================================================================================

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

                                   ----------

                                   FORM 10-QSB

          (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 1998

                                       OR

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

    For the transition period from _____________________to___________________

                         Commission File Number 0-20701

                                COMPOSITECH LTD.
             (Exact Name of Registrant as specified in its charter)

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


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

     Registrant's telephone number, including area code: (516) 436-5200

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirement for the past 90 days. Yes |X| No ___


     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock as of May 13, 1998:

     Common Stock $.01 par value                                12,451,206    
     ---------------------------                                              
                Class                                        Number of shares 
 
================================================================================



<PAGE>


                                COMPOSITECH LTD.


                                      Index

Part I - Financial Information                                              Page
------------------------------                                              ----

Item 1.  Financial Statements

         Balance Sheets as of March 31, 1998(unaudited) and 
           December 31, 1997..................................................2

         Statements of Operations (unaudited) for the three months
           ended March 31, 1998 and 1997......................................3

         Statements of Cash Flows (unaudited) for the three months
           ended March 31, 1998 and 1997......................................4

         Notes to Financial Statements (unaudited)............................5

Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations..............................7

Part II - Other Information
---------------------------

Item 2.  Changes in Securities...............................................10

Item 6.  Exhibits and Reports on Form 8-K....................................10

Signature....................................................................11



<PAGE>


                                COMPOSITECH LTD.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    March 31       December 31
                                                                                      1998            1997
                                                                                  ------------    ------------
ASSETS                                                                            (unaudited)
<S>                                                                               <C>             <C>         
Current assets:
  Cash and cash equivalents                                                       $  1,137,829    $    624,254
  Short-term investments
  Accounts receivable trade - net                                                       58,165          44,725
  Accounts receivable from joint venture                                               119,123         201,382
  Inventories                                                                          377,921         401,922
  Prepaid expenses and other                                                           181,110          97,371
                                                                                  ------------    ------------
        Total current assets                                                         1,874,148       1,369,654

Property and equipment at cost - net                                                 5,150,097       5,276,672
Investment in Canadian joint venture - net of accumulated
      amortization of $8,200 (1998)                                                  5,664,240       5,631,561
Advance payments on construction-in-progress                                           405,209         274,253
Deferred debt expense - net of accumulated amortization of $423,231 (1998)
       and $ 154,858 (1997)                                                            190,580         458,953
Other assets and other deferred charges, net of accumulated amortization
       of $9,637 (1998) and $6,846 (1997)                                              132,005         134,796
                                                                                  ------------    ------------
Total assets                                                                      $ 13,416,279    $ 13,145,889
                                                                                  ============    ============

LIABILITIES AND STOCKHOLDERS'  EQUITY
Current liabilities:
  Accounts payable                                                                $    337,857    $    609,278
  Deferred salaries - $627,943 (1998)  and $1,500 (1997) to  officers                  856,820         192,571
  Accrued interest - $141,339 (1998) and $ 916 (1997)  to stockholders                 152,720          26,017
  Other accrued liabilities                                                            372,518         370,707
  Current maturities of  long-term debt - directors/stockholders                     1,595,000
                                                                                  ------------    ------------
        Total current liabilities                                                    3,314,915       1,198,573

Non-current liabilities:
  Notes payable to directors/stockholders                                                            1,595,000
  5% Convertible debentures, net of unamortized discount
       of $27,891 (1998) and $67,650 (1997)                                          2,652,109       5,762,350
  Deferred salaries - officers                                                                         551,558
  Accrued interest - directors/stockholders                                                            100,159
  Capital lease obligations                                                             38,457          49,047
  Other liabilities                                                                     37,500          37,500
                                                                                  ------------    ------------
        Total non-current liabilities                                                2,728,066       8,095,614

Deferred licensing income                                                              917,084

Commitments

Stockholders'  equity :
  Undesignated preferred stock; authorized 4,000,000 shares,
    none issued and outstanding
  Series A convertible preferred stock, par value $3.00 per share;
    authorized shares - 714,161, issued and outstanding shares - 580,661 (1998)
    and 614,161 (1997)                                                               1,741,983       1,842,483
  Common stock, par value $.01 per share; authorized shares - 25,000,000,
    issued and outstanding shares -  10,577,786 (1998) and 7,767,921 (1997)            105,778          77,679
  Additional paid-in capital                                                        34,250,001      30,075,100
  Deficit                                                                          (29,641,548)    (28,143,560)
                                                                                  ------------    ------------
    Total stockholders' equity                                                       6,456,214       3,851,702
                                                                                  ------------    ------------
Total liabilities and stockholders' equity                                        $ 13,416,279    $ 13,145,889
                                                                                  ============    ============
</TABLE>


See accompanying notes.
                   

