UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


**Washington,
      D.C. 20549**


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





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




**For
      the fiscal year ended: December 31, 2006**




**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
                of Incorporation)
            **86-0965692**
              (Small
                Business Issuer
              I.R.S.
                Employer I.D. Number)**2
                Juniper Street, Versailles, PA**
              (Address
                of principal executive offices)
            **15132**
              (zip
                code)








**(412)
      405-1000**




(Issuer’s
      Telephone Number, Including Area Code)




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




None




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




Common
      Stock, par value $.001 per share




Check
      whether the Issuer (1) has 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.




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, 2006 were $610,721.




As
      of
      March 8, 2007, the aggregate market value of the common stock held by
      non-affiliates of the Registrant was approximately $54,465,000.




As
      of
      March 8, 2007, there were 12,769,904 shares of Common Stock, $.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, 2006**


**Table
      of Contents**


Page
                  No.PART
                  I
              
              1Item
                  1
              Description
                  of Business
              1Item
                  2
              Properties
              21Item
                  3
              Legal
                  Proceedings
              22Item
                  4
              Submission
                  of Matters to a Vote by Security Holders
              22PART
                  II
              
              22Item
                  5
              Market
                  for Common Equity and Related Stockholder Matters
              22Item
                  6
              Management’s
                  Discussion and Analysis or Plan of Operation
              25Item
                  7
              Financial
                  Statements
              33Item
                  8
              Changes
                  In and Disagreements With Accountants on Accounting and Financial
                  Disclosure
              33Item
                  8A
              Controls
                  and Procedures
              33Item
                  8B
              Other
                  Information
              34PART
                  III
              
              35Item
                  9
              Directors,
                  Executive Officers, Promoters and Control Persons; Compliance With
                  Section
                  16(a) of the Exchange Act
              35Item
                  10
              Executive
                  Compensation
              42Item
                  11
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters
              44Item
                  12
              Certain
                  Relationships and Related Transactions
              46Item
                  13
              Exhibits
                  and Reports on Form 8-K
              46Item
                  14
              Accountants
                  Fees and Services
              48














**CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




This
      report contains forward-looking statements within the meaning of Section 21E
      of
      the Securities Exchange Act of 1934, and Section 27A of the Securities Act
      of
      1933. Any statements contained in this report that are not statements of
      historical fact may be forward-looking statements. When we use the words
“anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will”
and similar expressions, we are identifying forward-looking statements.
      Forward-looking statements involve risks and uncertainties, which may cause
      our
      actual results, performance or achievements to be materially different from
      those expressed or implied by forward-looking statements. These factors include,
      among others, our need to raise additional financing; risks related to
      manufacturing and successfully demonstrating of our 400kW fuel cell module;
      our
      ability to sell and deliver or operate fuel cell power plants; market acceptance
      of our fuel cell power plants; intense competition in selling and delivering
      power plants for distributed power generation; our history of losses; regulatory
      environment in the geographies in which we now and intend to operate in the
      future; general market conditions; and other factors that may affect our
      business.




Except
      as
      may be required by applicable law, we do not undertake or intend to update
      or
      revise our forward-looking statements, and we assume no obligation to update
      any
      forward-looking statements contained in this prospectus or any prospectus
      supplement as a result of new information or future events or developments.
      Thus, you should not assume that our silence over time means that actual events
      are bearing out as expressed or implied in such forward-looking statements.
      You
      should carefully review and consider the various disclosures we make in this
      report and our other reports filed with the SEC that attempt to advise
      interested parties of the risks, uncertainties and other factors that may affect
      our business.




For
      further information about these and other risks, uncertainties and factors,
      please review the disclosure included in this report under “Part I,
      Item 1, Description of Business - Risk Factors.”













**PART
      I**






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




HydroGen
      designs, manufactures, markets and distributes fuel cell modules and energy
      systems (power plants) using phosphoric acid fuel cells. HydroGen owns certain
      technology, proprietary rights, and manufacturing assets for the production
      of
      400 kW, air-cooled phosphoric acid fuel cell modules.




**Market
      Opportunity for Fuel Cells**




HydroGen
      believes it is uniquely positioned to become a competitive player in the growing
      distributed generation market for electricity and in the movement towards clean,
      hydrogen-based power generation.




Demand
      for electricity in the U.S. continues to grow steadily. According to McKinsey
      & Co. data, summer peak consumption increased by 96,000 megawatts (MW) from
      1994-1999, while new generating capacity increased only 15,000 MW. The
      Energy Information Administration (EIA) reports that electricity demand
      (kilowatt-hours consumed) was more than 28% higher in 2000 than it was in 1990.
      The EIA estimates that by 2020, 393,000 MW of generation capacity will be
      needed to meet growing demand and to offset retirements of plants currently
      on
      line. We believe that this indicates a required increase of 50.5% in total
      generating capacity over the next 20 years.




Distributed
      generation is the decentralized, on-site generation and delivery of power at
      scales typically less than 30 MW. For the past 100 years, most commercial
      electricity has been generated in large centralized power plants and
      transmitted, often across great distances, to residential, commercial, and
      industrial end-users. Due to several interacting factors, demand is now growing
      for on-site power generation equipment that generates little pollution.
      Distributed generation represents a disruptive shift in the electric power
      industry and, therefore, a major growth opportunity for innovative energy
      service companies and equipment manufacturers. The current factors driving
      demand for distributed generation include:




·
            Evolving
                local, regional, national, and international environmental standards,
                which are making it increasingly difficult to permit and finance
                heavy-emitting, large centralized power
                plants;




·
            Inadequacy
                and expense of the existing electric power infrastructure (grid)
                to keep
                pace with soaring demand for high-quality, reliable
                power;




·
            Inefficiencies
                and costs associated with transmitting power from the point of generation
                to the ultimate consumer;




·
            Increasing
                volatility in energy prices;




·
            Growing
                concern over the national security implications of centralized models
                of
                power generation;




·
            Technological
                advancements in small-scale power generating equipment with greater
                efficiencies, environmental advantages, and lower costs;
                and













·
            Liberalization,
                including deregulation, of the electric power industry, exposing
                the
                industry to competitive pressures associated with a free
                market.




The
      deregulation of the United States electric power industry has created a business
      opportunity for companies to provide differentiated power generation,
      information technology, and customer service solutions. Management believes
      that
      the greatest opportunity within the restructuring electric power industry lies
      in small-scale power equipment such as micro-turbines and fuel cells that are
      located at the site of the end user.




The
      Department of Energy estimates that by 2010, 20% of new generating capacity
      will
      come in the form of distributed generation. The DOE also estimates that by
      2020,
      23% of industrial electric demand will be met by distributed generation. The
      industrial distributed generation market is already sizable and experiencing
      growth. Worldwide orders for combustion turbines for base load applications
      in
      the 2-30 MW class totaled approximately 3,500 MW from June 2004-May
      2005, up 136% from June 2001-May 2002. Of particular note is the growth seen
      over this period in the 7.5-10MW range (700%), and in the 20-30 MW range
      (1320%). (Source: 2003, 2004, 2005 Engine Order Survey, Diesel and Gas
      Worldwide). These are data for combustion turbines for the baseload stationary
      applications that HydroGen targets, *not* standby
      or peaking units. These data also held or were surpassed in 2006; according
      to
      the 2006 worldwide Diesel & Gas source, the number of gas turbines in the
      2-40 MW range has grown by 15% in the period mid-2005 - mid-2006.




*Distributed
      Generation*




Distributed
      generation systems provide significant benefits to two distinct customer
      segments. The first is *end
      users of electricity* ,
      to
      which this technology provides a wide range of solutions. One of the benefits
      of
      distributed generation systems is that they deliver high quality, reliable
      power, shielding end users from common problems associated with the electricity
      grid such as sags, surges, and power interruptions. Distributed generation
      technologies also have the potential to generate power at a high rate of
      efficiency, creating cost saving and arbitrage opportunities with the
      electricity grid. Another benefit of modern distributed generation systems,
      particularly fuel cells, is low or near-zero emissions, with significantly
      better overall environmental performance than existing power generation
      technologies. These environmental benefits translate into economic benefits
      to
      the owner of the generating equipment, through avoided costs of air emissions
      permits and penalties for exceeding pollution limits. An additional, desirable
      by-product of distributed generation technologies is heat, which can be used
      in
      cogeneration applications to satisfy the thermal demands of the end user’s home
      or facility. Finally, modular distributed generation technologies are available
      in a wide range of power outputs, from sub-kilowatt to several megawatts,
      enabling end users to tailor generation solutions to their own load
      requirements.




The
      second customer segment is *energy
      companies* ,
      including power utilities, independent power producers, and electricity
      distribution companies. To these customers, distributed generation systems
      can
      delay or eliminate large capital expenditures to build new centralized power
      plants, reduce significantly the amount of time it takes to bring new capacity
      on-line, enhance and support congested areas of the electricity grid, level
      load
      curves, provide enhanced customer service, and improve environmental
      performance. Losses associated with transmission and distribution, particularly
      when coupled with inefficient central generating plants, can also be
      considerable. Distributed generation is able to largely eliminate the need
      for
      building new transmission and distribution lines and new substations, each
      of
      which is very costly to permit and build, and to reduce losses from these
      aspects of delivering electricity.







-2-







*Fuel
      Cells within the Distributed Generation Segment*




Within
      the distributed generation segment of the electricity industry, fuel cells
      have
      the widest range of potential applications and the greatest overall market
      promise. A fuel cell may be thought of as a continuous battery, providing
      electricity through an electrochemical reaction without combustion or moving
      parts. Fuel cells can be operated as long as they are supplied with fuel for
      the
      electrochemical reaction.




In
      the
      process of a hydrogen fueled cell, a hydrogen-rich gas is supplied as fuel
      at
      the anode (negatively charged plate), where it is stripped of its electrons
      with
      the aid of a catalyst. The hydrogen ions pass through a membrane, typically
      an
      electrolyte fluid, and react with oxygen and the electrons (which traverse
      a
      circuit connecting anode and cathode) at the cathode (positively charged plate).
      The only products formed are electricity, heat, and water. A fuel cell can
      be
      viewed as an efficient, combustion-less, virtually pollution-free power source
      that runs almost silently, and has few moving parts, and furthermore is capable
      of being sited in diverse locations, such as downtown urban areas or in remote
      regions.




There
      are
      five major types of fuel cell technology, differing primarily by the type of
      electrolyte that is used and the associated operating temperature. These
      include: phosphoric acid fuel cells (PAFC), proton exchange membrane (PEM)
      fuel
      cells, alkaline fuel cells (AFC), molten carbonate fuel cells (MCFC), and solid
      oxide fuel cells (SOFC). The table below summarizes the fuel cell types and
      their commercialization status.




