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                     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 September 30, 1997

                                       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 November 14, 1997:

     Common Stock $.01 par value                            7,236,631
     ---------------------------
              Class                                      Number of shares

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<PAGE>


                                COMPOSITECH LTD.


                                      Index

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

Item 1.  Financial Statements

         Balance Sheets as of  September 30, 1997 (unaudited) and 
          December 31, 1996 ..................................................2

         Statements of Operations (unaudited) for the three months 
          and nine months ended September 30, 1997 and 1996 ..................3

         Statements of Cash Flows (unaudited) for the nine months
           ended September 30, 1997 and 1996 .................................4

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

Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations .............................8

Part II - Other Information

Item 2.  Changes in Securities ..............................................12

Item 6.  Exhibits and Reports on Form 8-K ...................................12

Signature ...................................................................13




<PAGE>


                                COMPOSITECH LTD.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                   September 30         December 31
                                                                                                       1997                1996
                                                                                                   ------------        ------------
ASSETS                                                                                              (unaudited)
<S>                                                                                                <C>                 <C>         
Current assets:
  Cash and cash equivalents                                                                        $  2,573,958        $    673,084
  Short-term investments                                                                                                  2,384,700
  Inventories                                                                                           441,578             217,974
  Accounts receivable trade - net                                                                        11,281              66,293
  Prepaid expenses and other                                                                            266,914              66,880
                                                                                                   ------------        ------------
        Total current assets                                                                          3,293,731           3,408,931

Property and equipment at cost - net                                                                  5,271,380           3,866,140
Advance payments on construction-in-progress                                                            237,253             114,712
Deferred debt expense - 5% convertible debentures                                                       564,691
Other assets and other deferred charges                                                                 260,479              58,087
                                                                                                   ------------        ------------
Total assets                                                                                       $  9,627,534        $  7,447,870
                                                                                                   ============        ============

LIABILITIES AND STOCKHOLDERS'  EQUITY
Current liabilities:
  Accounts payable                                                                                 $    604,710        $    691,763
  Deferred salaries - $ 539,904  to  officers/stockholders                                              715,728             715,728
  Accrued interest - $ 67,117 (1997) and all (1996) to stockholders                                      92,823              61,816
  Other accrued liabilities                                                                             424,480             227,889
  Current maturities of  long-term debt - officers / stockholders                                                           100,000
                                                                                                   ------------        ------------
        Total current liabilities                                                                     1,837,741           1,797,196

Long-term debt  to directors/stockholders                                                             1,595,000           1,495,000
5% Convertible debentures  (net of amortized discount of $983,345)                                    6,421,525

Capital lease obligations                                                                                58,172              19,336
Other liabilities                                                                                        37,500              37,500
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 - 614,161 (1997) and 
    684,161 (1996)                                                                                    1,842,483           2,052,483
  Common stock, par value $.01 per share; authorized shares - 25,000,000,
    issued and outstanding shares - 6,170,439 (1997) and 6,118,939 (1996)                                61,704              61,189
  Additional paid-in capital                                                                         23,882,758          22,558,933
  Deficit                                                                                           (26,109,349)        (20,573,767)
                                                                                                   ------------        ------------
    Total stockholders' equity                                                                         (322,404)          4,098,838
                                                                                                   ------------        ------------
Total liabilities and stockholders' equity                                                         $  9,627,534        $  7,447,870
                                                                                                   ============        ============
</TABLE>

See accompanying notes.


                                        2



<PAGE>


                                COMPOSITECH LTD.
                            STATEMENTS OF OPERATIONS
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                     Three Months Ended                     Nine Months Ended      
                                                                        September 30                          September 30        
                                                               ------------------------------        ------------------------------
                                                                   1997               1996               1997               1996  
                                                               -----------        -----------        -----------        -----------
<S>                                                            <C>                <C>                <C>                <C>        
Revenues:
  Sales                                                        $   115,999        $    63,100        $   411,467        $   158,152
                                                               -----------        -----------        -----------        -----------
       Total revenues                                              115,999             63,100            411,467            158,152
                                                               -----------        -----------        -----------        -----------

Costs and expenses:
  Manufacturing expenses                                         1,485,353            671,757          3,640,969          2,011,119
  Selling, general and administrative                              384,451            313,693          1,176,440            821,552
  Research and development                                          12,765             27,418             58,970             82,900
                                                               -----------        -----------        -----------        -----------