                                       2
<PAGE>


                                COMPOSITECH LTD.
                            STATEMENTS OF OPERATIONS
                                   (unaudited)
                                                                               
                                                                               
                                                                               
                                                         Three Months Ended
                                                              March 31
                                                     --------------------------
                                                         1998           1997
                                                     -----------    -----------

Revenues:
  Sales                                              $    86,401    $   151,999
  Licensing income                                        12,916
                                                     -----------    -----------
       Total revenues                                     99,317        151,999

Costs and expenses:
  Manufacturing expenses                                 960,562        765,723
  Selling, general and administrative                    292,252        422,491
  Research and development                                40,613         23,008
                                                     -----------    -----------

      Total operating expenses                         1,293,427      1,211,222
                                                     -----------    -----------

(Loss) from operations                                (1,194,110)    (1,059,223)

Other income (expenses):
  Interest income                                         16,782         25,588
  Interest expense
     (net of interest capitalized of $4,000 (1997))      (95,479)       (40,977)
  Amortization of debt discount and expenses            (308,132)
  Loss on disposal of property and equipment              (8,274)
  Other income (expense)                                  50,346          2,218
                                                     -----------    -----------
                                                        (344,757)       (13,171)

(Loss) before provision for income taxes              (1,538,867)    (1,072,394)
                                                     -----------    -----------
Net (loss) from operations before equity in
  income (loss) of joint ventures                     (1,538,867)    (1,072,394)

Equity in income (loss) of Canadian joint venture         40,879
                                                     -----------    -----------
  Net (loss)                                        ($1,497,988)   ($1,072,394)
                                                     ===========    ===========

Net (loss) per share                                 ($     0.16)   ($     0.17)
                                                     ===========    ===========

Shares used in computing net (loss) per share          9,474,190      6,128,161
                                                     ===========    ===========

See accompanying notes.


                                        3
<PAGE>



                                COMPOSITECH LTD.
                            STATEMENTS OF OPERATIONS
                                   (unaudited)
                                                                               
                                                                               
<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                                               March 31
                                                                      --------------------------
                                                                          1998           1997
                                                                      -----------    -----------
<S>                                                                   <C>            <C>         
Cash Flows from Operating Activities
Net (loss)                                                            ($1,497,988)   ($1,072,394)
Adjustments to reconcile net (loss) to net cash and
  cash equivalents used in operating activities:
    Depreciation and amortization, including capital leases               176,495         62,565
    Loss on disposal of property and equipment                              8,274
    Amortization of debt discount and expenses                            308,132
    Equity in net income of Canadian joint venture                        (40,879)
    Changes in operating assets and liabilities:
       Accounts receivable trade - net                                    (13,440)        41,815
       Accounts receivable from Canadian joint venture                     82,259
       Inventories                                                         24,001        (49,418)
       Prepaid expenses and other                                         (83,739)        (2,468)
       Other assets and other deferred charges                                              (633)
       Accounts payable                                                  (271,421)      (125,800)
       Deferred salaries                                                  112,691
       Accrued interest                                                    26,544         37,516
       Deferred licensing income                                          917,084
       Other accrued liabilities                                            2,175        (21,813)
                                                                      -----------    -----------
          Net cash and cash equivalents (used)
              in operating activities                                    (249,812)    (1,130,630)

Cash Flows from Investing Activities
Purchase of property and equipment - net                                  (47,203)      (726,800)
Advance payments on construction-in-progress                             (130,956)        87,512
Short term investments - maturities                                                    2,384,700
                                                                      -----------    -----------
          Net cash and cash equivalents provided by (used in)
              investing activities                                       (178,159)     1,745,412

Cash Flows from Financing Activities
Net proceeds from issuance of common stock                                952,500
Payment of capital lease obligations                                      (10,954)
                                                                      -----------    -----------
        Net cash and cash equivalents provided by financing
              activities                                                  941,546
                                                                      -----------    -----------
        Increase in cash and cash equivalents                             513,575        614,782
        Cash and cash equivalents at beginning of period                  624,254        673,084
                                                                      -----------    -----------
        Cash and cash equivalents at end of period                    $ 1,137,829    $ 1,287,866
                                                                      ===========    ===========

Supplemental disclosures of cash flow information
Noncash financing activities:
  Capital lease obligations for property and equipment acquisitions                  $    91,336
                                                                                     ===========
Cash paid for:
  Interest                                                            $    68,934    $     4,201
                                                                      ===========    ===========
</TABLE>


See accompanying notes.

