November 25, 1998.
                  Furthermore, the conversion price may not be less than a
                  specified "floor" initially set at $2.00. Commencing on
                  November 27, 1999, all or any portion of the remaining debt,
                  at the option of Eurotech, is convertible into common stock at
                  the 70% conversion rate.

                  On July 20, 1998, the Company modified the November 27, 1997
                  Convertible Debenture agreement, which eliminated the moving
                  floor conversion price terms. The November 27, 1997 conversion
                  price terms were replaced by the July 20, 1998 $1,000,000
                  convertible debenture note conversion price terms.

                  The Convertible Debenture agreement obligates the Company to
                  register a number of common shares equal to the sum of (i)
                  200% of the number of shares of common stock into which the
                  debentures are convertible, (ii) interest thereon and (iii)
                  127,500 shares of common stock related to the warrants.
                  Further, the Company has agreed that if a registration
                  statement covering the underlying shares of the Convertible
                  Debenture is either not filed with the SEC on or prior to
                  January 15, 1998, or, if filed, is not declared effective by
                  the SEC on or prior to February 16, 1998, the Company will be
                  obligated to pay to the debenture holders liquidated damages
                  equal to 1% of the aggregate principal amount of the then
                  outstanding notes on the first day of each month until such
                  filing or effectiveness deficiency is cured. The Company's
                  Registration Statement was declared effective by the SEC in
                  July 1998 and, accordingly, the Company accrued $180,000 for
                  liquidated damages in accordance with this debenture
                  agreement.


                                      F-29
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11 -         STOCKHOLDERS' DEFICIENCY (Continued)

                  Fourth Offering/November 27, 1997 8% Convertible Debentures
                  -----------------------------------------------------------
                  (Continued)

                  The Company has assigned a value of $1,337,143 to the
                  beneficial conversion feature of the debentures and $134,400
                  to the 60,000 warrants issued the purchasers of the
                  Convertible Debentures. These amounts are accounted for
                  separately from the Convertible Debentures as an addition to
                  paid-in capital and as a reduction of stockholders' equity for
                  the unearned portion. The unearned portion is being amortized
                  on the interest method over the 180-day period commencing
                  November 27, 1997 and is charged to financing costs. For the
                  years ended December 31, 1997, 1998 and 1999, amortization of
                  such unearned financing cost amounted to $227,958, $1,193,585
                  and $50,000, respectively.

                  Costs in connection with the $3,000,000 Convertible Debenture
                  offering allocated to the Convertible Debentures, amounted to
                  $472,080. Such costs were comprised of: (i) legal and
                  professional fees amounting to $22,000, (ii) a placement fee
                  to an unrelated party amounting to $300,000 and (iii) the
                  placement agent received non-cash consideration valued at
                  $150,080 consisting of warrants to purchase 67,500 shares of
                  the Company's common stock at $4.73 per share, or 110% of
                  Company's average closing price, determined over the last five
                  trading days prior to November 27, 1997. The Company is
                  amortizing such costs over 180 days as a financing expense
                  commencing November 27, 1997. For the years ended December 31,
                  1997, 1998 and 1999, amortization related to such costs
                  amounted to $89,170, $382,910 and $-0-, respectively. During
                  the year ended December 31, 1998, a debenture holder converted
                  $30,000 of principal and $2,169 of accrued interest into
                  100,002 shares of common stock.

                  Fifth Offering/February 23, 1998 8% 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.


                                      F-30
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11 -         STOCKHOLDERS' DEFICIENCY (Continued)

                  Fifth Offering/February 23, 1998 8% Convertible Debenture
                  ---------------------------------------------------------
                  Offering (Continued)
                  --------

                  On July 20, 1998, the Company modified the February 23, 1998
                  Convertible Debenture agreement, which eliminated the moving
                  floor conversion price terms. The February 20, 1998 conversion
                  price terms were replaced by the July 20, 1998 $1,000,000
                  Convertible Debenture note conversion price terms.

