UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-KSB** ****


**(Mark
      One)**


**x**
            **Annual
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**For
      the fiscal year ended: December 31, 2007**




**o**
            **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: 000-** **32065**




**HYDROGEN
      CORPORATION**


(Name
      of
      Small Business Issuer in Its Charter)





**Nevada**
              (State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            **86-0965692**
              (I.R.S.
                Employer Identification No.)**10
                East 40****th****Street, New York, New York**
              (Address
                of Principal Executive Offices)
            **10016**
              (Zip
                Code)





**(212)
      672-0380**


(Issuer’s
      Telephone Number)




**Securities
      registered under Section 12(b) of the Act:**




Title
                of Each Class
            
            Name
                of Each Exchange On Which RegisteredCommon
                Stock, $0.001 par value per share
            
            NASDAQ
                Capital Market




**Securities
      registered under Section 12(g) of the Act:**


None




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act   **o**




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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
o




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the registrant’ s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o  No x




Issuer’s
      revenues for the fiscal year ended December 31, 2007 were
      $1,445,196.




As
      of
      April 10, 2008, the aggregate market value of the common stock held by
      non-affiliates of the issuer was approximately $16,641,000.




As
      of
      April 14, 2008, there were 12,769,904 shares of Common Stock, $0.001 par
      value per share, outstanding.




Transitional
      Small Business Disclosure Format (check one): Yes o  No
x









**HydroGen
      Corporation**





**Annual
      Report on Form 10-KSB**


**Year
      Ended December 31, 2007**


**Table
      of Contents**




Page
                No.PART
              I
            1Item
                1
            
            Description
                of Business
            1Item
                2
            
            Description
                of Property
            19Item
                3
            
            Legal
                Proceedings
            20Item
                4
            
            Submission
                of Matters to a Vote of Security Holders
            20PART
              II
            20Item
                5
            
            Market
                for Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchases of Equity Securities
            20Item
                6
            
            Management’s
                Discussion and Analysis or Plan of Operation
            22Item
                7
            
            Financial
                Statements
            32Item
                8
            
            Changes
                in and Disagreements With Accountants on Accounting and Financial
                Disclosure
            32Item
                8A
            
            Controls
                and Procedures
            33Item
                8B
            
            Other
                Information
            34PART
              III
            34Item
                9
            
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance With Section 16(a) of the Exchange Act
            34Item
                10
            
            Executive
                Compensation
            40Item
                11
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            45Item
                12
            
            Certain
                Relationships and Related Transactions, and Director
                Independence
            47Item
                13
            
            Exhibits
            47Item
                14
            
            Principal
                Accountant Fees and Services
            49










**CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




This
      Form
      10-KSB (the “Annual Report”) contains “forward-looking statements” regarding
      future events and future results of HydroGen Corporation (the “Company”) and
      HydroGen, LLC, the Company's wholly-owned subsidiary, that are
      based on current expectations, estimates, forecasts, and projections and the
      beliefs and assumptions of the management of the Company and are made pursuant
      to the safe harbor provisions of Section 27A of the Securities Act of 1933,
      as
      amended (the “Act”), and Section 21E of the Securities Exchange Act of 1934, as
      amended (the “Exchange Act”). These statements often can be identified by the
      use of terms such as “may”, “will”, “expect”, “believe”, “anticipate”, “plan”,
“intend”, “project”, “estimate”, “approximate”, or “continue”, and other similar
      expressions or the negative thereof. The Company wishes to caution readers
      not
      to place undue reliance on any such forward-looking statements, which speak
      only
      as of the date made. Any forward-looking statements represent management's
      best
      judgment as to what may occur in the future. However, forward-looking statements
      are subject to risks, uncertainties and important factors beyond the control
      of
      the Company that could cause actual results and events to differ materially
      from
      historical results of operations and events and those presently anticipated
      or
      projected. Factors that might cause or contribute to such differences include,
      but are not limited to, those discussed in this Annual Report under “Part 1,
      Item 1, Description of Business - Risk Factors.” Except as required by
      applicable law or regulation, the Company disclaims any obligation subsequently
      to revise any forward-looking statements to reflect events or circumstances
      after the date of such statement or to reflect the occurrence of anticipated
      or
      unanticipated events.









**PART
      I**




**Item
      1.**  **Description
      of Business**




In
      this
      Annual Report on Form 10-KSB, the words “HydroGen,” the “Company,” “we,” “our”
and “us” refer to HydroGen Corporation, collectively with its wholly-owned
      subsidiary, HydroGen, LLC, unless the context indicates otherwise.





***Business
      Development***




HydroGen
      Corporation, through its wholly-owned subsidiary, HydroGen, LLC, designs,
      manufactures, markets and distributes fuel cell modules and energy systems
      (power plants) using phosphoric acid fuel cells (PAFC). HydroGen, LLC commenced
      the business of the Company in November 2001. On July 7, 2005, HydroGen, LLC
      entered into an exchange agreement with Chiste Corporation, a Nevada
      Corporation, pursuant to which the shareholders of HydroGen, LLC became
      shareholders of Chiste and HydroGen, LLC became a wholly-owned subsidiary of
      Chiste. On August 18, 2005, Chiste’s Articles of Incorporation were amended to
      rename the company to “HydroGen Corporation.”




***Business
      of Issuer***




**Products**




HydroGen’s
      core technology is a 400 kilowatt (kW) air-cooled, phosphoric acid fuel cell
      (PAFC) module which is comprised of four 100 kW stacks within one pressure
      vessel. The fuel cell stack technology and configuration were successfully
      tested by Westinghouse in over 125,000 hours of stack testing of different
      capacities, and over 2,000,000 hours of smaller scale cell testing.
      Additionally, HydroGen has conducted over 400,000 hours of small scale testing
      and over 6,000 hours of stack testing. It is anticipated that the fuel cell
      stacks will be able to reach a lifetime of 40,000 hours in the application
      of
      HydroGen’s first 4 to 6 megawatt (MW) modules.




Expected
      initial product attributes and performance of HydroGen’s 400 kW fuel cell
      technology are summarized below:





·
            
            Capacity:
            
            Approximately
                400 kW net AC power output (500 kW gross DC)·
            
            Efficiency:
            
            Application-dependent.
                Net electric efficiency anticipated at approximately 40% (natural
                gas-based) and 43% (hydrogen-based). Thermal efficiency anticipated
                to be
                from 74% to
                82% depending on the specific application and uses of the heat generated
                (natural gas-based) and 80% (hydrogen-based). Higher system efficiencies
                are anticipated in later generations of the technology.·
            
            Fuels:
            
            Hydrogen-rich
                industrial gases, hydrocarbon gases·
            
            Cogeneration:
            
            Up
                to 70 pounds per square inch absolute (psia) steam at 360°F (fuel cells);
                higher pressure steam is probable if a hydrogen plant is used to
                generate
                the hydrogen (i.e., at a site where hydrogen is not
                available)









·
            
            Net
                water:
            
            Up
                to 1,200 gallons per hour for a 10 MW system: this water is potable
                and needs only minor purification




HydroGen
      will initially sell multi-MW turn-key power plants in the 2 to 30 MW range.
      These power plants consist of multiple 400kW fuel cell modules as well as
      balance-of-plant (BOP) equipment. The Company will offer two classes of
      products, one designed to run on available hydrogen-rich gas for the “hydrogen
      available” market, and one with an integrated reformer that will generate
      electric power and heat for cogeneration from hydrocarbon gases. HydroGen will
      initially sell turn-key power plants to end user customers and distribution
      partners to penetrate target market application and geographic markets. After
      achieving initial turnkey sales, HydroGen anticipates selling only fuel cell
      stacks and modules to strategic partners in the engineering, contracting and
      distribution markets who will deliver turnkey fuel cell power plants based
      on
      HydroGen’s BOP system designs or utilize HydroGen’s technology to act as an
      independent power producer by directly selling the power generated. HydroGen’s
      long-term business model calls for it ultimately only to sell and service fuel
      cell stacks and modules to world-class engineering, contracting and distribution
      companies, who will supply the PAFC power plants on a turn-key basis to their
      end users or for their own use.




Additionally,
      HydroGen projects recurring revenues from the sale of operations and maintenance
      services for deployed 400 kW fuel cell modules which will include their
      replacement after approximately 40,000 hours of operation.




**HydroGen’s
      Market**




HydroGen’s
      products are intended to serve industrial and utility markets for distributed
      power generation in a size class from approximately 2 to 30 MW. Distributed
      generation is the production of energy at or close to where that energy is
      consumed. The principal benefits of distributed generation are to reduce the
      losses associated with long distance transmission of power over a grid, and
      to
      permit the capture and use of waste heat from power generation for residential,
      commercial, and industrial applications. This use of waste heat can bring
      overall system efficiency to 80% or greater, in comparison to the average
      (United States) electric grid efficiency of approximately 30% (Source:
      International Energy Agency, IEA Annual Energy Outlook 2005).




Worldwide
      demand for ultra-clean distributed generation, such as that provided by a fuel
      cell, is driven by a mix of energy price increases and volatility, tightening
      emissions standards and regulations, availability of credits and incentives,
      the
      losses and costs associated with the electric power distribution infrastructure,
      technical and economic advances in distributed generating equipment, and the
      need for high energy reliability.




In
      the
      United States, there are approximately 25,000 MW of installed distributed
      generation units for base load and combined heat and power (CHP) applications
      (Source: The Installed Base of U.S. Distributed Generation, 2004 Edition,
      Resource Dynamics Corporation, Washington D.C.). Analysts have forecast that
      an
      additional 20,000 - 40,000 MW of market potential exists for distributed
      generation in the United States (Source: High Natural Gas Prices and the Updated
      Market For CHP, 2004, Resource Dynamics Corporation, Washington D.C.).
      Worldwide, orders for gas turbines for distributed base load applications in
      the
      2 to 30 MW class totaled approximately 2,500 MW from June 2006 through
      May 2007 (Source: 2007 Power Generation Order Survey; Diesel and Gas Turbine
      Worldwide). If these were purchased at an average installed cost of $2,000/kW,
      the corresponding market value would be approximately $5 billion.




-2-




HydroGen
      targets two markets for distributed generation in its preferred size class
      of 6
      to 30 MW, which are differentiated from each other by the manner in which the
      fuel for the fuel cell power plant is generated:




·
            Hydrogen
                Available Market: hydrogen or hydrogen-rich gas is a byproduct of
                industrial processes and is available for use in the fuel cell power
                plant




·
            Hydrocarbon
                Market: hydrogen or hydrogen-rich gas is converted from other fuel
                sources
                (e.g., from natural gas) utilizing a reformer for use in the fuel
                cell
                power plant




Each
      of
      these markets is addressed in more detail below.




*Hydrogen
      Available Market*




HydroGen
      plans to target the existing hydrogen infrastructure of the United States and
      other industrialized countries for market entry and early growth in applications
      where hydrogen-rich fuel gas is already available. Such applications include
      chemical or industrial production facilities where hydrogen or hydrogen-rich
      gas
      is produced as a byproduct, such as at chlor-alkali and sodium chlorate plants,
      coke oven works, and refineries. These facilities are significant generators
      of
      hydrogen-rich byproduct gases, and large consumers of electric and thermal
      energy. As an example, United States chlor-alkali facilities produce as a
      byproduct a quantity of hydrogen that if it were used in a HydroGen fuel cell
      power plant it would be sufficient to generate up to 20% of these plant’s base
      load requirements. We estimate the market size for applications at existing
      chlor-alkali facilities in the U.S. to be up to 800 MW. Based on industry survey
      data for some of the industries cited above, the Company believes that the
      world-wide market opportunity for hydrogen-available applications is on the
      order of thousands of megawatts.




HydroGen’s
      ideal target customers for this market are facilities that generate large
      quantities of hydrogen-rich gases, where other factors favoring the adoption
      of
      clean distributed generation technology are present. Examples of these factors
      include:




·
            High
                electric power costs (or grid sell-back tariffs) relative to the
                value of
                hydrogen;




·
            Facility
                demand for thermal energy - enabling cogeneration opportunities that
                can
                double overall system efficiency and generate additional energy cost
                savings;




·
            Tax
                credits, tariffs, and other incentives that favor introduction of
                clean
                energy technology, distributed generation, and / or fuel
                cells;




·
            Air-quality
                regulations or other restrictions that favor clean energy technology,
                distributed generation, and / or fuel cells; and




·
            High
                quality and reliability requirements for power sensitive
                operations.




HydroGen
      plans to sell complete fuel cell systems directly to industrial end-users and
      to
      distributors or system integrators for siting near the hydrogen infrastructure
      when the value proposition justifies an investment in a HydroGen fuel cell
      power
      plant.




The
      total
      market size for this market is principally constrained by the value that a
      chemical or industrial production facility places on its hydrogen stream, in
      comparison with the value of the electric power that is generated with the
      fuel
      cell. The value of hydrogen as an industrial gas is much higher than its value
      as fuel. Therefore, the HydroGen market opportunity for this application is
      ideal for facilities that either vent their hydrogen or use it as a fuel to
      serve facility thermal demands, rather than selling or utilizing it as a
      chemical feedstock.




-3-




*Hydrocarbon
      Market*




HydroGen
      also expects to target the distributed generation market for utilities and
      commercial or industrial facilities in the 2 to 30 MW market class based on
      use of gaseous hydrocarbon fuels such as natural gas and landfill gas. The
      Company has accelerated its plans to enter this market as a result of its
      partnership with Samsung Corporation.




Energy
      companies offering distributed generation products and services, such as
      utilities and independent power producers, are attractive customers for HydroGen
      in this market. These potential customers would benefit from the advantages
      of
      large-scale cogeneration as noted above, by owning fuel cell systems, situating
      the systems at end-user facilities, and selling power and heat to the
      end-customer. This type of “community energy system” is becoming increasingly
      prevalent in certain markets. Utilities can capture some of the benefits of
      on-site generation and still pass the remaining benefits on to their
      end-customers.




**Marketing
      and Distribution**




We
      are
      actively marketing our product in the United States through our internal sales
      force and consultants, which include former senior employees from industrial
      companies that HydroGen is targeting for early commercial adoption. In addition,
      we have entered into a strategic partnership in the hydrogen available market
      with Samsung Corporation pursuant to which Samsung will serve as our exclusive
      distributor in South Korea, Asia, the Middle East, Australia, New Zealand and
      other territories in Eastern Europe. We anticipate entering into similar
      strategic partnerships and distribution agreements for specific markets in
      other
      parts of the world.




On
      January 11, 2008 HydroGen and Samsung Corporation entered into a series of
      agreements, including a Master Cooperation Agreement (the “Cooperation
      Agreement”), a Hydrogen Exclusive Distribution and Marketing Agreement (the
“Hydrogen Distribution Agreement”) and a Letter of Intent for the sale and
      purchase of a 5 MW fuel cell power plant (“LOI”).




Pursuant
      to the Cooperation Agreement, HydroGen and Samsung have agreed to use their
      best
      commercial efforts to cooperate with each other with respect to the sale and
      marketing of fuel cell power plants using stacks and modules under the
“HydroGen” brand or related or new brands. The Parties have further agreed to
      the following:




•  To
      use
      their commercially reasonable efforts to negotiate and execute a sales agreement
      for the sale by HydroGen and purchase by Samsung of an initial fuel cell power
      plant fueled by hydrogen rich gas of approximately 5 MW based upon, and
      effectuating, the terms of the LOI (the “Hydrogen Fuel Cell Power Plant Sales
      Agreement”) by March 31, 2008. At the request of Samsung’s customer, HydroGen
      now expects this sales agreement to be finalized after the ASHTA test plant
      has
      started operations, which is scheduled for the second quarter of 2008. While
      a
      definitive delivery schedule will be negotiated as part of the sales agreement,
      the Company’s nominal delivery time for a power plant project is approximately
      18 months.




•  Upon
      HydroGen delivering the first fuel cell power plant fueled by hydrogen rich
      gas,
      the Parties have agreed to enter into a BOP Technology Transfer, Licensing,
      and
      Technical Support Agreement pursuant to which Samsung shall obtain, in exchange
      for a royalty fee, certain rights to deliver to Samsung’s customers, fuel cell
      power plants utilizing HydroGen’s plant designs and related proprietary rights
      and confidential information. Through this agreement and as described below,
      HydroGen will transition into the role of a supplier of fuel cell stacks and
      modules to Samsung, who will market, distribute, and deliver complete PAFC
      plants to their end customers in their exclusive territories.




-4-




•  HydroGen
      shall undertake to complete a design for a fuel cell power plant fueled by
      methane rich gases to meet design specifications as agreed upon by the Parties
      by a target date of July 11, 2008. Upon HydroGen’s producing a design that meets
      the design specifications agreed upon by the Parties, the Parties have agreed
      to
      enter into an exclusive distribution and marketing agreement for fuel cell
      power
      plants fueled by methane rich gases using stacks and modules manufactured by
      HydroGen (the “LNG Distribution Agreement”). Pursuant to that contemplated
      agreement, HydroGen anticipates receipt of an order from Samsung in late 2008
      or
      early 2009 for a multi-megawatt turn key PAFC plant operated on natural gas.




•  Upon
      entering into the LNG Distribution Agreement and subject to Samsung obtaining
      the requisite internal and regulatory approvals, Samsung has agreed to purchase
      shares of the common stock of the Company for an aggregate purchase price of
      not
      less than $5 million.




•  Within
      two years after execution of the LNG Distribution Agreement (or, if the Parties
      do not enter into an LNG Distribution Agreement, within two years of June 30,
      2008), the Parties shall commence a study of the feasibility and desirability
      of
      establishing a joint venture company by 2012 to produce stacks and modules
      and /
      or balance of plant (“BOP”) components and assemblies worldwide.




•  HydroGen
      has the option to license any improvements that Samsung makes to Samsung’s
      balance of plant designs in exchange for a royalty fee to be negotiated between
      the parties.




Pursuant
      to the Hydrogen Distribution Agreement, HydroGen appointed Samsung as the
      exclusive distributor of HydroGen fuel cell stacks, modules and power plants
      in
      Asia, the Middle East, Australia, New Zealand and selected countries in Eastern
      Europe (the “Territory”). Additionally:




•  HydroGen
      has reserved the right to sell to any agency, authority or instrumentality
      of
      the United States of America including, without limitation, all branches of
      its
      military, in any place in the world. Samsung is prohibited from directly or
      indirectly selling, marketing or distributing (a) any fuel cell products with
      an
      output capacity of 1.5 megawatts or more in, or into, the Territory, other
      than
      products from HydroGen and (b) any fuel cell products with an output capacity
      of
      1.5 megawatts or more outside the Territory. HydroGen shall not sell, or cause
      to be sold, directly or indirectly, any HydroGen products with an output
      capacity of 1.5 megawatts or more, in, or into the Territory. Further, HydroGen
      shall not appoint other distributors or agents to sell HydroGen products of
      1.5
      megawatts or more in, or into, the Territory.




•  Each
      year
      Samsung and HydroGen shall set and / or revise performance targets for the
      proceeding three years. Samsung shall set its sales performance targets for
      each
      of the regions in the Territory and cumulatively. HydroGen shall set price
      targets, production targets and system performance targets.




-5-




**Competitive
      Business Conditions and Competitive Position**




HydroGen
      believes it is well positioned with its scalable multi-megawatt technology
      to
      offer products that will meet increasing global demand for large scale,
      ultra-clean distributed energy.




HydroGen
      faces competition from a number of different sources. Indirectly, there is
      competition from the current producers of electricity, including the major
      power
      producers, transmission companies and existing co-generation sources. Current
      electric producers all have existing facilities, are part of the current power
      grid and have an established market presence. In addition, terminating or
      modifying power supply relationships with some of their suppliers may require
      these potential customers to pay termination fees to end long term contractual
      arrangements or pay fees for remaining a user of grid electricity on a back-up
      basis.




Directly,
      there is competition from other producers of fuel cells, albeit based on
      different technologies, and from incumbent distributed generation technologies
      in HydroGen’s target size class. Incumbents include internal combustion engines
      and combustion turbines. The former are the largest and best-established
      distributed generation technology, with most installations using liquid fuels
      but a substantial amount using gaseous hydrocarbons as well. However, operating
      at low temperature, with little waste heat available for cogeneration, and
      with
      frequent maintenance intervals, engines are utilized in applications that are
      not as directly competitive to HydroGen’s as the turbines. Combustion turbines
      have a long operating and service support history, low installed costs, and
      currently a substantial market position. HydroGen can compete with these
      technologies based on the following anticipated attributes of its technology:




1.  High
      net
      electric and system efficiency;




2.  Ultra-low
      emissions;




3.  High
      reliability and availability;




4.  Fuel
      and
      application diversity; and




5.  Ability
      for integration of fuel cell plant into chemical plant.




Despite
      these attributes of our technology, incumbent technologies and producers are
      strongly entrenched and hold a highly defensible and dominant share of the
      market for electricity production. HydroGen will attempt to out-perform its
      competition by delivering products that offer a competitive value proposition
      against that of the incumbents, and through world class strategic partnerships
      that will provide significant market presence, credibility, and technical and
      business capability. HydroGen will also focus on and intends to deliver product
      cost reductions through aggressive value engineering projects to make HydroGen’s
      fuel cell power plants more attractive as an alternative source. Also, HydroGen
      can source projects where its fuel cell technology is the more logical solution
      such as locations where the electric grid is weak or not readily available,
      or
      where hydrogen is available.




Among
      other types of fuel cells, HydroGen also faces competition from producers of
      liquid-cooled PAFCs and molten carbonate fuel cells (MCFCs). Two leading
      manufacturers of liquid-cooled PAFCs are United Technologies Corporation and
      Fuji Electric. Both of these companies have a proven track record, substantial
      resources and a large number of installed power plants using their technology.
      Because both companies target natural gas-based applications below 1 MW, the
      Company does not anticipate significant direct competition from these providers.
      The leading supplier of MCFCs, FuelCell Energy, offers units ranging from 300
      kW
      to 2.4 MW, and targets hydrocarbon fuel applications. This provider has fielded
      numerous early commercial units and is competing in similar geographies as
      HydroGen. While the MCFC system operates at a higher electric efficiency than
      the PAFC for hydrocarbon applications, MCFCs are principally restricted to
      hydrocarbon applications because of the need for internal carbon dioxide
      recycling for electrolyte replenishment. Because of the nature of their
      technology and the stage of their development, HydroGen does not consider the
      manufacturers of solid oxide fuel cells (SOFC) to be directly competing in
      the
      size range of plants that the Company is considering; however, some
      manufacturers of SOFCs are indicating their focus on larger scale applications
      as their initial commercial focus.




-6-




HydroGen
      intends to compete with its fuel cell competitors on the basis of what the
      Company believes to be its competitive attributes. The Company believes that
      its
      highly scalable multi-megawatt plant design flexibility gives it access to
      a
      wider range and larger total size of market opportunity. By focusing on large
      multi-megawatt systems, we anticipate that the installed cost (and associated
      price to customer) for our air-cooled PAFC power plants will be very competitive
      with other fuel cells, with higher reliability and lower maintenance. By using
      mature, “off the shelf” balance of plant (BOP) equipment and reformer
      technology, the Company also believes its fuel cell plants will be more reliable
      and cost less. The Company also believes that PAFCs have demonstrated the
      longest operating lifetime of all fuel cells, reducing the life cycle cost
      of
      ownership to the customer by extending the time required between fuel cell
      stack
      replacements. Finally, the Company believes that its application diversity,
      including hydrogen-available and hydrocarbon markets, offers a larger
      opportunity for its technology.




**Customers**




HydroGen
      anticipates selling its first PAFC power plant(s) in 2008 on the basis of
      expectations established in its strategic partnership agreements with
      Samsung.




**Intellectual
      Property**




HydroGen
      owns certain rights and manufacturing assets for the 400 kW, air-cooled
      PAFC technology developed in the 1980s and early 1990s by Westinghouse. As
      part
      of the Department of Energy (DOE)-Westinghouse program, Westinghouse obtained
      a
      revocable, non-exclusive license to use all technology developed pursuant to
      the
      DOE sponsored program. In addition, Westinghouse undertook its own development
      of module designs and manufacturing plans, and constructed a manufacturing
      facility and working prototype module. During this manufacturing and prototype
      program, Westinghouse privately developed recipes, processes and plans for
      designing and manufacturing phosphoric acid fuel cells. That intellectual
      property, maintained by Westinghouse as trade secrets, has been transferred
      to
      HydroGen along with all of Westinghouse’s rights to the technology developed
      under the DOE research and development program, and has since been maintained
      as
      closely held trade secrets. HydroGen also employs some of the former
      Westinghouse engineers who developed the technology, and has substantially
      transferred their knowledge base to a new team of engineers.




Westinghouse,
      who originally developed the technology and made the decision to maintain the
      core technology in the form of trade secrets, subsequently transferred all
      of
      its intellectual property related to the PAFC program, including trade secrets,
      to Environmental Energy Services, Inc (EESI), the predecessor company to Fuel
      Cell Corporation of America (FCA), on or about March 31, 1993 pursuant to a
      general assignment set forth in the asset purchase agreement. FCA/EESI
      maintained these trade secrets, until ultimately transferring the assets to
      HydroGen, LLC in the fall of 2001.




HydroGen
      continues the use of trade secrets as its principal mode to protect its
      intellectual property. The Company is currently working with its intellectual
      property counsel to assist it in formulating strategies designed to protect
      most
      effectively its existing and future intellectual property.




-7-




Although
      most of the core technology has been maintained as trade secrets, Westinghouse
      applied for and received patents in this technology. All of the patents related
      to this technology that were issued to Westinghouse were subsequently assigned
      to the DOE. However most of these patents either expired or were allowed to
      lapse by the DOE. The DOE maintained four patents, only two of which remain
      in
      effect today. On August 26, 2005, HydroGen, LLC, entered into a patent license
      with the DOE to license two patents for its business operations. The DOE granted
      the license to promote both the interests of the federal government and the
      public, as well as provide incentives to the Company to bring these inventions
      to market. The two remaining DOE patents subject to the license
      are:


**Patent
                  No.**
              
              **Subject
                  Matter of Patent**
              
              **Expiration
                  Date**4978591
              
              Corrosion
                  Free Phosphoric Acid Fuel Cells
              
              9/20095096786
              
              Integral
                  Edge Seal for Phosphoric Acid Fuel Cells
              
              9/2009




The
      patent license from the DOE is royalty free, irrevocable and exclusive to
      HydroGen, LLC except to the extent the government may require us to issue
      sublicense(s) to parties for health and safety needs. We were required to and
      did spend not less than $1,000,000 in the development of products using the
      licensed patents during the first year. We are also required to maintain the
      licensed inventions at the U.S. Patent and Trademark Office. We have also
      committed that the products embodying the licensed inventions will be
      manufactured substantially in the United States. We are obligated to provide
      various reports to the DOE regarding the development of our products. We may
      grant sublicenses to third parties with the permission of the DOE. The license
      may be terminated in whole or in part if: (i) we do not execute our
      development plan as required under the license; (ii) we fail to make any
      required reports to the DOE; (iii) we materially breach the agreement or
      (iv) the DOE determines that termination is necessary to meet requirements
      for public use as specified in federal regulations and those regulatory
      requirements are not being met by us. The loss of the exclusive use of the
      patents could impair the Company’s ability to realize its business
      plan.