<PAGE>
 

                                COMPOSITECH LTD.


                          Notes to Financial Statements
                                   (Unaudited)

                                 March 31, 1998


Note 1 - Basis of Presentation and Significant Accounting Policies

     The  accompanying  unaudited  financial  statements  have been  prepared in
accordance with generally accepted  accounting  principles for interim financial
information  and  with  the  instructions  to  Form  10-QSB  and  Article  10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial  statements.  These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Annual Report on
Form  10-KSB for the year ended  December  31,  1997 of  Compositech  Ltd.  (the
"Company"). In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating results for the three-month period ended March 31, 1998 are
not  necessarily  indicative  of the results  that may be expected  for the year
ended December 31, 1998.

     On February 9, 1998, the Company entered into a joint venture agreement and
patent,  information and trademark agreement with a Taiwanese investor group led
by Fidelity  Venture  Capital Corp. of Taiwan  ("Fidelity") to establish a joint
venture to  manufacture  the  Company's  laminates in Taiwan  ("Taiwanese  joint
venture"). The Company received $1 million as a license down payment and it will
receive  additional  up-front  license payments of $1 million and, will in turn,
invest  $500,000  in  the  joint  venture,   upon  the  achievement  of  certain
milestones.  As part of the transaction,  the Company received $960,000,  net of
expenses,  in a private  placement  from the joint  venture,  and issued 610,868
shares of Common Stock,  including  commissions  and will issue a like amount of
shares to the joint  venture for another  $960,000,  net of expenses,  within 30
days following  approval of the joint venture  license by the science park where
it is proposed  to be  located.  The Company  will  receive an  approximate  10%
interest in the joint  venture and royalty  payments  based on sales.  A related
letter of intent with  Fidelity  provides for entering  into a contract with the
Company  for it to supply the joint  venture  with the  requisite  manufacturing
equipment.  Licensing income of $12,916 in the three months ended March 31, 1998
relates to the Taiwanese joint venture.

Reclassifications

     Certain  reclassifications  have been made to the financial  statements for
the three months ended March 31, 1997 to conform to presentations  for the three
months ended March 31, 1998.



                                       5
<PAGE>



Note 2 - Common Stock Issuances and Stock Options

     During  January  1998,  the Company  granted to selected  officers  and key
employees  options  to  purchase  243,000  shares of common  stock at $1.375 per
share,  the market value at the date of the grant.  During  February  1998,  the
Company  granted to selected  directors  and key  employees  options to purchase
17,000  shares of common stock at $2.00 per share,  the market value at the date
of the grant.

     In the three  months ended March 31,  1998,  33,500  shares of the Series A
convertible  preferred stock were converted at the existing conversion rate into
16,750 shares of common  stock,  resulting in a decrease in Series A convertible
preferred stock of $100,500, an increase in common stock of $168 and an increase
in additional paid-in capital of $100,332.

     During the three  months ended March 31,  1998,  $3,150,000  face amount of
Debentures  were converted into 2,182,247  shares of common stock,  resulting in
increases  in  common  stock  of  $21,822  and  additional  paid-in  capital  of
$3,120,678, net of expenses.

Note 3 - Subsequent Events

     During  April 1998,  the  remaining  balance of  $2,680,000  face amount of
Debentures  were converted into 1,873,420  shares of common stock,  resulting in
increases  of  common  stock  of  $18,734  and  additional  paid-in  capital  of
$2,661,266.



                                       6
<PAGE>


Item 2.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

     This Quarterly  Report on Form 10-QSB contains  forward-looking  statements
within the meaning of Section 27A of the  Securities Act of 1933 and Section 21E
of the Securities  Exchange Act of 1934.  Actual results could differ materially
from those projected in the  forward-looking  statements as a result of a number
of important  factors.  For a discussion of important  factors that could affect
the Company's results, in addition to the discussions below, please refer to the
Company's  Annual Report on Form 10-KSB for the year ended December 31, 1997 and
the risk factors listed therein.

Overview

     The  Company was founded in 1984 to develop  copper-clad  fiberglass  epoxy
laminates used to manufacture printed circuit boards required by the electronics
industry.  As part of its development  program,  the Company developed processes
and  machinery to  manufacture  its unique  laminates,  designed  and  assembled
prototype  equipment to produce 24" x 24"  laminates,  designed and assembled an
initial production module to produce 36" x 48" laminates.