                  The Convertible Debenture agreement obligates the Company to
                  register a number of common shares equal to the sum of (i)
                  200% of the number of shares of common stock into which the
                  debentures are convertible; (ii) interest thereon; and (iii)
                  60,000 shares of common stock related to the warrants.
                  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 and,
                  accordingly, the Company accrued $170,000 for liquidated
                  damages in accordance with this debenture agreement.

                  The Company has assigned a value of $1,000,000 to the
                  debentures' beneficial conversion feature and $100,000 to the
                  60,000 warrants, and such amount is being amortized over 180
                  days commencing February 23, 1998. For the year ended December
                  31, 1998, amortization related to such costs amounted to
                  $1,100,000.

                  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. For the year ended
                  December 31, 1998, amortization related to such costs amounted
                  to $235,000.


                                      F-31
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11 -         STOCKHOLDERS' DEFICIENCY (Continued)

                  Sixth Offering/July 20, 1998 8% 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 of $430,000 to the
                  debentures' beneficial conversion feature and $45,000 to the
                  125,000 warrants, and such amount will be amortized over 180
                  days commencing July 20, 1998. For the years ended December
                  31, 1998 and 1999, amortization related to such costs amounted
                  to $427,500 and $47,500, respectively.

                  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. For the years ended December 31, 1998 and 1999,
                  amortization of such costs amounted to $22,500 and $2,500,
                  respectively.

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


                                      F-32
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS



NOTE 11  -        STOCKHOLDERS' DEFICIENCY (Continued)

                  Seventh Offering - Sale of Common Stock - December 31, 1999
                  -----------------------------------------------------------

                  On December 31, 1999, the Company completed the sale, to an
                  accredited investor, of 1,882,353 shares of its common stock
                  and warrants to purchase 200,000 of its common shares to one
                  investor, resulting in net proceeds to the Company of
                  $2,832,000. Pursuant to the terms of the sale, the Company may
                  be compelled to issue to the investor additional shares of
                  common stock based on certain average closing prices of its
                  common stock over the four-month period following December 31,
                  1999.

                  In addition, another agreement was entered into, with the same
                  investor, under which the Company, at its option, could sell
                  to the investor up to $22 million value of its common shares.
                  The share must be registered and the agreement is subject to
                  monthly limits of $4,000,000, and various other limitations
                  and restrictions. The purchase price of the common stock for
                  each sale is based on 90% of the average of certain closing
                  prices of its common stock of the preceding 20 days.

                  Other Issuances
                  ---------------

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

                  During the years ended December 31, 1997 and 1998, the Company
                  issued 205,000 and 93,044 shares of common stock,
                  respectively, as consideration for consulting services
                  performed by various consultants, including related parties.
                  During July 1998, the Company and the consultant mutually
                  agreed to cancel 375,000 shares of common stock that were
                  issued for past consulting services valued at $93,750. The
                  value of the cancelled shares of $93,750 has been recorded as
                  a reduction of consulting expense for the year December 31,
                  1998. Shares issued, net of cancelled shares, under these
                  arrangements were valued at $839,550 and $422,200, which was
                  all charged to operations during 1997 and 1998, respectively.


                                      F-33
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11 -         STOCKHOLDERS' DEFICIENCY (Continued)

                  Other Significant Common Stock Issuances During 1999
                  ----------------------------------------------------

                  Debenture holders converted $410,000 of principal and $161,788
                  of accrued interest and penalties into 1,204,665 shares of
                  common stock.

                  The Company issued 1,398,659 shares of common stock as
                  consideration for consulting services performed by various
                  employees and consultants, including related parties. Shares
                  issued under these arrangements were valued at $1,312,679,
                  which was all charged to operations during the year ended
                  December 31, 1999.

                  During June 1999, the Company sold 1,000,000 shares of its
                  restricted common stock for $475,000.