**Governmental
      Regulations**




We
      presently are, and our fuel cell power plants will be, subject to various
      federal, state and local laws and regulations relating to, among other things,
      land use, safe working conditions, handling and disposal of hazardous and
      potentially hazardous substances and emissions of pollutants into the
      atmosphere.




We
      are
      also subject to federal, state, provincial or local regulation with respect
      to,
      among other things, emissions and siting. In addition, utility companies and
      several states have created and adopted or are in the process of creating
      interconnection regulations covering both technical and financial requirements
      for interconnection of fuel cell power plants to utility grids.




*Regulatory
      and other incentives*




An
      increasing array of federal, state, and foreign country incentives offer further
      opportunities for customers to benefit from HydroGen fuel cell systems. At
      the
      federal level, the Business Energy Tax Credit provides a tax credit equal to
      30%
      of the purchase cost of a fuel cell system to a corporate customer. Also, under
      the Modified Accelerated Cost Recovery System, fuel cells are classified as
      5-year property and are depreciated on an accelerated basis over that time
      period. Additionally, in 2006 the Department of Energy initiated a Loan
      Guarantee Program, under which the federal government has committed to serve
      as
      guarantor for up to $4 billion to encourage early commercial use in the
      United States of new or significantly improved technologies in energy projects,
      including hydrogen-related energy projects. Together, these existing incentives
      may assist in reducing the cost and risk associated with early adoption of
      the
      HydroGen product.




-8-




Additionally,
      numerous states are initiating or increasing commitments to renewable or
“alternative” energy portfolio standards and related mandates, and providing
      significant incentives to reduce the cost of such technologies to early
      adopters. One major example is the State of California, which currently offers
      a
      direct purchase incentive of $4,500/kW for fuel cells running on renewable
      fuel
      and $2,500/kW for all other fuel cells, through the Self-Generation Incentive
      Program. In the State of Connecticut, fuel cells qualify as a “renewable”
technology under the state’s renewable portfolio
      standard.   Additionally, fuel cells qualify as a
      Tier 1 alternative energy technology as part of the Commonwealth of
      Pennsylvania’s Alternative Energy Portfolio Standard (AEPS). The AEPS, enacted
      November 30, 2004, requires each electric distribution company and electric
      generation supplier to retail electric customers in Pennsylvania to supply
      18%
      of its electricity using alternative-energy resources by 2020, of which 8%
      must
      be derived from Tier 1 sources. Tier 1 generation credits are tradable
      instruments that can enable non-utility owner-operators of fuel cell systems
      to
      sell the credits to electricity suppliers which must comply with the AEPS
      requirements.




Other
      nations have begun to offer incentives to support development of fuel cell
      power
      generation systems and the related industry. In South Korea, for example, an
      array of incentives and subsidies directly benefit adopters of fuel cell
      systems. Under a feed-in tariff program, the federal government purchases the
      electric power output from the first 50MW of installed fuel cell systems for
      a
      price of $0.30/kWh, a premium of approximately over 400% above the cost of
      conventional generation in South Korea.




This
      discussion is not intended as a comprehensive review of all available
      incentives, but a general presentation of some such incentives to illustrate
      their widespread and increasing nature, and potential importance in spurring
      early adoption.




**Research
      and Development**




We
      incurred $10,886,000 and $3,860,000 in research and development activities
      for
      the periods ended December 31, 2007 and 2006, respectively. None of the amounts
      spent on research and development have been borne directly by
      customers.




**Suppliers
      and Raw Materials**




We
      use
      various raw materials and components to construct a fuel cell module, including
      platinum which is critical to our manufacturing process. Our BOP components
      are
      procured from several key suppliers. We continually evaluate new suppliers
      and
      currently are qualifying several new suppliers.




**Environmental
      Compliance**




We
      believe that we are, in
      all material respects, in compliance with local, state, and federal
      environmental laws applicable to our manufacturing and waste disposal
      operations, and we have prepared appropriate documentation as to our current
      operational procedures, standards, and guidelines in order to comply with
      applicable environmental laws.  In 2007, we spent approximately $90,000 on
      these compliance activities.




-9-




**Product
      Update**




On
      October 17, 2006, HydroGen announced that it had signed an agreement with
      ASHTA Chemicals to install and operate a 400 kW fuel cell demonstration
      power plant at ASHTA’s chlor-alkali manufacturing plant in Ashtabula, Ohio. We
      have completed construction of this plant and have delivered to it the 400
      kW
      fuel cell module. We are currently performing start-up testing and anticipate
      generating power in the second quarter of 2008.




**Employees**




As
      of
      April 1, 2008, HydroGen employed approximately 103 full time employees and
      three
      part time employees. Of its employees, HydroGen has seven members of executive
      management, 83 technical staff and 13 administrators and organizational support
      staff. HydroGen believes it has good relations with its employees, and none
      are
      represented by collective bargaining agreements.




**Risk
      Factors**




*Investors
      in HydroGen should be mindful of the following risk factors relative to
      HydroGen’s business.*




**HydroGen
      has limited revenues to sustain its business.**




As
      of
      December 31, 2007, HydroGen had cash of approximately $8.1 million. HydroGen
      is
      a development stage Company that cannot rely on revenues from sales. Without
      raising additional capital, HydroGen will not be able to sustain its operations
      past mid-May 2008.




**Our
      independent auditors have issued a going concern opinion.**




Our
      auditors have included an explanatory paragraph in their opinion that
      accompanies our audited consolidated financial statements as of and for the
      year
      ended December 31, 2007, indicating that our recurring losses from
      operations, net capital deficiency, and current liquidity position raise
      substantial doubt about our ability to continue as a going concern. The
      accompanying consolidated financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.




**HydroGen
      has a limited operating history in the fuel cell industry, and therefore
      investors may not be able to evaluate an investment in our common
      stock.**




HydroGen
      has a limited history of operations in the fuel cell industry. An investment
      in
      HydroGen should be viewed in light of the risks and uncertainties inherently
      faced by a company in the early stages of development. Due to the nature of
      the
      emerging industries in which HydroGen competes, some aspects of its business
      plan rest on the beliefs formed by its management and have not necessarily
      been
      supported by independent sources. As a result, there can be no guarantee as
      to
      the adequacy of HydroGen’s business plan and there is a limited basis for
      evaluating HydroGen.




**HydroGen
      has incurred substantial losses and expects continued losses. There can be
      no
      assurance that HydroGen can achieve profitability, and even if it does become
      profitable, that it can sustain profitability.**




HydroGen
      has incurred substantial losses since its formation and had an accumulated
      deficit of approximately $31.5 million as of December 31, 2007. HydroGen expects
      to continue to incur net losses for the next 30 to 40 months as it continues
      to
      make significant investments in commercialization activities and pursue
      cost-reduction activities. HydroGen cannot determine with certainty when or
      if
      it will achieve profitability, and even if it does achieve profitability,
      whether it can sustain or increase profitability.




-10-




**HydroGen
      will require a substantial amount of additional capital to fully execute its
      business plan, and we are uncertain about the availability of such additional
      funds without which we may not be able to execute our business
      plan.**




The
      business plan calls for the expenditure of substantial capital to finance power
      plant development projects, continued financing for its Versailles fuel
      cell manufacturing facility, and the construction of an advanced manufacturing
      facility with capacity for future large scale serial production of fuel cell
      stacks and potentially for other components used in the fuel cell power plants
      that HydroGen plans to sell and deliver. HydroGen will require additional
      capital to fund its expenditures, including business development, operating
      losses, and other cash needs to implement its market entry and cost reduction
      phases. HydroGen has made an initial estimate of its capital needs for its
      market entry stage and believes it will need a minimum of $75 million in
      additional capital. HydroGen plans in the future to seek portions of the
      required funding from commercial sales, equity investments from strategic
      partners and others, existing state incentive programs for fuel cells, federally
      funded fuel cell demonstration programs and low interest incentive based loans
      supported by one or more selected states. We currently have no committed sources
      of, or other arrangements with respect to, additional financing, and there
      can
      be no assurance that such additional financing will be available or, if
      available, be available on acceptable terms to HydroGen. Without the necessary
      funds, our business plan will have to be modified or may not be fully executed.
      Additionally, any future financing may significantly impair the Company’s
      ability to utilize net operating losses existing at the time of the financing
      as
      a result of limitations imposed under Internal Revenue Code
      Section 382.




**Current
      shareholders may be diluted as a result of additional
      financings.**




If
      HydroGen raises additional funds through the sale of equity or convertible
      debt
      securities, current shareholders’ percentage ownership will be reduced. In
      addition, these transactions may dilute the value of common stock outstanding.
      Moreover, HydroGen may have to issue securities that may have rights,
      preferences and privileges senior to its common stock.




**HydroGen’s
      current cost to produce its fuel cell modules exceeds the amount for which
      it
      can currently sell such product. While HydroGen has initiated specific work
      targeting cost reductions, if HydroGen is unable to reduce the costs of its
      fuel
      cell modules, it will have a material adverse effect on its business plans,
      prospects, results of operations and financial condition.**




The
      production costs of our initial industrial products are expected to be higher
      than their sales prices. HydroGen recognizes that successfully implementing
      its
      strategy and business plan requires that it offer fuel cell modules at
      competitive prices, which can only be accomplished when production costs are
      cut
      substantially from current levels. HydroGen has multiple value engineering
      projects in progress that target the required cost reductions. If HydroGen
      is
      unable to produce fuel cell modules at competitive prices relative to
      alternative technologies and products, HydroGen’s target market customers will
      be unlikely to buy its fuel cell modules. The failure to achieve cost reductions
      may materially adversely affect HydroGen’s business plans, prospects, results of
      operations and financial condition.




**HydroGen
      received a grant from the State of Ohio that has a number of obligations that
      if
      they are not met will cause the grant to be withdrawn.**




The
      State
      of Ohio has provided HydroGen a development grant of $1,250,000 on a
      reimbursement basis. The grant imposes a number of obligations on HydroGen,
      including the implementation of the outlined business plan in the grant
      application, relocation of the headquarters and establishment of manufacturing
      facilities in the state, creation of jobs and adherence to federal and state
      regulations of accountability and business practice. If these are not met,
      the
      grant may be withdrawn and the proceeds of the grant may have to be repaid
      to
      the State of Ohio. The loss of the grant funding may limit the ability of
      HydroGen to implement its business plan as currently established and require
      HydroGen to seek additional funding earlier than anticipated.




-11-




**HydroGen’s
      initial fuel cell modules will be based on technology developed by Westinghouse
      Electric Power Division. While this technology has been tested for millions
      of
      hours at the scale and stack level, it has not been manufactured in volume,
      deployed to industrial applications, nor proven for the nominal lifetime of
      5
      years. As experience with this technology is gained in the factory and in the
      field, there will likely be additional funds expended to improve
      manufacturability, performance and lifetime.**




HydroGen’s
      fuel cell modules are based on technology developed in the 1980s and early
      1990s
      by Westinghouse Electric Power Division. There exist some areas where further
      development might be done or required. Certain basic materials and components
      may have changed in nature or specifications, and additional associated problems
      may materialize during the initial production of the fuel cells and fuel cell
      stacks. There is no certainty that fuel cell production in our Versailles
      production plant or in the advance manufacturing plant which is planned to
      come
      on line in 2009 will not have a material impact upon the performance,
      profitability, and cash flows from future operations.




**HydroGen
      has entered into a license with the Department of Energy which has certain
      requirements that if not met will cause the license to be
      terminable.**




HydroGen
      has entered into a license of four patents from the Department of Energy (two
      of
      which have since expired) which requires us to make a yearly report to the
      DOE.
      If not met, the license will be terminable, the loss of which could impair
      HydroGen’s ability to attract additional investment.




**HydroGen
      relies on trade secret and similar means to protect much of its intellectual
      property which may not prove to be effective, with the effect of impairment
      in
      our rights.**




HydroGen
      relies on trade secret law, confidentiality agreements and physical security
      such as restricted access to protect much of its intellectual property. If
      these
      means of protection are compromised others may obtain knowledge of our
      intellectual property and could potentially develop competing products. For
      instance, confidentiality agreements to which HydroGen is a party may be
      breached, and HydroGen may not have adequate remedies for any breach. To protect
      its rights that others learn illegally may require HydroGen to expend time
      and
      financial resources pursuing court actions. These actions are typically
      expensive and are not always conclusive in favor of the claimant. In addition,
      though HydroGen believes doing so would be difficult, it may be possible for
      third parties to reverse engineer its fuel cells through inspection and testing.
      Finally, it is possible that third party patents may exist on which HydroGen’s
      technology may infringe. HydroGen’s financial condition may be impaired in any
      such events, and it may lose its competitive position as a result.




**Failure
      of HydroGen’s field tests could negatively impact demand for its
      products.**




HydroGen
      has a commercial demonstration test facility at ASHTA Chemicals, Inc. in
      Ashtabula, Ohio. Demonstrations of HydroGen’s product could encounter problems
      and delays for a number of reasons, including the failure of its technology,
      operator error, and the failure to properly maintain and service its test
      facility plants. Any problem or perceived problem with HydroGen’s field tests
      could materially harm its reputation and impair market acceptance of, and demand
      for, its products.




-12-




**HydroGen
      has no experience manufacturing fuel cell power plants on a commercial basis
      which may result in production delays, associated delays in sales and could
      result in additional development costs.**




HydroGen
      has no experience manufacturing fuel cell modules or in designing and
      constructing fuel cell power plants on a commercial basis. HydroGen does not
      know whether or when it will be able to develop efficient, low-cost
      manufacturing capability and processes that will enable it to meet the
      production standards or production volumes necessary to successfully market
      its
      products. Even if HydroGen is successful in developing its manufacturing
      capability and processes, it does not know whether it will do so in time to
      meet
      its product commercialization schedule. Therefore, investors may lose the
      opportunity to profit from the development of HydroGen’s technology and business
      plan because there may be delays in sales, and additional development
      costs.




**A
      viable market for HydroGen’s products may never develop or may take longer to
      develop than HydroGen anticipates.**




HydroGen’s
      fuel cell power plants represent an emerging market, and HydroGen does not
      know
      the extent to which distributors and resellers will want to purchase them and
      whether end-users will want to use them. If a viable market fails to develop
      or
      develops more slowly than HydroGen anticipates, HydroGen may be unable to
      recover the losses it has incurred to develop its products and may be unable
      to
      achieve profitability. The development of a viable market for HydroGen’s
      products may be impacted by many factors which are out of its control,
      including:




·
            the
                cost competitiveness of HydroGen’s
                products;




·
            the
                future costs of natural gas, hydrogen and other fuels expected to
                be used
                by our products;




·
            consumer
                reluctance to try a new product;




·
            consumer
                perceptions of HydroGen’s product
                safety;




·
            regulatory
                requirements;




·
            barriers
                to entry created by existing energy providers;
                and




·
            the
                emergence of newer, more competitive technologies and
                products.




**Utility
      companies could place barriers on HydroGen’s entry into the marketplace with the
      result that we may not be able to sell sufficient products to sustain operations
      and cause unexpected losses.**




Electric
      utilities commonly charge fees to industrial customers for disconnecting from
      the grid, for using less electricity, or for having the capacity to use power
      from the grid for back-up purposes. The imposition of such fees could increase
      the cost to customers using our systems and could reduce the desirability of
      our
      systems, thereby harming our potential for successful marketing and therefore
      revenues or profitability. Without sufficient sales, we will not gain the
      credibility necessary to compete in our industry, and we may not be able to
      sustain our operations.




**Alternatives
      to HydroGen technology could render HydroGen’s systems obsolete prior to
      commercialization, and therefore will cause us to curtail our current business
      plan and potentially impair an investment in HydroGen.**




HydroGen’s
      fuel cell power plants are one of a number of alternative energy products being
      developed today as supplements to the electric grid that have potential
      industrial applications, including microturbines, solar, wind, and other types
      of fuel cell technologies and advanced reciprocating engines. Technological
      advances in alternative energy products, improvements in reciprocating
      engine/generator sets, and other fuel cell technologies may render HydroGen’s
      systems obsolete, therefore causing a diminished value of an investment in
      HydroGen.




-13-




**HydroGen
      may be unable to sell and deliver or operate fuel cell power plants which will
      result in a loss of market opportunity and its ability to generate
      income.**




HydroGen’s
      success will depend on its and its partners’ ability to sell and deliver fuel
      cell power plants. Although there is interest indicated in its potential fuel
      cell power plants and HydroGen is in the process of negotiating its first sales
      contract for the sale and delivery of its air-cooled PAFC power plants, no
      definitive contracts have been executed to date. Factors that could adversely
      affect HydroGen’s ability to sell and deliver fuel cells include HydroGen’s
      ability to manage operations, increased competition and unexpected technological
      obsolescence of HydroGen’s air-cooled phosphoric acid fuel cell technology.
      Another reason for not being able to deliver the fuel cell power plants is
      the
      technological risk associated with new applications of technology. The inability
      of HydroGen to effectively sell and deliver fuel cell power plants, or to get
      the first few plants operational, would have a material adverse effect on
      HydroGen’s business, financial condition and results of operations because it
      will lose market opportunity and credibility.




**HydroGen
      may be unable to obtain the necessary governmental approvals, authorizations,
      certifications, permits, licenses, and rights-of-way to sell, deliver and/or
      operate fuel cell power plants without which HydroGen will not be able to sell
      its systems or be able to enter the market.**




The
      development, sales, and delivery of fuel cell power plants will depend on,
      among
      other things, HydroGen’s ability to secure and maintain regional governmental
      approvals, authorizations, permits and licenses. In certain jurisdictions,
      other
      legal requirements may delay, stop or impede the sales, delivery and/or
      operation of fuel cell power plants. There can be no assurance that HydroGen,
      its distributors, its customers, or its contractors will successfully obtain
      required approvals, authorizations, permits and licenses or enter into necessary
      agreements, as the case may be. If HydroGen, its distributors or any contractor
      fails to secure or maintain any necessary approvals, authorizations, permits
      or
      licenses, or faces delays in respect thereof, HydroGen may be unable to commence
      or complete any proposed fuel cell projects, which could materially and
      adversely affect HydroGen’s ability to sell, deliver or operate fuel cell power
      plants.




**If
      HydroGen or Samsung fail to perform under their strategic agreements, HydroGen’s
      business, prospects, results of operations or financial condition may be
      adversely affected.**




HydroGen
      and Samsung have entered into a Master Cooperation Agreement and a Hydrogen
      Distribution and Marketing Agreement pursuant to which Samsung will be the
      exclusive distributor of HydroGen’s fuel cell products in Asia, the Middle East,
      Australia, New Zealand and certain countries in Eastern Europe. There can be
      no
      assurance that Samsung will be able to effectively market and sell HydroGen’s
      fuel cell products in all or any parts of these regions, or if they are able
      to
      market and sell HydroGen’s fuel cell products, that they will be able to do so
      at the levels targeted by the parties. There can also be no assurance that
      HydroGen will be able to meet the sales demands of Samsung or that HydroGen
      will
      be able to sell at the prices required by Samsung’s customers. Any such failure
      by Samsung to market and sell HydroGen’s fuel cell products or HydroGen’s
      failure to meet sales demand or price requirements may adversely affect
      HydroGen’s business, prospects, results of operations or financial
      condition.




-14-




**The
      exclusivity of HydroGen’s agreements with Samsung are subject to early
      termination and any such early termination of exclusivity may have a material
      adverse effect on HydroGen’s business, prospects, results of operations or
      financial condition.**




If
      by
      December 31, 2009 (and on December 31 every two years thereafter) HydroGen
      fails
      to attain the efficiency, production capacity, or price targets set in the
      Hydrogen Distribution and Marketing Agreement, Samsung may in its sole
      discretion terminate the exclusivity of such agreement. In addition, on December
      31, 2012, Samsung shall have the one-time right to terminate the exclusivity
      of
      such agreement. If Samsung terminates the exclusivity of the Hydrogen
      Distribution and Marketing Agreement, it may have a material adverse effect
      on
      HydroGen’s business, prospects, results of operations or financial
      condition.


**HydroGen
        faces risks associated with its plans to market, distribute and service its
        products internationally.**
  HydroGen
        intends to market, distribute and service its products internationally and
        may
        establish international operations. HydroGen has limited experience developing
        and no experience manufacturing its products to comply with the commercial
        and
        legal requirements of international markets. HydroGen’s success in international
        markets will depend, in part, on our ability and that of our partners to
        secure
        relationships with foreign sub-distributors, and our ability to manufacture
        products that meet foreign regulatory and commercial requirements. Additionally,
        HydroGen’s planned international operations are subject to other inherent risks,
        including potential difficulties in enforcing contractual obligations,
        intellectual property rights in foreign countries, fluctuations in currency
        exchange rates, taxations, exchange controls, employment regulations and
        repatriation of earnings. Also, to the extent HydroGen’s operations and assets
        are located in foreign countries, they are potentially subject to
        nationalization actions over which HydroGen will have no control. Additionally,
        international transactions may involve increased financial and legal risks
        due
        to differing legal systems and customs in foreign countries. While these
        factors
        or the impact of these factors are difficult to predict, any one or more
        of them
        could adversely affect HydroGen’s business, financial condition or operating
        results.






**Platinum
      is a scarce resource on which HydroGen is dependent.**




Platinum
      is a key material in HydroGen’s phosphoric acid fuel cells. Platinum is a scarce
      natural resource and HydroGen is dependent upon a sufficient supply of this
      commodity. Any shortages could adversely affect our ability to produce
      commercially viable fuel cell systems and significantly raise HydroGen’s cost of
      producing HydroGen’s fuel cell systems. In addition, HydroGen intends to retain
      the ownership of the platinum in its fuel cell modules sold to customers and
      expects to be able to recover approximately 85% of the economic value of the
      platinum subsequent to the fuel cell modules useful life. HydroGen may have
      problems recovering the platinum from its customers or the costs of recovery
      may
      increase or the amount recovered may be less than HydroGen expects. Any one
      of
      more of these problems may adversely affect HydroGen’s business, financial
      condition or operating results.




-15-




**HydroGen’s
      products use flammable fuels that are inherently dangerous
      substances.**




HydroGen’s
      fuel cells use natural gas and hydrogen gas in catalytic reactions, which
      produce less heat than a typical gas furnace. While HydroGen’s products do not
      use this fuel in combustion process, natural gas and hydrogen gas are flammable
      fuels that could leak and combust if ignited by another source. Any such
      accidents involving HydroGen’s products or other products using similar
      flammable fuels could materially suppress demand for, or heighten regulatory
      scrutiny of, HydroGen’s products.




**HydroGen
      may not be able to implement the business plan as planned, on time and within
      budget which may cause a loss or diminution of investment value of the common
      stock.**




HydroGen’s
      ability to achieve its strategic objectives will depend in large part upon
      the
      successful, timely, and cost-effective completion of the business plan. The
      fuel
      cell projects will be offered and developed in various states and countries,
      and
      the success of these projects will rely on contracted construction companies
      and
      subcontractors in these states and countries. In addition to HydroGen’s
      obtaining and maintaining applicable governmental approvals, authorizations,
      permits and licenses the successful execution of the business plan is dependent
      upon a variety of factors, uncertainties and contingencies, many of which are
      beyond HydroGen’s control, such as power plant construction risks, subcontractor
      risks, and regulatory risks.




**HydroGen
      is subject to competition with traditional and other alternative energy systems,
      any of which could be determined to be more viable, more reliable or more cost
      efficient and any of which could reduce demand for air-cooled phosphoric acid
      fuel cell power systems of the type produced by HydroGen.**




HydroGen’s
      success depends on its ability to compete with other energy systems providers.
      HydroGen is likely to face competition from existing energy systems providers,
      including combustion turbine manufacturers and renewable energy developers,
      who
      may decide to sell to the same customers and/or to build expansions of their
      own
      power generating portfolio, and from equipment manufacturers and local
      contractors who typically build energy systems upon a customer’s request and may
      decide to build excess power generating capacity which would compete with the
      fuel cell power plants built by HydroGen. Further, national and regional energy
      utility providers that have established transmission and distribution networks
      throughout their home countries and/or territories may decide to enter the
      power
      plant supply industry, therewith creating more competitors in the market. Due
      to
      the highly competitive nature of the American, European, Asian and international
      energy industries, new companies may emerge in the future offering services
      and
      products similar to HydroGen’s. This intensifying competition could reduce or
      supplant the demand for the use of HydroGen’s fuel cell power plants.




**HydroGen
      will be competing with a new technology which if not accepted by the marketplace
      will impede its ability to sell fuel cells and jeopardizes its business
      plan.**




There
      can
      be no assurance that phosphoric acid fuel cells will become the preferred
      technology for power production in the future. New technologies may emerge,
      that
      may become more widely used than phosphoric acid fuel cells, particularly in
      view of the now rapid pace of technological development in the energy industry
      generally. If phosphoric acid fuel cells do not become the preferred technology
      for the production of distributed, as well as premium power, there will be
      substantially less demand for phosphoric acid fuel cell power
      plants.