     In 1997,  the Company had been  producing  and  selling  its  laminates  in
limited  quantities for qualification and use in production by its customers and
completed  installation of production  modules to achieve higher quantity levels
and  economies of scale.  The Company also added  manufacturing  management  and
initially expanded its workforce to meet anticipated  increases in sales levels.
Starting at the end of 1997,  however,  the  workforce  was scaled back when the
anticipated  increase  in sales did not occur in  accordance  with  management's
expectations.  This  production-scale  expansion is the first  undertaken by the
Company,  and  consequently  no  assurances  can  be  made  that  the  Company's
production facilities will meet the Company's production targets in a timely way
or that the resultant product will meet the high commercial  standard needed for
successful market penetration.  Furthermore,  the expanded production facilities
may not be able to provide  adequate  efficiencies  and produce high yields.  In
addition,  the costs of production may not be as low as management  expects,  in
which case the Company  may not achieve  profitable  operations.  The  Company's
business  involves highly complex  manufacturing  processes which are subject to
disruption.  There can be no assurance  that  disruptions  will not occur in the
future.  The loss of revenue and  earnings to the Company from such a disruption
could have a materially adverse effect on its results of operations.

Results of Operations

     Sales of  laminates  decreased  to $86,401 for the three months ended March
31, 1998 from $151,999 for the three months ended March 31,1997. The decrease is
the result of the continued delay in or cancellation of customers'  programs for
which Compositech's laminates were qualified.

     Licensing  income,  net of  expenses,  for the three months ended March 31,
1998 totaled  $12,916,  relating to the Taiwanese  joint  venture.  There was no
licensing income in the three months ended March 31, 1997.



                                       7
<PAGE>


     Research and development expenses increased to $40,613 for the three months
ended March 31, 1998 from  $23,008 for the three  months  ended March 31,  1997,
reflecting  the company's  development  efforts on new  products.  Manufacturing
expenses  increased  to $960,562 for the three month period ended March 31, 1998
from $765,723 for the three months ended March 31, 1997,  reflecting  the higher
levels  of  expenditures   related  to  new  product   development  and  process
enhancements  during  the  first  quarter  of 1998 as  well as the  addition  of
manufacturing  management  personnel  and related  expenses to meet  anticipated
increases in production levels.

     Selling,  general and administrative expenses decreased to $292,252 for the
three months ended March 31, 1998 from $422,491 for the three months ended March
31, 1997. Decreases in legal and professional fees and patent/trademark expenses
were partially  offset by costs incurred in relation to the recruitment  efforts
for  a  new  chief  executive  officer.   During  the  first  quarter  of  1998,
approximately  $113,000 of selling,  general and  administrative  expenses  were
charged to the Canadian  joint  venture,  in  accordance  with the joint venture
agreements.

     Interest expense (net of interest capitalized) increased to $95,479 for the
three  months ended March 31, 1998 from $40,977 for the three months ended March
31, 1997.  The increase in the  three-month  period is related to the  borrowing
cost of the 5%  convertible  debentures,  which  was not  present  in the  first
quarter of 1997. Amortization of debt discount and expenses totaled $308,132 for
the three months  ended March 31, 1998,  reflecting  the  amortization  of costs
associated   with  the  5%   convertible   debentures,   including   accelerated
amortization of $263,257 as a result of debenture  conversions  during the three
months  ended March 31, 1998.  Other  income  increased to $50,346 for the three
months  ended March 31, 1998 from  $2,218 for the three  months  ended March 31,
1997, reflecting the receipt of a property tax refund applicable to prior fiscal
periods as well as adjustments of prior period professional fee charges.

     The equity in the profit of the  Canadian  joint  venture  during the first
quarter of 1998, totaling $40,879, represents the Company's 50% share of the net
profit of the  joint  venture  which was  formed in  October  1997.  The  profit
resulted from interest  income  recorded by the joint venture on its' short term
investments in excess of administrative and marketing costs incurred.

     The foregoing  resulted in the Company  having a net loss of $1,497,988 for
the three months ended March 31, 1998  compared  with  $1,072,394  for the three
months ended March 31, 1997.  The increased loss was  attributable  primarily to
the  amortization of debt discount and expenses  relative to the  Debentures,  a
non-cash item, and the decrease in sales revenues.