**Type
                of Fuel Cell**
            **Some
                Companies Offering:**
            **Remark****PAFC**
            **UTC,
                Fuji, HYDG**
            **More
                than 350 systems delivered**AFC
            UTC
            Selected
                applications onlyPEM/SPFC
            Plug
                Power, Ballard
            Initially
                stationary applications, leading to transportation
                applicationsMCFC
            FCEL
            Complicated
                systems have long learning curveSOFC
                [tubular]
            Siemens-Westinghouse
            250
                kW system successfully testedSOFC
                [planar]
            SECA
                partners
            Small
                [<10 kW] systems may go fast




*
            First
                6 **
            First 25 MW
              (projected)




The
      lightweight and low operating temperature of PEM fuel cells, along with their
      cost and design advantages over AFC technology, make them ideally suited to
      provide power for transportation, residential, and portable applications. PAFC,
      MCFC and tubular SOFC technologies are generally designed for larger, stationary
      applications. The relatively high operating temperatures of these technologies
      enable cogeneration at commercial and industrial facilities with concurrent
      thermal and electric loads, with the potential to create substantial energy
      savings.







-3-







In
      contrast to the anticipated emergence of MCFC and SOFC systems in the coming
      decade, PAFC systems are commercially available today. MCFC and SOFC
      pre-commercial demonstration units continue to be deployed, but management
      believes that the installed overall cost of these fuel cell systems is currently
      in the range of $4,000 - $10,000/kW or above. Over 300 PAFC systems have been
      delivered since the mid-1990s. While the commercial availability and impressive
      performance of these PAFC systems has validated the technology, the current
      installed cost of more than $4,000/kW prohibits full commercialization of fuel
      cell technology for stationary applications. HydroGen believes that it will
      be
      able to produce its fuel cell systems at prices considerably lower than these
      competitors, enabling fuel cells to enter the market as a commercially viable
      product.




*HydroGen
      Market Opportunities*




HydroGen
      plans to initially target the existing hydrogen infrastructure of the United
      States and other industrialized countries for market entry and early growth,
      in
      applications where no hydrogen plant is required. Such applications include
      chemical production facilities where hydrogen is produced as a byproduct, for
      example in the chlor-alkali industry. In the United States, this industry
      produces approximately 10 million tons of chlorine annually and demands
      2,500 MW of generating capacity. The electrolysis of brine generates equal
      amounts of chlorine and hydrogen on a mole-to-mole or volumetric basis,
      providing sufficient hydrogen to generate approximately 20% of the base load
      requirements of a typical plant. HydroGen’s PAFC plants will operate at a
      projected net electrical efficiency of approximately 43% running on high-purity
      hydrogen. If our PAFC plants were able to capture 10% of this market
      (250 MW) at a sales price of $1,500/kW, our revenues from this one market
      in the United States alone would amount to approximately $375
      million.




As
      we
      enter the market through the “hydrogen available” segment, HydroGen also expects
      to target the distributed generation market for utilities and
      commercial/industrial facilities in the 6-30 MW market class, where annual
      demand is greater than 2000 MW. To the extent that HydroGen gains market
      penetration and achieves high-volume production, it will then target
      larger-scale applications up to 50 MW, with an addressable market size of
      10,000 MW annually.




*Potential
      Applications for Commercial and Industrial End Users*




HydroGen’s
      initial target customers are locations which present an optimal combination
      of
      low-opportunity cost hydrogen, high power prices, poor air quality, and a weak
      or strained grid. HydroGen plans to either sell its systems directly to
      industrial end-users located near the hydrogen infrastructure or to own and
      operate the systems itself and sell electric power and steam to nearby
      customers.




The
      most
      promising initial customer prospects/project locations include:




·
            Chlor-alkali
                facilities;




·
            Merchant
                hydrogen producers or pipeline operators with over capacity or under
                utilization;




·
            Coke
                production facilities;




·
            Ammonia
                producers;




-4-






·
            Refineries;




·
            Commercial
                facilities located close to hydrogen pipelines;
                and




·
            Desalination
                plants




The
      use
      of HydroGen fuel cell systems for these industrial customers should provide
      the
      following benefits:




·
            High
                quality and reliability for power sensitive
                operations;




·
            Cogeneration
                opportunities that could double the overall system efficiency and
                save
                money through use of existing hydrogen streams and with standard
                hydrogen
                plants;




·
            Reduction
                in peak demand for electricity coupled with the ability to sell excess
                electricity to the electric power grid, potentially introducing a
                previously-unrealized revenue stream or cost avoidance
                opportunity;




·
            Enhanced
                environmental performance and public image by generating and consuming
                environmentally clean power and renewable power in the case of landfill
                gas-derived hydrogen; and




·
            Whole-system
                efficiency and insulation from electricity and gas price volatility
                in
                which integrated fuel cell cogeneration units provide base load power
                for
                operations in low-margin
                industries.




Energy
      companies offering distributed generation products and services, such as
      utilities and independent power producers, are also attractive customers for
      HydroGen. These customers can benefit from the advantages of large-scale
      cogeneration noted above, by owning fuel cell systems, situating the systems
      at
      end-use facilities, and selling power and heat to the end-customer. Utilities
      can capture some of the benefits of on-site generation and still pass the
      remaining benefits on to their end-customers.




Utility
      and independent power producer customers also benefit by additional benefits
      of
      on-site fuel cell power systems, including:




·
            Grid
                support and capacity expansion by bringing capacity on-line faster
                and
                cheaper than possible with centralized power
                plants;




·
            Satisfy
                state-mandated restructuring standards that require utilities to
                derive an
                increasing percentage of their overall energy portfolio from fuel
                cells
                and other environmentally clean energy
                technologies;




·
            Differentiation
                from other energy service companies and retain revenues that may
                otherwise
                be lost on the basis of using environmentally better sourced power
                such as
                landfill and wastewater treatment plant gas, qualifying such systems
                as
                renewable energy;




·
            Streamlined
                local permitting process and avoided costs of NOx, SOx emission permits;
                and




·
            Reduced
                dependence on foreign oil and exposure to price
                volatility.





-5-




Two
      benefits to utility and independent power producer customers warrant further
      discussion: the influence of the fuel cell system on the transmission and
      distribution networks, and the effect on load leveling of the power purchase
      prices of power distribution companies.




Transmission
      and distribution networks are often old, less reliable, and in many places
      of
      insufficient capacity. New industrial, commercial and residential areas, where
      more power is needed than was originally planned, turn out to be bottlenecks
      in
      the grid. New permissions to extend the above-ground networks take time, if
      they
      are at all granted, and subsurface lines cost about 10 times more per mile
      than
      the above-ground lines. As more and more people in the world move to urban
      areas, this described problem will further increase over time. Distributed
      generation, with power-stabilizing fuel cells, can strengthen the existing
      grid,
      and avoid extension of the transmission and distribution networks. This can
      provide significant advantages that can be monetized by local utility
      companies.




Utilities
      can benefit from having a high percentage of distributed generation in the
‘mix’
of their power production and purchase, with flexible contracts with industrial
      and larger commercial customers, allowing the utilities to reduce the dependence
      on purchasing high- priced power from the power exchange during peak periods.
      As
      an example, utilities in Western Europe have remote control on the distributed
      generation systems, located at the customers’ premises, but can choose (within
      contractually agreed upon periods) when part of the power produced is fed back
      into the grid, and when the power is actually used at the location. To do this
      properly requires a carefully balanced mix of distributed generation joint
      ventures or cooperation contracts, spread over several target groups. As an
      example, some utilities in the Netherlands operate a mix of larger combined
      cycle and gas turbine plants in chemical plants, paper factories, and larger
      series of smaller co-generators in greenhouses, providing them with cheap
      distributed generation power when they otherwise would need expensive peak
      purchases. This effect on ‘leveling the utility’s load curve’ is important for
      system reliability. In fact, in certain European countries these advantages
      have
      led to decentralized power generation to contribute over 25% of the total
      generating ‘power plant mix’. Increasingly, electricity markets in the United
      States are beginning to provide monetary incentives to capture these benefits
      of
      distributed generation.




*Regulatory
      and other incentives*




An
      increasing array of Federal and state 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
      for depreciation purposes. 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 significantly reduce the cost and risk
      associated with early adoption of the HydroGen product.




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 fuel cells, through the Self-Generation Incentive Program.
      In the state of Connecticut, fuel cells qualify as a “renwewable” technology
      under the state’s renewable portfolio standard. In the state of Pennsylvania,
      fuel cells qualify as a Tier 1 alternative energy technology as part of the
      state’s alternative energy portfolio standard. 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.







-6-







**Developmental
      Background of the HydroGen Owned Technology**




The
      fuel
      cell technology that HydroGen owns and has rights to use was originally
      developed by the Advanced Energy Systems division of Westinghouse Electric
      Corporation under a Department of Energy sponsored research and development
      program during the 1980s and early 1990s. During this time Westinghouse had
      two
      fuel cell research and development programs, one focused on solid oxide fuel
      cells (SOFC) and one on the phosphoric acid fuel cell (PAFC) modules. While
      both
      the SOFC and PAFC programs obtained extensive Federal funding, in 1993 the
      PAFC
      program was determined to be commercial-ready, and its DOE funding stream was
      discontinued. At that point in time, Westinghouse had developed the module
      designs and manufacturing plans, and it had constructed a manufacturing facility
      and working prototype module. We believe more than $150 million was
      invested by Westinghouse to develop air-cooled PAFC related technology.




In
      the
      early to mid 1990’s Westinghouse was under severe financial strain related to
      large real estate losses. Westinghouse chose to retain the SOFC program which
      was continuing to receive Federal funding, and sell the PAFC technology, related
      intellectual property, and pilot manufacturing facility to a private investor.
      All assets were later transferred to FuelCell Corporation of America, a company
      the private investor subsequently founded. In 2001, Fuel Cell Corporation and
      certain individuals decided to form HydroGen LLC, to which Fuel Cell Corporation
      assigned all of its fuel cell technology assets.




**HydroGen
      Fuel Cell Technology**




Management
      believes that phosphoric acid fuel cell technology is the most logical, well
      demonstrated fuel cell for commercial, large scale stationary applications
      of
      greater than 100 kW. This position is supported by the fact that management
      believes United Technologies Corporation and Fuji Electric have delivered over
      300 units using this type of fuel cell to the field, serving the commercial
      cogeneration market segment of 100-1,000 kW with packaged power plants.
      These delivered plants have demonstrated the reliability and performance of
      stationary fuel cells, and established PAFC as the leading stationary fuel
      cell
      type with respect to performance and longevity.




HydroGen’s
      technology is an air-cooled PAFC module. This cooling methodology is different
      from that currently deployed in the marketplace, which uses a boiling
      water-cooled fuel cell. We believe air-cooling the PAFC offers a number of
      advantages over competitors’ water-cooled systems. Air-cooled stacks are simpler
      to build and operate than those cooled by water, because they require only
      air
      to be channeled to the graphite plates to take away the waste heat generated
      with the electric power production. This reduces the number of steps in the
      manufacturing of the fuel cell stacks. Additionally, water-cooled stacks have
      experienced corrosion problems with the high surface area-to volume ratio of
      the
      cooling tubes interlaced within the graphite plates that carry the water for
      heat rejection. HydroGen’s air-cooled PAFC stacks avoid these problems.