-16-




**Fuel
      cells are a new technology, and government regulation involving the use of
      fuel
      cells is evolving which introduces some uncertainty for customers which might
      therefore elect to stay with more traditional sources of energy, thereby
      limiting our sales opportunities.**


Currently,
        power generated by fuel cells is regulated in much the same manner as are
        other
        sources of power generation. Large scale power generation in the multi-megawatt
        range, which is the target market for HydroGen, is generally subject to the
        scrutiny of either the Federal Energy Regulatory Commission, if it affects
        inter-state commerce or state public service commissions if the market is
        wholly
        intrastate. While the regulatory law promulgated by these agencies will not
        regulate the manufacturing of fuel cells by HydroGen, such laws may affect
        the
        market for fuel cells. Currently, state and federal government agencies are
        pre-disposed to provide regulatory law favorable to the commercial deployment
        of
        fuel cells. However, there is risk that government agencies will adopt
        regulatory law unfavorable to fuel cell commercialization. Similarly, while
        government agencies are also pre-disposed to adopt codes and regulations
        that
        enable hydrogen manufacturing, transportation and storage for use in fuel
        cells,
        there are risks that such codes and regulations could be adopted that adversely
        affect the fuel cell market. Further, laws creating economic incentives to
        produce clean power tend to favor the fuel cell market. It is difficult to
        assess with certainty the likelihood that government will legislate more
        or less
        such laws.
  **HydroGen
        may have difficulty in obtaining supplies which could affect its ability
        to
        produce sellable products.**
  HydroGen
        may be unable to obtain an adequate supply of materials or components to
        complete the fuel cell power plants. Certain components may not be widely
        available. A failure of any supplier to deliver the necessary materials and/or
        components to HydroGen on schedule or at all could delay or interrupt the
        manufacturing of fuel cell modules and/or the construction of the fuel cell
        power plants. From time to time, there may be high demand in the market for
        some
        materials or components relative to the supply capacity, which could impede
        the
        ability of HydroGen to obtain the quantity of those materials and/or components
        it needs. Any delay in obtaining an adequate supply of materials and/or
        components could lead to construction delays and additional costs.
  **The
        fuel cell power plants could fail or be disrupted due to technological factors
        or external damage or could deteriorate more quickly than expected thereby
        increasing costs for replacement fuel cell stacks and modules, damaging sales
        for this technology and diminishing the business reputation of
        HydroGen.**
  The
        success of the fuel cell power plants will depend in part on HydroGen’s ability
        to protect the plants, and their materials and/or components from external
        damage. There can be no assurance that the availability of the fuel cell
        power
        plants to customers will not be disrupted due to external damage caused by
        construction work, weather, or by events such as fires, earthquakes, floods,
        power losses and similar accidents or disasters. Any prolonged difficulty
        in
        accessing the fuel cell power plants could threaten HydroGen’s relationship with
        its customers and have a material adverse effect on HydroGen’s business,
        financial condition and results of operations. HydroGen cannot guarantee
        the
        actual useful life of any part of the fuel cell power plants. Preventive
        maintenance programs and standard procedures will be in place, to minimize
        adverse consequences, due to faulty operational conditions of the fuel cell
        plants for HydroGen, and for its contractors and customers. A number of factors
        will affect the useful life of the fuel cell power plants, including, among
        other issues, quality of hydrogen, quality of construction, and unexpected
        deterioration. Failure of any part of the fuel cell power plants to operate
        for
        its full design life could have a material adverse effect on HydroGen’s business
        because they would not operate as marketed, thereby damaging sales and
        reputation.
  -17-
  **HydroGen’s
        success depends on its ability to hire and retain key personnel without which
        its ability to implement its business plan will be slowed.**
  HydroGen’s
        future success depends on the skills, experience and efforts of its officers
        and
        key technical and sales employees. Its management has significant experience
        in
        the energy and chemical plant construction industries, and the loss of any
        one
        of them could materially and adversely affect HydroGen’s ability to execute its
        business strategy. HydroGen’s success also depends on its ability to attract,
        train and retain qualified engineering, technical, and sales personnel.
        Competition for personnel in these areas is intense and HydroGen may not
        be able
        to hire or retain the required personnel. A failure to do so could have a
        material adverse effect on HydroGen’s business, financial condition and results
        of operations because without the right persons, HydroGen may not be able
        to
        fully implement its business plan. HydroGen does not maintain key man insurance
        on any of its management or employees.
  **HydroGen
        may be unable to manage its growth effectively which may result in improperly
        spent or managed resources or additional costs.**
  As
        a
        result of HydroGen’s expected growth and expansion, significant demands have
        been, and will continue to be, placed on HydroGen’s management, operational and
        financial resources and systems and controls. In order to manage growth
        effectively, HydroGen must continue to develop its operational and financial
        systems and controls, expand through the acquisition and utilization of
        additional facilities, and hire, train, and manage a qualified employee base.
        Inaccuracies in HydroGen’s forecasts of market demand could result in
        insufficient or excessive capacity or facilities and disproportionate fixed
        expenses for its operations. There can be no assurance that HydroGen will
        be
        able to develop the fuel cell power plants as planned or expand at the rate
        anticipated in accordance with its business plan. As HydroGen proceeds with
        its
        business development and expansion, there will be increased demands on
        HydroGen’s customer support, sales and marketing and administrative resources.
        There can be no assurance that HydroGen’s engineering, production, operations,
        and financial control systems will continue to be adequate to maintain and
        effectively manage growth. Failure to continue to upgrade the administrative,
        operating and financial control systems or the emergence of unexpected expansion
        difficulties could materially and adversely affect HydroGen’s business and
        results of operations and cost additional sums. Managing operations in multiple
        jurisdictions may place further strain on HydroGen’s ability to manage its
        overall growth.
  **Anticipated
        growth in demand for energy systems capacity may not occur which would reduce
        the market and the opportunity to sell HydroGen’s fuel cell
        systems.**
  One
        of
        HydroGen’s primary customers will be operators of fuel cell power plants for
        their power (and often co-generated heat) needs. To the extent local and
        regional demand for power generating capacity does not exceed the capacity
        of
        the current energy market suppliers, or technological advances increase the
        capacity of existing power generating equipment, HydroGen’s potential customers
        may not have a need for additional power generating capacity. Any significant
        decline in the local and regional demand for power generating capacity or
        downturn in the energy industry could result in unsold capacity of fuel cell
        power plants and hence lower revenues. If growth in the demand for power
        generating capacity for any of these, or other, reasons is less than that
        expected by HydroGen, there will be less demand for the fuel cell power plants,
        which would have a material adverse effect on HydroGen’s business, financial
        condition and results of operations due to a lack of demand for
        systems.
  -18-
  **It
        is possible there are claims resulting from prior corporate activities of
        which
        HydroGen is unaware that may come to light in the future and cost HydroGen
        considerable time, effort and expense to resolve.**
  Although
        prior to the exchange transaction with HydroGen, LLC, the Company was
        operational only as a shell corporation for at least two years, it is possible
        that claims may be asserted against HydroGen in the future. There can be
        no
        assurance given that some person will not devise a claim and attempt to assert
        it in the hopes of obtaining some monetary or other benefit. To resolve claims,
        including payment, may cost HydroGen considerable time, effort and expense.
        Any
        of these may impair management’s implementation of the Company’s business plan
        with the consequence of a loss of opportunity.
  **If
        the Company is not able to maintain its listing on the NASDAQ Capital Market,
        the liquidity of the common stock in the market may be
        affected.**
  On
        March 6, 2007, the common stock of the Company was listed on the NASDAQ
        Capital Market. If the Company is not able to maintain its listing for any
        number of reasons, including the trading price, it may have to remove the
        stock
        from that market and re-establish trading on the OTC Bulletin Board. If that
        were to happen, the liquidity offered by the NASDAQ Capital Market would
        be lost
        and there may not be as much trading opportunity offered to the stockholders
        or
        at prices as favorable on other markets.
  **Even
        though our common stock is now listed on the NASDAQ Capital Market, the market
        price of the shares may fluctuate greatly, and investors in the Company bear
        the
        risk that they will not recover their investment.**
  Trading
        in our common stock has been minimal from time to time and subject to large
        volume and price fluctuation. Therefore, there is no clearly established
        market
        for our shares at this time. The public market price is likely to be influenced
        by the price at which and the amount of shares the selling stockholders are
        attempting to sell at any point in time with the possible effect of limiting
        the
        trading price or lowering it to their offering price. Shares such as those
        of
        companies like ours are also subject to the activities of persons engaged
        in
        short selling the securities which have the effect of driving the price down.
        Therefore, the price of our common stock may fluctuate widely. A full and
        stable
        trading market for our common stock may never develop in which event any
        holder
        of our shares may not be able to sell at the time he elects or at
        all.
  **Item2.**
              **Description
                  of Propert****y**
  HydroGen
        does not own any real property or any rights to acquire any real
        property.
  HydroGen
        currently occupies approximately 34,500 square feet of manufacturing and
        office
        space in Versailles, Pennsylvania. At this location HydroGen maintains its
        current principal manufacturing and testing facilities. The Company is the
        sole
        occupant of this facility. This facility is leased from the National Carbide
        Die
        Corporation. On August 15, 2005, the Company entered into a 5 year lease
        for a
        price of $172,480 per year.
  -19-
  HydroGen
        has established a small corporate headquarters and advanced manufacturing
        development facility of approximately 900 square feet in Cleveland, Ohio
        at the
        Wright Fuel Cell Group building on the Case Western Reserve campus. In November
        2006, the Company executed a 1 year agreement to increase the size of the
        office
        space rented. The Company is renting the space at a base rent of approximately
        $2,700 per month. Since the expiration of the initial term of the lease,
        the
        Company has continued the lease on a month-to-month basis.
  In
        addition to the office in Cleveland, the Company has leased office space
        of
        approximately 1,900 square feet in Ashtabula, Ohio, which facility serves
        as the
        Company’s field office for building its 400 kW fuel cell demonstration
        plant. The Company is paying $1,800 per month for the rent, and the lease
        is on
        a month-to-month basis.
  HydroGen
        also has offices of approximately 1,700 square feet at 10 East 40 th Street
        in New York City, from which we conduct corporate governance, legal, investor
        relations, funding and related activities. On October 19, 2005, the Company
        entered a 61 month lease at an annual cost of $69,700 for the first year,
        and
        increasing 2.5% in each year thereafter of the lease term.
  Each
        of
        the premises leased by the Company is well-maintained, in good condition,
        is
        adequate for our current needs and adequately covered by insurance.
  HydroGen
        is currently in the process of locating space for an advanced manufacturing
        facility and believes that it will be able to find adequate space for such
        advanced manufacturing facility.
  **Item
                3.**
              **Legal
                  Proceedings**
  The
        Company is not currently a party to any material legal proceedings.
  **Item
                4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders**
  During
        the fourth quarter of 2007, no matters were submitted to a vote of security
        holders.
  **PART
        II**
  **Item
                  5.**
              **Market
                  for Common Equity, Related Stockholder Matters****and Small Business Issuer Purchases of Equity
                  Securities**
 **Market
        Information**
  Our
        common stock is traded on the NASDAQ Capital Market (symbol HYDG). At
        April 14, 2008, there were approximately 271 record holders of the
        Company’s common stock.
  The
        trading volume in our common stock has been and is extremely limited. The
        limited nature of the trading market can create the potential for significant
        changes in the trading price for the common stock as a result of relatively
        minor changes in the supply and demand for our common stock and perhaps without
        regard to our business activities.
  The
        market price of our common stock may be subject to significant fluctuations
        in
        response to numerous factors, including: variations in our annual or quarterly
        financial results or those of our competitors; conditions in the economy
        in
        general; announcements of key developments by competitors; loss of key
        personnel; unfavorable publicity affecting our industry or us; adverse legal
        events affecting us; and sales of our common stock by existing
        stockholders.
  -20-
  The
        Company has not declared or paid any dividends since its inception and does
        not
        plan to declare or pay any dividends in the foreseeable future. The payment
        of
        future dividends on the common stock and the rate of such dividends, if any,
        and
        when not restricted, will be determined by our board of directors in light
        of
        our earnings, financial condition, capital requirements and other factors.
  The
        ranges of high and low prices for shares of our common stock as indicated
        on the
        NASDAQ Capital Market for the periods indicated below were as
        follows:
  **QUARTER
                  ENDED**
              
              **HIGH**
              
              **LOW**December
                  31, 2007
              
              $
              3.25
              
              $
              1.90September
                  30, 2007
              
              
              6.57
              
              
              2.33June
                  30, 2007
              
              
              5.00
              
              
              3.72March
                  31, 2007
              
              
              5.22
              
              
              3.75December
                  31, 2006
              
              
              5.00
              
              
              2.80September
                  30, 2006
              
              
              6.00
              
              
              4.50June
                  30, 2006
              
              
              9.00
              
              
              5.00March
                  31, 2006
              
              
              5.75
              
              
              3.00
  **Transfer
        Agent**
  The
        Transfer Agent and Registrar for HydroGen’s common stock is Computershare Trust
        Company, Inc., 350 Indiana Street, Suite 800, Golden, CO 
80401.
  **Equity
        Compensation Plan Information**
  The
        following table gives information about our common stock that may be issued
        upon
        the exercise of options, warrants or rights under our existing equity
        compensation plans, including our 2005 Performance Equity Plan, as amended,
        and
        our 2007 Performance Equity Plan. The information in this table is as of
        December 31, 2007.
  **Plan Category**
              
              **Number of securities to be**
                **issued upon exercise of**
                **outstanding options,**
                **warrants and rights**
              
              **Weighted-average**
                **exercise price of**
                **outstanding options,**
                **warrants, and rights**
              
              **Number of securities**
                **remaining available**
                **for future issuance**
                **under equity**
                **compensation plans**
                **(excluding securities**
                **reflected in column**
                **(a))**Equity
                  compensation plans approved by security holders
              
              
              2,226,761
              
              $
              3.12
              
              
              173,239Equity
                  compensation plans not approved by security holders(1)
              