                  During September 1999, the Company sold 2,000,000 shares of
                  its restricted common stock for $500,000.

                  During December 1999, the Company sold 3,035,000 shares of its
                  restricted common stock for $1,180,000.

                  During December 1999, the Company sold 1,170,000 shares of its
                  restricted common stock for $352,000.

                  The Company acquired from a former member of the Company's
                  board of directors 6,795,000 shares of the voting capital
                  stock of KRHL in exchange for 4,530,000 shares of its own
                  common stock.
                  The KRHL shares were valued at $4,841,438 (Note 4).

                  The Company issued 181,784 shares in connection with a
                  litigation settlement. The shares were valued at $456,278
                  (Note 13).

                  Various warrant holders exercised their warrants and purchased
                  275,000 shares of common stock. Proceeds from these warrants
                  exercised aggregated $327,000.

                  As part of the consideration issued to KRHL for releasing all
                  of its rights in EKOR technology, the Company issued 2,000,000
                  shares of common stock valued at $2,137,500, and the Company
                  issued 1,000,000 shares of common stock at a value of
                  $1,068,750 in connection with the satisfaction of debt assumed
                  by Eurotech pursuant to this purchase (Note 4).


                                      F-34
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11 -         STOCKHOLDERS' DEFICIENCY (Continued)

                  Warrants
                  --------

                  At December 31, 1999, the Company had outstanding warrants to
                  purchase 1,426,250 shares of the Company's common stock at
                  prices ranging from $0.36 to $5.02 as described below.

                  Pursuant to a financial consulting agreements, in April of
                  1996, the Company agreed to issue warrants to purchase 600,000
                  shares of common stock. The warrants are exercisable for a
                  period of four years commencing May 22, 1997 at an exercise
                  price of $1.00 per share. To date, the Company has issued
                  warrants to purchase 130,000 shares of common stock. The
                  remaining 470,000 warrants were cancelled pursuant to a
                  settlement agreement dated November 1999 (see Note 13). During
                  1999, the warrant exercise price was reduced to $.05 per share
                  resulting in a charge to operations of $123,000 for 1999.

                  In October 1996, the Company entered into two-year consulting
                  agreements with two individuals for certain advisory services.
                  As full compensation for services to be rendered to the term
                  of the agreements, the Company issued warrants to purchase
                  150,000 shares of common stock each exercisable for a period
                  of five years commencing October 1, 1996 at an exercise price
                  of $1.50 per share. For the years ended December 31, 1997 and
                  1998, no warrants were exercised. During 1999, warrants to
                  purchase 200,000 shares of common stock were exercised,
                  resulting in net proceeds to the Company of $350,000.

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

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

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


                                      F-35
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11 -         STOCKHOLDERS' DEFICIENCY (Continued)

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

                  Pursuant to the Convertible Debenture financings completed on
                  February 23, 1998 and July 20, 1998, the Company issued, to
                  the purchasers of the convertible debenture notes, warrants to
                  purchase 60,000 and 125,000 shares of common stock,
                  respectively, at $2.30 and $1.06 per share, respectively. The
                  warrants from the February 23, 1998 and July 20, 1998
                  convertible debt financings may be exercised over the two-year
                  period ending February 23, 2000 and July 20, 2000,
                  respectively. The warrants from the February 23, 1998 and July
                  20, 1998 convertible debt financings were valued at $100,000
                  and $45,000, respectively, and said amounts were charged to
                  operations as a financing cost over the 180-day period
                  commencing February 23, 1998 and July 20, 1998, respectively.

                  During the year ended December 31, 1999, an officer and two
                  board members were granted warrants to purchase a total of
                  275,000 common shares at an exercise price of $0.75 per share
                  for 50,000 warrants and $1 for 225,000 warrants. The warrants
                  are exercisable exercised over a three-year period.