HydroGen’s
      core technology is the 400 kW fuel cell module which is comprised of
      4*100 kW stacks within one pressure vessel. The fuel cell stack technology
      and configuration have been indicated as 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. It is anticipated that the technology
      will
      be able to reach a lifetime of 40,000 hours in the application of HydroGen’s
      first 4-6 MW of modules.




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







-7-







·  
                Capacity:
              400 kW
                  net output  ·Efficiency:
              40%
                  (complete system with hydrogen plant) - 43% (H2-available). Higher
                  efficiencies are expected in later generations of the
                  technology.  · 
Fuels:
              Clean
                  H2 (H2 plant or byproduct), Steam-reformed natural
                  gas  ·  
Cogeneration:
              Up
                to 70psia steam @ 360°F (fuel cells); much higher pressure steam if a
                hydrogenplant is used to generate the hydrogen (i.e., at a site
                where H2 is not available)  ·  
Net
                water:
              Up
                  to 800 gal/hour for a 10 MW system: this water is potable and needs
                  only minor purification






**HydroGen
      PAFC Fuel Cell Systems Approach**




The
      systems approach of HydroGen in its PAFC technology and systems is unique in
      two
      respects: air-cooled stack design and “unbundled” fuel processing. Additionally,
      the targeted size range of HydroGen’s multi-megawatt power plants introduces the
      benefit of economy of scale. We anticipate these characteristics will enable
      HydroGen to produce and deliver fuel cell systems less expensively than our
      customers and these systems will have commercially acceptable reliability
      ratings. Future systems may include integrated plant designs, but only after
      we
      have achieved desired system reliability and cost targets.




As
      indicated before, we believe the air-cooled design of HydroGen’s PAFC modules
      makes them considerably simpler and cheaper to manufacture versus comparable
      liquid-cooled stacks. As summarized above, air-cooled stacks are inherently
      a
      simpler technology than those cooled by water, as they only require air to
      be
      channeled to the graphite plates. This reduces the number of steps in the
      manufacturing of the fuel cell stacks. Additionally, corrosion and water
      discharge/clean-up problems are negated, lengthening the useful life of the
      fuel
      cell stacks and reducing operating costs. HydroGen fuel cell systems can also
      be
      sited in remote arid areas since they do not require the use of water for waste
      heat rejection. The fuel cells in fact produce water as a byproduct. These
      air-cooled, water-generating features may help drive further adoption of
      HydroGen’s PAFC plants as regional water scarcity issues become more prevalent
      globally.




We
      also
      take advantage of the fact that the 400 kW modules do not include an
      on-board fuel processing system (hydrogen plant). We build complete PAFC power
      plants in the 6-30 MW range based presently on a standard building block of
      a 2 MW ‘power island’ (each of which consists of five (5) 400 kW
      modules) that is unbundled from the hydrogen source. The power islands will
      combine the HydroGen air-cooled PAFC module technology and standardized
      state-of-the-art balance of plant equipment with a minimum number of custom-made
      components. HydroGen’s business model focuses initially on applications where
      there is existing hydrogen infrastructure - for example by-product hydrogen
      from
      industrial activity associated with the production of chlorine, industrial
      gases, and ammonia - to supply hydrogen to our PAFC power plants. In such
      applications capital and fuel costs are reduced, as little or no fuel processing
      is required.




In
      utility and cogeneration applications where hydrogen is not available, we intend
      to install a standard, hydrogen plant sized for the application. Hydrogen plants
      are a mature and robust technology in multi-megawatt equivalent sizes, used
      for
      decades in petroleum refining, chemicals and food industries, with several
      suppliers, proven reliability and low cost. We believe using the HydroGen
‘unbundled’ approach will achieve lower system costs by deploying fuel cell
      systems using standard hydrogen technology and existing hydrogen infrastructure.
      The approach is in contrast to other manufacturers of low and intermediate
      temperature fuel cells, which typically target smaller applications of
      100-1,000 kW with packaged power plants. The cost structure of these
      technologies suffers from significant diseconomies of scale and from the complex
      learning curve of integrating the hydrogen plants with the fuel cell
      stacks.





-8-







**HydroGen
      Manufacturing Facilities**




HydroGen
      currently occupies a facility in Versailles, PA (near Pittsburgh), and operates
      it as a pilot manufacturing plant. HydroGen currently occupies approximately
      34,500 square feet of space in the manufacturing plant. The current facility
      includes production equipment for the electrodes, graphite plates, stacks,
      and
      various non-repeating components of the fuel cells and fuel cell stacks,
      assembly areas, and testing facilities. Our manufacturing facility is currently
      operational at 2 MW/year capacity on single-shift production, or
      4 MW/year capacity on double-shift production. In the future, management
      intends to expand the production capacity incrementally to a 4-5 MW/year (single
      shift) or 8-10 MW/year (double-shift). We believe this expansion will
      require a minimal amount of additional capital investment.




The
      long-term business plan for HydroGen is to expand production by deploying an
      advanced manufacturing plant capable initially of producing 25 MW (62
      modules) per year, and later 100 MW (250 modules) per year. HydroGen has
      preliminary plans and designs, which will be modified and modernized under
      a
      development program that is part of the scope of work associated with the
      current business plan. This work has been initiated in our Cleveland, Ohio
      corporate headquarters and advanced manufacturing development facility, located
      at the Wright Fuel Cell Group facility on the Case Western Reserve University
      campus, under partial support of a $1 million contract award through the
      state of Ohio’s Third Frontier Fuel Cell Program.




**HydroGen
      Manufacturing Activities**




HydroGen
      engages in two distinct types of manufacturing activities: the manufacturing
      of
      PAFC modules, and the contracting and construction of fuel cell power plants.
      These will be two entirely different processes with respect to logistics,
      value-chain analysis, and balance between in-house activities and
      outsourcing/subcontracting. The organization of the Company must be able to
      handle both processes in parallel and simultaneously.




HydroGen’s
      core operational activity is the manufacturing of 400 kW PAFC modules from
      raw materials at its Versailles, Pennsylvania manufacturing facility. Each
      important manufacturing step is done in-house, and gradual changes over time
      will be limited to production automation steps and those steps that support
      cost
      reduction and performance improvement objectives. With manufacturing and quality
      analysis and quality control procedures, the production process provides a
      certain yield of PAFC cells, stacks and modules, which after testing can be
      transported as ready-to-install modules into the field sites.




Over
      time, we expect to subcontract and outsource fuel cell stack components with
      experienced supply-chain partners once we have developed the manufacturing
      process and our in-house “know-how” is robust. In addition, we must find
      partners or subcontractors who are able to simultaneously perform to the level
      of manufacturing expertise and cost efficiency we expect.




**HydroGen
      Engineering Contracting Activities**




When
      the
      PAFC modules arrive in the field, they have to be incorporated with the
      balance-of-plant equipment (including a complete hydrogen plant in applications
      without available hydrogen) to construct and operate the fuel cell power plant
      at the customer’s site. These tasks require a management approach similar to
      that in the chemical and power plant contracting businesses. A main contractor
      will assume, under direct management of HydroGen staff (mainly under a
      lump-sum-turnkey contract), the ultimate responsibility for building the fuel
      cell power plant, and installing, testing and commissioning the complete plant
      at the customer site. This process requires project and contract management
      by
      HydroGen, and requires special staff and high quality procurement and project
      managers. The risks of this approach are different from the manufacturing risks,
      since here most of the actual work will be performed by third parties under
      contract.







-9-






HydroGen
      has in its executive and technology management team individuals who are
      experienced in both manufacturing and engineering contracting processes and
      they
      have demonstrated organizational capabilities in these critical areas as
      well.




**HydroGen
      Marketing**




HydroGen’s
      business model calls for it to sell 6-30 MW turn-key power plants, based on
      a parallel number of standardized 2 MW power islands, each consisting of
      five of HydroGen’s 400 kW modules. Additionally, HydroGen plans to attempt
      to generate recurring revenues from the sale of operations and maintenance
      services, plus ongoing lease revenues for the 400 kW modules, which must be
      replaced after approximately 40,000 hours of generation.




HydroGen
      is engaged in marketing efforts early in the implementation of the business
      plan
      because its products represent a disruptive technology. Because of the nature
      of
      its product, the decision process of a customer is expected to require
      substantial educative efforts and a multi-tiered decision process within the
      management organization of a customer. HydroGen will use its own personnel
      for
      the early phases of its marketing program and has appropriate staff currently
      in
      place, including former senior employees from industry segments HydroGen is
      targeting for early commercial adoption. HydroGen is in discussions with several
      generators of by-product hydrogen to become potential users of its fuel cell
      power plants.




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. This
      plant is currently under construction. HydroGen also is in discussions with
      other companies about the potential adoption of multi-megawatt systems at their
      plants.




**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 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 is in the process of transferring their knowledge
      base to a new team of engineers.







-10-







Most
      of
      HydroGen’s core intellectual property has been maintained as trade secrets,
      which are kept in the form of drawings, recipes, process descriptions and other
      writings in its files. 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 in the fall of 2001.




HydroGen,
      for the time being, will continue the Westinghouse policy of using trade secrets
      as the principal mode to protect its intellectual property. As we make
      improvements to the existing technology or develop new technologies, we will
      re-evaluate this policy, and determine an optimal combination of patent and
      closely-held trade secret protection.




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 Department of Energy (“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,
      the
      wholly owned subsidiary of HydroGen Corporation, 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 and require us to meet
      certain other criteria. We are obligated to spend not less than $1,000,000
      in
      the development of products using the licensed patents during the first year
      and
      maintain the licensed inventions at the U.S. Patent and Trademark Office. We
      may
      grant sublicenses to third parties with the permission of the DOE. 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. In
      addition, the license may be terminated in whole or in part provided:
      (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.




**Ohio
      Development Grants**




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 HydroGen’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 HydroGen’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 is given on the understanding that HydroGen will establish the corporate
      headquarters in Ohio within two years, locate manufacturing facilities in Ohio
      by 2008, and create new full-time jobs at both the skilled and unskilled level.
      The development work is expected to be undertaken during the period 2005 to
      2008. The grant was also contingent on HydroGen raising its own capital, which
      it achieved in July 2005.






-11-






The
      grant
      of the funds is on a reimbursement basis, provided HydroGen 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 runs from September 1, 2005 to
      July
      31, 2007, and funds not requested during that period will not be available
      to
      HydroGen. The grant is a deployment of federal development funds and as such,
      HydroGen will be required to adhere to various federal regulations on their
      use
      and accountability for deployment. Through December 31, 2006 HydroGen
      submitted requests for payment under this grant totaling approximately $600,000.
      The Company expects to realize the balance of this grant prior to July 31,
      2007 for costs incurred prior to that date.




The
      Grant
      may be terminated if the State of Ohio determines that HydroGen 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, HydroGen 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 HydroGen may be
      liable for damages to the State of Ohio. HydroGen may also request a termination
      of the grant if it is unable or unwilling to comply with the conditions of
      the
      grant.