Liquidity and Capital Resources

     The Company has incurred  significant  losses and has substantial  negative
cash flow since its inception.  The Company's independent auditors have included
an  explanatory  paragraph  in their  report  covering  the  December  31,  1997
financial  statements,  which  expresses  substantial  doubt about the Company's
ability  to  continue  as a  going  concern.  The  Company  expects  significant
operating  losses to continue  in 1998.  As of March 31,  1998,  the Company had
approximately  $1,138,000 of available cash  resources.  In January and February
1998, in connection with the Taiwanese joint venture,  the Company  received net
proceeds  aggregating  approximately  $1.9 million from the receipt of a license
fee  down  payment  and the  issuance  of stock  and  anticipates  receiving  an
additional $900,000 in the second quarter of 1998, net of 



                                       8
<PAGE>



expenses.  However, the Company will require additional funding to cover current
operations and expenditures of approximately  $500,000 for additional production
equipment  until revenues from  operations  are  sufficient for these  purposes.
Current  operations  require  approximately  $400,000  a month  based on current
levels of production and sales.  Such  additional  funding may be raised through
sources  including license fees, sales of equipment in connection with licensing
operations,  joint  ventures or other  collaborative  relationships,  as well as
equity or debt  financing.  The Company  plans to obtain $5 million or more from
these  sources.  There can be no assurance  that funding will be sufficient  and
available or, if it is available, that it will be available on acceptable terms.
If adequate  funds are not available to satisfy  either  short-term or long-term
capital  requirements,  the  Company  may be  required  to limit its  operations
significantly.  There can be no  assurance  that the Company  will  successfully
complete  expansion  of  its  production  equipment,  achieve  broad  commercial
acceptance of its product or generate  sufficient revenues to achieve profitable
operations.  There can be no assurance  that  management has identified and made
appropriate  assumptions  regarding  all factors  that may affect the  Company's
business in the future.

Three  Months  Ended March 31, 1998  Compared  with Three Months Ended March 31,
1997

     Net cash and cash  equivalents  used in operating  activities  decreased to
$249,812 for the three months ended March 31, 1998 from $1,130,630 for the three
months ended March 31, 1997. The licensing fees received in cash from the Taiwan
joint venture  totaling  $930,000,  net of expenses,  was the primary  source of
funds  provided by  operating  activities  for the three  months ended March 31,
1998, with $917,084 deferred to future periods for financial reporting purposes.
Increases in deferred  salaries  and accrued  interest for this same period were
offset by a decrease in accounts payable.

     Net cash and cash  equivalents  used in  investing  activity  for the three
months  ended March 31, 1998  amounted to $178,159,  compared  with net cash and
cash  equivalents  provided by investing  activities of $1,745,412 for the three
months ended March 31, 1997.  Capital  expenditures  for  equipment  and advance
payments  for  equipment  decreased to $178,159 for the three months ended March
31, 1998,  compared with $639,288 for the three months ended March 31, 1997. The
decrease is  attributable  to the decreased  rate of  acquisition  of additional
production  modules that  constituted  a  significant  portion of the  expansion
program and the  upgrading of existing  equipment  that  concluded in the second
half of 1997.  Maturities of short term U.S.  Government  securities  during the
three months ended March 31, 1997  accounted for $2,384,700 of funds provided by
investing activities.

     Cash flows from  financing  activities  increased to $941,546 for the three
months ended March 31, 1998.  The sale of stock to the Taiwanese  joint venture,
net  of  expenses,  accounted  for  $952,500  of  funds  provided  by  financing
activities,  reduced by the  payment of capital  lease  obligations  of $10,954.
There were no cash flows from financing  activities  during the first quarter of
1997.


                                       9
<PAGE>


Part II - Other Information

Item 2. Changes in Securities

     (c)  Recent Sales of Unregistered Securities.

     On February 9, 1998, the Company entered into a joint venture agreement and
patent,  information and trademark agreement with a Taiwanese investor group led
by Fidelity  Venture  Capital Corp. of Taiwan  ("Fidelity") to establish a joint
venture to  manufacture  the  Company's  laminates in Taiwan  ("Taiwanese  joint
venture").  As part of the  transaction,  the Taiwanese  joint venture  acquired
587,372 shares ( the "Shares" ) of the Company's  common stock for $1 million in
a private  placement  and agreed to buy a like  amount of shares for  another $1
million  within 30 days following  approval of the joint venture  license by the
science  park where it is  proposed  to be  located.  The sale of the Shares was
exempt from registration under the Securities Act of 1933, as amended,  pursuant
to Section 4(2) thereof, as a transaction not involving a public offering.

     Item 6. Exhibits and Reports on Form 8-K

(a)  Reports on Form 8-K

          None

     All other items  required in Part II have been filed  previously or are not
applicable for the quarter ended March 31, 1998.


                                       10
<PAGE>


                                    Signature

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                        COMPOSITECH LTD.



Dated: May 15, 1998                     /s/ Samuel S. Gross
                                        ----------------------------------------
                                        Executive  Vice  President and Treasurer
                                        (Principal    Accounting   Officer   and
                                        officer  duly  authorized  to sign  this
                                        report on behalf of the registrant)     
                                        

                                       11