                  Pursuant to the January 1999 debt financing, warrants to
                  purchase 84,750 shares of common stock were granted to the
                  noteholders (see Note 8). During 1999, warrants to purchase
                  75,000 common shares were exercised, resulting in proceeds to
                  the Company of $27,000.

                  In December of 1999, as part of the sale of the Company's
                  securities, warrants to purchase 200,000 shares of the
                  Company's common stock were sold to the investor. The warrants
                  are exercisable over five years at an exercise price of 125%
                  of the closing bid price at December 31, 1999.

                  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:


<TABLE>
<CAPTION>
                     <S>                                                                   <C>
                     Warrants to purchase common stock                                     1,426,250
                     Convertible Debentures (assumed conversion at December 31, 1999
                         market value price and at largest discount)                       4,000,000
                                                                                         ------------

                     Total as of December 31, 1999                                         5,426,250
                                                                                         ============

                     Substantial issuance after December 31, 1999 through March 15,
                     2000:
                     Sale of common stock for cash                                         1,200,000
                                                                                         ============

                     Issuance of common stock and warrants for payment of
                     interest, penalties and principal of debt                             1,039,655
                                                                                         ============

                     Technology rights acquired                                               54,000
                                                                                         ============
</TABLE>

                                      F-36
<PAGE>

                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 12 -         1995 AND 1999 STOCK OPTION PLANS

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

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

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

                  During the year ended December 31, 1999, 500,000 shares were
                  granted under the 1995 Option Plan and 150,000 under the 1999
                  Option Plan. All options granted during 1999 were 100% vested
                  as of December 31, 1999. No options were exercised during
                  1999. No options were granted during the years ended December
                  31, 1997 and 1998.


                                      F-37
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 12 -         1995 AND 1999 STOCK OPTION PLANS (Continued)

                  A summary of the Company's stock option activity and related
                  information follows:

<TABLE>
<CAPTION>

                                                                                                         Weighted
                                                                  Shares Under     Option Price           Average
                                                                    Option           Per Share        Exercise Price
                                                                 -------------     -------------      --------------
                     <S>                                          <C>              <C>                <C>

                     Balance at December 31, 1998:                    -                  -                  -
                        Granted                                    650,000         $0.32 - $0.71          $0.68
                        Exercised                                     -              -       -              -
                        Cancelled                                     -              -       -              -
                                                                 -------------     -------------      --------------

                     Balance at December 31, 1999                  650,000         $0.32 - $0.71          $0.68
                                                                 =============     =============      ==============

</TABLE>

                  The weighted-average fair value of options granted during 1999
                  was $0.68. The weighted-average remaining contractual life for
                  options outstanding as of December 31, 1999 was 9 years.

                  Stock options for 650,000 were exercisable at December 31,
                  1999.

                  In estimating the value of options and certain warrants issued
                  to employees and consultants pursuant to the accounting
                  provisions SFAS 123, the Company used the following
                  assumptions:

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                           ---------------------------------
                                                                            1997         1998         1999
                                                                           -------      -------      -------
                         <S>                                               <C>          <C>          <C>
                         Risk-free interest rate                                5%           5%           5%
                         Expected life                                     2 years      2 years      5 years
                         Expected volatility                                   99%          33%          33%
                         Dividend yield                                          0            0            0

</TABLE>

                  If such accounting provisions of SFAS 123 were applied to the
                  year ended December 31, 1999, then the Company's net loss and
                  the net loss per share would have been $7,742,000 and $0.32,
                  respectively. There is no proforma effect for the years ended
                  December 31, 1997 and 1998.


                                      F-38
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS



NOTE 13 -         COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

                  Lease Obligations
                  -----------------

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

                  On February 17, 1998, the Company assigned the California
                  premise lease to an entity controlled by a company
                  shareholder. This assignment was approved by the original
                  lessor. During February 1998, the Company moved to a new
                  office located in Washington, D.C. The office premise was
                  rented on a month-to-month basis at the rate of $3,350 per
                  month through April of 1999. In May 1999, the Company moved to
                  a new office located in Washington, D.C. for a one year lease
                  at $1,900 per month.