      Total operating expenses                                   1,882,569          1,012,868          4,876,379          2,915,571
                                                               -----------        -----------        -----------        -----------

(Loss) from operations                                          (1,766,570)          (949,768)        (4,464,912)        (2,757,419)

Other income (expenses):
  Interest income                                                   35,397             73,167             74,230             97,258
  Interest expense
     (net of interest capitalized of $103,000
     (1997) and $15,000 (1996))                                    (89,291)           (33,821)          (107,974)          (308,857)
  Amortization of debt discount and expenses                      (911,263)          (224,814)        (1,032,465)          (380,734)
  Other                                                            (12,921)             1,117             (4,461)             8,735
                                                               -----------        -----------        -----------        -----------
                                                                  (978,078)          (184,351)        (1,070,670)          (583,598)

                                                               -----------        -----------        -----------        -----------
Net (loss)                                                     ($2,744,648)       ($1,134,119)       ($5,535,582)       ($3,341,017)
                                                               ===========        ===========        ===========        ===========
Net (loss) per share                                           ($     0.42)       ($     0.19)       ($     0.86)       ($     0.68)
                                                               ===========        ===========        ===========        ===========

Shares used in computing net (loss) per share                    6,465,097          6,013,353          6,462,401          4,917,136
                                                               ===========        ===========        ===========        ===========
</TABLE>

See accompanying notes.



                                        3


<PAGE>




<TABLE>
<CAPTION>
                                                                                                          Nine Months Ended
                                                                                                            September 30,
                                                                                                   --------------------------------
                                                                                                       1997                1996
                                                                                                   ------------        ------------
<S>                                                                                                <C>                 <C>          
Cash Flows from Operating Activities
Net (loss)                                                                                         ($ 5,535,582)       ($ 3,341,017)
Adjustments to reconcile net (loss) to net cash and
  cash equivalents used in operating activities:
    Depreciation and amortization, including capital leases                                             325,104             192,161
    Loss on disposal of property and equipment                                                            9,613
    Amortization of debt discount and expenses                                                        1,032,465             380,734
    Changes in operating assets and liabilities:
       Inventories                                                                                     (229,604)           (110,875)
       Accounts receivable - trade                                                                       55,012              (8,869)
       Prepaid expenses and other                                                                      (200,034)             19,836
       Other assets and other deferred charges                                                          (95,180)             14,911
       Accounts payable                                                                                 (87,053)            247,026
       Deferred salaries                                                                                                    (93,001)
       Accrued interest                                                                                  31,007             (87,146)
       Other accrued liabilities                                                                        168,260             206,350
                                                                                                   ------------        ------------
          Net cash and cash equivalents  used in operating activities                                (4,525,992)         (2,579,890)

Cash Flows from Investing Activities
Purchase of property and equipment - net                                                             (1,638,450)           (782,473)
Advance payments on construction-in-progress                                                           (122,541)           (290,140)
Patent costs deferred                                                                                  (111,383)
Short term investments - maturities                                                                   2,384,700
                                                                                                   ------------        ------------
          Net cash and cash equivalents (used in) provided by investing activities                      512,326          (1,072,613)

Cash Flows from Financing Activities
Net proceeds from issuance of common stock                                                               47,520          11,350,850
Net proceeds from notes payable                                                                                             145,687
Net proceeds received from convertible debentures                                                     5,891,189
Payment received on notes receivable                                                                                        750,000
Payment of capital lease obligations                                                                    (24,169)
Payment of notes payable                                                                                                 (4,137,500)
                                                                                                   ------------        ------------
        Net cash and cash equivalents provided by financing activities                                5,914,540           8,109,037
                                                                                                   ------------        ------------
        Increase in cash and cash equivalents                                                         1,900,874           4,456,534
        Cash and cash equivalents at beginning of period                                                673,084             925,848
                                                                                                   ------------        ------------
        Cash and cash equivalents at end of period                                                 $  2,573,958        $  5,382,382
                                                                                                   ============        ============

Supplemental disclosures of cash flow information 
Noncash financing activities:
  Capital lease obligations for property and equipment acquisitions                                $     91,336
                                                                                                   ============
Cash paid for:
  Interest                                                                                         $    164,324        $    436,198
                                                                                                   ============        ============
</TABLE>


See accompanying notes.


<PAGE>



                                COMPOSITECH LTD.


                          Notes to Financial Statements
                                   (Unaudited)

                               September 30, 1997


Note 1 - Basis of Presentation

     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,  1996 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 nine-month period ended September 30, 1997
are not necessarily  indicative of the results that may be expected for the year
ended December 31, 1997.