              
              342,345
              
              
              4.34
              
              
              —Total
              
              
              2,569,106
              
              $
              3.28
              
              
              173,239
  -21-
  **(1)**
              In
                  March and April, 2005, the Company issued options to certain employees
                  and
                  advisors for an aggregate of 12.22 Membership Units in HydroGen,
                  LLC. The
                  options had an exercise price of $121,500 per unit, which reflected
                  fair
                  market value at the time of the grant, and vested over a 36 month
                  period. These agreements were subsequently amended to reflect the
                  recapitalization of the Company, and are now options on the Company’s
                  common stock. The exercise price of these options, on a per share
                  basis,
                  is $4.34. These options were not issued under any
                  plan.
  **Item
                6.**
              **Management’s
                  Discussion and Analysis or Plan of
                  Operation**
  The
        following discussion and analysis provides information that we believe is
        relevant to an assessment and understanding of our results of operation and
        financial condition. You should read this analysis in conjunction with our
        audited consolidated financial statements and related footnotes. This discussion
        and analysis contains forward-looking statements relating to future events
        and
        our future financial performance. These statements involve known and unknown
        risks, uncertainties and other factors, including those set forth in this
        Annual
        Report on Form 10-KSB, which may cause our actual results, levels of activity,
        performance or achievements to be materially different from any future results,
        levels of activity, performance or achievements expressed or implied by these
        forward-looking statements.
  **General**
  HydroGen
        is in the development stage and is expected to remain so for at least the
        next
        several quarters. HydroGen’s business plan calls for it to design, manufacture
        and sell multi-megawatt turn-key power plants, based on a series of standardized
        product designs incorporating HydroGen’s 400 kW fuel cell modules, and to
        sell fuel cell stacks and modules to other system integrators and turn-key
        project developers. Additionally, HydroGen’s plan calls for it to generate
        recurring revenues from the sale of fuel cell stack and module operations
        and
        maintenance (“O&M”) services.
  The
        principal objective of our plan of operation is to achieve levels of market
        penetration and product cost that will enable the Company to sell profitably
        PAFC stacks and modules, complete PAFC power plants, and related O&M
        services. The Company believes that it can ultimately reduce the cost of
        its
        400kW fuel cell modules to a level that is comparable to the installed cost
        of
        conventional power generation in the 2 to 30 MW size class, with a product
        that
        is considerably higher in electrical efficiency than incumbent technology.
        These
        costs also compare favorably to those of competitors in the stationary fuel
        cell
        arena.
  **Plan
        of Operation**
  The
        chart
        below illustrates the key elements of our plan of operation. The chart depicts
        our fuel cell production costs, future cost projections, anticipated ranges
        of
        sales prices for our fuel cell systems and modules, and projected sales volumes
        for the period 2008 through 2011.
  As
        shown,
        our “first article” product costs for fuel cell stacks and modules are
        approximately $3,300/kW, and “first article” costs for a complete, installed
        PAFC power plant are approximately $6,000/kW (both exclusive of the cost
        of
        platinum, of which HydroGen retains ownership and recovers at the end of
        the
        fuel cell’s useful life). Management’s objective is to reduce fuel cell
        stack and module costs to a level of approximately $1,500/kW or less by
        2010-2011, which management believes is a cost level necessary to achieve
        positive gross margins and cash flows. The Company believes that its complete
        PAFC systems can be sold to end users for price levels ranging from
        approximately $2,000-5,000/kW installed and that PAFC stacks and modules
        can be
        provided to system integrators for a price of approximately $1,250-3,000/kW.
        These sales price ranges are depicted in the two boxes titled “Sales price range
– system” and “Sales price range – modules,” and are based on the Company’s
        analysis of pricing levels that can be borne in different market segments.
        Finally, the chart presents management’s forecast for fuel cell product sales,
        with initial sales of two turnkey PAFC systems totaling approximately 10
        MW
        projected for 2008-early 2009, then approximately 20 MW projected for 2009,
        50
        MW for 2010, and 90 MW for 2011. Management believes that the majority of
        sales
        after the initial 10 MW will be for the Company’s stacks and modules, with more
        limited turnkey plant sales in the 2009-2010 time frame in
        particular.
  -22-
  Hydrogen
  *Chart:
        Plan of Operation Metrics*
  Management
        has developed the following plan of operation in order to achieve the necessary
        market penetration levels, cost reductions, and manufacturing capacities
        to
        support the Company’s transition to profitable operation, while minimizing
        overall financial needs. The key elements of HydroGen’s plan of operation
        include:
  1.
              Demonstration
                  and validation of HydroGen’s PAFC technology at customer field sites;
  2.
              Early
                  “turnkey” sales of complete PAFC power plants to support initial market
                  penetration;
  3.
              Limited
                  manufacturing of fuel cell modules in our Versailles, PA manufacturing
                  facility to support initial sales;
  4.
              Next-generation
                  PAFC product and high volume advanced manufacturing development
                  to deliver
                  necessary cost reductions; and
  5.
              Transition
                  to role of supplier / servicer of PAFC stacks and modules through
                  partnerships with system integrators and distributors. Execution
                  of
                  additional strategic agreements with system integrators and
                  distributors.
  -23-
  In
        order
        to support the plan of operation, the Company intends to increase staffing
        levels by a total of approximately 55 individuals from April 1,
        2008 through December 31, 2008 and up to 120 in 2009. The majority of these
        new employees will be technical and production staff to support the Company’s
        manufacturing, system engineering, and cost reduction initiatives. The Company
        anticipates that it will have to raise additional funds in the next 12 months
        to
        meet the objectives of our plan of operation.
  *Demonstration
        and Validation of HydroGen’s PAFC Technology at Customer Field
        Sites*
  In
        order
        to support initial market penetration, HydroGen is undertaking commercial
        scale
        technology demonstration and validation activities. The principal purpose
        of
        these activities is to obtain a successful validation and performance history
        for the core 400 kW module and, in certain markets, demonstrate the
        Company’s ability to process hydrogen-rich waste gas streams to specifications
        required for fuel cell operation. Once successful validation is obtained,
        we
        anticipate that the Company will be able to obtain commercial orders for
        full-scale PAFC power plants consistent with HydroGen’s sales objectives as
        described below.
  On
        October 17, 2006, HydroGen announced that it had signed an agreement with
        ASHTA
        Chemicals to install and operate a 400kW fuel cell demonstration power plant
        at
        ASHTA’s chlor-alkali manufacturing plant in Ashtabula, Ohio.  This effort
        is being partially funded by a $1,250,000 award that the Company received
        from
        the State of Ohio Department of Development. The Company completed construction
        and check-out of the demonstration power plant in 2007, in preparation for
        delivery of the Company’s first newly-produced 400kW PAFC module. The Company
        delivered the PAFC module on February 22, 2008 and is currently engaged in
        start up and testing activities. The Company expects the plant to be operational
        in the second quarter of 2008, and plans to perform various tests and
        performance demonstrations during the course of 2008.
  In
        Fall
        2006, HydroGen also initiated a project to design and build a pilot scale
        system
        to clean coke oven gas to meet the input feed requirements of the HydroGen
        PAFC
        system. The overall goal of this project is to support market penetration
        efforts into the coke oven gas market for HydroGen’s PAFC systems. The principal
        project objective is to build and demonstrate a complete prototype coke oven
        gas
        cleanup system that will perform acceptably in a commercial scale plant.
        The
        project is being undertaken at the United States Steel Clairton Works coke
        oven
        facility, the largest such facility in the United States, located near the
        Company’s manufacturing plant in Versailles, Pennsylvania. The Company has
        designed and, in concert with United States Steel, has almost completed
        construction of, the pilot scale gas treatment facility. HydroGen plans to
        have
        this pilot plant on-line in the second quarter of 2008. The test plant will
        generate data to directly support power plant design and sales efforts into
        this
        market.
  *Early
        “Turnkey” Sales of Complete PAFC Power Plants to Support Initial Market
        Penetration*
  The
        Company’s plan of operation calls for us to execute sales contracts for initial
        sales of at least 10MW of turnkey projects in 2008 through early 2009. The
        Company anticipates orders for two turnkey PAFC systems, each of approximately
        5MW in capacity from Samsung Corporation. These turnkey power plants may
        be
        either hydrogen-available plants or a combination of hydrogen-available and
        hydrocarbon fueled power plants. These anticipated orders are pursuant to
        a
        series of strategic agreements signed January 11, 2008 between HydroGen and
        Samsung Corporation. The Company expects to execute the first of these orders
        in
        the second quarter of 2008.
  In
        addition to the two anticipated sales to Samsung pursuant to the agreements
        described above, HydroGen intends to sell additional turn-key power plants
        in
        North America and elsewhere in order to achieve our stated sales goals and
        gain
        penetration into targeted markets. HydroGen has been developing a pipeline
        of
        projects with several large generators of by-product hydrogen and other
        potential customers who have expressed interest in acquiring fuel cell power
        plants. The total number of turn-key sales targeted for the period will be
        set
        annually by the Company, and will be a function of the quality/attractiveness
        of
        the market opportunities, the sales prices that can be borne in those
        opportunities, and the product cost levels achieved during this period through
        the Company’s cost reduction programs.
  -24-
  To
        support these sales efforts, HydroGen will invest working capital to complete
        the design, component selection, and full costing of at least two full-scale
        PAFC plants: 1) a 5MW PAFC plant to be operated on available hydrogen gas,
        and
        2) a multi-megawatt plant to be operated on gaseous hydrocarbon fuels.
  *Limited
        manufacturing of fuel cell modules in our Versailles, Pennsylvania manufacturing
        facility to support initial sales*
  HydroGen
        has principally completed the initial ramp up of its manufacturing facilities
        to
        achieve pilot production capacity of up to 2 MW (five 400 kW modules) per
        annum
        on single shift, and to recapture the performance and operation of the original
        Westinghouse design of the module.
  HydroGen
        intends to produce a sufficient number of new fuel cell modules at its
        Versailles facility in 2008 and 2009 in order to support new design test
        objectives and the delivery requirements associated with the Company’s first
        anticipated sale to Samsung.
  *Next-generation
        PAFC product and high volume advanced manufacturing development to deliver
        necessary cost reductions*
  The
        present “first article” cost to produce the Company’s fuel cell modules is
        approximately $3,300/kW (exclusive of platinum). The Company will aggressively
        pursue opportunities for performance improvements and cost reductions that
        can
        be implemented immediately. These efforts will include:
  v
              design
                  modifications to, and new sourcing options for, the fuel cell module
                  pressure vessel;
  v
              new
                  catalyst substrate materials;
  v
              manufacturing
                  process improvements;
  v
              design
                  modifications to certain non-repeating hardware
                  components;
  v
              modifications
                  in fuel cell stack acceptance test procedures;
                  and
  v
              leveraging
                  the procurement infrastructure of the Company’s strategic partners for
                  cheaper materials and subcomponent
                  sourcing.
  -25-
  To
        support the cost reductions and performance improvements that are required
        in
        the Company’s business plan, management has planned and is initiating an
        integrated effort to develop the next generation of its PAFC product, and
        to
        manufacture that product at the high volumes required to support growth and
        profitability. This integrated project prioritizes efforts to drive down
        the
        highest sources of cost in the manufacture of the PAFC module and BOP, improve
        fuel cell stack and system performance, and significantly increase fuel cell
        manufacturing capacity through process improvement, automation and outsourcing.
        The highest priority areas for cost reduction include graphite plates, catalyst
        layers, non-repeating hardware, fuel cell module pressure vessel, specialty
        backing papers, and labor costs. The Company’s objective is to complete the key
        cost reduction initiatives and implement them in an advanced manufacturing
        facility that the Company intends to bring on line in the second half of
        2009.
        This facility is anticipated to have initial PAFC production capacity of
        approximately 25 MW/annum, and be capable of expansion to approximately 100
        MW/annum. The Company estimates that the development, equipment procurement,
        and
        ramp up for the advanced manufacturing facility will require approximately
        $20
        million **** in
        capital spending **,** and
        intends to finance the facility principally through a package of state loans,
        grants, and similar incentives.
  To
        support these initiatives, the Company has initiated collaborative relationships
        with certain industry and academic partners, and is evaluating additional
        collaboration opportunities with a variety of entities.  In addition, the
        Company has received grant funding to support these initiatives (including
        grants of $1,000,000 from the state of Ohio Third Frontier Fuel Cell Program
        to
        support the development of our planned advanced manufacturing facility, and
        approximately $230,000 from the Pennsylvania Nano Materials Commercialization
        Center to support our advanced electrode development work), and will continue
        to
        seek out and apply for additional developmental funding.
  HydroGen
        has completed construction of an initial series of test facilities at its
        Versailles, Pennsylvania manufacturing facilities, and plans to expand its
        testing capabilities, to support the testing and validation requirements
        associated with these cost reduction and process development initiatives.
        Management intends to expand its testing capabilities in Versailles and to
        augment these testing capabilities at our Ohio-based development facilities.
  *Transition
        to role of supplier / servicer of PAFC stacks and modules through partnerships
        with system integrators and distributors*
  The
        Company believes that the sale and servicing of fuel cell stacks and modules
        to
        system integrators and distributors, who have turn-key responsibility for
        fuel cell plant delivery and installation at the end customer site, offers
        a
        higher margin business opportunity than the delivery of turn-key fuel cell
        plants, and a faster path for the Company to achieve gross margin and cash
        flow
        positive operations. The Company’s overall strategy is to deploy and demonstrate
        multi-megawatt fuel cell plants on a turn-key basis for our earliest sales
        into
        key markets, and enter into strategic agreements with leading global system
        integrators and distributors with core capabilities in system engineering
        and plant construction, which can effectively penetrate those markets.
  The
        agreements between HydroGen and Samsung Corporation described in Item 1
        represent the implementation of this strategy for the Asian and Middle
        Eastern markets. The Company anticipates selling on a turnkey basis in 2008
        to
        early 2009 two multi-megawatt PAFC plants to Samsung. The turnkey power plants
        may be either hydrogen-available plants or a combination of hydrogen-available
        and hydrocarbon fueled power plants. The Company will also design a
        multi-megawatt power plant to be fueled by hydrocarbon gas, after which the
        Company and Samsung anticipate entering into an Exclusive Distribution and
        Marketing Agreement for that market. The Company anticipates that subsequent
        sales to Samsung will be of fuel cell stacks and modules, with Samsung having
        responsibility for turn-key plant delivery. To achieve this objective, HydroGen
        and Samsung plan to enter into a BOP Technology Transfer, Licensing, and
        Technical Support Agreement pursuant to which Samsung shall obtain (in exchange
        for a royalty fee) certain rights to deliver to Samsung’s customers, fuel cell
        power plants utilizing HydroGen’s plant designs and related proprietary rights
        and confidential information. Through this agreement, HydroGen will transition
        into the role of a supplier of fuel cell stacks and modules to Samsung, who
        will
        market, distribute, and deliver complete PAFC plants in their territory.
  -26-
  Although
        during 2009-2010 the Company will target higher-margin stack and module sales
        to
        Samsung Corporation for the majority of its product sales, as discussed above
        it
        will also engage in the sale of a limited number of additional turn-key PAFC
        systems during this time frame. These turn-key sales will support market
        penetration into new markets (geographic and application), and in parallel,
        the
        consummation of agreements, similar to those in place with Samsung Corporation,
        with other system integrators/ distributors focused on those market segments.
        HydroGen will focus on the following market segments, among others: chlor-alkali
        / sodium chlorate; coke-oven gas; and hydrocarbon-based applications in states
        that offer significant incentives for adoption of stationary fuel cell systems,
        such as California.
  The
        Company will support both turn-key and fuel cell stack/module sales with
        fuel
        cell module Operations and Maintenance (“Module O&M”) agreements. Module
        O&M services will include dedicated monitoring and trending of fuel cell
        operating parameters, fuel cell plant operational support, and stack or module
        replacements as necessary. The Company believes that Module O&M services may
        generate high margins and significant cash flow to the business as the number
        of
        units in the field increases, particularly as fuel cell module lifetime,
        and
        fuel cell plant operating techniques, improve.
  **Critical
        Accounting Policies and Estimates**
  The
        preparation of our consolidated financial statements requires us to make
        estimates and judgments that affect the reported amounts of assets, liabilities,
        revenues and expenses, and the related disclosures. A summary of those
        accounting policies can be found in the notes to the consolidated financial
        statements included elsewhere in this Annual Report on Form 10-KSB. Certain
        of
        our accounting policies are considered critical as they are both important
        to
        the portrayal of our financial condition and results of operations and require
        judgments on the part of management about matters that are uncertain. We
        have
        identified the following accounting policies that are important to the
        presentation of our financial condition and results of operations.
  *Revenue
        Recognition*
  Grant
        revenue is recognized as the Company incurs reimbursable costs or achieves
        designated milestones as set forth under its contracts. All of the Company’s
        revenue in 2007 and 2006 is from grants from government agencies of the State
        of
        Ohio and the Commonwealth of Pennsylvania.
  The
        Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
        No. 104, “Revenue Recognition”. Revenue is recognized when persuasive
        evidence of a sale exists, the product has been delivered, the rights and
        risks
        of ownership have passed to the customer, the price is fixed and determinable,
        and collection of the resulting receivable is reasonably assured. For
        arrangements which include customer acceptance provisions, revenue is not
        recognized until the terms of acceptance are met. Reserves for sales returns
        and
        allowances are estimated and provided for at the time of shipment.
  -27-
  *Research
        and Development Expenses*
  Research
        and development expenditures are expensed as incurred. Research and development
        expenditures include the costs associated with the ramp-up in HydroGen’s
        technology recapture activities and power plant design, as well as other
        development activities.
  *Equity-Based
        Compensation*
  Effective
        January 1, 2006, the Company adopted the provisions of Statement of
        Financial Accounting Standards No. 123 (revised 2004), “Share-Based
        Payment”, (“SFAS 123(R)”), which requires the measurement and recognition of
        compensation expense for all share-based payment awards to employees and
        directors based on estimated fair values. The Company adopted SFAS 123(R)
        using
        the modified prospective transition method. Under this transition method,
        share-based compensation expense recognized during the year ended December
        31,
        2006 included: (a) compensation expense for all share-based awards granted
        prior to, but not yet vested, as of January 1, 2006, based on the grant date
        fair value estimated in accordance with the original provisions of SFAS 123,
        and
        (b) compensation expense for all share-based awards granted on or after
        January 1, 2006, based on the grant date fair value estimated in accordance
        with
        the provisions of SFAS 123(R). In accordance with the modified prospective
        transition method, our consolidated financial statements for prior periods
        have
        not been restated to reflect the impact of SFAS 123(R).
  As
        a
        result of adopting SFAS 123R, the Company recorded pretax compensation expense
        of $584,964 and $561,331 for the years ended December 31, 2007 and 2006,
        respectively. Stock-based compensation is included in each expense category
        that
        includes salary expense. The Company has recorded a full valuation allowance
        on
        the deferred tax asset related to stock-based compensation and therefore,
        no tax
        benefit is recognized for the years ended December 31, 2007 and
        2006.
  *Impact*  *of
        Recently Issued Accounting Pronouncements*
  SFAS
        No. 157, “Fair Value Measurements” In
        September 2006, the FASB issued SFAS No. 157, “Fair Value
        Measurements”, which establishes a framework for reporting fair value and
        expands disclosures about fair value measurements. SFAS No. 157 is
        effective for the Company January 1, 2008. The Company is currently
        evaluating the impact of this new standard on its consolidated financial
        statements.
  SFAS
        No. 159, “The Fair Value Option for Financial Assets and Financial
        Liabilities” In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities – including an amendment of FASB
        Statement No. 115.” SFAS
        No.
        159 provides companies with an option to report selected financial assets
        and
        financial liabilities at fair value. Unrealized gains and losses on items
        for
        which the fair value option has been elected are
        reported in earnings at each subsequent reporting date. Upfront costs and
        fees
        related to items for which the fair value option is elected are recognized
        in earnings as
        incurred. SFAS No.159 is effective for the Company beginning January 1, 2008. The
        Company is currently evaluating the impact of this new standard on its
        consolidated financial statements.
  -28-
  SFAS
        No. 141 (R), “Business Combinations” In
        December 2007, the FASB issued SFAS No. 141 (R), “Business Combinations.”
SFAS No. 141(R) establishes principles and requirements for how an acquirer
        in a business combination recognizes and measures in its financial statements
        the identifiable assets acquired, the liabilities assumed, any controlling
        interest in the acquiree, and the goodwill acquired.  SFAS No. 141(R)
        also establishes disclosure requirements to enable users of the financial
        statements to evaluate the nature and financial effects of the business
        combination.  SFAS No. 141(R) applies to business combinations for
        which the acquisition date is on or after the beginning of the first annual
        reporting period beginning on or after December 15, 2008.  The Company
        does not expect the adoption of SFAS No. 141 (R) to have a significant impact
        on
        its consolidated financial statements
  SFAS
        No. 160, “Noncontrolling Interests in Consolidated Financial
        Statements” In
        December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements – an amendment to Accounting Research Bulletin
        No. 51.” SFAS No. 160 establishes accounting and reporting standards that
        require the ownership interest in subsidiaries held by parties other than
        the
        parent be clearly identified and presented in the Consolidated Balance Sheets
        within equity, but separate from the parent’s equity; the amount of consolidated
        net income attributable to the parent and the noncontrolling interest be
        clearly
        identified and presented on the face of the Consolidated Statement of Earnings;
        and changes in a parent’s ownership interest while the parent retains its
        controlling financial interest in its subsidiary be accounted for
        consistently.  SFAS No. 160 is effective for the Company beginning January
        1, 2009. We do not expect the adoption of SFAS No. 160 to have a significant
        impact on our financial statements.
  **Liquidity
        and Financing Activities**
  **** At
        December 31, 2007, the Company had $8.1 million in cash.  The Company
        expects such cash balance to be sufficient to fund its operations through
        mid-May 2008.
  The
        Company is in the development stage, and as such, has historically reported
        net
        losses. The Company anticipates it will continue to incur losses in the future
        as it enters commercialization for its products. Commercialization activities
        will require significant operating and capital expenditures related to the
        manufacture of the Company’s fuel cell modules, purchase of equipment, and
        build-out of its advanced manufacturing facility. In order to fund the costs
        associated with such development, the Company will require additional financing
        in the next 12 months.
  If
        the
        Company is unable to raise sufficient capital, liquidity problems will cause
        the
        Company to curtail operations, liquidate assets, seek additional capital
        on less
        favorable terms and/or pursue other such actions that could adversely affect
        future operations. These factors raise substantial doubt as to the Company’s
        ability to continue operations as a going concern. The financial statements
        included in this report do not include any adjustments relating to the
        recoverability and classification of assets or the amounts and classification
        of
        liabilities that might be necessary should the Company be unable to continue
        as
        a going concern.
  *Private
        Placement of Equity Securities*
  On
        May 2,
        2006, the Company sold in a private placement an aggregate of 5,155,000 shares
        of its common stock, and warrants to purchase up to an aggregate of 1,288,750
        shares of common stock for aggregate gross proceeds of $25,775,000. The Company
        paid approximately $1,705,000 in commissions and expenses. The Company issued
        to
        its placement agent a warrant to purchase up to 128,875 shares of common
        stock
        as additional compensation.
  The
        warrants issued to investors and the placement agent are exercisable at $6.60
        per share at any time until May 2, 2011. On July 19, 2006, a registration
        statement that the Company filed covering the re-offer and re-sale of the
        common
        stock issued in the private offering and the Common Stock underlying the
        warrants was declared effective by the Securities and Exchange Commission.
        The
        Company has used the proceeds of the private placement for commercial
        demonstration of the Company’s products, advanced manufacturing development
        efforts, sales and marketing efforts and general working capital
        purposes.
  -29-
  *State
        of Ohio and Commonwealth of Pennsylvania Financings*
  On
        August
        26, 2005, the State of Ohio Department of Development provided to HydroGen
        Corporation $1,250,000 as a development grant for a three phase program to
        deploy, demonstrate, and commercialize the Company’s 400 kW phosphoric acid
        fuel cell system. The grant is under an Ohio Fuel Cell Initiative Demonstration
        Program, and is to be used towards the costs associated with the commercial
        demonstration and validation of the Company’s air-cooled phosphoric acid fuel
        cell module technology and for the procurement and preparation of the plant
        equipment, system engineering, plant construction, and initial operations.
        The
        grant was given on the understanding that the Company will establish its
        corporate headquarters in Ohio, locate manufacturing facilities to Ohio by
        the
        end of 2008, and create new full-time jobs at both the skilled and unskilled
        level in Ohio. The establishment of a corporate headquarters in Ohio was
        achieved in 2006. The development work which commenced in 2005 is expected
        to
        continue through the end of 2008. The grant was also contingent on the Company
        raising its own capital, which was achieved in July 2005.
  The
        grant
        of the funds is on a reimbursement basis, provided the Company meets the
        objectives of the grant and is carrying out the terms of the defined project
        as
        represented to the state. The grant reimbursement period ran from
        September 1, 2005 to July 31, 2007. The grant is a deployment of
        federal development funds and as such, the Company will be required to adhere
        to
        various federal regulations on their use and accountability for
        deployment.
  The
        grant
        may be terminated if the State of Ohio determines that the Company is not
        in
        compliance with certain federal regulations governing the grant or federal
        employment laws, the requirements of any other applicable program statute
        or
        rule or with the terms of the grant agreement after suitable notice and the
        passage of cure periods. If there is a termination, the Company may not continue
        to incur expenses under the grant. It may be directed by the State of Ohio
        to
        dispose of various property, data, studies, and reports, and the Company
        may be
        liable for damages to the State of Ohio.
  As
        of
        December 31, 2007, the Company has submitted requests and has been reimbursed
        for the entire grant award totaling $1,250,000.
  On
        March 7, 2006, the Company was notified that it would be awarded $1,000,000
        (the “Grant”) by the State of Ohio Third Frontier Fuel Cell Program (TFFCP) to
        support the Company’s advanced manufacturing development program.  On June
        8, 2006, the Company entered into a Grant Agreement with the State of Ohio
        pursuant to which the Grant funds are to be awarded. Under the terms of the
        Grant Agreement, the Company may recoup from the State the full $1,000,000
        as
        Grant activities take place, and as the costs are incurred and reported.
        The
        Company has pledged a total of $555,000 in cost share for the program. The
        Company will use the funds to dedicate appropriate personnel, consultants,
        and
        infrastructure to optimize decisions and resource allocations for its planned
        advanced manufacturing facility. The proposed facility will be where the
        Company
        will mass produce its standard 400 kilowatt (kW) air-cooled PAFC modules,
        which
        will serve as the building block of its core product, a 2-2.5 megawatt (MW)
        power island.  Initial production capacity will be 25 MW per year of
        the Company’s 400 kW modules, and is expected to be subsequently expanded
        to 100 MW per year capacity.
  -30-
  All
        disbursements from the Grant are on a reimbursement basis, after documentation
        has been provided evidencing that expenses were incurred in furtherance of
        the
        Grant.  The term of the Grant Agreement, including reimbursement period,
        runs until April 10, 2009. At the close of the Grant term, the Company will
        own
        all equipment valued over $5,000 purchased with Grant money.
  The
        Grant
        may be terminated if the State of Ohio determines that the Company is not
        in
        compliance with the applicable program rules, State of Ohio law, or with
        the
        terms of the Grant Agreement, after suitable notice and the passage of cure
        periods. Performance by the State is also subject to the availability of
        funds.
        If there is a termination, the Company may not continue to incur expenses
        under
        the Grant, and it may be directed by the State of Ohio to dispose of various
        property, data, studies and reports. The Company may further be liable for
        damages to the State of Ohio in the event of default.  The Company may also
        request a termination of the Grant if it is unable or unwilling to comply
        with
        the conditions of the Grant.
  Work
        under the Grant commenced in June of 2006. The Company submitted requests
        for
        payment under this grant totaling approximately $550,000 through December
        31,
        2007, $409,000 of which has been collected as of that date.
  On
        May
        16, 2007, the Company was notified that it was awarded a grant in the amount
        of
        $250,000 by the Pennsylvania Energy Development Authority (PEDA) to support
        the
        construction of a small scale, air-cooled phosphoric acid fuel cell test
        facility. The project period, as outlined within the grant agreement, is
        from
        October 5, 2006 through October 4, 2008. All reimbursements for the project
        must
        be submitted during the project period. The Company has submitted requests
        for
        payment under this grant totaling approximately $250,000, $225,000 of which
        has
        been collected through December 31, 2007.
 On
          October 12, 2007, the Company entered into a grant agreement (the “Grant
          Agreement”) with the Pennsylvania NanoMaterials Commercialization Center (PNCC)
          pursuant to which the PNCC will grant the Company approximately $230,000
          to
          support the development of advanced fuel cell catalyst systems. The Company
          has
          pledged a total of $131,545 in cost share for this program. The Company
          will be
          working in cooperation with the University of Pittsburgh’s Peterson Institute of
          Nano Science and Engineering on this project. The Company has submitted
          requests
          for payment under this grant totaling approximately $46,000, all of which
          has
          been collected through December 31, 2007.
  On
        October 17, 2007, the Company was notified that it was awarded a grant in
        the
        amount of $500,000 by the Pennsylvania Energy Development Authority (PEDA)
        to
        support clean-up of coke oven gas for fuel cell operations. The Company is
        in
        the process of establishing the terms and conditions of the Grant Agreement
        with
        PEDA.
  -31-
  **Results
        of Operations**
  *Comparison
        of the Years Ended December 31, 2007 and 2006*
  The
        following table sets forth certain of HydroGen’s operating data for the years
        ended December 31, 2007 and 2006; certain reclassifications have been made
        to the 2006 financial information to conform to the 2007
        presentation:
  **December 31, 2007**
              
              **December 31, 2006**
              
              **Increase**
                **(Decrease)**Research
                  & development
              
              $
              10,886,000
              
              $
              3,860,000
              
              $
              7,026,000Payroll
                  and related costs
              
              
              3,125,000
              
              
              2,035,000
              
              
              1,090,000Stock
                  based compensation
              
              
              585,000
              
              
              561,000
              
              
              24,000Professional
                  fees
              
              
              573,000
              
              
              770,000
              
              
              (197,000
              )Travel
                  & entertainment
              
              
              511,000
              
              
              362,000
              
              
              149,000Other
              
              
              2,758,000
              
              
              1,398,000
              
              
              1,360,000Totals
              
              $
              18,438,000
              
              $
              8,986,000
              
              $
              9,452,000
  The
        increase in research and development expenses was due to the acceleration
        of the
        Company’s efforts related to the commercial demonstration of its air-cooled
        phosphoric acid fuel cell module technology. Costs associated with manufacturing
        the balance of plant at the demonstration site, purchasing module materials,
        retaining consultants to assist with the plant design and construction, and
        the
        performance of outside processing on module materials all contributed to
        this
        increase.
  The
        increase in payroll and related costs was due to an increased staff required
        to
        manage the Company’s expanding operations and severance expense of $406,000
        related to the resignation of the Company’s CEO.
  The
        increase in the stock based compensation expense relates to stock options
        issued
        to the Board of Directors, the Company’s executive management team, and the
        initial stock option grant to the Company’s new CEO as part of his compensation
        package.
  The
        decrease in professional fees resulted from the growing staff’s ability to
        perform work internally that was previously performed by consultants.
  The
        increase in travel and entertainment costs resulted from an increase
        in commercial activities.
  The
        increase in other expenses was due to the Company’s ramp-up in manufacturing
        activities and increased staffing, which led to significant increases in
        depreciation on new equipment, increased utilities expense, an increase in
        computer expense for new employees, and increased premium costs for workers
        compensation insurance. Further, slight increases in rent, Board of Director
        fees, and fees associated with the Company’s public filings contributed to this
        increase.
  **Item
                7.**
              **Financial
                  Statements**
  The
        information required by this Item is incorporated herein by reference to
        the
        financial statements beginning on page F-1.
  **Item
                  8.**
              **Changes
                  In and Disagreements With Accountants on Accounting and Financial
                  Disclosure******
  As
        we
        have previously disclosed, certain of the partners of Goldstein Golub Kessler
        LLP (GGK) became partners of McGladrey & Pullen, LLP (M&P) in a limited
        asset purchase agreement effective October 3, 2007. As a result, GGK resigned
        as
        auditors of the Company effective November 15, 2007 and M&P was appointed as
        auditors for the Company’s annual financial statements for the year ended
        December 31, 2007.
  -32-
  During
        the two most recent fiscal years, the Company did not consult with either
        GGK or
        M&P regarding either: (i) the application of accounting principles to a
        specified transaction, either completed or proposed, or the type of audit
        opinion that might be rendered on the Company’s financial statements; or (ii)
        any matter that was either the subject of a disagreement or reportable event
        identified in paragraph (a)(1)(iv) of Item 304 of Regulation S-B. Prior to
        the Company’s appointment of both M&P and GGK as its independent auditor,
        the Company had not consulted GGK or M&P regarding any accounting or
        auditing matters.
  **Item
        8A.**  **Controls
        and Procedures**
  Disclosure
        controls and procedures are controls and other procedures that are designed
        to
        ensure that information required to be disclosed in company reports filed
        or
        submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is
        recorded, processed, summarized and reported, within the time periods specified
        in the Securities and Exchange Commission’s rules and forms. Disclosure controls
        and procedures include, without limitation, controls and procedures designed
        to
        ensure that information required to be disclosed in the HydroGen reports
        filed
        under the Exchange Act is accumulated and communicated to management, including
        the Chief
        Executive Officer and
        Chief Financial Officer ,
        as
        appropriate to allow timely decisions regarding required disclosure.
  The
        Company’s principal executive officers (“CEO” and “President”) and principal
        financial officer (“CFO”) evaluated, together with other members of senior
        management, the effectiveness of the Company’s disclosure controls and
        procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as
        of
        December 31, 2007; and, based on this review, the Company’s CEO, President and
        CFO concluded that, as of December 31, 2007, the Company’s disclosure controls
        and procedures were effective to ensure that information required to be
        disclosed by it in the reports that it files or submits under the Securities
        Exchange Act of 1934 (i) is recorded, processed, summarized and reported
        within
        the time periods specified in the SEC’s rules and forms and (ii) is accumulated
        and communicated to the Company’s management, including the Company’s CEO,
        President, and CFO, as appropriate, to allow timely decisions regarding required
        disclosure.
  HydroGen’s
        internal control over financial reporting is a process designed by, or under
        the
        supervision of, the CEO, President and CFO and effected by the Board of
        Directors, management and other personnel, to
        provide reasonable assurance regarding
        the reliability of HydroGen’s financial reporting and the preparation of the
        HydroGen financial statements for external purposes in accordance with generally
        accepted accounting principles. Internal control over financial reporting
        includes policies and procedures that pertain to the maintenance of records
        that
        in reasonable detail accurately and fairly reflect the transactions and
        dispositions of the Company’s assets; provide reasonable assurance that
        transactions are recorded as necessary to permit preparation of the HydroGen
        financial statements in accordance with generally accepted accounting
        principles, and that the receipts and expenditures are being made only in
        accordance with the authorization of the Board of Directors and management;
        and
        provide reasonable assurance regarding prevention or timely detection of
        unauthorized acquisition, use or disposition of the Company assets that could
        have a material effect on its financial statements.  There
        were no changes in the Company’s internal control over financial reporting
        during the Company’s most recently completed fiscal quarter that has materially
        affected, or is reasonably likely to materially affect, the Company’s internal
        control over financial reporting.
 
 Our
        management is responsible for establishing and maintaining adequate internal
        control over financial reporting. Internal control over financial reporting
        is a
        process designed by, or under the supervision of, the Chief Executive Officer,
        President and Chief Financial Officer and effected by our Board of Directors,
        management and other personnel, to provide reasonable assurance regarding
        the
        reliability of financial reporting and the preparation of financial statements
        for external purposes in accordance with generally accepted accounting
        principles.
  -33-
  Our
        evaluation of internal control over financial reporting includes using the
        COSO
        framework, an integrated framework for the evaluation of internal controls
        issued by the Committee of Sponsoring Organizations of the Treadway Commission,
        to identify the risks and control objectives related to the evaluation of
        our
        control environment.
 
 Based
        on
        our evaluation under the framework described above, our management has concluded
        that our internal control over financial reporting was effective as of
        December 31, 2007.
  This
        Annual Report does not include an attestation report of the Company’s registered
        public accounting firm regarding internal control over financial reporting.
        Management’s report was not subject to attestation requirements by the Company’s
        registered public accounting firm pursuant to temporary rules of the Securities
        and Exchange Commission that permit the Company to provide only management’s
        report in this Annual Report.
  **Item
                8B.**
              **Other****Information**
  None.
  **PART
        III**
  **Item
                  9.**
              **Directors,
                  Executive Officers, Promoters, Control Persons and Corporate Governance;
                  Compliance with Section 16(a) of the Exchange Act**
  The
        following table sets forth certain information as of April 1, 2008 about
        each of
        the members of the Board of Directors and each executive officer:
  **Name**
              
              **Age**
              
              **Positions**
              
              **Director
                  Since**(1)John
                  Freeh
              
              56
              
              Chief
                  Executive Officer and Director
              
              2005(5)Joshua
                  Tosteson
              
              36
              
              President
                  and Director
              
              2005Dr.
                  Howard Shapiro(2)
              
              60
              
              Director
              
              2005Brian
                  Bailys
              
              48
              
              Director
              
              2005Michael
                  Basham(3)(4)
              
              58
              
              Director
              
              2006Dr.
                  Leo Blomen
              
              53
              
              Director,
                  Chairman of the Board
              
              2005Philip
                  Jack Kranenburg(3)
              
              47
              
              Director
              
              2006Brian
                  T. McGee(2)(3)(4)
              
              48
              
              Director
              
              2006Dr.
                  Alton D. Romig, Jr.(2)
              
              54
              
              Director
              
              2007**Executive
                  Officers**
              ****
              **Age**
              ****
              **Positions**
              ****
              **Officer
                  Since**Scott
                  M. Schecter
              