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

                  Rent expense for all premise operating leases was
                  approximately $42,000, $58,864 and $40,790 for the years ended
                  December 31, 1997, 1998 and 1999, respectively.

                  Employment Agreement
                  --------------------

                  On January 11, 1999, the Company entered into an employment
                  agreement with its current president. The agreement provides
                  for $2,000 per week. He also received a 5-year warrant to
                  purchase 50,000 shares of the Company's common stock at $1 per
                  share. On September 1, 1999, he was awarded, under the 1999
                  Stock Option Plan, 150,000 options with exercise price of
                  $0.71. Effective November 5, 1999, he entered into a
                  three-year employment contract with the Company that provides
                  for base compensation in the first contract year of $104,000;
                  in the second contract year, the sum of that amount, plus the
                  bonus awarded to him in the first contract year; and in the
                  third contract year, that amount, plus the bonus awarded to
                  him in the second contract year. The bonus to which he is
                  entitled in each contract year is an amount, not to exceed 50%
                  of base salary, determined by applying to that year's base
                  salary the percentage by which the market price of our common
                  stock had increased between the beginning and the end of the
                  contract year. In addition, for each contract year, he will be
                  issued a five-year warrant to purchase 100,000 shares of the
                  Company's common stock for $1, $2 and $3 per share,
                  successively.


                                      F-39
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 13 -         COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

                  Consulting Agreements/Commitments
                  ---------------------------------

                  In August 1999, the Company entered into a consulting
                  agreement with a consultant to provide corporate
                  communications, planning and strategy consultation and
                  financial services to the Company for a term of one year, with
                  the option of extending and renegotiating terms at the end of
                  the one-year period. The agreement provided that the
                  consultant initially receive monthly payments of $3,500,
                  increased to $5,000, upon achieving certain financial goals
                  set by the Company. In addition to the monthly payments, the
                  Company will issue 5,000 shares of common stock per month. The
                  Company will issue these shares to the consultant on a
                  quarterly basis.

                  On November 2, 1996, the Company entered into a two-year
                  consulting agreement for certain technology advisory services,
                  including the evaluation of nuclear waste disposal
                  technologies acquired by the Company for the purpose of
                  introducing such technologies to potential licensees. The
                  Company is obligated to pay $4,000 and issue 20,000 shares of
                  common stock for services performed through November 15, 1996.
                  Commencing December 15, 1996, the consultant is obligated to
                  receive $4,000 and 4,000 shares of common stock on a monthly
                  basis as compensation during the term of the agreement.
                  Commencing November 1, 1998, the date the two-year consulting
                  agreement expired, the Company and the consultant agreed to
                  continue the former agreement on a month-to-month basis at the
                  previous compensation arrangement.

                  In December 1996, effective November 30, 1996, the Company
                  entered into a two-year consulting agreement for certain
                  advisory services, including directing a technology
                  development branch in Israel. The advisor was paid $2,000 and
                  issued 5,000 shares of common stock for services performed
                  through November 15, 1996. Commencing January 1, 1997, on a
                  monthly basis, the advisor will receive as compensation $1,000
                  and 2,000 shares of common stock during the term of the
                  agreement. On December 1, 1997, the agreement was revised for
                  a term of two years commencing on December 1, 1997. The
                  revised agreement states that, on a monthly basis, the
                  compensation will increase to $3,000 and 4,000 shares of
                  common stock. Effective April 1, 1998, the Company agreed to
                  increase the consultant's cash compensation to $5,000 per
                  month, and will issue a number of shares of common stock equal
                  to $6,000 per month. The number of shares will be determined
                  based on the bid price 5 days prior to issuance.


