HNIPU (Hybrid Non-Isocyanate Polyurethane) - Chemonol, Ltd., is one of the Israeli start-up companies in which we have invested. Chemonol has completed the development of HNIPU, the basic concept for which is one of the technologies that we purchased from Prof. Oleg Figovsky, that can be incorporated into commercial coatings, paints and adhesives, while continuing to work on the development of variants of this product. During 2000, we received from Chemonol sample quantities of HNIPU paints for use in marketing. At one point we considered financing the installation in Israel of a pilot plant for this and some of our other Israeli technology products in order to position ourselves to supply larger sample quantities and initial commercial products and to demonstrate the production process, but this project has been deferred. The approach that we are now taking with respect to HNIPU is to attempt to identify in the USA suitable binder production facility to which the technology for making HNIPU precursors could be transferred, with a view to sales of the resulting products to paint and coating manufacturers for incorporation in polyurethane paints, coatings and adhesives. During 2000, we invested an additional $265,000 in Chemonol, bringing our total investment to $630,000, which represents 52% of ownership of the common stock outstanding. We expect to spend in 2001 on the order of $300,000 on HNIPU-related activities and to begin to record some revenues, but because of the postponement of the Israeli pilot plant facility we do not expect to see any major HNIPU sales before 2002.

RBHM (Rapidly biodegradable hydrophobic material) - Developed by Rademate, Ltd., another of the Israeli start-up companies in which we have invested, has completed laboratory scale demonstration of this biodegradable coating for paper products. During 2000, an industrial scale demonstration was performed in the U.S.; this test identified areas for improvement, which are being addressed. During 2000, we invested an additional $370,000 in Rademate, bringing our total investment to $460,000, which represents 52% of ownership of the common stock outstanding. We expended on RBHM in 2000 on the order of $20,000 and may spend on further development and marketing of RBHM on the order of $100,000 in 2001. It is unlikely that we will see any RBHM revenues before 2002. Rademate is one of the companies that would participate in the pilot plant facility that we refer to above in the context of HNIPU, if and when we proceed with it.

QAS (Highly stable organomineral polymers based on quarternary ammonium silicates) - This silicate material with excellent fire resistance, high chemical resistance and friendly environmental characteristics is in what we understand to be the final stages of development by Amsil, Ltd., another Israeli company in which we have invested. During 2000, there were several credible expressions of interest in QAS from industry, and we are engaged in discussions

with one firm to initiate performance evaluation in 2001. During 2000, we invested an additional $230,000 in Amsil, bringing our total investment to $322,500, which represents 52% of ownership of the common stock outstanding.

CONTINUOUS COMBUSTION SYNTHESIS and CONTINUOUS ACTION REACTOR - Comsyntech, Ltd., the Israeli company in which we have invested and that is developing these processes, has been approached by a manufacturer that is interested in buying its business. During 2000, we invested an additional $200,000 in Comsyntech, bringing our total investment to $292,500, which represents 52% of ownership of the common stock outstanding. Whether or not we sell Comsyntech, we expect to expend in 2001 about $100,000 on continuing Comsyntech development activities.

In summary, during 2000, we increased our total investment in the six Israeli start-up companies by $1,375,000 bringing our total investment to $2,320,000.

OTHER ISRAELI TECHNOLOGIES - In addition to the $235,000 payment that we made to Prof. Figovsky in March, 2000 to change his 49% net profit interest in the technologies that we purchased directly from him to a 1% royalty, we spent on these technologies, collectively, about $150,000 in 2000 and expect to spend on them about $75,000 in 2001. We do not expect to see any benefits from any of these technologies before 2002. We refer you to the description of our business in Part I, Item 1 of this report for a description of each of these technologies, there identified as : Firesil; Polydiene Urethane Adhesives (Poly-D Adhesives) - Electronic Glues; Kauton; Hapocorr;  Anticorrosive Additives for Polymers (AAdd);  Liquid Ebonite Mixtures (LEM); Rubber Concrete (RubCon)

Research and development expenses increased for 2000 to $4,620,000 from $1,443,000 for 1999. Research and development expenditures for 2000 included $1,405,000, including expenses, related to our continuing investment in six Israeli technology companies and $565,000 for our Russian technologies. Included in research and development expense for 2000 is amortization expense of $1,610,000 related to our November 1999 purchase of technology rights from the company now called Advanced Technology Industries, Inc. (ATI). This transaction is discussed in Note 3 to our Financial Statements. We expect amortization expense related to this asset for 2001 to approximate $1,600,000.

Professor O. Figovsky - Is a founding partner, the Research & Development Director and Chief Scientist of Polymate, Ltd. - Israel Research Center, and a leading world scientist in the field of material technologies. Professor Figovsky is the official technical expert for the Israeli Ministry for Trade and Industry for the assessment of R&D projects. In addition, Professor Figovsky is the vice president of the Israeli Association of New Immigrant Scientists, a coordinator for the European Community for the scientific-technological programs for CIS countries. He is  the foreign member of the Russian Academy of A & B Sciences and Russian Engineering Academy and owner of more than 400 inventions.