              51
              
              Chief
                  Financial Officer
              
              2005Scott
                  Wilshire
              
              45
              
              Chief
                  Operating Officer
              
              2005Gregory
                  Morris
              
              61
              
              Sr.
                  Vice President / Sales and Projects
              
              2005
  -34-
  
 (1)  Each
        Director (except Dr. Romig) was elected to a one-year term that expires at
        the
        next annual meeting. Dr. Romig was appointed in December 2007 and his term
        will
        also expire at the next annual meeting.
 (2)  Member
        of
        the Compensation Committee
 (3)  Member
        of
        the Audit Committee
 (4)  Member
        of
        the Nominating Committee
 (5)  Chief
        Executive Officer since November 2007
  **Directors**
  Dr.
        Leo
        Blomen is Chairman of the Board of HydroGen, and has been active in fuel
        cells
        and energy related management for almost 23 years. From the Company’s inception
        until November 2007, Dr. Blomen served as the Chief Executive Officer of
        HydroGen. Since November 2007 he has served as a technical consultant to
        HydroGen. From 1996 to 2000, Dr. Blomen served as Executive Director and
        Head of the International Division of NUON, the largest electric, gas, water
        and
        telecom utility company in the Netherlands serving millions of customers
        and
        with over $4 billion in revenues. Dr. Blomen was responsible for starting
        and
        building a portfolio of over 20 companies in countries such as USA, UK, China,
        Czech Republic, and Romania. He served on the Boards of most of those companies,
        and invested several $100’s million successfully. Among his responsibilities
        were a number of fuel cell projects, including the installation and operation
        of
        the world’s first 100 kW solid oxide fuel cell (SOFC) system, supplied by
        Westinghouse to a consortium led by NUON. Prior to his NUON assignment, he
        worked on several energy companies through his own consulting company Blomenco
        B.V., including the Dutch company Heron, which has built a compact 1.4 MW
        gas turbine with 43% net electrical efficiency. Dr. Blomen was also responsible
        for making the first designs of fuel cell/gas turbine combination systems
        under
        contract from Westinghouse. He was the primary editor of a book on Fuel Cell
        Systems (Plenum Press, 1993). From 1983 to 1992, Dr. Blomen served in several
        capacities for the engineering contractor KTI (Kinetics Technology
        International), a world leader in hydrogen plant construction, most of the
        time
        on its Board and as Group VP. He initiated and managed over 40 research,
        development and demonstration projects in Europe and the USA, including the
        construction of the first two PAFC power plants in Europe, as well as several
        steam reformer developments. Dr. Blomen is a co-founder of the EFCG (European
        Fuel Cell Group) and has served as its Treasurer throughout its existence.
        EFCG
        merged with FuelCell Europe in 2004. He holds a doctorate of medicine from
        Leiden University and an engineering degree in chemical technology from Delft
        University.
  Mr.
        John
        J. Freeh, Director and Chief Executive Officer of HydroGen, served as director
        since 2005 and as Lead Independent Director from August 2007 until November
        2007. In November 2007 Mr. Freeh was appointed Chief Executive Officer.
        Mr. Freeh was previously employed by Lockheed Martin and the General
        Electric Company for approximately 33 years. At Lockheed Martin, he served
        as
        president of LM Systems Management from July 2001 until his retirement in
        February 2007. In this position, Mr. Freeh was responsible for Lockheed Martin’s
        Defense, Energy and National Security Services businesses. In January of
        1993
        the General Electric Company appointed Mr. Freeh President and General Manager
        of KAPL, Inc. Mr. Freeh held this position during transition to Martin
        Marietta and subsequently Lockheed Martin. He left KAPL in July of 2001.
        KAPL,
        Inc. designs, develops and tests nuclear reactors and propulsion systems
        and
        operates land-based nuclear power plants to test reactor and propulsion system
        designs for the United States Naval Nuclear Propulsion Program. From 1974
        to
        1993, Mr. Freeh held other positions with KAPL, Inc., including Manager -
        Computer Information Systems; Manager - Special Projects; Manager – Power Plant
        Systems and Design; and Manager - Prototype Engineering.
  -35-
 Mr.
          Joshua Tosteson is a Director and President of HydroGen, has served as
          director
          since 2005 and as president since 2002. He is a co-founder of HydroGen,
          LLC and
          of FullCircle LLC, a company that deployed facilities to remediate organic
          waste
          streams and produce high-value organic soil amendments, and which consulted
          to
          international development and aid organizations. Over 2000-2001, Mr. Tosteson
          served as Eco-Industrial Development Manager for the redevelopment of a
          deactivated army ammunition site in Louisiana. In this capacity on behalf
          of the
          Operations Support Command of the US Army, Mr. Tosteson and colleagues
          attracted
          over $20 million in private and federal investment to establish two new
          commercial manufacturing operations. From 1994 to 1997, Mr. Tosteson served
          in
          various capacities as a management consultant for the Biosphere 2 facility
          in
          Oracle, Arizona, supporting a reorganization of the project that culminated
          in a
          long-term facility management contract with Columbia University. Concurrently
          to
          that assignment he served as an Adjunct Fellow and researcher at the Kennedy
          School of Government, Harvard University. He holds degrees in environmental
          science and public policy (BA, Harvard University) and atmospheric science
          (MA,
          Columbia University). He also serves on the Board of Organic Recovery,
          LLC, a
          Florida-based company that converts food waste into organic liquid fertilizer
          and biodiesel.
  Mr.
        Brian
        D. Bailys, Director of HydroGen, has been the principal of The Bailys Group,
        a
        consulting and strategic and financial planning company that he formed in
        January 1993. Mr. Bailys is also a certified public accountant. The consulting
        firm has been involved in strategic planning with numerous early stage companies
        and their funding requirements and works with high net worth individuals
        in many
        different capacities. From June 1981 to 1993, Mr. Bailys was with Plant &
Moran, an accounting and consulting firm where he acted as a tax accountant,
        personal financial planner and business planner. Mr. Bailys is a director
        of Life
        Settlement Insights, a life settlement company, and Life-X, an on-line exchange
        for the sale of life insurance policies.
  Dr.
        Howard-Yana Shapiro, Director of HydroGen, was appointed Director of External
        Research of Mars, Incorporated in 2005, and has served as its Director of
        Plant
        Science since 2000. Mars, Incorporated operates in over 65 countries, with
        business units in snack food, pet care, main meal food, drinks, and electronics.
        Within Mars, Dr. Shapiro is responsible for plant genetics, integrated pest
        management/biological control of diseases, water conservation and the
        sustainability/production models for agroecology, agro-forestry and
        agro-economics of cacao. Additionally, he is the Director of the
        Multi-Disciplinary Research Unit, a collaboration between Mars, Incorporated,
        and the University of California, Davis. In 1991, Dr. Shapiro joined Seeds
        of
        Change, a leading supplier of organic seeds, garden products, and specialty
        foods, as its Vice-President for Agriculture, and later served as its
        Vice-President of Research and Development/Agriculture before leading the
        company’s acquisition by Mars, Incorporated in 1997. Dr. Shapiro has twice been
        named a Fulbright Scholar, twice a Ford Foundation Fellow, and was winner
        of the
        National Endowment for the Humanities Award.
  Mr.
        Brian
        T. McGee, Director of HydroGen, serves as Senior Vice President and Chief
        Financial Officer for Intellon Corporation, a designer and seller of integrated
        circuits for powerline communications for home networking, networked
        entertainment, commercial and broadband over powerline applications. From
        May
        2003 to January 2006, Mr. McGee served as Chief Financial Officer and Vice
        President, Finance of Lexar Media, Inc., a developer, manufacturer and marketer
        of high-performance digital media. From May 2000 to May 2003, Mr. McGee was
        Chief Financial Officer of Equator Technologies, Inc., a fabless semiconductor
        company that designs, develops, and markets programmable system-on-a-chip
        processors for video applications. From August 1999 to May 2000, Mr. McGee
        was Vice President, Finance of SmartAge.com, an internet provider of
        business-to-business products and services. From November 1998 to August
        1999,
        Mr. McGee was Vice President, Finance and Chief Financial Officer of
        Academic Systems Corporation, a provider of education software products.
        From
        January 1987 to November 1998, he served in a variety of finance positions
        at
        Raychem Corporation, a material science company. Mr. McGee holds a B.S. in
        business administration from California Polytechnic State University, San
        Luis
        Obispo and a Certificate in Management Accounting.
  -36-
  Mr.
        Michael E. Basham, Director of HydroGen, has over 30 years of experience in
        the energy and finance industries. Mr. Basham currently serves as executive
        vice president for finance and planning for Howard Energy & Co., Inc., a
        privately held energy company with a diversified portfolio of both domestic
        and
        international energy investments in the oil and gas exploration, natural
        gas
        marketing and storage, energy services, hydroelectric power generation, and
        drilling services industries. Prior to joining Howard Energy in 1999,
        Mr. Basham served as a principal in the consulting practice of Ernst
&Young from 1996 to 1999. From 1994 to 1996, Mr. Basham served as an
        executive vice president with First Fidelity Bank. From 1991 to 1994,
        Mr. Basham was a managing director at Shearson Smith Barney, now owned by
        Citigroup, where he headed up the Privatization investment banking group
        and the
        International division. From 1989 to 1991, Mr. Basham served as Deputy
        Assistant Secretary and Acting Assistant Secretary of the United States
        Treasury. From 1987 to 1989, Mr. Basham worked as a senior professional at
        Wertheim Schroder, an investment bank. From 1982 to 1986, Mr. Basham
        founded and served as chief executive officer of Norden Capital, an investment
        management firm. From 1972 to 1982, Mr. Basham served in various roles,
        including vice president of the investment division and manager of fixed
        income,
        trading, and sales, for South Carolina National Bank. Mr. Basham attended
        the United States Air Force Academy, received a Bachelor of Science degree
        from
        the University of Southern Mississippi, and received an MBA from the University
        of South Carolina.
  Mr.
        Philip J. Kranenburg, Director of HydroGen, has served as Managing Director
        of Kranenburg Capital Management and as a Partner in Kranenburg Certified
        Public
        Accountants since 2002. In 2001, Mr. Kranenburg served as Vice President of
        Marketing at Virtual Purchase Card, Inc.; and from 1999 to 2000 served as
        Director of Marketing at Xcert International, a provider of electronic security
        solutions. Mr.
        Kranenburg also held management positions at Gemplus International, Framdrive
        Corp., and Shearson Lehman Hutton. He earned his CPA while with Price Waterhouse
        and is a graduate of Stanford University.
  Dr.
        Alton
        D. Romig, Jr., Director of HydroGen, has been with Sandia National Laboratories
        since 1979 and is currently Senior Vice President and Deputy Laboratories
        Director for Integrated Technologies and Systems located in Albuquerque,
        New
        Mexico. Sandia National Laboratories is operated by Sandia Corporation, a
        Lockheed Martin Company, for the US Department of Energy. His responsibilities
        include the leadership and management of development and engineering activities
        that provide science, technology, systems, and expertise in support of US
        Programs in military technology; proliferation prevention; technology
        assessments; counterintelligence; energy science, resources, conservation,
        and
        infrastructure assurance; and homeland security. In 1979, he joined Sandia
        National Laboratories as a member of the technical staff. After a variety
        of
        management assignments, he was named Director, Materials and Process Sciences
        in
        1992. From 1995 to 1999, he was Director of Microsystems Science, Technology,
        and Components. From 1999 to 2003, he was named Chief Technology Officer
        and
        Vice President for Science, Technology, and Partnerships. In that role, he
        was
        Chief Scientific Officer for the Nuclear Weapons program, accountable for
        Sandia’s interactions with industry and academia. In addition, he was
        responsible for the Laboratory Directed Research & Development program. In
        2003, he was named Vice President, Nonproliferation and Assessments. He served
        in this capacity until attaining his present position in 2005. He received
        his
        B.S., M.S., and Ph.D. degrees in materials science and engineering from Lehigh
        University in 1975, 1977, and 1979, respectively.
  **Executive
        Officers**
  Other
        than Mr. Freeh and Mr. Tosteson the Company has the following three named
        executive officers.
  -37-
  Mr.
        Scott
        Schecter was the interim Chief Financial Officer of HydroGen from June 2004
        to
        April 2005, when he became the Chief Financial Officer on a full time basis.
        From 1994 to 2004, Mr. Schecter, a CPA, served as Vice President, Chief
        Financial Officer and Treasurer of Fuel-Tech N.V., a publicly-traded technology
        company in the air pollution control, fuel treatment and software businesses.
        He
        also served as Chief Financial Officer of Clean Diesel Technologies, Inc.,
        a
        publicly-traded development stage company in the specialty chemical business
        from 1995 through 1999. In 1990, Mr. Schecter participated in a management
        buyout of American Vision Centers, Inc., a retail optical chain, and served
        as
        that company’s Senior Vice President and Chief Financial Officer through January
        1994. After graduating with his MBA from the Wharton School of the University
        of
        Pennsylvania, Mr. Schecter served as a corporate development officer for
        W. R.
        Grace & Co. from 1986 to 1990, focusing on acquisitions, strategic
        investments and divestitures. After receiving his B.S. in Accounting from
        the
        State University of New York at Albany, Mr. Schecter practiced for 6 years
        as a
        CPA, the last 4 of which were with Goldstein Golub Kessler & Co. Mr.
        Schecter was previously a member of the Board of Directors of Fuel Tech,
        Inc.
        (the operating subsidiary of Fuel-Tech N.V.) and American Vision Centers,
        Inc.
        Mr. Schecter currently serves as a Director and Chairman of the Audit Committee
        of DayStar Technologies, Inc. (NASDAQ: DSTI), a manufacturer and developer
        of
        photovoltaic products, and as a director of bieMEDIA LLC, a media design,
        production, distribution and technology company.
  Mr.
        Scott
        Wilshire has been HydroGen’s Chief Operating Officer since March 2005. From
        November 2000 to March 2005, Mr. Wilshire was Director of Marketing Engagement
        of Plug Power Inc., a development stage company that designs, develops and
        manufactures on-site electric power generation systems using proton exchange
        membrane fuel cells for stationary applications. From March 1999 to November
        2000, Mr. Wilshire was the Director of Large Stationary Systems/GE Interface
        of
        Plug Power Inc., responsible for a joint venture with General Electric Company
        working in the development of a residential fuel cell product and directing
        marketing and product development for Plug Power’s first successful large-scale
        fuel cell system. From April 1986 to March 1999, Mr. Wilshire was employed
        at
        KAPL Inc, a Lockheed Martin Company, in various capacities, including Principal
        Field Engineer from 1986 to 1993, Lead Engineer, Materials and Maintenance
        from
        1993 to 1995 relating to engineering, planning and execution of an inactivation
        of a nuclear reactor test facility, Manager of S9G Servicing Development
        from
        1995 to 1997 responsible for design and development of major systems and
        equipment support for the installation and servicing of advanced submarine
        power
        plants, and Manager of Pressure Vessel Removal from 1997 to 1999 responsible
        for
        removal and disposal of three expended naval nuclear power plant reactor
        vessels. Mr. Wilshire was employed by GE Nuclear Energy as a nuclear field
        engineer from 1984 to 1986. He received a Bachelor of Science degree in Marine
        Engineering/Nuclear Engineering from the United States Merchant Marine Academy,
        a Master of Business Administration from Rensselaer Polytechnic Institute,
        and
        completed the U.S. Navy Nuclear Power Engineering School.
  Mr.
        Gregory Morris has been HydroGen’s Senior Vice President of Sales and Projects
        since 2005. He leads the Company’s sales and marketing efforts and supports the
        Company’s project development activities. Mr. Morris brings over 30 years
        of experience in the chlorine and related industries, mostly with Dow Chemical,
        where he worked from 1970-1998. During his tenure with Dow, Mr. Morris was
        a worldwide production engineer and project manager, designing, building,
        operating and managing chlorine plants in Korea, Italy, France, Pakistan,
        India
        and Iran. Mr. Morris also led numerous R&D and commercialization
        efforts, particularly for development of chlorine membrane cell and water
        membrane filtration technology, and served as Dow’s Pacific area GasSpec
        marketing president. Mr. Morris more recently served as President and CEO
        of the North American division of DeNora (2001-2003), an Italian multinational
        that is a leading supplier of diverse technologies for the production of
        chlorine, and is the largest worldwide supplier of noble metal-coated catalysts
        for the chlor-alkali industry. DeNora has built over 500 chlor-alkali plants
        worldwide. Mr. Morris received a Bachelor of Science Degree in Mechanical
        Engineering from the University of Oklahoma and is a Licensed Engineer in
        the
        State of Texas.
  -38-
  **2005
        Performance Equity Plan**
  The
        2005
        Performance Equity Plan was adopted on July 6, 2005 by the board of directors
        and approved by the shareholders on August 16, 2005. The plan provides for
        the
        issuance of up to 1,100,000 shares of common stock under various awards,
        including incentive and non-incentive options, stock appreciation rights,
        restricted stock, deferred stock and other stock based grants. The plan is
        administered by the Board of Directors. The Board of Directors, at the time
        of
        an award, will determine the type of award, the exercise price, vesting
        schedule, and expiration date, as well as any other terms of the award. The
        minimum price of an award cannot be less than the market price on the date
        of
        the award. Incentive options may be granted only to employees, otherwise
        awards
        may be granted to officers, directors, employees and consultants who are
        individuals. The plan provides for acceleration of vesting of outstanding
        awards
        in the event of a non-approved acquisition of more than 35% of the combined
        voting power of HydroGen. The vesting may also be accelerated in the event
        of
        certain approved transactions. Currently, there are 1,098,617 shares subject
        to
        stock option awards under the plan at a weighted average exercise price of
        $3.76
        and there are 1,383 shares available for future grants of awards.
  **2007
        Performance Equity Plan**
  The
        2007
        Performance Equity Plan was adopted on April 13, 2007 by the board of directors
        and approved by the shareholders on June 22, 2007. The plan provides for
        the
        issuance of up to 1,300,000 shares of common stock under various awards,
        including incentive and non-incentive options, stock appreciation rights,
        restricted stock, deferred stock and other stock based grants. The plan is
        administered by the Board of Directors. The Board of Directors, at the time
        of
        an award, will determine the type of award, the exercise price, vesting
        schedule, and expiration date, as well as any other terms of the award. The
        minimum price of an award cannot be less than the market price on the date
        of
        the award. Incentive options may be granted only to employees, otherwise
        awards
        may be granted to officers, directors, employees and consultants who are
        individuals. The plan provides for acceleration of vesting of outstanding
        awards
        in the event of a non-approved acquisition of more than 35% of the combined
        voting power of HydroGen. The vesting may also be accelerated in the event
        of
        certain approved transactions. Currently, there are 1,128,144 shares subject
        to
        stock option awards under the plan at a weighted average exercise price of
        $2.49
        and there are 171,856 shares available for future grants of awards.
  **Section
        16(a) Beneficial Ownership Reporting Compliance** ****
  Section
        16(a) of the Securities Exchange Act of 1934 requires HydroGen’s officers and
        directors, and persons who own more than ten percent of a registered class
        of
        HydroGen’s equity securities, to file reports of ownership and changes in
        ownership with the Securities and Exchange Commission (the “Commission”).
        Officers, directors and greater than ten percent beneficial owners are required
        by Commission regulations to furnish the Company with copies of all forms
        they
        file pursuant to Section 16(a). Based solely on the Company’s review of the
        copies of such forms it received and written representations from reporting
        persons required to file reports under Section 16(a), to HydroGen’s knowledge
        all of the Section 16(a) filing requirements applicable to such persons with
        respect to fiscal 2007 were complied with.
  **Code
        of Ethics**
  HydroGen
        adopted a formal code of ethics statement that is designed to deter wrong
        doing
        and to promote ethical conduct and full, fair, accurate, timely and
        understandable reports that HydroGen files or submits to the SEC and others.
        HydroGen’s code of ethics applies to all of its employees, including the chief
        executive officer, chief financial officer and controller. A copy of the
        code of
        ethics is filed as an exhibit to this Form 10-KSB and may be obtained free
        of
        charge from the Company by calling (412) 405-1000 ext.
        244.
  -39-
  **Nominating
        Committee**
  The
        Board
        of Directors has a Nominating Committee comprised of Messrs. McGee and
        Basham. The Committee held two meetings during fiscal year 2007. The members
        of
        the Committee are all independent directors under applicable NASDAQ rules.
        Members of the Nominating Committee are appointed by the Board of Directors.
        The
        principal duty of the Nominating Committee, in its capacity as a committee
        of
        the Board of Directors, is to identify individuals qualified to become members
        of the Board of Directors and recommend the persons to be nominated by the
        Board
        of Directors for election as directors at the annual meeting of
        stockholders.
  The
        Nominating Committee will consider nominees for the Board of Directors
        recommended by stockholders. Nominations by stockholders must be in writing,
        and
        must include the full name of the proposed nominee, a brief description of
        the
        proposed nominee’s business experience for at least the previous five years, and
        a representation that the nominating stockholder is a beneficial or record
        owner
        of the Company’s common stock. Any such submission must also be accompanied by
        the written consent of the proposed nominee to be named as a nominee and
        to
        serve as director if elected. Nominations must be delivered to the Nominating
        Committee at the following address:
  Nominating
        Committee
 HydroGen
        Corporation
 10
        East
        40 th Street,
        Suite 3405
 New
        York,
        NY 10016
  The
        Nominating Committee is required to review the qualifications and backgrounds
        of
        all directors and nominees (without regard to whether a nominee has been
        recommended by stockholders), and recommend a slate of directors to be nominated
        for election at the annual meeting of stockholders, or in the case of a vacancy
        on the Board of Directors, recommend a director to be elected by the Board
        to
        fill such vacancy.
  **Audit
        Committee and Financial Expert**
  The
        Audit
        Committee of our Board of Directors is comprised of three non-employee directors
        who meet the independence standards of the NASDAQ Stock Market. The members
        of
        the Audit Committee are Messrs. Basham, McGee and Kranenburg. Mr. Basham
        has been selected as the Chairman of the Audit Committee. Our Board has
        determined that each member of the Audit Committee qualifies as an “audit
        committee financial expert” under federal securities laws, by virtue of his
        relevant experience.
  **Item
                  10.**
              **Executive
                  Compensation**
  The
        table
        below sets forth for the calendar years ending December 31, 2006 and
        December 31, 2007, the compensation of HydroGen’s Chief Executive Officer
        and the two other most highly compensated executive officers of HydroGen
        during
        the calendar year 2006 and 2007.
  -40-
  **Summary
        Compensation Table**
 
 **Name and Principal**
                **Position**
              
              **Year**
              
              **Salary ($)**
              
              **Bonus ($)**
              
              **Option**
                **Awards**
                **($)**
              
              **All** **Other**
                **Compensation**
                **($)**
              
              **Total**
                **($)**John
                  Freeh,
                Chief
                  Executive Officer
              
              
              2007
                2006
              
              
              41,373
                -
              (1)
              
              -
                -
              
              
              944,264
                -
              
              
              19,460
                -
              (2)
              
              1,005,097
                -Leo
                  Blomen,
                Chairman
                  and Chief Executive Officer
              
              
              2007
                2006
              (3)
              
              358,000
                233,949
              (4)
                (4)
              
              168,000
                115,239
              (4)
                (4)
              
              -
                125,015
              
              
              411,000
                -
              (5)
              
              937,000
                125,015Joshua
                  Tosteson,
                President
              
              
              2007
                2006
              
              
              238,500
                215,295
              
              
              99,200
                89,696
              
              
              124,400
                107,967
              
              
              14,042
                13,951
              
              
              467,442
                426,909Scott
                  M. Schecter,
                Chief
                  Financial Officer
              
              
              2007
                2006
              
              
              260,000
                243,000
              
              
              73,800
                55,450
              
              
              155,500
                54,552
              
              
              20,533
                27,642
              
              
              500,233
                380,644
  
  (1)
              Mr. Freeh
                  became Chief Executive Officer on November 10, 2007. His annual
                  salary as Chief Executive Officer in 2007 was
                  $300,000.
  (2)
              Mr.
                  Freeh’s other compensation represents $19,460 in fees he earned as a
                  Director in 2007.
  (3)
              Dr. Blomen
                  served as Chief Executive Officer in 2007 from January 1, 2007 until
                  November 10, 2007.
  (4)
              Dr. Blomen’s
                  services as Chief Executive Officer were provided through Blomenco
                  B.V., a
                  Dutch management services company controlled by Dr. Blomen.
                  Accordingly, compensation for Dr. Blomen’s services was paid directly
                  to Blomenco.
  (5)
              Dr.
                  Blomen’s other compensation amount for 2007 is comprised of severance
                  payments of $406,000 and Board of Director fees of $5,000.
  **Employment
        and Other Agreements**
  Each
        officer serves at the discretion of our Board of Directors. We have entered
        into
        employment agreements with John Freeh, Chief Executive Officer and Director,
        Joshua Tosteson, President and Director, Scott Schecter, Chief Financial
        Officer, Scott Wilshire, Chief Operating Officer and Gregory Morris, Senior
        Vice
        President of Sales and Projects. Under each such employment agreement, the
        executive is entitled to participate in an annual bonus program, which program
        must be adopted by the Board on an annual basis. Each executive’s receipt of
        bonus compensation is within the sole discretion of the Compensation Committee
        of the board of directors, which consists entirely of non-employee Directors.
        The Compensation Committee has the right to alter, amend or eliminate all
        or any
        part of any bonus or incentive plans at any time, without compensation. Each
        executive is also entitled to participate in all of our employee benefit
        plans.
        As part of each agreement, each executive has signed a general employment
        agreement, which inter alia contain nondisclosure, development and
        nonsolicitation provisions, in which he has agreed, among other things, to
        protect HydroGen’s confidential information, not to solicit Company employees,
        and not to breach any agreements with third parties.
  John
        Freeh, Director and Chief Executive Officer of HydroGen and HydroGen have
        entered into an employment agreement dated November 10, 2007. The agreement
        may
        be terminated for cause at any time by HydroGen. If the Company terminates
        Mr.
        Freeh without cause or Mr. Freeh terminates his employment for good reason,
        the
        Company will be obligated to pay Mr. Freeh one year’s salary, plus the
        acceleration of certain rights to options that would not have been otherwise
        earned. In addition, if Mr. Freeh is terminated in connection with a change
        of
        control of the Company, the Company will be obligated to pay Mr. Freeh one
        and a
        half times his annual salary. Mr. Freeh earns an annual salary of $300,000,
        and is entitled to a yearly bonus of up to 70% of his annual salary based
        upon
        the performance of HydroGen and Mr. Freeh, as determined by the
        Compensation Committee. Mr. Freeh is eligible to participate in the standard
        benefits offered to all employees of HydroGen, including coverage under the
        Company medical and disability plans.
  -41-
  Joshua
        Tosteson and HydroGen have entered into an employment agreement with Mr.
        Tosteson serving as the President of HydroGen for a period of three years
        commencing April 1, 2005. Mr. Tosteson and the Company have entered into an
        extension of his employment agreement which shall terminate on the earlier
        of
        May 1, 2008 and the date on which Mr. Tosteson and the Company enters
        into a new employment agreement. The agreement may be terminated at any time
        for
        cause, however if Mr. Tosteson is terminated without cause or if he terminates
        his employment for good reason, he is entitled to one year severance pay
        from
        HydroGen, plus the acceleration of certain rights to options that would have
        been otherwise earned. In addition, Mr. Tosteson earns an annual salary of
        $238,500 and is entitled to bonuses based upon his performance and the
        performance of HydroGen, as determined by the Compensation Committee. Mr.
        Tosteson is eligible to participate in the standard benefits offered to all
        employees of HydroGen, including coverage under the company medical and
        disability plans.
  Scott
        Schecter and HydroGen have entered into an employment agreement with Mr.
        Schecter as the Chief Financial Officer of HydroGen for a period of three
        years
        commencing April 1, 2005. Mr. Schecter and the Company have entered
        into an extension of his employment agreement which shall terminate on the
        earlier of May 1, 2008 and the date on which Mr. Schecter and the
        Company enters into a new employment agreement. The agreement may be terminated
        at any time for cause, however if Mr. Schecter is terminated without cause
        or if
        Mr. Schecter terminates for good reason, he is entitled to one year severance
        pay from HydroGen, plus the acceleration of certain rights to options that
        would
        have been otherwise earned. In addition, Mr. Schecter earns an annual salary
        of
        $260,000 and is entitled to bonuses based upon his performance and the
        performance of HydroGen, as determined by the Compensation Committee. Mr.
        Schecter has been granted an option commencing April 2005 to acquire 114,115
        shares of HydroGen common stock, exercisable until April 2015 at approximately
        $4.34 per share. These options vest ratably each month until April 2008.
        He also
        will be eligible to receive awards of additional options to acquire future
        awards of common stock of HydroGen. Mr. Schecter will be eligible to participate
        in the standard benefits offered to all employees of HydroGen, including
        coverage under the company medical and disability plans.
  Scott
        Wilshire, the Chief Operating Officer of HydroGen, entered into an employment
        agreement with HydroGen in March of 2005 for a period of three years.
        Mr. Wilshire and the Company have entered into an extension of his
        employment agreement which shall terminate on the earlier of May 1, 2008
        and the date on which Mr. Wilshire and the Company enters into a new
        employment agreement. Mr. Wilshire earns an annual salary of $201,600, and
        is entitled to bonuses based upon his performance and the performance of
        HydroGen, as determined by the Compensation Committee. Mr. Wilshire can be
        terminated at any time for cause. If Mr. Wilshire is terminated without cause
        or
        if he terminates his employment for good reason, he is entitled to receive
        one
        year severance pay. Mr. Wilshire has been granted an option to acquire 85,768
        shares of HydroGen common stock at an exercise price of approximately $4.34
        per
        share, exercisable until January 31, 2015. These options are fully vested.
        He
        also will be eligible to receive awards of additional options to acquire
        future
        awards of common stock of HydroGen. Mr. Wilshire will be eligible to participate
        in the standard benefits offered to all employees of HydroGen, including
        coverage under the company medical and disability plans.
  -42-
  Gregory
        Morris, the Sr. Vice President of Sales and Projects of HydroGen, entered
        into
        an employment agreement with HydroGen in April of 2005 for a period of three
        years. Mr. Morris and the Company have entered into an extension of his
        employment agreement which shall terminate on the earlier of May 1, 2008
        and the date on which Mr. Morris and the Company enters into a new
        employment agreement. Mr. Morris earns an annual salary of $190,800, and is
        entitled to bonuses based upon his performance and the performance of HydroGen,
        as determined by the Compensation Committee. Mr. Morris can be terminated
        at any time for cause. If Mr. Morris is terminated without cause or if he
        terminates his employment for good reason, he is entitled to receive one
        year
        severance pay. He also will be eligible to receive awards of additional options
        to acquire future awards of common stock of HydroGen. Mr. Morris will be
        eligible to participate in the standard benefits offered to all employees
        of
        HydroGen, including coverage under the company medical and disability plans.
  Dr.
        Blomen, HydroGen, LLC, and Blomenco, B.V., a Dutch consulting firm controlled
        by
        Dr. Blomen, have entered into a Consulting Services Agreement on November
        10, 2007 through which Dr. Blomen will provide consulting services to the
        Company and Hydrogen, LLC at the rate of €175 per hour for a minimum of 1000
        hours in the first twelve months following the effective date of the
        agreement. Either party may terminate the agreement at any time after
        twelve months from the effective date of the agreement with six months’ notice
        to the other party. The Company shall also pay Blomenco in equal monthly
        payments at a yearly rate of €25,000 for Dr. Blomen’s service as Chairman
        of the Board of Directors of the Company.
  Dr.
        Blomen, HydroGen, LLC, and Blomenco, B.V. entered into a Separation Agreement
        on
        November 10, 2007 pursuant to which HydroGen would pay Blomenco in connection
        with Dr. Blomen’s separation from HydroGen as Chief Executive Officer a
        severance payment of $406,000 to be paid out over twelve months.
  The
        following table sets forth information concerning the outstanding equity
        awards
        granted to the named executive officers as of December 31,
        2007.
  **OUTSTANDING
        EQUITY AWARDS AT FISCAL YEAR-END**
 **OPTION
        AWARDS**
 