     Through December 31, 1996, the Company's  activities had been accounted for
as those of a "Development Stage  Enterprise".  Based on the level of production
and sales  anticipated  for 1997, the Company has concluded that it is no longer
in the development stage as of January 1, 1997.

     The Company has obtained  patents in the United States and  internationally
and has filed additional patent applications.  As of January 1, 1997, coincident
with no longer being in the development  stage, the costs incurred in connection
with patents have been  deferred  and are being  amortized  over the life of the
patents beginning upon issue. Costs related to unsuccessful  patent applications
will be expensed.

     In February 1997, the Financial Accounting Standards Board issued Statement
128,  Earnings per Share,  which is required to be adopted on December 31, 1997.
At that time,  the Company will be required to change the method  currently used
to compute  earnings per share and to restate all prior  periods.  Under the new
requirements for calculating  primary earnings per share, the dilutive effect of
stock options will be excluded.  The impact of Statement 128 on the  calculation
of primary and fully  diluted  earnings per share as of  September  30, 1997 and
September 30, 1996 is not material.

     Certain  reclassifications  have been made to the financial  statements for
the three  months  and nine  months  ended  September  30,  1996 to  conform  to
presentations for the three months and nine months ended September 30, 1997.


                                        5

<PAGE>


Note 2 -Long Term Debt


     From May 28 through  August 5, 1997,  the Company  issued  $6,505,000 of 5%
convertible  debentures (the  "Debentures") in a private placement for which the
Company received net proceeds of  approximately  $5,900,000 after the payment of
commissions and expenses.  The Debentures were issued to provide funds to obtain
additional  production  equipment and for working  capital.  Interest is payable
quarterly.  The Debentures are due May 31, 2000 and are partially collateralized
either by the  equipment to be obtained  with the  proceeds or certain  existing
production equipment. The Debentures are convertible into shares of Common Stock
commencing August 26, 1997 at the lesser of (i) $6.00 per share or (ii) (a) from
August 26, 1997 to November  24,  1997,  85% and (b) from  November  25, 1997 to
maturity,  80% of the closing  bid price of the Common  Stock as reported on The
Nasdaq  SmallCap  Market(SM)  for the  five  trading  days  prior to the date of
conversion. The Company may repurchase any of the individual Debentures at a 25%
premium if the closing bid price of the Common  Stock is less than $4.00 for any
two days out of a five day trading  period.  Trautman Kramer & Company Inc., the
placement agent, received warrants to buy 182,140 shares of the Company's Common
Stock, at $6.00 per share,  as partial  compensation in connection with the sale
of  Debentures.  The value of the  warrants  have  been  estimated  at  $91,070.
Accordingly,  additional paid in capital was credited with $31,500 in the second
quarter of 1997 and was credited with $59,570 in the third quarter of 1997.  The
debt  discount  resulting  from the  warrants  and the related  commissions  and
expenses are being amortized over the life of the Debentures.

     Based on a recent SEC pronouncement, due to the difference between the fair
market value of the Common Stock on the dates the  Debentures  were sold and the
earliest discounted  conversion price, the Company recognized deferred financing
costs of  $114,000  in the  second  quarter  of 1997 and  $861,750  in the third
quarter of 1997.  The deferred  financing  cost were  amortized over the periods
from issuance to August 26, 1997, the date on which the Debentures  first became
convertible.  Management believes that the proceeds received from the Debentures
and the discount offered on conversion of the debt is a fair  representation  of
the net proceeds the Company  would  otherwise  expect to receive from an equity
offering  of a like  number  of shares  after  consideration  of all  associated
commissions, costs and expenses.

     In September  1997,  the due date of notes payable to  stockholders  in the
amount of $100,000 was extended to January 2, 1999. In this connection, warrants
to purchase  30,000  shares of common stock were issued at an exercise  price of
$6.09 per share,  the market  value at the date of the  extension,  expiring  in
September 2002.

     Subsequent  to  September  30,  1997,  the due  date of  notes  payable  to
directors/stockholders  in the amount of  $1,495,000  was extended to January 2,
1999. The notes payable are shown as non-current liabilities in the accompanying
balance sheet.

     Substantially all of the Company's production equipment, patents and patent
applications are collateral for the above mentioned debt.