On
      March 7, 2006, the Company was notified that it would be awarded $1,000,000
      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 which instrument
      sets forth the terms and conditions pursuant to which the Grant funds are to
      be
      awarded. Under the terms of the Grant Agreement, the Company may recoup from
      the
      State of Ohio 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. 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 to be located in Ohio. The
      proposed facility will be located where the Company expects to mass produce
      its
      standard 400 kilowatt (kW) air-cooled PAFC modules, which will serve as the
      building block of its core product, a 2 megawatt (MW) power island. Initial
      production capacity will be 25 MW per year of the Company’s 400 kW
      modules, and is subsequently expected to be expanded to 100 MW per year
      capacity.




The
      grant
      of the funds is on a reimbursement basis, provided HydroGen 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 runs between April 10, 2006
      and April 10, 2008; however, 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.







-12-







**Competition**




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, and from
      combustion turbines that are used to produce electric power. Also indirectly,
      HydroGen faces competition from the various alternative uses that a prospective
      customer may have for its byproduct or excess hydrogen gas. Directly, there
      is
      competition from other producers of fuel cells, albeit based on different
      technologies.




The
      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.




The
      HydroGen PAFC systems face competition from incumbent distributed generation
      technologies with similar performance and size characteristics, specifically
      internal combustion engines and combustion turbines. This technology has a
      long
      operating and service support history and low installed costs, and currently
      they have a substantial market position. HydroGen will compete with these
      technologies largely on the basis of efficiency, high reliability and
      availability, low to zero-emissions, low maintenance-intensity, modularity,
      fuel
      source diversity, and an ability to make direct use of by-product hydrogen
      from
      industrial processes. The power reliability issue is of particular value as
      the
      HydroGen fuel cell system will provide significant redundancy; for a 10 MW
      system, for example, 25 individual 400 kW fuel cell modules are used. If
      one module fails or has maintenance issues, the other fuel cell modules will
      continue to run, thereby maintaining the vast majority of the plant’s rated
      power production.




Although
      it is projected that fuel cells of all kinds will gain market share in time,
      the
      incumbent technologies of power plants, co-generation sources and internal
      combustion engines and the producers of these technologies and power sources
      using them are very strongly entrenched and hold a highly defensible and
      dominant share of the market for electricity production. HydroGen will attempt
      to meet this competition by creating and maintaining strategic partnerships
      and
      achieving cost reductions in its technologies to make it more attractive as
      an
      alternative source. Also, HydroGen will seek applications where the fuel cell
      is
      the more logical solution in operation such as locations where the electric
      grid
      is weak or not readily available.




HydroGen
      also faces competition from producers of liquid-cooled fuel cells. Two leading
      manufacturers of this type of fuel cell 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 the technology.
      Additionally, in the future, HydroGen may also face competition from producers
      of molten carbonate fuel cells and solid oxide fuel cells. The latter of these
      two technologies is not expected to be commercially available at competitive
      prices for at least a decade. Currently it is estimated that molten carbonate
      fuel cells cost approximately over $4,000 to $10,000 per kW and are only
      available in units up to approximately 1 MW. The solid oxide fuel cell
      units are also only available in units up to 300 kW and costs are estimated
      to be at least as expensive as molten carbonate systems. These types of fuel
      cells all currently have design and operational issues that make them more
      expensive to manufacture and operate and overall make them compare less
      favorably to air cooled PAFC modules. While certain manufacturers of molten
      carbonate fuel cells are beginning to adopt similar principles of plant
      construction that HydroGen intends to employ, in management’s view the inherent
      complexity of these systems limits the potential for ultimate cost reductions
      in
      comparison to air-cooled PAFC.







-13-







In
      the
      future, HydroGen may also have to compete with proton exchange membrane
      technology. Currently this is a fuel cell developed for both stationary and
      mobile applications, but it is anticipated that this technology will be deployed
      more broadly in smaller stationary applications. This technology operates at
      a
      lower temperature and efficiency than the PAFC module stacks and requires
      relatively pure hydrogen for the stacks. The proton exchange membrane technology
      also suffers from a shorter operating life. Overall, currently they do not
      appear to be suited to the larger-sized base load applications that HydroGen
      plans to target.




HydroGen
      intends to compete with its other fuel cell competitors on the basis that its
      technology is commercially ready, there are few manufacturers of PAFC modules,
      and most importantly, on the basis of low cost. We anticipate that the price
      per
      kW installed for our multi-megawatt PAFC power plants will be substantially
      less
      than other fuel cells, and that they will have higher reliability and lower
      maintenance. HydroGen will also compete on the basis of a more mature technology
      that is ready for market introduction; significant resources have already been
      invested in the technology by Westinghouse and the United States government,
      and
      the technology is in the manufacturing and product introduction stage of
      development, rather than in a research and development stage.




**Employees**




HydroGen
      currently employs approximately 71 full time employees. The CEO, Dr. Leo Blomen,
      a resident of the Netherlands, is contracted through Blomenco B.V. for at least
      80% of his business time and supports HydroGen’s management team in all facets
      of business operations. Of its employees, HydroGen has 6 members of executive
      management, 58 technical staff and 7 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 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. There can be no assurance that HydroGen will
      achieve or sustain profitability or positive cash flows from operating
      activities in the future. Investors may lose their investment or the opportunity
      to profit from a developing business or be unable to correctly assess our
      ability to operate in our chosen industry.




**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, finance the preparation of our Pittsburgh area
      fuel
      cell manufacturing facility, and construct a production 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 between $20-$35 million in additional capital. Furthermore, if
      HydroGen decides to expand the business beyond what is currently planned;
      additional capital beyond what is anticipated in our current business plan
      will
      be required. HydroGen plans in the future to seek portions of the required
      funding from commercial sales, existing state incentive programs for fuel cells,
      and federally funded fuel cell demonstration programs. It may seek funds under
      low interest incentive based loans supported by one or more selected states.
      Although HydroGen currently plans to obtain some of the required additional
      financing through the issuance of debt instruments, conditions and circumstances
      may change such that HydroGen may decide to raise capital through the issuance
      of equity securities, which would result in dilution to existing shareholders.
      Any such financing terms may be adverse to existing security holders of HydroGen
      and could impose operational limitations on HydroGen. There can be no assurance
      that such additional financing will be available to HydroGen. Without the
      necessary funds, our business plan will have to be modified or may not be fully
      executed.







-14-






**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 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 ability to seek reimbursement will be terminated.
      Therefore, HydroGen may have
      expenses that it believed would be paid under the grant but will become a
      financial obligation payable out of its general working capital. 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.




**HydroGen
      has rights to use the technology previously developed by Westinghouse Electric
      Power Division, but there may have to be some additional development for the
      technology to be useful which will present obstacles that will cost more money
      and time.**




HydroGen
      acquired the rights to assets of certain fuel cell 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 new Pittsburgh area production plant will not have a material
      impact upon the performance, profitability, and cash flows from future
      operations.




**HydroGen
      has entered into a license of four patents from the Department of Energy (two
      of
      which have since expired) which has certain requirements that if not met will
      cause the license to be terminable, the loss of which could impair HydroGen’s
      ability to justify additional investment.**




HydroGen
      has entered into a license of four patents from the Department of Energy (two
      of
      which have since expired) which has certain requirements that if not met will
      cause the license to be terminable, the loss of which could impair HydroGen’s
      ability to attract additional investment.







-15-







**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 an 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. These
      means of protection may not be effective with the consequence that others may
      obtain knowledge of our intellectual property. 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.




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




HydroGen
      has no experience designing and manufacturing 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 its 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 technology
      and business plan because there may be delays in sales, additional development
      costs and loss of market position.




**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 causing 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 its systems obsolete prior to
      commercialization, and therefore will cause us to curtail our current business
      plan and an impairment in 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.







-16-







**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 ability to sell and deliver fuel cell power plants.
      Although there is interest indicted in its potential fuel cell power plants,
      no
      contracts for the sale and delivery of our air-cooled PAFC power plants have
      been executed to date. Factors that could adversely affect HydroGen’s ability to
      sell and deliver fuel cells include increased competition, increased
      consolidation in the energy industry (which would reduce HydroGen’s base of
      potential customers) 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,
      permits, licenses, and rights-of-way to sell, deliver and/or operate fuel cell
      power plants without which we will not be able to sell our 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 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 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.




**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 the success
      of these projects will rely on contracted construction companies and
      subcontractors in these states. 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 better, 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 on the market. Due
      to
      the highly competitive nature of the American, European and international energy
      industries, new companies may emerge in the future offering services and
      products similar to HydroGen’s. Management believes that the liberalization of
      the energy market is likely to attract more competitors, such as companies
      offering traditional technology products like combustion turbines, internal
      combustion engines and others, but also companies offering renewable energy
      technologies such as wind and solar plants, as well as biogas/biomass
      applications, and including other fuel cell companies offering other fuel cell
      types to the market, such as molten carbonate fuel cells, or solid oxide fuel
      cells. This intensifying competition could reduce or supplant the demand for
      the
      use of HydroGen’s fuel cell power plants.







-17-







**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 fuel cells will become the preferred technology for power
      production in the near future. New technologies may emerge, that may become
      more
      widely used than fuel cells, particularly in view of the now rapid pace of
      technological development in the energy industry generally. If 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 the fuel cell power
      plants.




**As
      a company operating in the energy systems industry in various countries,
      HydroGen is or will be subject to varying degrees of regulation in each of
      the
      jurisdictions in which it operates any of which could be an impediment to
      marketing and sales or add unexpected costs.**




There
      can
      be no assurance that regulatory, judicial and legislative changes will not
      have
      a material adverse effect on HydroGen. For example, regulators may raise
      material issues with regard to HydroGen’s compliance or non-compliance with
      applicable regulations or judicial decisions may impact on HydroGen’s
      operations, each of which could have a material adverse effect on HydroGen’s
      business, financial condition and results of operations because of added costs
      or as an impediment or barrier to marketing and sales.




**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.







-18-







**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
      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
      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 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. Additionally, although HydroGen
      customers may realize a recovery value of the component parts of the fuel cell
      stacks that will defer from the cost of the replacement stacks, HydroGen cannot
      warrant the recovery values attained, if any. 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, or 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.




**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. Moreover, HydroGen may not be able
      to
      retain some of the former Westinghouse design and manufacturing engineers
      previously employed at the Westinghouse production facility and who played
      an
      integral role in the fuel cell development program during the late eighties
      and
      early nineties. These people are considered important to HydroGen, with tasks
      including: production, design development, training, and technology transfer
      to
      new workers and strategic partners. 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, it will not be able to implement
      its business plan. HydroGen does not maintain key man insurance on any of its
      management or employees.







-19-







**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, hire, train, and manage a qualified employee base.
      Inaccuracies in HydroGen’s forecasts of market demand could result in
      insufficient or excessive capacity/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 its fuel cell
      systems.**




HydroGen’s
      primary customers will be operators of the 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.