 **Name**
              
              **Number of Securities**
                **Underlying**
                **Unexercised Options**
                **(#) Exercisable**
              
              **Number of Securities**
                **Underlying**
                **Unexercised Options**
                **(#) Unexercisable**
              
              **Equity Incentive Plan**
                **Awards: Number of**
                **Securities Underlying**
                **Unexercised Unearned**
                **Options (#)**
              
              **Option**
                **Exercise**
                **Price ($)**
              
              **Option**
                **Expiration**
                **Date**Leo
                  Blomen
              
              
              36,667
              
              
              18,333
              (1)
              
              18,333
              
              
              4.50
              
              
              12/11/2011John
                  Freeh
              
              
              7,500
                4,000
                -
              
              
              -
                -
                607,244
              (2)
              
              -
                -
                607,244
              
              
              6.05
                4.50
                2.43
              
              
              05/22/2011
                12/11/2011
                11/10/2017Joshua
                  Tosteson
              
              
              31,667
                -
              
              
              15,833
                80,000
              (3)
                (4)
              
              15,833
                80,000
              
              
              4.50
                2.43
              
              
              12/11/2011
                11/10/2017Scott
                  M. Schecter
              
              
              107,775
                16,000
                -
              
              
              6,340
                8,000
                100,000
              (5)
                (6)
                (4)
              
              6,340
                8,000
                100,000
              
              
              4.34
                4.50
                2.43
              
              
              04/01/2015
                12/11/2011
                11/10/2017
 
 (1)  These
        options will vest on December 11, 2008.
 
 (2)  These
        options will vest in one-third increments on November 10, 2008, November
        10,
        2009, and November 10, 2010.
 
 (3)  These
        options will vest in equal portions every three months beginning on February
        10,
        2009 and ending on November 10, 2010.
  -43-
  (4)  One-third
        of these options will vest on November 10, 2008. Beginning after November
        10,
        2008 and ending on November 10, 2010, the remaining unvested shares will
        vest in
        approximately equal amounts on each of the first day of every calendar quarter
        and November 10, 2010 (with the last amount vesting on November 10, 2010).
 
 (5)  These
        options will vest monthly on January 31, 2008 and February 29, 2008.
 
 (6)  These
        options will vest on December 11, 2008.
 
 **Director
        Compensation** ****
  The
        following Director Compensation Table summarizes the compensation of our
        non-employee directors for services rendered by HydroGen during the year
        ended
        December 31, 2007.
  **DIRECTOR
        COMPENSATION TABLE**
  **Name**
              
              **Fees Earned**
                **or Paid in Cash ($)**
              
              **Option Awards**
                **($)**
              
              **Total ($)**Brian
                  Bailys
              
              
              18,000
              
              
              75,100
              (1)
              
              93,100Howard
                  Yana-Shapiro
              
              
              17,500
              
              
              75,100
              (1)
              
              92,600Michael
                  Basham
              
              
              27,793
              
              
              89,900
              (2)
              
              117,693Philip
                  Kranenburg
              
              
              19,000
              
              
              89,900
              (2)
              
              108,900Brian
                  McGee
              
              
              19,500
              
              
              89,900
              (2)
              
              109,400Alton
                  Romig(3)
              
              
              2,441
              
              
              11,942
              (4)
              
              14,383
 
 (1) This represents
        stock option awards totaling 61,500 shares.
  (2)
        This represents stock option awards totaling 57,500
        shares.
  (3)  D r.
        Romig
        became a Director on December 7, 2007.
  (4) This
        represents stock option awards totaling 7,500 shares .
  The
        Chairman of the Board of Directors, Dr. Blomen, is paid an annual retainer
        of
€25,000. All other non-employee directors are paid an annual retainer of
        $10,000. In addition to their annual retainers, all non-employee directors
        (excluding Dr. Blomen) are paid $1,000 for each meeting they attend in person
        and $500 for each meeting they attend via telephone. The Chairman of the
        Audit
        Committee is paid an additional retainer of $1,500 quarterly and an additional
        $500 for each Audit Committee meeting. The Chairman of the Compensation
        Committee is paid an additional retainer of $1,000 per quarter and an additional
        $300 for each Compensation Committee Meeting. In addition, all non-employee
        directors (excluding Dr. Blomen) are paid $500 for each committee meeting
        they
        attend.
  Non-employee
        directors are also granted options to purchase 7,500 shares of common stock
        on
        their initial appointment or election to the Board of Directors and each
        year
        thereafter they will be granted options to purchase 4,000 shares of common
        stock
        so long as they continue as directors of HydroGen. Any options will vest
        immediately on grant and be exercisable for a period of up to ten years.
        Alternatively, HydroGen may issue restricted securities or deferred securities
        under the stock option plan with a restricted period or deferred period to
        be
        determined.
  -44-
  During
        2007, the non-employee directors were provided with a special grant of 50,000
        shares of common stock.
 
 **Item
                  11.**
              **Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters******
  The
        following table sets forth certain information regarding our common stock
        beneficially owned on April 1, 2008 for (i) each shareholder known to
        be the beneficial owner of 5% or more of outstanding common stock,
        (ii) each executive officer and director, and (iii) all executive officers
        and directors as a group. The table assumes a total of 12,769,904 shares
        of
        common stock outstanding.
  **Name
                  of Beneficial Owner**
              
              **Amount
                  of**
                **Beneficial**
                **Ownership***
              
              **Percent**
                **of
                  Class**Leo
                  Blomen(1)(2)
              
              
              448,253
              
              
              3.51
              %John
                  J. Freeh(1)(3)
              
              
              43,500
              
              
              0.34
              %Joshua
                  Tosteson(1)(4)
              
              
              575,764
              
              
              4.51
              %Scott
                  Schecter(1)(5)
              
              
              227,946
              
              
              1.79
              %Scott
                  Wilshire(1)(6)
              
              
              111,050
              
              
              0.87
              %Gregory
                  Morris(1)(7)
              
              
              66,688
              
              
              0,52
              %Brian
                  Bailys(1)(8)
              
              
              66,925
              
              
              0.52
              %Howard-Yana
                  Shapiro(1)(9)
              
              
              11,500
              
              
              —Michael
                  E. Basham(1)(10)
              
              
              16,000
              
              
              0.13
              %Philip
                  J. Kranenburg(1)(11)
              
              
              107,500
              
              
              0.84
              %Brian
                  T. McGee(1)(10)
              
              
              7,500
              
              
              —Alton
                  D. Romig(1)(12)
              
              
              7,500
              
              
              —FuelCell
                  Holdings, LLC(13)
              
              
              757,445
              
              
              5.93
              %Alysheba
                  Funds(14)
              
              
              875,000
              
              
              6.85
              %Federated
                  Investors, Inc.(15)
              
              
              1,250,000
              
              
              9.79
              %Pequot
                  Capital Management, Inc.(16)
              
              
              1,116,313
              
              
              8.74
              %Security
                  Investors, LLC(17)
              
              
              1,952,646
              
              
              15.29
              %All
                  Executive Officers and Directors as a group (twelve persons)(18)
              
              
              1,690,126
              
              
              13.24
              %
   *
              Beneficial
                  ownership is determined in accordance with the rules of the Securities
                  and
                  Exchange Commission and generally includes voting or investment
                  power with
                  respect to securities. Shares of common stock issuable upon the
                  exercise
                  of options or warrants currently exercisable or convertible within
                  60
                  days, are deemed outstanding for computing the percentage ownership
                  of the
                  person holding such options or warrants but are not deemed outstanding
                  for
                  computing the percentage ownership of any other
                  person.
  
 (1)
              c/o
                  2 Juniper Street, Versailles, PA
                  15132.
  (2)
              Includes
                  36,667 shares of common stock subject to options that vest as of
                  June 1, 2008, but does not include 18,333 shares of common stock that
                  are subject to options that may vest in the future.
  (3)
              Includes
                  11,500 shares of common stock subject to options that vest as of
                  June 1, 2008, but does not include 607,244 shares of common stock
                  subject to options that may vest in the
                  future.
  (4)
              Includes
                  31,667 shares of common stock subject to options that vest as of
                  June 1, 2008, but does not include 95,833 shares of common stock that
                  are subject to options that may vest in the future.
  -45-
  (5)
              Includes
                  130,115 shares of common stock subject to options that vest as
                  of
                  June 1, 2008, but does not include 108,000 shares of common stock
                  that are subject to options that may vest in the
                  future.
  (6)
              Includes
                  108,550 shares of common stock subject to options that vest as
                  of
                  June 1, 2008, but does not include 145,565 shares of common stock
                  subject to options that may vest in the
                  future.
  (7)
              Includes
                  10,667 shares of common stock subject to options that vest as of
                  June 1, 2008, but does not include 125,333 shares of common stock
                  subject to options that may vest in the
                  future.
  (8)
              Includes
                  11,500 shares of common stock subject to options that vest as of
                  June 1, 2008, but does not include 50,000 shares of common stock
                  subject to options that may vest in the
                  future.
  (9)
              Includes
                  11,500 shares of common stock subject to options that vest as of
                  June 1, 2008, but does not include 50,000 shares of common stock
                  subject to options that may vest in the future. Mr. Shapiro has
                  gifted these securities to his daughter and thus disclaims all
                  beneficial
                  ownership.
  (10)
              Includes
                  7,500 shares of common stock subject to options that vest as of
                  June 1, 2008, but does not include 50,000 shares of common stock
                  subject to options that may vest in the
                  future.
  (11)
              Includes
                  7,500 shares of common stock subject to options that vest as of
                  June 1, 2008, but does not include 50,000 shares of common stock
                  subject to options that may vest in the future. Also includes 100,000
                  shares of common stock held by Kranenburg Fund LP of which Mr.
                  Kranenburg
                  is a partial beneficial owner.
  (12)
              Includes
                  7,500 fully vested stock options that were received upon joining
                  the Board
                  of Directors.
  (13)
              FuelCell
                  Holdings, LLC has an address at 3201 Enterprise Parkway, Suite
                  460,
                  Beachwood, Ohio 44122. Mr. Saul Siegel has investment authority over
                  these shares.
  (14)
              Each
                  of Alysheba QP Fund L.P., Alysheba Fund L.P. and Alysheba Fund
                  Ltd. are
                  registered companies pursuant to the Investment Company Act of
                  1940.
                  John A. Murphy, manager of the funds and Philip C. Furse,
                  co-manager of the funds, have dispositive and voting authority
                  of all the
                  shares held by the aforementioned investors. Amount includes 175,000
                  shares of common stock subject to
                  warrants.
  (15)
              Federated
                  Kaufman Fund, a Portfolio of Federated Equity Funds, is a registered
                  company pursuant to the Investment Company Act of 1940. The fund
                  is an
                  affiliate of Federated Securities Corp., a NASD or a broker-dealer
                  registered pursuant to Section 15 of the Exchange Act through common
                  ownership by the parent corporation of each Federated Investors.
                  Amount
                  includes 250,000 shares of common stock subject to warrants.
  (16)
              Shares
                  beneficially owned by Pequot Capital Management, Inc. represent
                  490,442
                  shares of common stock held of record by Pequot Scout Fund, L.P.
                  and
                  275,871 shares of common stock held of record by Pequot Mariner
                  Master
                  Fund, L.P. Pequot Capital Management, Inc., which is the investment
                  manager to the above named funds exercises sole dispositive, voting
                  and
                  investment power for all the shares. Arthur J. Samberg is the sole
                  shareholder of Pequot Capital Management, Inc. and disclaims beneficial
                  ownership of the shares except for his pecuniary
                  interest.
  -46-
  (17)
              Security
                  Investors, LLC is the investment advisor to (a) SBL Fund, Series
                  J, (b)
                  Security Mid Cap Growth Fund, (c) Security Equity Fund, Mid Cap
                  Values
                  Series, and (d) SBL Fund, Series V (collectively, the “Funds”). Each of
                  the Funds is an investment company registered under the Investment
                  Company
                  Act of 1940, as amended. The securities listed in the table above
                  are
                  owned by the Funds. As investment advisor, Security Investors,
                  LLC may be
                  deemed to be the beneficial owner of such
                  securities.
  (18)
              Includes
                  374,666 shares of common stock subject options that vest as of
                  June 1,
                  2008, but does not include 1,300,308 shares of common stock that
                  are
                  subject to options that may vest in the
                  future.
  **Item
                  12.**
              **Certain
                  Relationships and Related Transactions****and Director Independence**
  Dr. Blomen,
        Chairman of our Board of Directors, is retained as Chairman of the Board
        of
        Directors and as a consultant to the Company through Blomenco, B.V., a Dutch
        management services company
        controlled by Dr. Blomen. Prior to November 10, 2007, Dr. Blomen was
        retained through Blomenco as the Chief Executive Officer of
        HydroGen.
  In
        2007,
        Blomenco earned fees for the services of Dr. Blomen totaling $937,000,
        which includes management fees of $358,000, a bonus of $168,000, a severance
        payment of $406,000 being paid out over twelve months, and Board of Directors
        fees of $5,000.
  Pursuant
        to a Consulting Services Agreement, Dr. Blomen will provide consulting
        services to the Company and HydroGen, LLC at the rate of €175 per hour for a
        minimum of 1000 hours until November 2008 to be paid to Blomenco. After such
        time, either party may terminate the agreement with six months’ notice to the
        other party.
  **Director**  **Independence**
  The
        following directors are “independent” pursuant to the independent standards of
        NASDAQ: Michael Basham, Philip Kranenburg, Howard Yana-Shapiro, Alton Romig,
        Brian McGee.
  **Item
                  13.**
              **Exhibits**
  a.  The following Exhibits
        are filed as part of this Report:
 **Exhibit No.**
                ****
                **Description**3.1
                
                Articles
                    of Incorporation – under the name TSI Holdings*3.2
                
                Certificate
                    of Amendment to the Articles of Incorporation*3.3
                
                Certificate
                    of Designation - Series A 10% Cumulative Convertible Preferred
                    Stock*3.4
                
                Certificate
                    of Designations, Preferences, Rights and Limitations of Series
                    B
                    Convertible Preferred Stock of Chiste Corporation (Incorporated
                    by
                    reference from Form 8-K dated July 7, 2005, Exhibit
                    4.1)3.5
                
                Amendment
                    to Articles of Incorporation – Change of Name to HydroGen Corp.
                    (Incorporated by reference from Form 10-KSB for fiscal year ended
                    December 31, 2005)3.6
                
                Amendment
                    to Articles of Incorporation – Withdrawal of Certificate of Designations –
                    Series B Preferred Stock (Incorporated by reference from Form
                    10-KSB for
                    fiscal year ended December 31,
                    2005)
  -47-
  **Exhibit No.**
                ****
                **Description**3.7
                
                By-laws
                    – under the name TSI Holdings*3.8
                
                By-laws
                    Amendment (Incorporated by reference from Form 8-K dated November
                    10,
                    2007, Exhibit 3.1)10.2
                
                Exchange
                    Agreement between Chiste Corporation and HydroGen LLC (Incorporated
                    by
                    reference from Exhibit 2.2 of Form 8-K filed May 18,
                    2005)10.3
                
                Letter
                    Agreement – John J. Freeh (Incorporated by reference from Form 8-K dated
                    November 10, 2007, Exhibit 10.4)10.4
                
                Employment
                    Agreement – Joshua Tosteson (Incorporated by reference from Form 8-K dated
                    July 7, 2005, Exhibit 10.4)10.5
                
                Amendment
                    to Joshua Tosteson Employment Agreement*10.6
                
                Employment
                    Agreement – Scott Schecter (Incorporated by reference from Form 8-K dated
                    July 7, 2005, Exhibit 10.5)10.7
                
                Amendment
                    to Scott Schecter Employment Agreement*10.8
                
                Employment
                    Agreement – Scott Wilshire (Incorporated by reference from Form 8-K dated
                    July 7, 2005, Exhibit 10.6)10.9
                
                Amendment
                    to Scott Wilshire Employment Agreement*10.10
                
                Employment
                    Agreement – Greg Morris (Incorporated by reference from Form 8-K dated
                    July 7, 2005, Exhibit 10.7)10.11
                
                Amendment
                    to Gregory Morris Employment Agreement*10.12
                
                Option
                    Agreement – Scott Schecter (Incorporated by reference from Form 8-K dated
                    July 7, 2005, Exhibit 10.8)10.13
                
                Option
                    Agreement – Scott Wilshire (Incorporated by reference from Form 8-K dated
                    July 7, 2005, Exhibit 10.9)10.14
                
                Option
                    Agreement – Greg Morris*10.15
                
                Form
                    of General Investor Stock Purchase Agreement, including voting
                    agreement
                    (Incorporated by reference from Form 8-K dated July 7, 2005,
                    Exhibit
                    10.11)10.16
                
                Form
                    of Preferred Shares Investor Stock Purchase Agreement for institutional
                    investors (Incorporated by reference from Form 8-K dated July
                    7, 2005,
                    Exhibit 10.12)10.17
                
                Preferred
                    Shares Investor Registration Rights Agreement for institutional
                    investors
                    (Incorporated by reference from Form 8-K dated July 7, 2005,
                    Exhibit
                    10.13)10.18
                
                2005
                    Performance Equity Plan (Incorporated by reference from Form
                    8-K dated
                    July 7, 2005, Exhibit 10.15)10.19
                
                2007
                    Performance Equity Plan (Incorporation by reference from Form
                    S-8 dated
                    July 23, 2007, Exhibit 4.2)10.20
                
                Agreement
                    Department of Development of the State of Ohio dated August 26,
                    2005
                    (Incorporated by reference from Form 8-K dated August 26, 2005,
                    Exhibit
                    10.1)
  -48-
  **Exhibit No.**
                ****
                **Description**10.21
                
                Patent
                    License from US Department of Energy dated August 26, 2005 (Incorporated
                    by reference from Form 8-K dated August 26, 2005, Exhibit
                    10.2)14.1
                
                Code
                    of Ethics (Incorporated by reference from Form 10-KSB for fiscal
                    year
                    ended December 31, 2005, Exhibit 14.1)21.1
                
                Subsidiaries
                    of HydroGen Corp.(Incorporated
                    by reference from Form 10-KSB for fiscal year ended December 31,
                    2005, Exhibit 21.1)31.1
                
                Certificate
                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – John J.
                    Freeh*31.2
                
                Certificate
                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Joshua
                    Tosteson*31.3
                
                Certificate
                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Scott
                    Schecter*32.1
                
                Certificate
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – John J.
                    Freeh*32.2
                
                Certificate
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Joshua
                    Tosteson*32.3
                
                Certificate
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Scott
                    Schecter*99.1
                
                Year
                    end release (Incorporated by reference from Form 8-K dated March 31,
                    2008).
  *
        Filed
        herewith
  **Item
                  14.**
              **Principal
                  Accountant Fees and
                  Services**
  As
        we
        have previously disclosed, certain of the partners of GGK became partners
        of
        M&P in a limited asset purchase agreement effective October 3, 2007. As a
        result, GGK resigned as auditors of the Company effective November 15, 2007
        and
        M&P was appointed as auditors for the Company’s annual financial statements
        for the year ended December 31, 2007.
  Through
        November 15, 2007, GGK had a continuing relationship with RSM McGladrey,
        Inc.
        (“RSM”) from which it leased auditing staff who were full time, permanent
        employees of RSM and through which its partners provide non-audit services.
        Subsequent to November 15, 2007, this relationship ceased and M&P
        established, and maintains, a similar relationship with RSM.  M&P
        has no full time employees and, therefore, none of the audit services performed
        were provided by permanent full-time employees of M&P. M&P manages
        and supervises the audit and audit staff and is exclusively responsible for
        the
        opinion rendered in connection with its examination.
  -49-
  The
        following table shows the fees paid or accrued for the audit and other services
        provided for the years ended December 31, 2007 and 2006:
  December 31,
                2007
              
              December 31,
                2006Audit
                  Fees
              
              $
              85,000
              
              $
              92,000Audit
                  Related Fees
              
              
              -
              
              
              -Tax
                  Fees
              
              
              -
              
              
              -All
                  Other Fees
              
              
              -
              
              
              -$
              85,000
              
              $
              92,000
  Audit
        services for the years 2007 and 2006 consisted of the audit of the year end
        financial statements, the review of the quarterly financial statements, and
        the
        review of registration statements and other SEC filings.
  The
        services and engagements performed during 2007 were approved by the Audit
        Committee. Because the board of directors of HydroGen did not have an audit
        committee prior to 2007, the Chairman of the board of directors approved
        the
        services and engagements performed during 2006.
  -50-
  **SIGNATURES**
  In
        accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
        this Report to be signed on its behalf by the undersigned, thereunto duly
        authorized on April 14, 2008.
  HYDROGEN
                  CORPORATIONBy:
              /s/
                  John J. FreehJohn
                  J. FreehChief
                  Executive Officer and Director
 
 In
        accordance with the Exchange Act, this Report has been signed below by the
        following persons on behalf of the Registrant and in the capacities indicated,
        on April 14, 2008.
  **Signature**
              
              **Capacities**
              
              **Date**/s/
                  John J. Freeh
              
              Chief
                  Executive Officer (Principal
              
              April 14,
                  2008**John
                  J. Freeh**
              
              Executive
                  Officer) and Director/s/
                  Joshua L. Tosteson
              
              President
                  and Director
              
              April 14,
                  2008**Joshua
                  L. Tosteson**/s/
                  Scott M. Schecter
              
              Chief
                  Financial Officer (Principal
              
              April 14,
                  2008**Scott
                  M. Schecter**
              
              Financial
                  and Accounting Officer)/s/
                  Leo Blomen
              
              Chairman
                  of the Board of Directors
              
              April 14,
                  2008**Leo
                  Blomen**/s/
                  Brian Bailys
              
              Director
              
              April 14,
                  2008**Brian
                  Bailys**/s/
                  Michael E. Basham
              
              Director
              
              April 14,
                  2008**Michael E.
                  Basham**/s/
                  Philip J. Kranenburg
              
              Director
              
              April 14,
                  2008**Philip J.
                  Kranenburg**/s/
                  Brian T. McGee
              
              Director
              
              April 14,
                  2008**Brian
                  T. McGee**/s/
                  Alton D. Romig, Jr.
              
              Director
              
              April 14,
                  2008**Alton
                  D. Romig, Jr.**/s/
                  Howard Yana-Shapiro
              
              Director
              
              April 14,
                  2008**Howard
                  Yana-Shapiro**
  -51-


**Financial
      Statements**




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**PAGE****Reports
                of Independent Registered Public Accounting Firms**
            F-2**Consolidated
                Balance Sheet**– December
                31, 2007
            F-4**Consolidated
                Statements of Operations**– For
                the Years Ended December 31,2007 and 2006, and from November 11, 2001
                (inception) throughDecember 31, 2007
            F-5**Consolidated
                Statements of Shareholders’ Equity (Deficiency)**– From
                November 11, 2001(inception) through December 31, 2007
            F-6**Consolidated
                Statements of Cash Flows**– For
                the Years Ended December 31,2007 and 2006, and from November 11, 2001
                (inception) throughDecember 31, 2007
            F-8**Notes
                to Consolidated Financial Statements**
            F-9










**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




To
      the
      Board of Directors and Shareholders


HydroGen
      Corporation




We
      have
      audited the accompanying consolidated balance sheet of HydroGen Corporation
      (development stage company) as of December 31, 2007 and the related consolidated
      statements of operations, cash flows and shareholders’ equity (deficiency) for
      the year ended December 31, 2007 and the 2007 amounts included in the
      cumulative columns in the statements of operations and cash flows for the year
      then ended. These consolidated financial statements are the responsibility
      of
      the Company’s management. Our responsibility is to express an opinion on these
      consolidated financial statements based on our audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit 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 audit provides a
      reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of HydroGen Corporation as
      of
      December 31, 2007 and the results of its operations and its cash flows for
      the year then ended and the 2007 amounts included in the cumalitive columns
      in
      the statements of operations and cash flows for the year then ended in
      conformity with U.S. generally accepted accounting principles.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 2 to the
      consolidated financial statements, the Company has had losses from operations
      and net losses from inception and has an accumulated deficit. This matter raises
      substantial doubt about its ability to continue as a going concern. Management’s
      plans in regard to these matters are also described in Note 2. The consolidated
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.