                                      F-40
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 13 -         COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

                  Consulting Agreements/Commitments (Continued)
                  ---------------------------------

                  In December 1996, the Company entered into a two-year
                  consulting agreement for certain advisory services, including
                  managing a technology development branch in Israel. The
                  advisor was paid $2,000 and issued 5,000 shares of common
                  stock for services performed through November 15, 1996.
                  Commencing January 1, 1997, on a monthly basis, the advisor
                  will receive as compensation $1,000 and 2,000 shares of common
                  stock during the term of the agreement. On December 1, 1997,
                  the agreement was revised for a term of two years commencing
                  on December 1, 1997. The revised agreement states that, on a
                  monthly basis, the compensation will increase to $3,000 and
                  4,000 shares of common stock. Effective April 1, 1998, the
                  Company agreed to increase the consultant's cash compensation
                  to $5,000 per month, and will issue a number of shares of
                  common stock equal to $6,000 per month. The number of shares
                  will be determined based on the closing bid price 5 days prior
                  to issuance.

                  In October 1999, the Company entered into a one-year
                  consulting agreement for marketing and advisory services
                  related to the Company's technologies. The agreement can be
                  terminated by either party by 90 days written notice. The
                  agreement provides for a monthly fee of $2,500 per month,
                  starting December 1999 through May 2000, and $5,000 per month
                  thereafter. In addition, the Company issue 5,000 shares of
                  Eurotech's stock per month starting October 1999 through May
                  2000, and 2,500 shares per month thereafter.

NOTE 13 -         COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

                  International Operations
                  ------------------------

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

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


                                      F-41
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 13 -         COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

                  Risk of Environmental Liability; Present Lack of Environmental
                  --------------------------------------------------------------
                  Liability Insurance
                  -------------------

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

                  Concentration of Credit Risk
                  ----------------------------

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

                  Business Risks
                  --------------

                  The Company requires additional funds to commercialize its
                  technologies and continue research and development efforts.
                  Until the commencement of sales, the Company will have no
                  operating revenues, but will continue to incur substantial
                  expenses and operating losses. No assurances can be given that
                  the Company can complete development of any technology, not
                  yet completely developed, or that with respect to any
                  technology that is fully developed, it can be manufactured on
                  a large scale basis or at a feasible cost. Further, no
                  assurance can be given that any technology will receive market
                  acceptance. Being a start-up stage entity, the Company is
                  subject to all the risks inherent in the establishment of a
                  new enterprise and the marketing and manufacturing of a new
                  product, many of which risks are beyond the control of the
                  Company.


                                      F-42
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 13 -         COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

                  Settled 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 from an
                  agreement between Eurotech and National Securities Corporation
                  ("National") relating to financial advisory services to be
                  performed by National Securities Corporation, a broker/dealer
                  with which the plaintiffs were affiliated and of which Raymond
                  Dirks Research was a division. Eurotech granted National a
                  warrant certificate for 470,000 shares at $1.00 per share (as
                  adjusted to reflect the June 1, 1996, four-to-one forward
                  split of Eurotech common stock) as a retainer for general
                  financial advisory services. In conjunction with the
                  separation of the plaintiffs and Raymond Dirks Research from
                  National Securities Corporation, National assigned a
                  significant portion of the warrant certificate to the
                  plaintiffs. This litigation was settled in October 1999, with
                  an agreement to issue to the plaintiffs 181,784 shares of
                  Eurotech common stock in twelve equal monthly installments
                  valued at $456,278, in exchange for the cancellation of the
                  warrants for 470,000 shares.

                  The Company's former President, Mr. Wilkie, brought an action
                  against the Company in the Superior Court of the District of
                  Columbia, seeking monetary damages of $360,000, plus
                  pre-judgement interest, for alleged wrongful termination under
                  a purported employment agreement. The Company took the
                  position that this purported employment agreement was not
                  valid or binding and intended to defend vigorously against
                  this claim. Moreover, the Company filed a counterclaim for
                  breach of fiduciary duty and mismanagement. In February 2000,
                  the Company settled the litigation with Mr. Wilkie by issuing
                  to him 10,000 shares of the Company's common stock.