                                        6

<PAGE>



Note 3 - Common Stock Issuances and Stock Options

     During the first quarter of 1997, the Company granted to selected officers,
directors and key employees  options to purchase  123,500 shares of common stock
at $5.75 per  share,  the market  value at the date of grant.  During the second
quarter of 1997,  the  Company  granted to  selected  key  employees  options to
purchase  18,000 shares of common stock at prices  ranging from $4.375 to $4.75,
the market values at the date of the grant.

     In the nine months ended September 30, 1997,  70,000 shares of the Series A
convertible  preferred stock were converted at the existing conversion rate into
35,000 shares of common  stock,  resulting in a decrease in Series A convertible
preferred stock of $210,000, an increase in common stock of $350 and an increase
in additional paid-in capital of $209,650.

     In September  1997,  warrants to purchase  16,500  shares of the  Company's
common stock were exercised at an exercise price of $ 3.00 per share,  resulting
in an increase in common  stock of $ 165 and an increase in  additional  paid in
capital of $ 47,355, net of expenses.

     Note 4 - Net Loss Per Share

     Net loss per  share is based on the  weighted  average  number of shares of
common stock  outstanding  assuming the  conversion  of the Series A convertible
preferred stock into common stock.

     Note 5 - Subsequent Events

     On  October  16,  1997,  the  Company   closed  its  previously   announced
transaction with four Quebec institutional investors (collectively, the  "Quebec
Investors")  to form a 50/50 joint venture for the  establishment  of a plant in
the greater Montreal area to manufacture  Compositech's  laminates. The investor
group  is  comprised  of  four  institutional  investors:  Societe  Generale  de
Financement du Quebec,  Fonds de solidarite des travailleurs du Quebec (F.T.Q.),
Societe  Innovatech du Grand  Montreal and Fonds  regional de solidarite  Ile de
Montreal.  The project cost is estimated to be approximately  $24.5 million with
an initial  capitalization  by the parties of approximately $11 million with the
balance to be in debt  financing for which firm  commitments  have been obtained
from the  National  Bank of Canada  and  governmental  agencies.  The  Company's
$5,426,917  capital  investment  in the joint  venture  was funded by the Quebec
Investors purchasing 1,066,192 shares of the Company's Common Stock at $5.09 per
share,  resulting  in an increase in common  stock of $10,662 and an increase in
additional paid in capital of $5,408,755,  net of expenses. The Quebec Investors
have an option to sell their 50%  interest  in the joint  venture to the Company
for a like number of shares and, under certain circumstances, the Company has an
option to purchase  the  interest  for the same  number of shares.  The plant is
planned to start  production  late in 1998 or early in 1999 with an  anticipated
annual production capacity of approximately 10 million square feet.


                                        7

<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,  please  refer  to  the  discussions  below  and in the
Company's  Annual Report on Form 10-KSB for the year ended December 31, 1996 and
in the Company's  Registration  Statement on Form S-3 declared  effective by the
Securities and Exchange Commission on November 4, 1997.

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,  designed,  assembled
and started up additional  production modules obtained with part of the proceeds
of its IPO in order to achieve commercial levels of production.

     During 1996 and  continuing  through the third quarter of 1997, the Company
has  been  producing  and  selling  its  laminates  in  limited  quantities  for
qualification and use in production by its customers. The Company recently added
production  modules to achieve  higher  quantity  levels and economies of scale.
This  expansion  is  the  first  production-scale  expansion  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.  Process  disruptions have occurred,  resulting in delays in product
shipments.  Process disruptions were due to machine breakdowns, lack of adequate
interior atmospheric control of temperature and humidity, electric utility power
failures, problems of breaking in an expanded workforce, contamination generated
during  installation  of equipment and  development of processes,  and recently,
defective  incoming copper foil. The Company has obtained an alternate source of
supply  for  copper  foil and  also has  explored  solutions  with the  previous
supplier.  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.

     Through  December 31, 1996, the Company had been in the  development  stage
because it had not generated  significant  revenues  from its planned  principal
operations. Based on the level of production and sales anticipated for 1997, the
Company  has  concluded  that it is no  longer  in the  development  stage as of
January 1, 1997.


                                        8

<PAGE>



Results of Operations

     Sales of  laminates  increased  to  $115,999  for the  three  months  ended
September  30, 1997 from $63,100 for the three months ended  September  30, 1996
and to $411,467 for the nine months ended  September  30, 1997 from $158,152 for
the nine months ended September 30, 1996. The increase  resulted from additional
orders of laminates by customers but was limited by the  production  constraints
referred to above and by delays in customers'  programs for which  Compositech's
laminates were qualified.