We
      were
      not engaged to examine management’s assertion about the effectiveness of
      HydroGen Corporation’s internal control over financial reporting as of December
      31, 2007 included in the accompanying Management’s Annual Report on Internal
      Control over Financial Reporting and, accordingly, we do not express an opinion
      thereon.




**/s/** MCGLADREY &
      PULLEN, LLP




New
      York,
      New York


April
      10,
      2008





F-2




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




To
      the
      Board of Directors


HydroGen
      Corporation




We
      have
      audited the accompanying consolidated statements of operations, shareholders’
equity (deficiency) and cash flows of HydroGen Corporation (a development stage
      company) for the year ended December 31, 2006 and for the period from
      November 11, 2001 (inception) through December 31, 2006. These consolidated
      financial statements are the responsibility of HydroGen Corporation's
      management. Our responsibility is to express an opinion on these financial
      statements based on our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit 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 provide a
      reasonable basis for our opinion.




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the results of operations and cash flows of HydroGen
      Corporation for the year ended December 31, 2006, and for the period from
      November 11, 2001 (inception) through December 31, 2006, in conformity
      with United States generally accepted accounting principles.




The
      Company changed its method of accounting for stock-based compensation effective
      January 1, 2006.




**/s/
      GOLDSTEIN GOLUB KESSLER LLP**


New
      York,
      New York




February
      16, 2007




F-3





**HYDROGEN
      CORPORATION AND SUBSIDIARY**


**(A
      Development Stage Company)**


**CONSOLIDATED
      BALANCE SHEET**


**December
                  31,**
                **2007****ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              8,065,758Accounts
                  receivable
              
              
              165,628Other
                  current assets
              
              
              1,837,657**TOTAL
                  CURRENT ASSETS**
              
              
              10,069,043Property
                  and equipment, net
              
              
              4,799,588Other
                  assets
              
              
              66,433**TOTAL
                  ASSETS**
              
              $
              14,935,064**LIABILITIES
                  AND SHAREHOLDERS’ EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable and accrued expenses
              
              $
              3,094,511Capital
                  lease obligations, current portion
              
              
              102,804**TOTAL
                  CURRENT LIABILITIES**
              
              
              3,197,315**LONG-TERM
                  LIABILITIES**Capital
                  lease obligations, net of current portion
              
              
              74,813**TOTAL
                  LIABILITIES**
              
              $
              3,272,128Commitments
                  (Note 11)**SHAREHOLDERS’
                  EQUITY**Common
                  stock, par value $0.001 per share, authorized 65,000,000shares,
                  12,769,904 issued and outstanding at December 31, 2007
              
              
              12,770Additional
                  paid-in capital
              
              
              43,180,779Deficit
                  accumulated during the development stage
              
              
              (31,530,613
              )**TOTAL
                  SHAREHOLDERS’ EQUITY**
              
              
              11,662,936**TOTAL
                  LIABILITIES AND SHAREHOLDERS’ EQUITY**
              
              $
              14,935,064




See
      accompanying notes to the financial statements


F-4


**HYDROGEN
      CORPORATION AND SUBSIDIARY**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**For the Years Ended**
                **December 31,**
              
              **November 11,**
                **2001 (Inception)**
                **through December 31,**
                **2007****2007**
              
              **2006**Grant
                  Revenue
              
              $
              1,445,196
              
              $
              610,721
              
              $
              2,192,619Research
                  and development expenses
              
              
              10,886,210
              
              
              3,859,950
              
              
              15,014,160Costs
                  and expenses (including stock-based compensation expense of $584,964,
                  $561,331, and $2,411,145, respectively)
              
              
              7,552,140
              
              
              5,125,618
              
              
              18,942,344**LOSS
                  FROM OPERATIONS**
              
              
              (16,993,154
              )
              
              (8,374,847
              )
              
              (31,763,885
              )Interest
                  and other income
              
              
              811,331
              
              
              1,046,602
              
              
              2,055,350Interest
                  and other financing charges
              
              
              (27,782
              )
              
              (95,055
              )
              
              (798,267
              )Charge
                  for repricing conversion price of convertible debt
              
              
              -
              
              
              -
              
              
              (875,000
              )**NET
                  LOSS**
              
              $
              (16,209,605
              )
              $
              (7,423,300
              )
              $
              (31,381,802
              )Weighted
                  average common shares outstanding (basic and diluted)
              
              
              12,769,904
              
              
              11,060,986Net
                  loss per share (basic and diluted)
              
              $
              (1.27
              )
              $
              (0.67
              )




See
      accompanying notes to the financial statements




F-5


**HYDROGEN
      CORPORATION AND SUBSIDIARY**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIENCY)**


**Common Stock**
              
              **Series B Preferred Stock**
              
              **Additional**
                **Paid-in**
              
              **DeficitAccumulated
                  During the Development**
              
              **Total
                  Shareholders’**
                **Equity****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Capital**
              
              **Stage**
              
              **(Deficiency)****Balance,
                  November 11, 2001 (Inception)**
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Capital
                  contributed on November 11, 2001
              
              
              -
              
              
              -
              
              
              377,704
              
              $
              378
              
              $
              476
              
              $
              -
              
              $
              854Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,564
              )
              
              (5,564
              )**Balance,
                  December 31, 2001**
              
              
              -
              
              **$**
              **-**
              
              $
              377,704
              
              $
              378
              
              $
              476
              
              $
              (5,564
              )
              $
              (4,710
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (104,354
              )
              
              (104,354
              )**Balance,
                  December 31, 2002**
              
              
              -
              
              $
              -
              
              $
              377,704
              
              $
              378
              
              $
              476
              
              $
              (109,918
              )
              $
              (109,064
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (163,128
              )
              
              (163,128
              )**Balance,
                  December 31, 2003**
              
              
              -
              
              **$**
              **-**
              
              $
              377,704
              
              $
              378
              
              $
              476
              
              $
              (273,046
              )
              $
              (272,192
              )Equity
                  issued for compensation in January and June, at $22.81 per preferred
                  share
              
              
              -
              
              
              -
              
              
              28,012
              
              
              28
              
              
              638,802
              
              
              -
              
              
              638,830Issuance
                  of equity in connection with issuance of convertible notes from
                  November
                  24 – December 20, at $16.36 per preferred share
              
              
              -
              
              
              -
              
              
              27,850
              
              
              28
              
              
              455,480
              
              
              -
              
              
              455,508Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,734,654
              )
              
              (1,734,654
              )**Balance,
                  December 31, 2004**
              
              
              -
              
              **$**
              **-**
              
              $
              433,566
              
              $
              434
              
              $
              1,094,758
              
              $
              (2,007,700
              )
              $
              (912,508
              )Vesting
                  of equity issued for compensation in January and June, 2004 at
                  $22.81 per
                  preferred share
              
              
              -
              
              
              -
              
              
              21,731
              
              
              22
              
              
              513,319
              
              
              -
              
              
              513,341Equity
                  issued on March 8 to existing shareholders electing antidilution
                  protection, at $23.18 per preferred share
              
              
              -
              
              
              -
              
              
              4,862
              
              
              5
              
              
              112,674
              
              
              -
              
              
              112,679Issuance
                  of equity in connection with issuance of convertible notes from
                  January
                  4 – February 23, at $16.82 per preferred share
              
              
              -
              
              
              -
              
              
              6,147
              
              
              6
              
              
              103,397
              
              
              -
              
              
              103,403Conversion
                  of convertible notes on July 7, 2005
              
              
              -
              
              
              -
              
              
              60,446
              
              
              60
              
              
              1,999,940
              
              
              -
              
              
              2,000,000Repricing
                  of convertible notes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              875,000
              
              
              -
              
              
              875,000Forgiveness
                  of debt by significant shareholder on July 7, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              150,000
              
              
              -
              
              
              150,000Chiste
                  shareholders’ interest on July 7, 2005, post-reverse
                  merger
              
              
              375,865
              
              
              376
              
              
              -
              
              
              -
              
              
              (376
              )
              
              -
              
              
              -
 See
        accompanying notes to the financial
        statements
  F-6
  **Common Stock**
              
              
              **Series B Preferred Stock**
              
              
              **Additional**
                **Paid-in**
              
              
              **DeficitAccumulated
                  During the Development**
              
              
              **Total
                  Shareholders’**
                **Equity****Shares**
              
              
              **Amount**
              
              
              **Shares**
              
              
              **Amount**
              
              
              **Capital**
              
              
              **Stage**
              
              
              **(Deficiency)**Sale
                  of equity securities on July 7, 2005 at $31.70 per preferred
                  share
              
              
              -
              
              
              -
              
              
              427,072
              
              
              427
              
              
              12,394,137
              
              
              -
              
              
              12,394,564Conversion
                  of preferred securities into common stock on August 29, 2005, valued
                  at
                  $4.46 per common share
              
              
              7,071,735
              
              
              7,072
              
              
              (953,824
              )
              
              (954
              )
              
              (6,118
              )
              
              -
              
              
              -Dividend
                  - round up of odd-lot shareholders on August 29, September 14 and
                  November
                  1, valued at $4.53 per share
              
              
              32,865
              
              
              33
              
              
              -
              
              
              -
              
              
              148,778
              
              
              (148,811
              )
              
              -Sale
                  of common shares on September 29, 2005 for $4.46 per share
              
              
              134,439
              
              
              134
              
              
              -
              
              
              -
              
              
              584,746
              
              
              -
              
              
              584,880Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,741,197
              )
              
              (5,741,197
              )**Balance,
                  December 31, 2005**
              
              
              7,614,904
              
              $
              7,615
              
              $
              -
              
              $
              -
              
              $
              17,970,255
              
              $
              (7,897,708
              )
              $
              10,080,162Sale
                  of common shares on May 2, 2006 for $5.00 per share
              
              
              5,155,000
              
              
              5,155
              
              
              -
              
              
              -
              
              
              24,064,229
              
              
              -
              
              
              24,069,384Net
                  Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (7,423,300
              )
              
              (7,423,300
              )Stock
                  based compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              561,331
              
              
              -
              
              
              561,331**Balance,
                  December 31, 2006**
              
              
              12,769,904
              
              $
              12,770
              
              $
              -
              
              $
              -
              
              $
              42,595,815
              
              $
              (15,321,008
              )
              $
              27,287,577Net
                  Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (16,209,605
              )
              
              (16,209,605
              )Stock
                  based compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              584,964
              
              
              -
              
              
              584,964**Balance,
                  December 31, 2007**
              
              
              12,769,904
              
              $
              12,770
              
              $
              -
              
              $
              -
              
              $
              43,180,779
              
              $
              (31,530,613
              )
              $
              11,662,936




See
      accompanying notes to the financial statements




F-7


**HYDROGEN
                CORPORATION AND SUBSIDIARY**
              **(A
                Development Stage Company)**
              **CONSOLIDATED
                STATEMENTS OF CASH FLOWS**


****
                ****
                ****
                ****
                ****
                **November 11, 2001**
                ********
                ****
                **For the Year Ended**
                ****
                **(Inception) through**
                ********
                ****
                **December
                    31,**
                ****
                **December 31,**
                ********
                ****
                **2007**
                ****
                **2006**
                ****
                **2007****CASH
                    FLOWS FROM OPERATING ACTIVITIES**Net
                    loss
                
                $
                (16,209,605
                )
                $
                (7,423,300
                )
                $
                (31,381,802
                )Adjustments
                    to reconcile net loss to net cash used in operating
                    activities:Depreciation
                
                
                625,352
                
                
                230,956
                
                
                871,142Amortization
                    of discount on convertible notes
                
                
                -
                
                
                -
                
                
                558,911Stock-based
                    compensation
                
                
                584,964
                
                
                561,331
                
                
                2,411,145Financing
                    cost recognized upon change in terms of convertible debt
                
                
                -
                
                
                -
                
                
                875,000Loss
                    on disposal of property and equipment
                
                
                -
                
                
                35,416
                
                
                35,416Changes
                    in operating assets and liabilitiesDecrease
                    (Increase) in accounts receivable
                
                
                96,780
                
                
                (222,366
                )
                
                (165,628
                )Increase
                    in other current assets
                
                
                (547,662
                )
                
                (973,361
                )
                
                (1,837,657
                )Increase
                    in other assets
                
                
                (9,416
                )
                
                (42,644
                )
                
                (66,433
                )Increase
                    in accounts payable and accrued expenses
                
                
                1,435,070
                
                
                1,046,480
                
                
                3,094,511**NET
                    CASH USED IN OPERATING ACTIVITIES**
                
                $
                (14,024,517
                )
                $
                (6,787,488
                )
                $
                (25,605,395
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES**Purchase
                    of short-term investments
                
                
                (6,010,397
                )
                
                (24,691,930
                )
                
                (37,195,809
                )Maturity
                    of short-term investments
                
                
                15,900,000
                
                
                21,295,809
                
                
                37,195,809Purchase
                    of property and equipment
                
                
                (1,882,763
                )
                
                (2,475,467
                )
                
                (5,405,332
                )**NET
                    CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES**
                
                $
                8,006,840
                
                $
                (5,871,588
                )
                $
                (5,405,332
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES**Issuance
                    of common stock for cash, net of expenses, including the exchange
                    of
                    member’s units and preferred stock
                
                
                -
                
                
                24,069,384
                
                
                37,049,682Proceeds
                    from notes payable, related parties
                
                
                -
                
                
                -
                
                
                150,000Principal
                    payments on capital lease obligations
                
                
                (87,095
                )
                
                (36,102
                )
                
                (123,197
                )Proceeds
                    from issuance of convertible notes payable including amount allocated
                    to
                    equity component
                
                
                -
                
                
                -
                
                
                2,000,000**NET
                    CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES**
                
                $
                (87,095
                )
                $
                24,033,282
                
                $
                39,076,485**NET
                    (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS**
                
                
                (6,104,772
                )
                
                11,374,206
                
                
                8,065,758**CASH
                    AND CASH EQUIVALENTS, beginning of period**
                
                
                14,170,530
                
                
                2,796,324
                
                
                -**CASH
                    AND CASH EQUIVALENTS, end of period**
                
                $
                8,065,758
                
                $
                14,170,530
                
                $
                8,065,758**SUPPLEMENTAL
                    DISCLOSURES OF CASH FLOW INFORMATION**Cash
                    paid for interest
                
                $
                27,541
                
                $
                11,038
                
                $
                155,072Cash
                    paid for taxes
                
                $
                -
                
                $
                -
                
                $
                -**SUPPLEMENTAL
                    SCHEDULE OF NON-CASH INVESTING AND FINANCING
                    ACTIVITIES**Equipment
                    acquired under capital lease
                
                $
                72,644
                
                $
                228,170
                
                $
                300,814Preferred
                    stock issued upon conversion of convertible notes
                
                $
                -
                
                $
                -
                
                $
                2,000,000Reduction
                    in note payable to related party
                
                $
                -
                
                $
                -
                
                $
                150,000Issuance
                    of equity in connection with issuance of convertible notes
                
                $
                -
                
                $
                -
                
                $
                103,403Dividend – roundup
                    of odd-lot shareholders
                
                $
                -
                
                $
                -
                
                $
                148,811


See
      accompanying notes to the financial statements




F-8






**HYDROGEN
      CORPORATION AND SUBSIDIARY**


**(A
      Development Stage Company)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2007**




**NOTE
              1 -**
            ***DESCRIPTION
                OF THE COMPANY***




The
      business of HydroGen
      Corporation (the “Company”) commenced
      under the entity HydroGen, L.L.C. in November 2001 to
      conduct the business of designing and manufacturing air-cooled Phosphoric Acid
      Fuel Cell (“PAFC”) power generation systems .




The
      Company is a manufacturer of multi-megawatt fuel cell systems utilizing
      proprietary 400-kilowatt (kW) phosphoric acid fuel cell (PAFC) technology.
      The
      technology was developed by Westinghouse Electric Corporation, and was acquired
      in 1993 by Fuel Cell Corporation of America (“FCA”), the Company’s predecessor.
      In 2001, FCA assigned all of its ownership rights to the technology to the
      Company.




Effective
      February 23, 2005, the Company entered into a Non-Binding Letter of Intent
      (“LOI”) with Chiste Corporation, a Nevada corporation (“Chiste”), setting forth
      the preliminary terms by which Chiste acquired the Company. Chiste was a
      reporting company under the Securities and Exchange Act of 1934, and its shares
      of common stock were traded on the OTC Bulletin Board. On July 7, 2005, the
      Company and Chiste consummated a definitive exchange agreement (“Exchange
      Agreement”) whereby Chiste acquired all the membership interests of the Company
      (“LLC Units”) outstanding as of the closing date by an exchange of 742,255
      shares of Series B Preferred Stock for LLC Units. The Preferred Stock had
      voting rights equivalent to its voting rights on an as converted basis. On
      July
      7, 2005, HydroGen, L.L.C. became a wholly-owned subsidiary of Chiste
      Corporation. On August 16, 2005, the Company’s shareholders voted to change
      its name from Chiste to HydroGen Corporation.




HydroGen,
      L.L.C. remains a wholly-owned limited liability company of HydroGen Corporation,
      and continues to be the operating entity through which the Company principally
      conducts its business operations.




Prior
      to
      the closing of the Exchange Agreement, HydroGen raised gross proceeds of
      approximately $6,500,000 through the sale of membership units. In addition,
      in
      connection with the exchange, Chiste sold 211,569 preferred shares to an
      institutional investor for $7,000,000. The shareholders of Chiste prior to
      this
      transaction owned, immediately after the transaction on a fully diluted basis,
      common shares amounting to approximately 5% of the common stock of Chiste,
      and
      the holders of Company LLC Units and new investors held approximately 95% of
      the
      outstanding common stock on a fully diluted basis. In September, 2005, the
      Company registered for resale shares of common stock of certain holders into
      which the Series B Preferred Stock was converted. The above described
      exchange transaction is being treated as a recapitalization of HydroGen, and
      the
      accompanying financial statements reflect the impact of the recapitalization
      for
      all periods presented.




F-9




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
              2 -**
            ***LIQUIDITY
                AND FUTURE OPERATIONS*******




The
      Company’s consolidated financial statements for the year ended December 31,
      2007 have been prepared on a going concern basis, which contemplates the
      realization of assets and the settlement of liabilities and commitments in
      the
      normal course of business. The Company has historically reported net losses,
      including a net loss of $16.2 million for the year ended December 31, 2007,
      and anticipates incurring losses in the future, due to the investment in
      research and development and product and technology testing, validation and
      commercialization of the Company’s technologies.




The
      Company is in the development stage. Its current business plans include
      expenditures to continue the development of the current manufacturing production
      capability and to expand development efforts for next generation production
      processes. These activities require the Company to add employees, purchase
      production equipment, build-out additional manufacturing facilities, manufacture
      400kW modules, and construct and operate test facilities. The Company does
      not
      believe that it can achieve profitability until it has completed its market
      entry and cost reduction stages. In order to fund the costs associated with
      these stages, the Company will require additional financing. Without additional
      financing, the Company would need to delay certain of these activities.




The
      Company plans to seek required financing from the following: (1) obtaining
      private equity funding, (2) completing a secondary public offering,
      (3) obtaining debt financing and (4) increasing government grant and
      other contract revenue. Such financing may not be available to the Company
      on
      terms that are acceptable to it, if at all, and any new equity financing may
      be
      dilutive to its shareholders.




If
      the
      Company is unable to raise sufficient capital, liquidity problems will cause
      the
      Company to curtail operations, liquidate assets, seek additional capital on
      less
      favorable terms and/or pursue other such actions that could adversely affect
      future operations. These factors raise substantial doubt as to the Company’s
      ability to continue operations as a going concern. These financial statements
      do
      not include any adjustments relating to the recoverability and classification
      of
      assets or the amounts and classification of liabilities that might be necessary
      should the Company be unable to continue as a going concern.




**NOTE
              3 -**
            ***PRIVATE
                PLACEMENT OF EQUITY
                SECURITIES***




On
      May 2,
      2006, the Company sold in a private placement an aggregate of 5,155,000 shares
      of its common stock, and warrants to purchase up to an aggregate of 1,288,750
      shares of common stock for aggregate gross proceeds of $25,775,000. The Company
      paid approximately $1,705,000 in commissions and expenses. The Company issued
      to
      its placement agent a warrant to purchase up to 128,875 shares of common stock
      as additional compensation.




The
      warrants issued to investors and the placement agent are exercisable at $6.60
      per share at any time until May 2, 2011. On July 19, 2006, a registration
      statement that the Company filed covering the re-offer and re-sale of the common
      stock issued in the private offering and the Common Stock underlying the
      warrants was declared effective by the Securities and Exchange Commission.




F-10




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
              3 -**
            ***PRIVATE
                PLACEMENT OF EQUITY SECURITIES -
                Continued***




The
      Company has used the proceeds of the private placement for commercial
      demonstration of the Company’s products, advanced manufacturing development
      efforts, sales and marketing efforts and general working capital
      purposes.




**NOTE
                4 -**
            ***BASIS
                OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                POLICIES***




**Principles
      of Consolidation**




The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiary, HydroGen LLC. All significant intercompany balances
      have been eliminated in consolidation.




**Revenue
      Recognition**




Grant
      revenue is recognized as the Company incurs reimbursable costs or achieves
      designated milestones as set forth under its contracts. All of the Company’s
      revenue in 2007 and 2006 and from inception is from grants from government
      agencies of the State of Ohio and Commonwealth of Pennsylvania.




The
      Company will recognize revenue in accordance with SEC Staff Accounting Bulletin
      No. 104, “Revenue Recognition” (SAB 104). Revenue is recognized when
      persuasive evidence of a sale exists, the product has been delivered, the rights
      and risks of ownership have passed to the customer, the price is fixed and
      determinable, and collection of the resulting receivable is reasonably assured.
      For arrangements which include customer acceptance provisions, revenue is not
      recognized until the terms of acceptance are met. Reserves for sales returns
      and
      allowances are estimated and provided for at the time of shipment.




**Accounts
      Receivable**




Accounts
      receivable consist of obligations due from the State of Ohio
      and Commonwealth of Pennsylvania government agencies. Management reviews
      trade receivables periodically and reduces the carrying amount by a valuation
      allowance that reflects management’s best estimate of the amount that may not be
      collectible. At December 31, 2007 the Company had outstanding accounts
      receivable of $166,000. The Company recorded no bad debt expense during the
      years ended December 31, 2007 and 2006.




**Credit
      Risk**




From
      time
      to time the Company maintains cash deposits with its principal bank in excess
      of
      FDIC insured limits. The Company has not experienced any losses in these
      accounts. The Company’s cash was on deposit with three financial institutions at
      December 31, 2007.




**Statements
      of Cash Flows**




For
      purposes of the statements of cash flows, the Company considers its short-term
      cash investments which have an original maturity of three months or less to
      be
      cash equivalents.




F-11




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
                4 -**
            ***BASIS
                OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –
                Continued***




**Property
      and Equipment**




Property
      and equipment are stated at cost. Depreciation is computed using the
      straight-line method over the estimated useful lives of related assets as
      follows:




Computer
      equipment and software – three to seven years


Machinery
      and equipment – three to fifteen years


Leasehold
      improvements – the shorter of the lease term or the asset’s useful life


Office
      equipment – three to seven years




**Research
      and Development Expenses**




Research
      and development expenditures are charged to operations as incurred. Research
      and
      development expense for the years ended December 31, 2007 and 2006 and the
      period from November 11, 2001 (inception) to December 31, 2007, was
      approximately $10,886,000, $3,860,000 and $15,014,000,
      respectively.




**Loss
      Per Share**




Loss
      per
      common share is computed by dividing the net loss by the weighted-average number
      of common shares outstanding during the period. Shares to be issued upon the
      exercise of options and warrants aggregating 3,986,731 and 2,472,627,
      respectively, as of December 31, 2007 and 2006 are not included in the
      computation of loss per share as their effect is antidilutive.




**Equity-Based
      Compensation**




Effective
      January 1, 2006, the Company adopted the provisions of Statement of
      Financial Accounting Standards No. 123 (revised 2004), “Share-Based
      Payment” (“SFAS 123(R)”), which requires the measurement and recognition of
      compensation expense for all share-based payment awards to employees and
      directors based on estimated fair values. The Company adopted SFAS 123(R) using
      the modified prospective transition method. Under this transition method,
      share-based compensation expense recognized during the year ended December
      31,
      2006 included: (a) compensation expense for all share-based awards granted
      prior to, but not yet vested, as of January 1, 2006, based on the grant date
      fair value estimated in accordance with the original provisions of SFAS 123,
      and
      (b) compensation expense for all share-based awards granted on or after
      January 1, 2006, based on the grant date fair value estimated in accordance
      with
      the provisions of SFAS 123(R). In accordance with the modified prospective
      transition method, the consolidated financial statements for prior periods
      have
      not been restated to reflect the impact of SFAS 123(R).




F-12




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
                4 -**
            ***BASIS
                OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –
                Continued***




As
      a
      result of adopting SFAS 123R, the Company recorded pretax compensation expense
      of $584,964 and $561,331 for the years ended December 31, 2007 and 2006,
      respectively. Stock-based compensation is included in each expense category
      that
      includes salary expense. The Company has recorded a full valuation allowance
      on
      the deferred tax asset related to stock-based compensation and, therefore,
      no
      tax benefit related to stock-based compensation is recognized for the years
      ended December 31, 2007 and 2006.




**Investments**




The
      Company follows Statement of Financial Accounting Standards (SFAS) No. 115,
“Accounting for Debt and Equity Securities.” The Company invests its excess cash
      in short-term debt obligations of various agencies of the United States
      Government, and has classified each security purchased as “held to maturity,” as
      it has the positive intent and ability to hold these instruments to maturity.
      As
      per SFAS 115, securities so classified are appropriately carried at
      amortized cost in the financial statements. Therefore, the Company does not
      recognize unrealized gains and losses on such investments in its financial
      statements.




**Recently
      Issued Accounting Standards**




SFAS
      No. 157, “Fair Value Measurements” In
      September 2006, the FASB issued SFAS No. 157, “Fair Value
      Measurements”, which establishes a framework for reporting fair value and
      expands disclosures about fair value measurements. SFAS No. 157 is
      effective for the Company on January 1, 2008. The Company is currently
      evaluating the impact of this new standard on its consolidated financial
      statements.