NOTE 14 -         SUPPLEMENTAL CASH FLOW INFORMATION

                  Non-Cash Transactions
                  ---------------------

                  1997:
                  -----

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

                  1998:
                  -----

                  During the year ended December 31, 1998, a holder of
                  debentures exercised the right under the November 27, 1997
                  convertible debenture bond agreement to convert principal of
                  $30,000 and accrued interest of $2,194 into 100,002 shares of
                  the Company's common stock.


                                      F-43
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 14 -         SUPPLEMENTAL CASH FLOW INFORMATION (Continued)

                  Non-Cash Transactions (Continued)
                  ---------------------

                  1999:
                  -----

                  During the year ended December 31, 1999, a holder of
                  debentures converted $410,000 of principal and $161,788 of
                  accrued interest into 1,204,665 shares of common stock.

                  Technology rights were acquired for non-cash consideration
                  totalling $8,047,688 (Note 4).

NOTE 15 -         ABORTED PROPOSED INITIAL PUBLIC OFFERING OF PREFERRED STOCK

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

NOTE 16 -         SUBSEQUENT EVENTS

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

                  Pursuant to amended terms of an additional agreement with
                  Woodward LLC, on March 2, 2000, the Company sold 1,200,000
                  shares of its common stock for net proceeds of approximately
                  $6,000,000. The purchaser agreed to hold such shares for a
                  minimum of six months. Additional shares of common stock may
                  be issuable to the purchaser in the event that the average bid
                  price of the common stock during the months of September of
                  2000 and October of 2000 are below $6.58.

                  Investments in Israel Research and Development Expenses
                  -------------------------------------------------------

                  During the period commencing January 1, 2000 to March 15,
                  2000, the Company made additional investments, aggregating
                  $725,000, in seven Israeli research and development companies
                  in return for increased ownership interests.

                  The additional investments will be charged to research and
                  development expenses during the year ended December 31, 2000.

                  Acquisitions
                  ------------

                  During February 2000, the Company entered into a technology
                  acquisition agreement with a developer. The Company will form
                  and fund a corporation for the purpose of this agreement named
                  Crypto.Com, Inc. The Company agrees to pay the developer a
                  salary of $6,000 per month, plus usual Company benefits, for a
                  period of one year. The Company will be the controlling
                  shareholder of Crypto.Com, Inc. upon the formation of
                  Crypto.Com, Inc.


                                      F-44
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 16 -         SUBSEQUENT EVENTS (Continued)

                  Employment Agreements
                  ---------------------

                  During February 2000, the Company entered into an employment
                  agreement with an existing member of the Company's board of
                  directors to act as the Company's Executive Vice-President.
                  The Company agrees to pay the employee an annual salary of
                  $72,000. In addition, the Company shall issue to the
                  employees, each year for the next 5 years, a warrant to
                  purchase 15,000 shares of the Company's common stock at a
                  purchase price of $1 for year one, $2 for year two, $3 for
                  year three, $4 for year four and $5 for year five. The term of
                  the agreement extends through February 6, 2005, at which time
                  the agreement may be renewed.

                  During February 2000, the Company entered into an employment
                  agreement with an individual to act as the Company's Chief
                  Financial Officer. The Company agrees to pay the employee an
                  annual salary of $100,000. In addition, the Company issued to
                  the employee 10,000 restricted shares of the Company's common
                  stock and a $10,000 signing bonus. The term of the agreement
                  extends through February 6, 2001, at which time the agreement
                  may be renewed.

                  Consulting Agreement
                  --------------------

                  During February 2000, the Company entered into a consulting
                  agreement with an individual to carry out various activities
                  for the Company's operations in Germany. The Company agreed to
                  pay the consultant $4,000 per month. The term of the agreement
                  extends for one year and is renewable at the end of each
                  contract year.