     Research and development expenses decreased to $12,765 for the three months
ended  September 30, 1997 from $27,418 for the three months ended  September 30,
1996 and to $58,970 for the nine months  ended  September  30, 1997 from $82,900
for the nine months ended  September  30, 1996,  reflecting a  concentration  on
manufacturing activities. Manufacturing expenses increased to $1,485,353 for the
three month period ended  September  30, 1997 from $671,757 for the three months
ended  September 30, 1996 and to $3,640,969 for the nine months ended  September
30,  1997  from  $2,011,119  for the  nine  months  ended  September  30,  1996,
reflecting  the  higher  levels  of  production  during  1997,  affected  by the
production yields referred to above and the addition of manufacturing  personnel
to meet anticipated increases in production levels.

     Selling,  general and administrative expenses increased to $384,451 for the
three months ended  September  30, 1997 from $313,693 for the three months ended
September  30, 1996 and to  $1,176,440  for the nine months ended  September 30,
1997 from $821,552 for the nine months ended September 30, 1996. Legal and other
expenses  related  to being a public  company  increased  $109,000  for the nine
months ended September 30, 1997 as compared with the nine months ended September
30, 1996.  Other  increases were  approximately  $225,000 in personnel costs and
$34,000 in insurance related to increases in commercial activities.

     Interest expense (net of interest capitalized) increased to $89,291 for the
three  months ended  September  30, 1997 from $33,821 for the three months ended
September 30, 1996 and decreased to $107,974 for the nine months ended September
30 from $308,857 for the nine months ended  September 30, 1996.  The increase in
the  three-month  period is related to the borrowing costs of the 5% convertible
debentures, while the decrease in the nine-month period was due to the repayment
of a large portion of the Company's  debt with the proceeds of the Company's IPO
in July 1996.  Amortization of debt discount and expenses  increased to $911,263
for the three months ended September 30, 1997 from $224,814 for the three months
ended  September 30, 1996 and to $1,032,465 for the nine months ended  September
30, 1997 from  $380,734  for the nine  months  ended  September  30,  1996.  The
amortization of the deferred  financing cost included therein (see Note 2 to the
financial  statements ) was $861,750  for the three months ended  September  30,
1997 and $975,750 for the nine months ended September 30, 1997.

     The foregoing  resulted in the Company  having a net loss of $2,744,648 for
the three months ended September 30, 1997 compared with $1,134,119 for the three
months  ended  September  30,  1996 and  $5,535,582  for the nine  months  ended
September 30, 1997 compared with  $3,341,017 for the nine months ended September
30, 1996. Increases in sales revenue and decreases in interest expense were more
than offset by increases in manufacturing,  selling,  general and administrative
expenses, and the amortization of debt discount applicable to the Debentures.


                                        9

<PAGE>



Liquidity and Capital Resources

     Prior to its IPO, the Company had financed its operations  through  private
placements of debt and equity  securities and from income from a patent immunity
agreement.  Some of this  financing  had come from officers and directors of the
Company.

     The Company has been a development  stage company through December 31, 1996
and  has  had  limited  revenues  from  the  sale  of  laminates,  has  incurred
significant  losses  and  has had  substantial  negative  cash  flow  since  its
inception.  The Company's  independent  auditors  have  included an  explanatory
paragraph in their report  covering the December 31, 1996 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
1997. As of September 30, 1997,  the Company had  approximately  $2.6 million of
available  cash resources  which the Company  believes will be necessary to meet
its cash needs for operations  and equipment  purchases for the remainder of its
fiscal year. However,  the Company will require additional  financing thereafter
to cover operating expenses and expenditures for additional production equipment
until  revenues  from  operations  are  sufficient  for  these  purposes.   Such
additional  financing may be raised through  additional equity offerings,  joint
ventures or other collaborative  relationships,  borrowings or other financings.
There can be no assurance  that  additional  financing  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.  The foregoing is based on important  assumptions regarding a number
of factors and future  events,  some of which are beyond the  Company's  control
including risks and uncertainties described in reports and other documents filed
by the Company from time to time with the  Securities  and Exchange  Commission.
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.

     On  October  16,  1997,  the  Company   closed  its  previously   announced
transaction  with four  Quebec  institutional  investors  to form a 50/50  joint
venture  for  the  establishment  of a plant  in the  greater  Montreal  area to
manufacture  Compositech's  laminates.  See  Note 5 of the  Notes  to  Financial
Statements.  The plant is planned to start production late in 1998 or early 1999
with an  anticipated  annual  production  capacity of  approximately  10 million
square feet.