SFAS
      No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities” In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities – including an amendment of FASB
      Statement No. 115.” SFAS
      No.
      159 provides companies with an option to report selected financial assets and
      financial liabilities at fair value. Unrealized gains and losses on items for
      which the fair value option has been elected are reported in earnings at each
      subsequent reporting date. Upfront costs and fees related to items for which
      the
      fair value option is elected are recognized in earnings as
      incurred. SFAS No.159 is effective for the Company beginning January 1, 2008. The
      Company is currently evaluating the impact of this new standard on its
      consolidated financial statements.




SFAS
      No. 141 (R), “Business Combinations” In
      December 2007, the FASB issued SFAS No. 141 (R), “Business Combinations.”
SFAS No. 141(R) establishes principles and requirements for how an acquirer
      in a business combination recognizes and measures in its financial statements
      the identifiable assets acquired, the liabilities assumed, any controlling
      interest in the acquiree, and the goodwill acquired.  SFAS No. 141(R)
      also establishes disclosure requirements to enable users of the financial
      statements to evaluate the nature and financial effects of the business
      combination.  SFAS No. 141(R) applies to business combinations for
      which the acquisition date is on or after the beginning of the first annual
      reporting period beginning on or after December 15, 2008.  The Company
      does not expect the adoption of SFAS No. 141 (R) to have a significant impact
      on
      its consolidated financial statements.




F-13




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**


**NOTE
                4 -**
            ***BASIS
                OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –
                Continued***


SFAS
      No. 160, “Noncontrolling Interests in Consolidated Financial
      Statements” In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements – an Amendment to Accounting Research Bulletin
      No. 51.” SFAS No. 160 establishes accounting and reporting standards that
      require the ownership interest in subsidiaries held by parties other than the
      parent be clearly identified and presented in the Consolidated Balance Sheets
      within equity, but separate from the parent’s equity; the amount of consolidated
      net income attributable to the parent and the noncontrolling interest be clearly
      identified and presented on the face of the Consolidated Statement of Earnings;
      and changes in a parent’s ownership interest while the parent retains its
      controlling financial interest in its subsidiary be accounted for
      consistently.  SFAS No. 160 is effective for the Company beginning January
      1, 2009. The Company does not expect the adoption of SFAS No. 160 to have a
      significant impact on its consolidated statements.




**Use
      of Estimates**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America 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 revenue and expenses during
      the reporting period. Actual results may differ from those
      estimates.




**Reclassifications**




Certain
      reclassifications have been made to the 2006 financial statements to conform
      to
      the 2007 presentation.




**NOTE
              5 –**
            ***OTHER
                CURRENT ASSETS***




Other
      current assets consisted of the following at December 31, 2007:




Raw
                material supplies
            
            $
            1,335,597Prepaid
                expenses
            
            
            502,060Total
                other current assets
            
            $
            1,837,657




Raw
      material supplies, at cost, consist of raw materials that have not yet been
      introduced to the manufacturing process.




Prepaid
      expenses include items for which payment has been made for goods or services
      not
      yet received or incurred.




F-14




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
              6 –**
            ***PROPERTY
                AND EQUIPMENT***




Property
      and equipment consisted of the following at December 31, 2007.




Computer
                equipment and software
            
            $
            191,124Machinery
                and equipment
            
            
            4,131,725Leasehold
                improvements
            
            
            1,299,781Office
                equipment
            
            
            73,505Assets
                under construction
            
            
            264,1875,960,322Less
                accumulated depreciation
            
            
            1,160,734$
            4,799,588




Property
      and equipment includes amounts acquired under capital leases of approximately
      $551,000 at December 31, 2007, with related accumulated depreciation of
      approximately $81,000. Depreciation is included in costs and expenses in the
      accompanying consolidated statements of operations.




Assets
      under construction consist entirely of manufacturing equipment. Depreciation
      of
      these assets will begin when they are placed in service.




Depreciation
      expense of property and equipment for the years ended December 31, 2007 and
      2006
      and for the period November 11, 2001 (inception) to December 31, 2007 was
      approximately $625,000, $231,000, and $871,000, respectively.




**NOTE
              7 –**
            ***ACCOUNTS
                PAYABLE AND ACCRUED
                EXPENSES***




At
      December 31, 2007, accounts payable and accrued expenses include the
      following:




Accounts
                payable
            
            $
            1,734,690Accrued
                payroll & bonuses
            
            
            764,976Other
            
            
            594,845$
            3,094,511




**NOTE
              8 –**
            ***INCOME
                TAXES***




Subsequent
      to the consummation of the Exchange Agreement in July 2005, HydroGen, LLC became
      a wholly-owned subsidiary of HydroGen Corporation and, for tax purposes,
      HydroGen, LLC is being treated as a C-corporation rather than a limited
      liability company. At that time, HydroGen, LLC began accounting for income
      taxes
      in accordance with SFAS No. 109, “Accounting for Income Taxes”. SFAS
      No. 109 requires the use of an asset and liability approach in accounting
      for income taxes. Deferred tax assets and liabilities are recorded based on
      the
      differences between the financial statement and tax bases of assets and
      liabilities and the tax rates in effect when these differences are expected
      to
      reverse. SFAS No. 109 requires the reduction of deferred tax assets by a
      valuation allowance, if, based on the weight of available evidence, it is more
      likely than not that such portion of the deferred tax asset will not be
      realized.




F-15




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
                8 –**
              ***INCOME
                  TAXES – Continued***


Significant
      components of deferred tax assets and liabilities are as follows:




**December
                31,****2007**Deferred
                tax assetsNet
                operating losses
            
            $
            11,246,000Compensation
                and Benefits
            
            
            670,000Other
            
            
            199,000Total
                deferred tax assets
            
            
            12,115,000Deferred
                tax liabilitiesDepreciation
            
            
            459,000Total
                deferred tax liabilities
            
            
            459,000Net
                deferred tax asset
            
            $
            11,656,000Valuation
                allowance
            
            
            11,656,000Net
                deferred tax asset
            
            $
            -




A
      reconciliation between the statutory and effective tax rates
      follows:




**Years
                ended December 31,****2007**
            
            **2006**Statutory
                tax rate
            
            
            (34.0
            )%
            
            (34.0
            )%Increases
                (decreases) resulting fromState
                taxes, net of federal benefit
            
            
            (8.4
            )
            
            (6.6
            )Permanent
                differences
            
            
            .4
            
            
            1.1Other
            
            
            (
                .2
            )
            
            -Increase
                in valuation allowance
            
            
            42.2
            
            
            39.5Effective
                Tax Rate
            
            
            -
            %
            
            -
            %




The
      Company has accumulated federal operating losses of approximately
      $27 million and $11.2 million as of December 31, 2007 and
      December 31, 2006 respectively, which will expire between 2012 and 2027, if
      not fully utilized. The Company has accumulated state net operating losses
      of
      approximately $33.6 million and $9.8 million as of December 31,
      2007 and December 31, 2006 respectively, which will expire between 2015 and
      2017, if not utilized. The Company’s recapitalization, described in Note 1,
      may have significantly impaired the Company’s ability to utilize
      pre-recapitalization net operating losses as a result of limitations imposed
      under Internal Revenue Code Section 382. As of December 31, 2007, the
      Company has weighed the available evidence and determined that it is appropriate
      to carry a full valuation allowance against its net deferred tax asset until
      such time as management is reasonably certain that these assets will be
      realized.




On
      January 1, 2007, the Company adopted the provisions of FIN 48,
“Accounting for Uncertain Tax Positions - an interpretation of FASB
      No. 109”. The Company has determined that it does not have any uncertain
      tax positions.




F-16




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**


**NOTE
                  8 –**
                ***INCOME
                    TAXES – Continued***


The
      Company does not expect its unrecognized tax benefit to change during the next
      12 months. The Company will record interest and penalties associated with
      unrecognized tax benefits as income tax expense/benefit.




The
      Company’s US and state income tax returns are subject to examination for the
      years ended December 31, 2004 through December 31, 2007. The Company
      is not currently under examination by any taxing authority.




**NOTE
              9 –**
            ***SHARE-BASED
                COMPENSATION*******




The
      Company has granted stock options under its 2005 Performance Equity Plan, as
      amended, (“2005 Plan”) and under its 2007 Performance Equity Plan (“2007 Plan”
and, together with the 2005 Plan, the “Plans”.) Prior to the adoption of the
      2005 Plan, HydroGen, L.L.C.’s members voted to issue options for membership
      units to key employees and advisors. Upon HydroGen, LLC becoming a wholly-owned
      subsidiary of Chiste (the prior name of the Company), these options became
      options to purchase 342,345 shares of common stock of Chiste. These options
      today represent options to purchase 342,345 shares of common stock of the
      Company.




Subject
      to the provisions of the Plans, awards may be granted to employees, officers,
      directors, advisors, and consultants who are deemed to have rendered or are
      able
      to render significant services to the Company or its subsidiaries, and who
      are
      deemed to have contributed or to have the potential to contribute to the
      Company’s success. Incentive stock options may only be awarded to individuals
      who are employees at the time of the grant. The amount of shares that may be
      issued or reserved for awards to participants under the 2005 Plan and the 2007
      Plan, which was approved by shareholders at the Company’s Annual Meeting on June
      22, 2007, and the amount of options issued and outstanding to purchase shares
      as
      of December 31, 2007 are listed in the table below.




**Authorized for Issuance**
            
            **Issued and Outstanding**2005
                Plan
            
            
            1,100,000
            
            
            1,098,6172007
                Plan
            
            
            1,300,000
            
            
            1,128,144Total:
            
            
            2,400,000
            
            
            2,226,761




As
      discussed in Note 4, Basis of Presentation and Summary of Significant Accounting
      Policies – Equity-Based Compensation, effective January 1, 2006, the Company
      adopted the fair value recognition provisions of SFAS 123(R) using the modified
      prospective transition method. The adoption of SFAS 123 (R) resulted in
      share-based compensation expense of $584,964 and $561,331 for the years ended
      December 31, 2007 and 2006, respectively. These expenses increased basic and
      diluted loss per share by $0.05 for each of the years ended December 31, 2007
      and 2006.




The
      fair
      value of each option award is estimated on the date of grant using the
      Black-Scholes option valuation model that uses the assumptions noted in the
      following table. As the Company’s common stock has only traded publicly since
      July 7, 2005, expected volatility has been estimated according to the following
      methods to allow for an adequate trading history for the Company’s common stock
      to be developed for use in this estimation:




F-17




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**


**NOTE
                9 –**
              ***SHARE-BASED
                  COMPENSATION*****-*****Continued***


1)
            *Prior
                to July 7, 2005*:
                As the Company’s shares were not publically traded, 0% volatility was used
                in accordance with SFAS 123 for options issued to employees and
                consultants prior to becoming a public
                company.




2)
            *July
                8, 2005 – September 30, 2007*:
                Expected volatility was based on an arithmetic average of the volatility
                of 5 publicly-traded companies that operate in the Company’s industry or
                sell into similar markets. To calculate the estimated life for grants
                of
                “plain vanilla” stock options, the Company used a formula proscribed by
                the Securities and Exchange Commission’s Staff Accounting Bulletin No.
                107.




3)
            *October
                1, 2007 and thereafter*:
                Using the trading history of the Company’s common stock beginning with
                July 1, 2006. Management believes that this time period adequately
                captures a representative history and will continue to use July 1,
                2006 as
                the beginning date of the measurement period until the Company fully
                develops a 5 year trading history from that
                date.




Because
      the Company’s employee stock options have characteristics significantly
      different from those of traded options and because changes in the subjective
      input assumptions can materially affect the fair value estimate, in management’s
      opinion, the existing models do not necessarily provide a reliable single
      measure of the fair value of its options.




The
      following table summarizes the assumptions used for options granted during
      the
      years ended December 31, 2007 and 2006.




**2007**
            
            **2006**Expected
                life (in years)
            
            
            3.5 – 6.0
            
            
            3.5 – 5.0Risk-free
                interest rate
            
            
            3.51% - 4.68%
            
            
            3.67% - 5.04%Volatility
            
            
            64% - 68%
            
            
            66% - 74%Dividend
                yield
            
            
            —
            
            
            —




F-18




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
              9 –**
            ***SHARE-BASED
                COMPENSATION –
Continued***




The
      following table summarizes the Company’s stock option activity for the years
      ended December 31, 2007 and 2006:




**Number**
              **of**
              **Options**
            
            **Weighted**
              **Average**
              **Option**
              **Price**
            
            **Aggregate**
              **Intrinsic**
              **Value**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Term**Outstanding
                at January 1, 2006
            
            
            420,880
            
            $
            4.48Granted
            
            
            783,422
            
            $
            4.96Exercised
            
            
            —
            
            
            —Forfeited/Cancelled
            
            
            (149,300
            )
            
            5.32Outstanding
                at December 31, 2006
            
            
            1,055,002
            
            $
            4.73
            
            $
            297,020Exercisable
                at December 31, 2006
            
            
            397,912
            
            $
            4.55
            
            $
            184,947Vested
                and expected to vest at December 31, 2006
            
            
            895,348
            
            $
            4.71
            
            $
            278,460Outstanding
                at January 1, 2007
            
            
            1,055,002
            
            $
            4.73
            
            
            297,020Granted
            
            
            1,712,944
            
            $
            2.57Exercised
            
            
            —
            
            
            —Forfeited/Cancelled
            
            
            (198,840
            )
            $
            4.89Outstanding
                at December 31, 2007
            
            
            2,569,106
            
            $
            3.28
            
            $
            752,826
            
            
            8.18Exercisable
                at December 31, 2007
            
            
            642,781
            
            $
            4.58
            
            $
            3,375
            
            
            5.97Vested
                and expected to vest at December 31, 2007
            
            
            2,440,651
            
            $
            3.28
            
            $
            715,185
            
            
            8.18




A
      summary
      of the status of the Company’s non-vested stock options as of December 31, 2007,
      and of changes during the year ended December 31, 2007, is presented
      below:




**Number**
              **of**
              **Options**
            
            **Weighted**
              **Average**
              **Option
                Price**Non-vested
                at December 31, 2006
            
            
            657,090
            
            $
            4.84Granted
            
            
            1,712,944
            
            
            2.57Vested
            
            
            (244,869
            )
            
            4.63Forfeited/Cancelled
            
            
            (198,840
            )
            
            4.89Non-Vested
                at December 31, 2007
            
            
            1,926,325
            
            $
            2.84




F-19




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
              9 –**
            ***SHARE-BASED
                COMPENSATION –
Continued***




As
      of
      December 31, 2007, there was $2,877,000 of total unrecognized compensation
      cost
      related to non-vested stock options which is expected to be recognized over
      a
      remaining weighted average life of 8.92 years.




The
      weighted average grant-date fair value of options granted during the years
      ended
      December 31, 2007 and 2006 was $1.59 and $2.52, respectively.




The
      following table summarizes information about stock options outstanding and
      exercisable at December 31, 2007:




**Options Outstanding**
            
            **Options Exercisable****Exercise prices**
            
            **Number**
              **outstanding**
            
            **Weighted**
              **average**
              **remaining**
              **contractual**
              **life**
            
            **Weighted**
              **average**
              **exercise**
              **price**
            
            **Number**
              **exercisable**
            
            **Weighted**
              **average**
              **exercise**
              **price**$2.00
                - $3.00
            
            
            1,616,844
            
            
            9.75
            
            $
            2.84
            
            
            7,500
            
            $
            2.43$3.01
                - $4.00
            
            
            42,600
            
            
            4.61
            
            
            3.50
            
            
            —
            
            
            —$4.01
                - $5.00
            
            
            678,645
            
            
            5.57
            
            
            4.47
            
            
            513,390
            
            
            4.43$5.01
                - $6.00
            
            
            206,917
            
            
            5.85
            
            
            5.19
            
            
            98,857
            
            
            5.17$6.01
                - $7.00
            
            
            24,100
            
            
            3.39
            
            
            6.06
            
            
            23,034
            
            
            6.052,569,106
            
            
            8.18
            
            $
            3.28
            
            
            642,781
            
            $
            4.58




**NOTE
              10 –**
            ***STATE
                GRANTS***




**State
      of Ohio Development Grant**




On
      August
      26, 2005, the State of Ohio Department of Development provided to HydroGen
      Corporation $1,250,000 as a development grant for a three phase program to
      deploy, demonstrate, and commercialize the Company’s 400 kW phosphoric acid
      fuel cell system. The grant is under an Ohio Fuel Cell Initiative Demonstration
      Program, and is to be used towards the costs associated with the commercial
      demonstration and validation of the Company’s air-cooled phosphoric acid fuel
      cell module technology and for the procurement and preparation of the plant
      equipment, system engineering, plant construction, and initial operations.
      The
      grant was given on the understanding that the Company will establish its
      corporate headquarters in Ohio, locate manufacturing facilities to Ohio by
      the
      end of 2008, and create new full-time jobs at both the skilled and unskilled
      level in Ohio. The establishment of a corporate headquarters in Ohio was
      achieved in 2006. The development work which commenced in 2005 is expected
      to
      continue through the end of 2008. The grant was also contingent on the Company
      raising its own capital, which was achieved in July 2005.




F-20




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
              10 –**
            ***STATE
                GRANTS –
Continued***




The
      grant
      of the funds is on a reimbursement basis, provided the Company meets the
      objectives of the grant and is carrying out the terms of the defined project
      as
      represented to the state. The grant reimbursement period ran from
      September 1, 2005 to July 31, 2007. The grant is a deployment of
      federal development
      funds and as such, the Company will be required to adhere to various federal
      regulations on their use and accountability for deployment.




The
      grant
      may be terminated if the State of Ohio determines that the Company is not in
      compliance with certain federal regulations governing the grant or federal
      employment laws, the requirements of any other applicable program statute or
      rule or with the terms of the grant agreement after suitable notice and the
      passage of cure periods. Performance under the agreement is subject to a force
      majeure limitation. If there is a termination, the Company may not continue
      to
      incur expenses under the grant. It may be directed by the State of Ohio to
      dispose of various property, data, studies, and reports, and the Company may
      be
      liable for damages to the State of Ohio. The Company may also request a
      termination of the grant if it is unable or unwilling to comply with the
      conditions of the grant.




As
      of
      December 31, 2007, the Company has submitted requests and has been reimbursed
      for the entire grant award totaling $1,250,000.




**State
      of Ohio Third Frontier Fuel Cell Program**




On
      March 7, 2006, the Company was notified that it would be awarded $1,000,000
      (the “Grant”) by the State of Ohio Third Frontier Fuel Cell Program (TFFCP) to
      support the Company’s advanced manufacturing development program.  On June
      8, 2006, the Company entered into a Grant Agreement with the State of Ohio
      pursuant to which the Grant funds are to be awarded. Under the terms of the
      Grant Agreement, the Company may recoup from the State the full $1,000,000
      as
      Grant activities take place, and as the costs are incurred and reported. The
      Company has pledged a total of $555,000 in cost share for the program. The
      Company will use the funds to dedicate appropriate personnel, consultants,
      and
      infrastructure to optimize decisions and resource allocations for its planned
      advanced manufacturing facility. The proposed facility will be where the Company
      will mass produce its standard 400 kilowatt (kW) air-cooled PAFC modules, which
      will serve as the building block of its core product, a 2-2.5 megawatt (MW)
      power island.  Initial production capacity will be 25 MW per year of
      the Company’s 400 kW modules, and is expected to be subsequently expanded
      to 100 MW per year capacity.




All
      disbursements from the Grant are on a reimbursement basis, after documentation
      has been provided evidencing that expenses were incurred in furtherance of
      the
      Grant.  The term of the Grant Agreement, including reimbursement period,
      runs until April 10, 2009. At the close of the Grant term, the Company will
      own
      all equipment valued over $5,000 purchased with Grant money.




The
      Grant
      may be terminated if the State of Ohio determines that the Company is not in
      compliance with the applicable program rules, State of Ohio law, or with the
      terms of the Grant Agreement, after suitable notice and the passage of cure
      periods. Performance by the State is also subject to the availability of funds.
      If there is a termination, the Company may not continue to incur expenses under
      the Grant, and it may be directed by the State of Ohio to dispose of various
      property, data, studies and reports. The Company may further be liable for
      damages to the State of Ohio in the event of default.  The Company may also
      request a termination of the Grant if it is unable or unwilling to comply with
      the conditions of the Grant.




F-21




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
              10 –**
            ***STATE
                GRANTS -
                Continued***




Work
      under the Grant commenced in June of 2006. The Company submitted requests for
      payment under this grant totaling approximately $550,000 through December 31,
      2007, $409,000 of which has been collected as of that date.




**Pennsylvania
      Energy Development Authority Grant – Fuel Cell Test
      Facility**




On
      May
      16, 2007, the Company was notified that it was awarded a grant in the amount
      of
      $250,000 by the Pennsylvania Energy Development Authority (PEDA) to support
      the
      construction of a small scale, air-cooled phosphoric acid fuel cell test
      facility. The project period, as outlined within the grant agreement, is from
      October 5, 2006 through October 4, 2008. All reimbursements for the project
      must
      be submitted during the project period.




All
      disbursements from the grant are on a reimbursement basis. Reimbursement is
      made
      after documentation has been provided evidencing that expenses were incurred
      in
      furtherance of the grant. The grant may be terminated in whole, or in part,
      at
      any time if PEDA determines that the terms and conditions of the Agreement
      have
      not been met.




The
      Company has submitted requests for payment under this grant totaling
      approximately $250,000, $225,000 of which has been collected through December
      31, 2007.




**Pennsylvania
      Energy Development Authority Grant – Clean-Up of Coke Oven
      Gas**




On
      October 17, 2007, the Company was notified that it was awarded a grant in the
      amount of $500,000 by the Pennsylvania Energy Development Authority (PEDA)
      to
      support clean-up of coke oven gas for fuel cell operations. The Company is
      in
      the process of establishing the terms and conditions of the Grant Agreement
      with
      PEDA.




**Pennsylvania
      NanoMaterials Commercialization Center Grant**




On
      October 12, 2007, the Company entered into a grant agreement (the “Grant
      Agreement”) with the Pennsylvania NanoMaterials Commercialization Center (PNCC)
      pursuant to which the PNCC will grant the Company approximately $230,000 to
      support the development of advanced fuel cell catalyst systems. Under the terms
      of the Grant Agreement, the Company will be reimbursed by the PNCC as grant
      activities take place and as the costs are incurred and reported. The Company
      has pledged a total of $131,545 in cost share for this program. The Company
      will
      be working in cooperation with the University of Pittsburgh’s Peterson Institute
      of Nano Science and Engineering on this project. The grant may be terminated
      in
      whole, or in part, at any time if PNCC determines that the terms and conditions
      of the Grant Agreement have not been met.




The
      Company has submitted requests for payment under this grant totaling
      approximately $46,000, all of which has been collected through December 31,
      2007.




F-22




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
              11 –**
            ***COMMITMENTS***




**Operating
      Leases**




On
      August 15, 2005, the Company executed a 5 year agreement to lease
      approximately 34,500 square feet of industrial space in Versailles, PA, to
      house
      its manufacturing operations and certain administrative functions. Terms of
      the
      lease provide for minimum lease payments of $14,373 per month, plus increases
      in
      real estate taxes and insurance costs over 2005 “Base Year” costs. The Company
      took occupancy of the space in October 2005, after the landlord made certain
      improvements to the property. The Company has the option to extend the lease
      for
      an additional 5 years, with certain adjustments made to the base rent.




On
      October 19, 2005, the Company entered into an agreement to lease
      approximately 1,700 square feet of office space in New York City for 61 months
      at a base rent of approximately $69,700 in the first year, increasing by 2.5%
      in
      each subsequent year. The lease includes provisions for additional payments
      related to the Company’s pro rata share of annual increases in real estate
      taxes. The Company’s occupancy of this space commenced on December 1, 2005.




In
      November 2006, the Company executed a 1 year agreement to lease office space
      in
      Cleveland, Ohio, which will serve as the Company’s headquarters, consistent with
      the terms of the development grant provided to the Company by the State of
      Ohio
      (see Note 10). The Company is renting the space at a base rent of
      approximately $2,700 per month. Since the expiration of the initial term of
      the
      lease, the Company has continued the lease on a month-to-month
      basis.




In
      addition to the office in Cleveland, the Company has leased office space of
      approximately 1,900 square feet in Ashtabula, Ohio, which facility serves as
      the
      Company’s field office for building its 400 kW fuel cell demonstration plant.
      The Company is paying $1,800 per month for rent, and the lease is on a
      month-to-month basis.




Rent
      expense for the years ended December 31, 2007 and 2006, and for the period
      from November 11, 2001 (inception) to December 31, 2007 was
      approximately $298,000, $246,000 and $826,000, respectively.




Future
      minimum lease payments for capital leases, operating leases, and financing
      contracts comprised of insurance policy premiums during the year are as follows:




**Years Ending**
              **December 31,**
            
            **Capital**
              **Lease Amount**
            
            **Operating**
              **Lease Amount**
            
            **Financing**
              **Contracts**2008
            
            $
            102,804
            
            $
            246,014
            
            $
            195,6542009
            
            
            65,579
            
            
            247,852
            
            
            -2010
            
            
            9,234
            
            
            178,485
            
            
            -**Total**
            
            $
            177,617
            
            $
            672,351
            
            $
            195,654




F-23




**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2007**




**NOTE
              12 –**
            ***DEFINED
                CONTRIBUTION PLAN***




The
      Company initiated a defined contribution plan in January of 2006. The retirement
      savings plan was made available to all U.S. employees who have met minimum
      length-of-service requirements. The Company matches employees’ contributions at
      the rate of 50% of the first 8% contributed. Pension expense for the years
      ended
      December 31, 2007 and 2006 and the period from November 11, 2001
      (inception) to December 31, 2007, was approximately $126,000, $76,000 and
      $202,000, respectively.




**NOTE
              13 -**
            ***RELATED
                PARTY TRANSACTIONS***




During
      November 2007, the Company executed a consulting agreement with Blomenco B.V.
      and Dr. Leo Blomen, the Chairman of the Company’s Board of Directors and its
      former CEO.  This contract carries an initial term of 12 months and
      establishes that the Company incurs a minimum level of service of 1,000 service
      hours at €175 per hour from Blomenco B.V.  After the initial term, either
      party may terminate the agreement with six months’ written notice to the other
      party.  The contract also establishes a yearly rate of €25,000 for Dr.
      Blomen’s services as Chairman of the Board of Directors. In
      2007,
      Blomenco B.V. earned fees totaling $937,000, which includes management fees
      of
      $358,000, a bonus of $168,000, and a severance payment of $406,000 to be paid
      out over twelve months, and Board of Director fees of $5,000.




F-24