                  Lease Agreement
                  ---------------

                  During February 2000, the Company entered into a lease
                  agreement for office space at a monthly rental of $435. The
                  term of the lease is for one year, commencing on February 21,
                  2000, and terminating on February 20, 2001.

                  Settlement Agreement
                  --------------------

                  During March 2000, the Company entered into a settlement
                  agreement. Under the agreement, the Company issued 10,000
                  shares of its common stock in full settlement of the
                  litigation with a former chief executive officer.

                  Warrants Exercised
                  ------------------

                  During January and February 2000, various individuals
                  exercised warrants and purchased a total of 235,000 shares of
                  the Company's common stock, for net proceeds to the Company of
                  $327,500.


                                      F-45
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 16 -         SUBSEQUENT EVENTS (Continued)

                  Technology Interests Acquired
                  -----------------------------

                  Pursuant to a technology purchase agreement dated January 1,
                  1998 (Note 3c), the Company acquired the rights to a certain
                  technology from Oleg L. Figovsky, Ph.D., a consultant to the
                  Company. The acquisition was subject to a royalty, payable to
                  Professor Figovsky, equal to 49% of the net profits derived by
                  the Company from such technology. During February 2000, the
                  Company acquired substantially all (48% out of 49%) of royalty
                  interest in the net profits derived by the Company from such
                  technologies, along with rights to certain other technologies,
                  for a cash payment to Professor Figovsky of $235,000 and
                  54,000 shares of the Company's common stock, and a payment of
                  $15,000 to an Israeli research institute. The acquisition of
                  this 48% profit interest reduced the Company's royalty
                  obligation to 1% of the net profits derived by the Company
                  from this technology.

                  Debt Satisfied
                  --------------

                  During the period commencing January 1, 2000 to March 15,
                  2000, the Company satisfied the following obligations, which
                  were outstanding as of December 31, 1999:

                  o        An accrued liability for legal fee of $125,789 was
                           paid in full.

                  o        Obligations under a note payable dated January 1999
                           of $452,142 was paid in full, including accrued
                           interest of $52,142.

                  o        Accrued interest through December 31, 1999 on the
                           November 1997, February 1998 and July 1998
                           Convertible Debentures totalling $902,276 was
                           satisfied for a cash payment of $451,138 and the
                           issuance of 289,655 shares of common stock valued at
                           $451,138.

                  o        Obligation under a convertible promissory note dated
                           January 1999 of $50,000, plus accrued interest,
                           payable to a former Chairman of the Board of the
                           Company, was satisfied by the issuance of 200,000
                           shares of common stock. In connection with this
                           transaction, warrants to purchase 9,750 shares of
                           common stock were cancelled.


                                      F-46
<PAGE>


                                 EUROTECH, LTD.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 16 -         SUBSEQUENT EVENTS (Continued)

                  Settled Penalty to Holders of Convertible Debenture
                  ---------------------------------------------------

                  In January 2000, the Company settled penalties outstanding
                  under the November 1997 and February 1998 Convertible
                  Debenture, resulting from a failure to obtain an effective
                  registration statement during the July 1998 and part of 1999.
                  The penalty was settled in full by Eurotech issuing to the
                  holders of the debentures 300,000 shares of the Company's
                  common stock and warrants to purchase 250,000 shares of common
                  stock at an exercise price of $3. The consideration issued to
                  the debenture holders was valued at $1,120,000, which was
                  equal to the penalty assessed. This obligation of $1,120,000
                  is included in accrued liabilities as of December 31, 1999.

                  In addition, in January 2000, the holders of this Convertible
                  Debentures agreed to a conversion price floor of $2 per share
                  on all outstanding indebtedness under the November 1997 and
                  February 1998 Convertible Debentures.


                                      F-47