**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,
      whether colorable or not, may be asserted against HydroGen in the future. To
      date, there has been notice to HydroGen of a potential claim in patent
      infringement relating to the predecessor company, but there has not been any
      service made on HydroGen. 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 business plan concerning HydroGen with the
      consequence of a loss of opportunity.







-20-







**Future
      sales of shares by our stockholders could adversely affect the market price
      of
      our stock and your ability to realize value from stock
      transactions.**




On
      July
      8, 2007, the shares issued in the reorganization of the Company and simultaneous
      financing consummated on July 8, 2005 and on May 2, 2008, the shares issued
      in
      the private placement consummated May 2, 2006, will be eligible for resale
      under
      Rule 144k, without regard to limitations of amount, except for affiliates.
      Thus,
      at those dates substantial amounts of our common stock will be tradable without
      restriction. At any time after those dates, there will be an abundance of shares
      that may be offered with the possible effect of depressing the price of a share,
      at any given moment. Therefore, you may not be able to sell your shares or
      sell
      them at a price previously indicated.




**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 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.




**Item
              2.**
            **Properties**




HydroGen
      currently occupies approximately 34,500 square feet of manufacturing and office
      space in Versailles, Pennsylvania. At this location HydroGen maintains its
      principal current manufacturing and testing facilities. The Company is the
      sole
      occupant of this facility. This facility is leased from the National Carbide
      Die
      Corporation on a 5 year lease term for a price of $172,480 per
      year.




HydroGen
      has established a small corporate headquarters and advanced manufacturing
      development facility 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 $2,300 per month. In addition
      to the office in Cleveland, the Company has leased storage and office space
      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
      $1,000 per month for the rent, and the lease is on a month-to-month
      basis.







-21-







HydroGen
      also has offices at 10 East 40 th Street
      in New York City, from which we conduct corporate governance, investor
      relations, funding and related activities. The office facility, approximately
      1,700 square feet, is leased on a 5 year term at an annual cost of $69,700
      for
      the first year, and increasing 2.5% in each year of the lease term.




**Item
              3.**
            **Legal
                Proceedings**




The
      Company is not currently a party to any material legal proceedings.




**Item
              4.**
            **Submission
                of Matters to a Vote by Security
                Holders**




During
      the fourth quarter of 2006, no matters were submitted to a vote by security
      holders.






**PART
      II**






**Item
              5.**
            **Market
                for Common Equity and Related Stockholder
                Matters**




**Market
      Information**




The
      common stock was listed on the NASDAQ Capital Market on March 6, 2007 and
      is traded under the symbol HYDG. From August 19, 2005 through March 5,
      2007, the common stock was traded in the over-the-counter market and quoted
      on
      the OTC BB under the symbol “HYDG”. From May 14, 2004 to August 19, 2005, the
      common stock was quoted on the OTC BB under the symbol “ CSTC “ and from
      September 21, 2001 to May 14, 2004, the common stock was traded on the OTC
      BB
      under the symbol “DYCE”. On August 19, 2005, HydroGen affected a reverse split
      of the outstanding common stock at the rate of one for 25 outstanding
      shares.




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.




The
      high
      and low bid prices below are for the common stock while it traded on the OTC
      BB,
      and are presented for each quarter as set indicated (such prices are without
      retail mark-up, mark-down, or commissions).




**QUARTER
                ENDED**
            
            **HIGH**
            
            **LOW**December
                31, 2006
            
            $
            5.00
            
            $
            2.80September
                30, 2006
            
            
            6.00
            
            
            4.50June
                30, 2006
            
            
            9.00
            
            
            5.00March
                31, 2006
            
            
            5.75
            
            
            3.00December
                31, 2005
            
            
            5.55
            
            
            3.30September
                30, 2005
            
            
            21.25
            
            
            3.30







-22-







**Holders**




We
      have
      approximately 303 record holders of our common stock. We believe that in
      addition to the record ownership there are in excess of 279 beneficial owners
      who hold their shares in street name or through other nominees.




**Dividend
      Policy**




We
      plan
      to retain all earnings generated by our operations, if any, for use in our
      business. We do not anticipate paying any cash dividends to our stockholders
      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.




**Recent
      Sales of Unregistered Securities**




Except
      as
      previously reported during the period covered by this report, the Company issued
      option grants for the following unregistered equity securities.




The
      following sets forth certain information as to all options granted to purchase
      our common stock during the year ended December 31, 2006 and through the date
      of
      this report, which were not registered under the Securities Act. In each of
      the
      transactions, we granted options to affiliates (directors, consultants) and
      employees. The transactions were exempt from the registration requirements
      of
      Section 5 of the Securities Act under Sections 4(2) and 4(6) of the Securities
      Act. Each option holder agreed that, if the option is exercised, the option
      holder would purchase his common stock for investment and not for resale to
      the
      public. Also, we provide all option holders with all reports we file with the
      SEC and press releases issued by us.




On
      March
      2, 2006, we granted options to purchase 120,700 shares for a five-year
      period at the exercise price of $5.25, the fair market value on the date of
      grant, to 22 employees under our 2005 Performance Equity Plan. These options
      were to vest based on the achievement of a certain milestone by December 31,
      2006. Because the milestone was not achieved by the prescribed date, these
      options expired on December 31, 2006. Under the same milestone-based plan,
      on
      May 17, 2006, we granted options to purchase 12,600 shares for a five-year
      period at the exercise price of $6.20, the fair market value on the date of
      grant, to 5 employees. These options also expired on December 31,
      2006.




On
      March
      29, 2006, we granted options to purchase 16,535 shares for a five-year
      period at the exercise price of $5.56, the fair market value on the date of
      grant, to 1 employee under our 2005 Performance Equity Plan.




On
      April
      11, 2006, we granted options to purchase 46,500 shares for a five-year
      period at the exercise price of $5.25, the fair market value on the date of
      grant, to 9 employees under our 2005 Performance Equity Plan.




On
      May
      17, 2006, we granted options to purchase 1,600 shares for a five-year
      period at the exercise price of $6.20, the fair market value on the date of
      grant, to 2 employees under our 2005 Performance Equity Plan.




On
      May
      22, 2006, we granted options to purchase 22,500 shares for a five-year
      period at the exercise price of $6.05, the fair market value on the date of
      grant, to 3 independent members of our board of directors under our 2005
      Performance Equity Plan.







-23-







On
      July
      17, 2006, we granted options to purchase 85,247 shares for a five-year
      period at the exercise price of $5.15 the fair market value on the date of
      grant, to 12 employees under our 2005 Performance Equity Plan.




On
      October 23, 2006, we granted options to purchase 89,500 shares for a
      five-year period at the exercise price of $4.90, the fair market value on the
      date of grant, to 12 employees and 1 consultant under our 2005 Performance
      Equity Plan. Additionally, on the same date, we granted performance-based
      options to purchase 181,980 shares for a five-year period at the exercise price
      of $4.90, the fair market value on the date of grant, to 47 employees under
      our
      2005 Performance Equity Plan.




On
      December 11, 2006, we granted options to purchase 198,100 shares for a
      five-year period at the exercise price of $4.50, the fair market value on the
      date of grant, to 11 employees and 3 independent members of our board of
      directors under our 2005 Performance Equity Plan. Additionally, on the same
      date, we granted performance-based options to purchase 2,160 shares for a
      five-year period at the exercise price of $4.50, the fair market value on the
      date of grant, to 4 employees under our 2005 Performance Equity
      Plan.




**Transfer
      Agent**




The
      Transfer Agent and Registrar for HydroGen’s common shares 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 plan, our 2005 Performance Equity Plan, as amended. The information
      in this table is as of December 31, 2006.




**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**Equity
                compensation plans approved by security holders(1)
            
            
            712,657
            
            $
            4.91
            
            
            387,343Equity
                compensation plans not approved by security holders
            
            
            342,345
            
            
            4.34
            
            
            ---Total
            
            
            1,055,002
            
            $
            4.73
            
            
            387,343





**(1)**
            Our
                2005 Performance Equity Plan, as amended, permits the issuance of
                restricted stock, stock appreciation rights, options to purchase
                our
                common stock, deferred stock and other stock-based awards, not to
                exceed
                1,100,000 shares of our common stock, to employees, outside directors,
                and
                consultants.







-24-







**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 that 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, including those set forth in this
      Annual Report on Form 10-KSB.




**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 6-30 MW turn-key power plants, based on a standardized 2 MW
      power island consisting of five of HydroGen’s 400 kW modules. Additionally,
      HydroGen plans to attempt to generate recurring revenues from the sale of
      operations and maintenance services, and ongoing lease revenues for the
      400 kW modules, which must be replaced after approximately 40,000 hours of
      operation.




HydroGen
      expects to enter the market at a cost of approximately $3,000/kW installed
      for a
      first article plant of approximately 4-8 MW. Management expects its
      production costs in the future will fall below $1,000/kW for a complete system
      (fuel cell modules and balance of plant) once its PAFC modules are produced
      in
      an accelerated manufacturing facility with a capacity of 25 MW per annum or
      greater. These costs compare favorably with its competition of water cooled
      PAFCs, molten carbonate fuel cells, and solid oxide fuel cells.




**Plan
      of Operation**




HydroGen’s
      business plan is divided into three stages: market entry, cost reduction, and
      growth.  Management anticipates that the market entry stage will last
      approximately through 2007.  During this period, HydroGen is focusing its
      efforts on the following activities:




1. *Ramp
      up fuel cell manufacturing operations to achieve 2 MW per year single-shift
      production capacity.* HydroGen
      has invested most of the intended approximately $1,500,000-$2,000,000 to ramp
      up
      its manufacturing facilities to achieve initial pilot production capacity of
      2
      MW (five 400 kW modules) per annum on single shift, or 4 or more MW per year
      on
      multiple shift basis, and to recapture the performance and operation of the
      original Westinghouse design of the module.  These funds have been used to
      acquire certain additional production equipment, to implement certain facilities
      upgrades and to prepare and train a new team of production staff in the fuel
      cell production processes. All production lines are now in
      operation.




2. *Manufacture
      400 kW modules.*  HydroGen
      has started production of three or more new 400 kW air-cooled phosphoric acid
      fuel cell modules in our manufacturing facilities for use during the market
      entry phase. The modules will be tested at our facilities, and then delivered
      to
      customer demonstration sites in the field.  Management has allocated
      $2,000,000 to $3,500,000 to the manufacturing activities and is manufacturing
      the components for the first new module.




3. *Product
      and technology testing and validation* . HydroGen
      has completed or is nearing completion on construction of the initial test
      facilities that we will operate at our Versailles, PA manufacturing
      facilities.  Management has allocated and spent most of the intended
      initial $1,500,000 to $2,000,000 for initial product and technology testing
      and
      validation activities. The
      test
      facilities include:







-25-







(a) 400 kW
      module test facility, to test finished product at full rated capacity prior
      to
      field delivery, which was mechanically completed in February 2007.