Nine Months Ended  September 30, 1997 Compared with Nine Months Ended  September
30, 1996

     Net cash and cash  equivalents  used in operating  activities  increased to
$4,525,992 for the nine months ended  September 30, 1997 from $2,579,890 for the
nine months ended  September 30, 1996.  Prepaid  expenses  increased in the nine
month  period  ended  September  30, 1997 by  $200,034  relating to costs of the
Montreal  joint venture and tooling costs.  The increased net loss,  increase in
prepaid  expenses,  increase of deferred  charges  related to the Montreal joint
venture and a reduction in the rate of increase of accrued liabilities represent
the  principal  components  of the  increase  in funds  used,  partly  offset by
increased amortization of debt discount and expenses.


                                       10


<PAGE>



     Net cash and cash equivalents  provided by investing activities amounted to
$512,326 for the nine months ended  September  30, 1997,  compared with net cash
and cash  equivalents  used in investing  activities of $1,072,613  for the nine
months ended September 30, 1996. Capital  expenditures for equipment and advance
payments  for  equipment  increased  to  $1,760,991  for the nine  months  ended
September 30, 1997 from $1,072,613 for the nine months ended September 30, 1996.
The increase  resulted from design,  engineering and  construction of additional
production  modules  as part of the  expansion  program  and  the  upgrading  of
existing  equipment.  Patent costs deferred totaled $111,383 for the nine months
ended September 30, 1997.  Maturities of short term U.S.  Government  securities
during the nine months ended  September  30, 1997  accounted  for  $2,384,700 of
funds provided by investing activities.

     Cash flows from financing  activities  decreased to $5,914,540 for the nine
months  ended  September  30, 1997 from  $8,109,037  for the nine  months  ended
September  30,  1996.  The nine months  ended  September  30, 1997  included the
issuance of the  Debentures  resulting  in net  proceeds of  $5,891,189  and the
exercise of  warrants  resulting  in net  proceeds  of  $47,520.  The  principal
financing  activities  in the nine months ended  September 30, 1996 were (i) net
proceeds  from the  issuance  of common  stock in the IPO of  $9,920,071  and in
private  placements  of  $1,430,779,  (ii) net  proceeds  from notes  payable of
$145,687,  (iii) the  collection  of  $750,000 of notes  receivable  received in
connection  with the 10% Secured Note  financing in 1995 and (iv) the payment of
notes payable of  $4,137,500,  of which  $4,055,000 was from the proceeds of the
IPO.



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<PAGE>



Part II - Other Information

Item 2. Changes in Securities

     (c)  Recent Sales of Unregistered Securities.

     On September 4 and September 12, 1997,  the Company issued to two investors
an aggregate of 16,500 shares of common stock upon their exercise of outstanding
stock  purchase  warrants to purchase the Company's  common stock at an exercise
price of $3.00 per  share,  or  $49,500  in the  aggregate.  The stock  purchase
warrants were originally  issued to the investors in a 1995 private placement to
accredited  investors.  The sales of common  stock  upon  exercise  of the stock
purchase  warrants were exempt from  registration  under the  Securities  Act of
1933, as amended (the "Securities  Act"),  pursuant to Section 4(2) thereof,  as
transactions not involving a public offering.

     During the three month  period  ended  September  30,1997,  the Company had
closings  on an  aggregate  of  $4,255,000  of 5%  Convertible  Debentures  (the
"Debentures")  (net proceeds to the Company of  approximately  $3,869,000)  in a
private  placement to accredited  investors.  Closings in this private placement
during this  period took place on each of July 21, July 24,  August 4 and August
5, 1997. The sales of the  Debentures  were exempt from  registration  under the
Securities Act pursuant to Section 4(2) thereof, as transactions not involving a
public  offering.  The Debentures are  convertible  into shares of the Company's
common  stock  pursuant  to the  terms  described  in  Note  2 to the  Financial
Statements.  Trautman Kramer & Company,  Inc. served as the Company's  placement
agent for the private placement.  In May and June of 1997, the Company had prior
closings on a aggregate of $2,250,000 in Debentures (net proceeds to the Company
of approximately $2,022,000) with substantially similar terms as the investments
described above.

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 September 30, 1997.



                                       12

<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: November 14, 1997                     /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)


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