Mr. Alex Trossman - Is a founding partner and General Manager of Polymate, Ltd. -Israeli Research Center, and General Manager of EUROTECH Israel, Ltd. (representative of EUROTECH, Ltd., USA). Prior to joining EUROTECH, Mr. Trossman was Technical Manager of Galam, Ltd., Israel. This company is a starch, glucose and fructose producer. He was head of the engineering department of Rotem Fertilizers, Ltd., Israel before working with Galam, Ltd. He was assistant chief engineer of Automotive Industries, Ltd., Israel, and a project manager with Elbit Computers, Ltd., Israel. Mr. Trossman attained the rank of major with the Israel Defense Forces, where he served as head of the military vehicle-rebuilding program. Mr. Trossman was a senior designer for the Armament Development Authority (RAFAEL), Israel.

 

Israeli Research Center - Polymate Ltd.

The Israel Research Center - Polymate Ltd. (Polymate IRC) specializes in providing mostly applied but also to a certain extent theoretical research and development to the industry in the field of materials, chemical and environmental engineering, with the focus on the development, marketing, commercialization and manufacturing of advanced and novel materials. Polymate IRC successfully operates on the basis of multi-sided partnerships in Israel and around the world, mostly in Europe, the territory of the Former Soviet Union and the USA. The funding for the Center activities so far was provided by its US partner Eurotech, Ltd. and by the company's own resources and through the Israeli Government programs. Polymate IRC is located at the R&D park at Migdal HaEmek, (North of Haifa) and is equipped with modern, research, testing and technological equipment for different projects in materials engineering.

Polymate IRC also conducts a wide spectrum of R&D related works needed for commercialization of the developed technologies, such as patent search and patenting, marketing research and marketing, and implementation of the technologies. In addition to its own R&D - Polymate IRC has a unique well developed and tested organization for search, evaluation and acquisition of new developed but not yet commercialized technologies primarily from Israeli, Russia and other CIS countries sources. Presently Polymate IRC has several dozen advanced technologies it its databank either finished or at the final stages of the development planned for acquisition. The majority of these technologies is in the advanced materials engineering field.

The founding partner and R&D Manager, Professor Oleg L. Figovsky who is a leading world scientist in the field of novel materials technologies, heads IRC R&D activities. Professor Oleg L. Figovsky was elected as a foreign member of Russian Academy of A&B Sciences and is the author of more than 400 inventions. He is also the chief scientific adviser of the American investment company Eurotech, Ltd. and the Israeli Association of the New Immigrant Scientists, a coordinator for the European Community scientific programs for CIS countries, and an official expert for the Israel Ministry of Trade and Industry for the assessment of R&D technological projects. Polymate's Execute Manager is Mr. Alex Trossman, an experienced manager and engineer with over 20 years of involvement in Israeli Industry.

The main Laboratory of the Polymate IRC is currently staffed with several senior scientists - all with recognized achievements in advanced materials engineering projects involving polymer materials, to expand its R&D activities and its scientific staff in the near future. Projects currently under development at IRC include the following:

• Hybrid composite polymer materials based on interpenetrated networks with structures of hydroxyurethane fragments;

• Thermosetting structure composite materials based on hybrid organo-silicate oligomeric matrix;

• Composite materials based on low-molecular polybutadiene matrix;

• Polymer materials with very low permeability and high resistance to aggressive environments;

• Corrosion passive glues for the electronic industry;

• Advanced adhesives for labeling;

• Aerodynamic structure coatings;

• Biotechnology for wood waste recycling and producing of facecut decorative plates;

• Special primers for joining wet concrete surfaces with different polymer coverings;

• Special coatings for battery-electrodes.

Polymate IRC is carrying out by request of Eurotech Ltd. and other investment companies the financial and marketing accompaniment for projects in Israeli technological incubators, subsided by Chief Scientist Office - Ministry of Industry and Trade, such as:

• Nonisocyanate Polyurethanes (Chemonol Ltd.)

• Rapidly-Biodegradable Hydrophobic Material (Rademate Ltd.)

• Continuous Action Reactor (Comsyntech Ltd.)

• Co and Ni Recovering from Industrial Waste (Remptech Ltd.)

• New Sorbent for Oil Spill Removal ( Sorbtech Ltd.)

• Highly Stable Organomineral Polymers (Amsil Ltd.)

• Water -Based CSPE Protective Coating (Corpem Ltd, Migdal HaEmek Incubator)

Four projects developed at Polymate IRC network have received gold and silver medals at International Innovation Exhibition - IENA 98 (Nuremberg, Germany) and the best award at the World Polyurethane Congress - 1997 (Amsterdam, The Netherlands). Five projects also received the best awards at the Technological Projects Exhibition - 2000 (Haifa, Israel). The project "Nonisocyante Polyurenthanes" has received the Israeli State Prize for New Immigrants (1998).

Polymate IRC is interested in increasing of number of their strategic partners internationally and is going to begin a few new projects.