(b) 10-cell
      stack pressurized test facility, to validate design and material changes to
      the
      fuel cells as a final step before incorporating such changes into the full
      400 kW module.  This test facility was built and successfully started
      in 2006, operating a 2.5 kW stack at rated 100% capacity within 3 weeks
      after its completion.




(c) 2”x2”
      small scale test facility, to test new electrode materials prior to selection
      for 10-cell stack testing and validation.  A first group of 24 was built in
      the beginning of 2006, and a second battery of 24 additional cell test units
      was
      completed in late 2006 and the beginning of 2007.




Management
      has allocated additional funds for the construction and operation of additional
      test facilities to expand product and technology testing and validation
      activities. These include:




(a) An
      additional, transportable 10-cell stack pressurized test facility (2.5 kW),
      which will allow us to undertake operational field tests at customer sites
      with
      different gas compositions. This facility is in the design and engineering
      phase.




(b) A
      series
      of two atmospheric 3-cell test facilities, which will be used to test
      differences and changes in cell-design, component materials, and geometry in
      full-scale cells, prior to pressurized testing in the 2.5 kW test stand.
      These 3-cell test facilities will be constructed at the Company’s Wright Fuel
      Cell Group facility in Cleveland, OH.




4. *Finish
      2 MW power plant design and initiate advanced manufacturing
      development.* HydroGen is in the process of investing working capital proceeds to complete
      the
      design, component selection, and full costing of the standard 2 megawatt (MW)
      power plant product, and is in the execution phase of a project of development
      activities necessary to achieve targeted fuel cell production capacity of
      25 MW/year scheduled for the end of 2008 / beginning of 2009, and
      100 MW/year scheduled for the 2010 time frame under the current business
      plan.  The advanced manufacturing development program consists of a staged
      series of projects to implement design and material changes to the technology,
      develop and implement automated manufacturing processes, and collaborate with
      outsource suppliers of key components of the fuel cells.  The Company has
      initiated collaborative relationships with certain outsourced suppliers of
      key
      components of the fuel cells, and is evaluating additional collaboration
      opportunities with a variety of entities.  HydroGen will also seek
      additional financing in the form of grants from state and/or federal government
      sources for some aspects of this phase of the business plan, and is currently
      performing work under a state grant, a $1,000,000 award by the State of Ohio
      Third Frontier Fuel Cell Program, to support the Company’s advanced
      manufacturing development program. Overall progress on advanced manufacturing
      development is proceeding according to schedule.




5. *Sales
      and marketing* . 
      The initial sales goal is to achieve firm orders for 2-4 MW of fuel cell
      power plants on a semi-commercial basis, and contingent orders for full-scale
      commercial fuel cell power plants in the range of 25-50 MW aggregate
      capacity, in addition to the one already-contracted 400 kW commercial
      demonstration power plant.  A principal purpose of the commercial
      demonstration and semi-commercial power plants is to obtain a successful
      validation and performance history for the core 400 kW module and the
      2 MW standard commercial product. Once successful validation of the core
      module is obtained, we anticipate that the contingency related to commercial
      orders received for full-scale fuel cell power plants will be removed.  To
      achieve our sales and marketing objectives, HydroGen is 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, and management believes that it could conclude agreements with one
      or
      more of these entities within the next 10 months.







-26-







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, OH.  This effort is
      being supported by a $1,250,000 award that the Company received from the State
      of Ohio Department of Development, and the Company expects to install the fuel
      cell module in the first half of 2007. The Company may additionally decide
      to
      develop one or more projects of similar capacity at another customer’s
      site.




Sales
      and
      marketing will take place concurrently with the previously described phases
      of
      the business plan during the development stage.  Marketing the kind of
      disruptive product that HydroGen offers involves a multifaceted decision
      process, and it typically takes multiple contacts and a substantial customer
      educative endeavor to achieve firm commitments and orders.




Once
      HydroGen has achieved the objectives of its market entry stage, it will enter
      the cost reduction stage of the business plan.  This stage has started and
      is expected to last through the end of 2008 or first half of 2009. 
Management estimates that approximately $20-35 million in additional equity
      capital, plus approximately $15-20 million in low-interest debt, will be
      required to execute this phase of the business plan. The Company has no
      agreements or arrangements for such funding at this time. The principal goals
      of
      this stage of development will be to:




1. Complete
      the manufacturing roadmap, design and process development for advanced
      manufacturing.




2. Secure
      strategic supply chain relationships and construct an advanced manufacturing
      facility capable of producing 25 MW/year of fuel cell modules by the end of
      2008
      / beginning of 2009, while reducing module production costs through high volume
      manufacturing and assembly.




3. Manufacture
      and deliver to customers up to 10 MW of commercial fuel cell power
      plants.




4. Achieve
      positive net cash flow from operations.




After
      successful completion of the objectives of the cost reduction phase of the
      business plan, HydroGen plans to expand the automated production facility to
      100 MW/year capacity or greater, launch a worldwide sales and marketing
      effort, expand production capacity further by investing in a European or Asian
      manufacturing facility, and further driving down costs through maturation of
      our
      outsourcing activities.




**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.







-27-







*Revenue
      Recognition*




HydroGen
      recognizes 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.




Demonstration
      grant revenue is recognized as the Company incurs reimbursable costs as set
      forth under the contract. All of the Company’s revenue in 2006 and 2005 is from
      grant agreements with State of Ohio government agencies.




*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*




Prior
      to
      January 1, 2006, the Company accounted for stock option awards granted
      under the Company’s Equity Incentive Plan in accordance with the recognition and
      measurement provisions of Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees”, (“APB 25”) and related
      Interpretations, as permitted by Statement of Financial Accounting Standards
      No. 123, “Accounting for Stock-Based Compensation”, (“SFAS 123”).
      Share-based employee compensation expense was not recognized in the Company’s
      consolidated statements of operations prior to January 1, 2006, as all
      stock option awards granted had an exercise price equal to or greater than
      the
      market value of the common stock on the date of the grant. As permitted by
      SFAS 123, the Company reported pro-forma disclosures presenting results and
      earnings per share as if the Company had used the fair value recognition
      provisions of SFAS 123 in the Notes to Consolidated Financial Statements.
      Share-based compensation related to non-employees and modifications of options
      granted were accounted for based on the fair value of the related stock or
      options in accordance with SFAS 123 and its interpretations.




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. HydroGen adopted SFAS 123(R)
      using the modified prospective transition method. Under this transition method,
      share-based compensation expense recognized during the nine months ended
      September 30, 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).







-28-







*Investments*




HydroGen
      follows Statement of Financial Accounting Standards (SFAS) No. 115,
“Accounting for Debt and Equity Securities.” HydroGen 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, HydroGen does not recognize
      unrealized gains and losses on such investments in its financial
      statements.




*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.




FASB
      Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes -
      interpretation of FASB Statement No. 109.” FIN 48
      clarifies the accounting for uncertainty in income taxes recognized in the
      financial statements and sets forth recognition, derecognition and measurement
      criteria for tax positions taken or expected to be taken in a tax filing. For
      HydroGen, this guidance will apply to all tax positions taken or expected to
      be
      taken beginning on January 1, 2007. We do not expect the adoption of FIN 48
      to
      have a significant impact on our financial statements.




The
      Company does not believe that any other recently issued, but not yet effective
      accounting standards will have a material effect on the Company’s consolidated
      financial position, results of operations or cash flows.




**Financing
      Activities**




From
      inception in late 2001 as a limited liability company until the completion
      of a
      bridge financing (described below) in early 2005, HydroGen was financed by
      working capital loans provided by Fuel Cell Corporation of America (“FCA”), the
      predecessor owner of the HydroGen’s intellectual property assets and a
      significant shareholder of HydroGen. At June 30, 2005, these loans had an
      aggregate balance of $267,360, and were evidenced by promissory notes.
      Additionally, FCA provided an interest free line of credit to HydroGen of
      $350,000, all of which was borrowed and was also outstanding at June 30, 2005.
      FCA agreed that, upon repayment of the $350,000 non-interest bearing note,
      it
      would forgive the principal balance of the interest-bearing loans by $150,000.
      These loans, plus accrued interest, were payable upon the occurrence of certain
      events, but in no case later than July 31, 2005. HydroGen paid $467,360, plus
      accrued interest in full satisfaction of amounts owed to FCA out of the proceeds
      of the offerings completed in connection with the Exchange Agreement described
      below.




During
      late 2004 and early 2005, HydroGen sold in a private placement $2 million of
      bridge units, each unit consisting of a $10,000 convertible note and .045
      membership unit. The bridge notes were due on the earlier of June 30, 2005,
      or
      earlier upon the occurrence of certain events. The bridge notes were initially
      convertible into an additional .045 membership unit, at an effective conversion
      price of $220,772. However, to encourage the conversion of these notes, the
      conversion price was lowered to $125,000 per membership unit, the same terms
      being offered to investors in HydroGen’s private placement completed in
      connection with the Exchange Agreement described below. Holders of all
      $2,000,000 of convertible notes elected to convert the principal amount of
      their
      notes as part of the private placement into 16.0 membership units in HydroGen,
      which membership units were immediately exchanged for 60,446 Preferred Shares
      of
      the Company. HydroGen recorded a non-cash charge of $875,000 in July, 2005,
      related to the lowering of the conversion price of these notes.







-29-






On
      May
      13, 2005, Chiste Corporation, a Nevada corporation (“Chiste”), entered into an
      Exchange Agreement (“Exchange Agreement”) with HydroGen, LLC, an Ohio limited
      liability company (“HydroGen”), certain members of HydroGen representing
      approximately 69.7% of the outstanding membership interests, and Keating Reverse
      Merger Fund, LLC (“KRM Fund”). The closing of the transactions contemplated by
      the Exchange Agreement occurred on July 7, 2005. At the closing, pursuant to
      the
      terms of the Exchange Agreement, Chiste acquired all of the outstanding
      membership interests of HydroGen (the “Interests”) from all the HydroGen
      members, and the HydroGen members contributed all of their Interests to Chiste.
      All the HydroGen members either executed or joined the Exchange Agreement prior
      to the closing, including persons investing in membership units as part of
      a
      private placement by HydroGen. The completion of the HydroGen private placement
      of membership units for a minimum gross proceeds of $5,000,000 and a maximum
      of
      $10,000,000 was a condition to the Closing. HydroGen raised $6,536,283 in gross
      proceeds from the private placement, and the holders of $2,000,000 of notes
      converted the principal amount of their notes into membership units in the
      private placement. In the exchange transaction, Chiste issued to the HydroGen
      members, including the new investors and converting note holders, an aggregate
      of 742,255 shares of Series B Convertible Preferred Shares, par value $0.001
      per
      share (“Preferred Shares”), which converted into shares of Chiste’s common stock
      on August 19, 2005. In addition, immediately following the closing of the
      exchange transaction, Chiste sold to four institutional investors, 211,569
      Preferred Shares for an aggregate purchase price of $7,000,000, which also
      converted into common stock on August 19, 2005. At the closing, HydroGen became
      a wholly-owned subsidiary of Chiste and continues as HydroGen’s principal
      operating entity.




In
      August
      2005, the State of Ohio, Department of Development, provided HydroGen with
      a
      $1,250,000 grant, on a reimbursement basis, to fund development costs of its
      products. The grant is subject to certain conditions and permits reimbursement
      to July 31, 2007. HydroGen billed the State of Ohio, Department of Development,
      approximately $600,000 through December 31, 2006, related to this grant.




In
      September 2005, Hydrogen raised an additional $600,000 in gross proceeds, before
      expenses, in a private placement of 134,439 shares of common stock to two
      institutional investors.




On
      March
      7, 2006, the Company was notified that it was awarded $1,000,000 by the State
      of
      Ohio Third Frontier Fuel Cell Program (TFFCP) to support the Company’s advanced
      manufacturing development program. The Company will use the funds to optimize
      decisions and resource allocations for its planned advanced manufacturing
      facility to be located in Ohio. The facility is where the Company will mass
      produce its standard 400-kilowatt (kW) air-cooled PAFC modules, which serve
      as
      the building block of its core product, a 2 MW power island. Initial
      production capacity is expected to be 25 MW per year of the company’s
      400 kW modules, and is subsequently expected to be expanded to 100 MW
      per year capacity.




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 $1,660,937 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 was committed to file the registration statement within 45 days of
      closing and have it declared effective within 90 days of closing, or otherwise
      be subject to liquidated damages, not to exceed 10% of the subscription amount
      for the shares. Liquidated damages related to this private placement of
      securities were therefore not incurred by the Company. There was no requirement
      to pay liquidated damages in respect of the shares of common stock underlying
      the warrants if those shares were not registered. In connection with the
      liquidated damages provision of the registration rights agreement, HydroGen
      evaluated the classification of the equity subject to liquidated damages under
      Emerging Issues Task Force Topic D-98. In concluded that the equity should
      be
      classified as permanent equity because the damages were capped at 10% of the
      value of the common shares sold which is no more than a reasonable estimate
      of
      the difference in the fair values between registered shares and unregistered
      shares.







-30-






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




HydroGen
      is using its working capital to manufacture 400 kW modules, test and
      validate HydroGen’s product and technology, complete power plant design work,
      continue development work for an accelerated manufacturing facility and for
      other general corporate purposes. Management estimates that its working capital
      will last at least through the conclusion of calendar year 2007.




**Results
      of Operations**




*Comparison
      of the Years Ended December 31, 2006 and 2005*




The
      following table sets forth certain of HydroGen’s operating data for the years
      ended December 31, 2006 and 2005; certain reclassifications have been made
      to the 2005 financial information to conform to the 2006
      presentation:




**December
                31, 2006**
            
            **December
                31, 2005**
            
            **Increase**
              **(Decrease)**Research
                & development
            
            $
            4,081,000
            
            $
            1,164,000
            
            $
            2,917,000Payroll
                and related costs
            
            
            2,375,000
            
            
            1,148,000
            
            
            1,227,000Professional
                fees
            
            
            770,000
            
            
            1,270,000
            
            
            (500,000
            )Travel
                & entertainment
            
            
            312,000
            
            
            258,000
            
            
            54,000Other
            
            
            1,448,000
            
            
            698,000
            
            
            750,000Totals
            
            $
            8,986,000
            
            $
            4,538,000
            
            $
            4,448,000




The
      increase in research and development expenses was due to the accelerated and
      expanded ramp-up in the Company’s technology recapture efforts and power plant
      design, as well as other development activity in 2006. Most of the development
      activity involved fees paid to contractors and consultants to assist with the
      construction of testing facilities at the Versailles plant location. Employee
      costs also showed a significant increase as approximately 30 new employees,
      mostly engineers and technicians, were hired during 2006.




The
      increase in payroll and related costs was largely due to increases in the
      compensation of executives and administrative employees. During 2006, 5
      administrative employees were added to payroll. Increases in executive
      compensation were primarily in the form of bonuses and stock options, as well
      as
      the addition of 5 employees.







-31-







Professional
      fees decreased significantly from 2005 as work performed by external consultants
      in 2005 was brought in house and performed by professionals hired and retained
      by the Company during 2006. Further, significant legal fees related to the
      Company’s restructuring in 2005 did not recur in 2006.




Travel
      and entertainment costs increased slightly as activity related to prospect
      development increased during 2006.




The
      increase in other expenses relates to several factors, including an increase
      of
      approximately $100,000 in directors’ and officers’ liability insurance, an
      increase of approximately $100,000 in fees to outside members of our board
      of
      directors ($80,000 of which related to initial option grants made to these
      directors), and an increase of approximately $125,000 in rent expense. Finally,
      depreciation expense and loss on disposals increased approximately $100,000
      from
      2005.




*Comparison
      of the Years Ended December 31, 2005 and 2004*




The
      following table sets forth certain of HydroGen’s operating data for the years
      ended December 31, 2005 and 2004:




**December
                31, 2005**
            
            **December
                31, 2004**
            
            **Increase****(Decrease)**Research
                & development
            
            $
            1,164,000
            
            $
            248,000
            
            $
            916,000Payroll
                and related costs
            
            
            1,148,000
            
            
            404,000
            
            
            744,000Professional
                fees
            
            
            1,270,000
            
            
            694,000
            
            
            576,000Travel
                & entertainment
            
            
            258,000
            
            
            97,000
            
            
            161,000Other
            
            
            698,000
            
            
            196,000
            
            
            502,000Totals
            
            $
            4,538,000
            
            $
            1,639,000
            
            $
            2,899,000




The
      increase in research and development expenses was due to the accelerated and
      expanded ramp-up in HydroGen’s technology recapture activities and power plant
      design, as well as other development activities in 2005. Most of these expenses
      relate to the hiring of 11 engineers and technicians in 2005 to support these
      efforts. Additional expenses reflect increases in orders of supplies and
      equipment to support technical work.




The
      increase in payroll and related costs reflect, as above, the expansion of
      HydroGen’s staff and executive management team resulting from the equity
      financings that took place in July and September, 2005. In 2005 the executive
      management and administrative staffs increased from three to eight. Most of
      HydroGen’s management team received significant increases in compensation in
      April 2005, which brought their cash compensation levels closer to market rates,
      and earned bonuses totaling approximately $177,000. This was partially offset
      by
      a decrease in equity compensation granted to members of the management team
      in
      2004 of approximately $144,000.




The
      significant increase in professional fees in 2005 versus 2004 relates primarily
      to the legal, accounting and consulting fees incurred in HydroGen’s corporate
      restructuring activities (reverse merger transaction), financing efforts, and
      other public company expenses such as investor relations.




The
      increase in travel and entertainment expenses in 2005 versus 2004 was due to
      increased travel activity in support of HydroGen’s financing and
      commercialization activities by the expanded management team.







-32-







The
      increase in other expenses relates to several factors, including an increase
      of
      approximately $86,000 in directors’ and officers’ liability insurance, $91,000
      related to relocating HydroGen’s manufacturing facility, an increase of $135,000
      in rent expense primarily related to a significant increase in square footage
      leased for HydroGen’s manufacturing facility, and a $112,000 charge related to
      the issuance of 1.287 LLC Units to certain members who elected not to be diluted
      by the LLC Units issued to a consultant of HydroGen.




**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.**
                **C****hanges
                    In and Disagreements With Accountants on Accounting and Financial
                    Disclosure******




On
      July
      6, 2005, HydroGen dismissed Epstein Weber & Conover, PLC as its independent
      certified public accountants. The decision was approved by the Board of
      Directors.




The
      report of Epstein Weber & Conover, PLC on the financial statements for the
      fiscal year ended March 31, 2005 did not contain an adverse opinion or
      disclaimer of opinion. However, the report was modified due to an uncertainty
      about the Company’s ability to continue as a going concern at that time. During
      the Company’s fiscal year ended March 31, 2005 and the subsequent interim period
      preceding the termination, there were no disagreements with Epstein Weber &
Conover, PLC on any matter of accounting principles or practices, financial
      statement disclosure, or auditing scope or procedure, which disagreements,
      which
      if not resolved to the satisfaction of Epstein Weber & Conover, PLC would
      have caused Epstein Weber & Conover, PLC to make reference to the subject
      matter of the disagreements in connection with its report on the financial
      statements for such years or subsequent interim periods.




Epstein
      Weber & Conover, PLC was requested to furnish a letter addressed to the
      Securities and Exchange Commission (“SEC”) stating whether or not it agrees with
      the statements in Item 4.01(a) of the Current Report on Form 8-K filed July
      13,
      2005 by HydroGen which was filed as Exhibit 16.2 to the Form 8-K




On
      July
      7, 2005, Goldstein Golub Kessler LLP (“GGK”) was engaged as HydroGen’s new
      independent certified accountants. During the two most recent fiscal years
      and
      the interim period preceding the engagement of GGK, HydroGen did not consult
      with GGK 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 HydroGen’s financial statements; or (ii) any
      matter that was either the subject of a disagreement or event identified in
      paragraph (a)(1)(iv) of Item 304 of Regulation S-B. Prior to
      July 7, 2005, GGK acted as the independent certified accountants to
      HydroGen LLC.




**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 (the
      “Certifying Officers”), as appropriate to allow timely decisions regarding
      required disclosure.







-33-






As
      required by Rules 13a-15 and 15d-15 under the Exchange Act, the Certifying
      Officers carried out an evaluation of the effectiveness of the design and
      operation of HydroGen’s disclosure controls and procedures as
      of
      December 31, 2006. Their evaluation was carried out with the participation
      of
      other members of the HydroGen management. Based upon their evaluation, the
      Certifying Officers concluded that HydroGen’s disclosure controls
      and procedures were effective .




HydroGen’s
      internal control over financial reporting is a process designed by, or under
      the
      supervision of, the Certifying Officers 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.




**Item
              8B.**
            **Other****Information**




None.





-34-







**PART
      III**




**Item
          9.** **Directors,
          Executive Officers, Promoters and Control Persons; Compliance With Section
          16(a)
          of the Exchange Act** ****




The
      following table sets forth certain information about each of the members of
      the
      Board of Directors and each executive officer:




**Name**
            
            **Age**
            
            **Positions**
            
            **Director
                Since**Dr.
                Leo Blomen
            
            52
            
            Chairman
                and Chief Executive Officer
            
            2005Joshua
                Tosteson
            
            35
            
            President
                and Director
            
            2005Dr.
                Howard Shapiro(1)
            
            59
            
            Director
            
            2005Brian
                Bailys(1)
            
            47
            
            Director
            
            2005John
                Freeh(1)(3)
            
            55
            
            Director
            
            2005Michael
                Basham(2)(3)
            
            57
            
            Director
            
            2006Philip
                J. Kranenburg(2)
            
            46
            
            Director
            
            2006Brian
                T. McGee(2)
            
            47
            
            Director
            
            2006**Executive
                Officers**
            ****
            **Age**
            ****
            **Positions**
            ****
            **Officer
                Since**Scott
                M. Schecter
            
            50
            
            Chief
                Financial Officer
            
            2005Scott
                Wilshire
            
            44
            
            Chief
                Operating Officer
            
            2005


****


(1) Member
      of
      the Compensation Committee


(2) Member
      of
      the Audit Committee


(3) Member
      of
      the Nominating Committee




**Directors**




Dr.
      Leo
      Blomen is the Chairman and Chief Executive Officer of HydroGen, and has been
      active in fuel cells and energy related management for almost 23 years. 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. Dr. Blomen devotes a minimum of 50% of his professional time to
      Hydrogen, augmenting the day-to-day full time management activities of Mr.
      Tosteson with his decades of experience in portfolio management of companies.
      The Messrs. Blomen and Tosteson have developed this management model over the
      past three years of intensive collaboration in developing HydroGen.







-35-




Mr.
      Joshua Tosteson is a Director and President of HydroGen, and has been active
      in
      the fields of earth systems science, education, public outreach, management
      consulting, and environmental entrepreneurship for over 10 years. He is a
      co-founder of FullCircle LLC, a New York-based 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 on assignment 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
      $20MM
      in private and Federal investment to establish two new commercial manufacturing
      operations on the site utilizing regionally available waste streams as
      feedstock. From 1994 to 1997, Mr. Tosteson served in various capacities as
      a
      management consultant for the Biosphere 2 facility in Oracle, AZ, supporting
      a
      comprehensive effort to re-tool and reorganize 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 has published widely in the
      peer-reviewed and popular literature. He holds degrees in environmental science
      and public policy (BA, Harvard University) and atmospheric science (MA, Columbia
      University).




Mr.
      John
      J. Freeh, Director of HydroGen, served as president of LM Systems Management
      and
      as an officer of Lockheed Martin from July 2001 until his retirement in February
      2007. Mr. Freeh was responsible for Lockheed Martin’s Defense, Energy and
      National Security Services businesses. From January, 1993 to 2001, Mr. Freeh
      was
      the president and general manager of KAPL, Inc. KAPL, Inc designed, developed
      and tested naval nuclear reactors and propulsion systems and operated land
      passed nuclear power prototypes to test reactor and propulsion system designs.
      From 1974 to 1993, Mr. Freeh held other positions with KAPL, Inc., including
      Manager - Computer Information Systems, Manager - Special Projects, Manager
      -
      Prototype Programs and Design and Manager - Prototype Engineering.




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.







-36-







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.




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.




**Executive
      Officers**




Other
      than Dr. Blomen and Mr. Tosteson the Company has the following two executive
      officers.




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 SmallCap: DSTI), a manufacturer and
      developer of photovoltaic products.







-37-







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.




**Director
      Compensation**




Each
      of
      the non-employee directors of HydroGen are paid an annual fee of $10,000 and
      paid $1,000 per face-to-face meeting or $500 per telephonic meeting attended.
      Non-employee directors are also paid $500 for each committee meeting attended,
      either in person or telephonically. 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 five 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.







-38-




The
      following Director Compensation Table summarizes the compensation of our
      non-employee directors for services rendered by HydroGen during the year ended
      December 31, 2006.




**DIRECTOR
      COMPENSATION TABLE**




**Name**
            
            **Fees
                Earned**
              **or
                Paid in Cash**
            
            **Option
                Awards****(1)**
            
            **Total**John
                Freeh
            
            $
            17,000
            
            $
            37,165
            
            $
            54,165Brian
                Bailys
            
            
            17,000
            
            
            37,165
            
            
            54,165Howard
                Yana-Shapiro
            
            
            14,000
            
            
            37,165
            
            
            54,165Michael
                Basham
            
            
            -
            
            
            -
            
            
            -Philip
                Kranenburg
            
            
            -
            
            
            -
            
            
            -Brian
                McGee
            
            
            -
            
            
            -
            
            
            -




**Employment
      Agreements** ****




Each
      officer serves at the discretion of our board of directors. We have entered
      into
      employment agreements with Joshua Tosteson, President and Director, Scott
      Schecter, Chief Financial Officer, and Scott Wilshire, Chief Operating Officer.
      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.




Dr.
      Leo
      Blomen is the Chairman and Chief Executive Officer of HydroGen, and his services
      are made available through a Dutch management consulting firm that charges
      HydroGen a biweekly management fee for his services. The basic terms of an
      agreement between the management firm and HydroGen have been negotiated, and
      formalization of an agreement should be finalized in early 2007. Blomenco’s
      current fee arrangement totals approximately €252,000 per annum for 80% of Dr.
      Blomen’s time. Blomenco will also be reimbursed for benefits that it provides
      Dr. Blomen, so long as such benefits are similar to those provided to HydroGen’s
      executive officers. Through Blomenco, Dr. Blomen can also earn bonuses from
      HydroGen, and HydroGen has agreed to provide Blomenco with its usual management
      fee, bonus payment and benefits for one year following termination without
      cause.




Joshua
      Tosteson, Director and the President of HydroGen, and HydroGen have entered
      into
      an employment agreement for a period of three years commencing April 1, 2005,
      renewable on an automatic basis annually thereafter. The agreement may be
      terminated for cause at any time by HydroGen. If the agreement is terminated
      without cause, HydroGen will owe Mr. Tosteson one year of severance pay.
      Mr. Tosteson earns an annual salary of $238,500, and is entitled to various
      bonuses upon HydroGen reaching various milestones, at the discretion of the
      Compensation Committee. Mr. Tosteson will be eligible to participate in the
      standard benefits offered to all employees of HydroGen, including coverage
      under
      the company medical and disability plans.







-39-







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.
      The agreement may be terminated at any time for cause, however if Mr. Schecter
      is terminated without cause, 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 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, 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 once vested. These options vest ratably
      each
      month until March 2008. 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.




**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 712,657 shares subject
      to
      stock option awards under the plan at an weighted average exercise price of
      $4.26 and there are 387,343 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 2006 were complied with, except that on December 11,
      2006, the Company granted stock options to Messrs. Freeh, Bailys, Tosteson,
      Schecter, Wilshire and Dr.’s Blomen and Yana-Shapiro, and the applicable
      Form 4’s weren’t filed until January 2007. The individual officers and
      directors who were obligated to file Form 4 were inadvertently late in such
      filing.







-40-






**Audit
      Committee and Financial Expert**




The
      Audit
      Committee of our Board of Directors is composed of three non-employee directors
      who meet the independence standards of the NASDAQ Stock Market. The members
      of
      the Audit Committee are Michael E. Basham, Brian T. McGee and
      Philip J. Kranenburg. 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, and is independent under
      the applicable requirements of the Securities Exchange Act of 1934. A Chairman
      of the Audit Committee will be selected by the board of directors at its next
      board meeting.




**Code
      of Ethics**




A
      code of
      ethics relates to written standards that are reasonably designed to deter
      wrongdoing and to promote:




1) Honest
      and ethical conduct, including the ethical handling of actual or apparent
      conflicts of interest between personal and professional
      relationships;




2) Full,
      fair, accurate, timely and understandable disclosure in reports and documents
      that are filed with, or submitted to the Securities and Exchange Commission
      and
      in other public communications made by HydroGen;




3) Compliance
      with applicable government laws, rules and regulations;




4) The
      prompt internal reporting of violations of the code to an appropriate person
      or
      persons identified in the code; and




5) Accountability
      for adherence to the code.




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.
      A
      copy of the code of ethics is filed as an exhibit to this Form 10-KSB and may
      be
      obtained from the Company upon request.




**Shareholder-Director
      Communication**




The
      Board
      of Directors has a Nominating Committee comprised of Messrs. Freeh and
      Basham. The Committee held no meetings during fiscal year 2006 having been
      appointed January 16, 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:






-41-






Nominating
      and Corporate Governance 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.




The
      board
      of directors does not have a formal policy of attendance of directors at the
      annual meeting. It does encourage such attendance. HydroGen held an annual
      meeting on July 17, 2006 and all the directors attended the
      meeting.




**Item
                  10.**
                **Executive
                    Compensation**




The
      table
      below sets forth for the calendar years ending December 31, 2005, 2004 and
      2003,
      the compensation of HydroGen’s Chief Executive Officer and the three other most
      highly compensated executive officers of HydroGen during the calendar year
      2005.




**SUMMARY
      COMPENSATION TABLE**




**Name
                and Principal**
              **Position**
            
            **Year**
            
            **Salary**
            
            **Bonus**
            
            **Option**
              **Awards**
              ******($)**
            
            **Non-Equity
                Incentive Plan Compensation****($)**
            
            **Nonqualified
                Deferred Compensation****Earnings
                ($)**
            
            **All
                Other Compensation****($)**
            
            **Total**
              **($)**Leo
                Blomen,(1)
              Chairman
                and Chief Executive Officer
            
            
            2006(2
            )
            
            -
            
            
            -
            
            
            125,015
            
            
            -
            
            
            -
            
            
            -
            
            
            125,015Joshua
                Tosteson,
              President
            
            
            2006(2
            )
            
            215,295
            
            
            89,696
            
            
            107,967
            
            
            -
            
            
            -
            
            
            13,951
            
            
            426,909Scott
                M. Schecter,
              Chief
                Financial Officer
            
            
            2006(2
            )
            
            243,000
            
            
            55,450
            
            
            54,552
            
            
            -
            
            
            -
            
            
            27,642
            
            
            380,644Scott
                Wilshire,
              Chief
                Operating Officer
            
            
            2006(2
            )
            
            173,019
            
            
            47,160
            
            
            119,956
            
            
            -
            
            
            -
            
            
            23,060
            
            
            363,195









(1)
            HydroGen
                has a relationship with Blomenco B.V., a Dutch management services
                company
                organized under Dutch law and making available, among other things,
                the
                management services of Dr. Leo Blomen, along with the necessary support
                staff, office and infrastructure. Dr. Blomen spends a minimum of 80%
                of his time on HydroGen business
                activities.




(2)
            From
                January 2006 to April 2006, Blomenco B.V. charged a management fee
                of
                €185,000 per annum, but was paid in US dollars at a conversion rate
                equal
                to 50% of the difference between the dollar and the euro. From April
                2006
                to October 2006, Blomenco B.V. charged a management fee of €225,000 per
                annum, but was paid in US dollars at a conversion rate equal to 50%
                of the
                difference between the dollar and the euro. From November 2006 -
                December
                2006, Blomenco B.V. charged a management fee of €252,000 per annum and was
                paid in US dollars at the market conversion rate between the dollar
                and
                the euro. In 2006, Blomenco B.V earned fees totaling $349,188, which
                includes a bonus earned of
                $115,239.







-42-






The
      following table sets forth information concerning the other compensation granted
      to the named executive officers for the year ending December 31,
      2006.




**Name**
            **Year**
            **Medical
                Premiums**
            **401K
                Employer Match**Leo
                Blomen
            2006
            -
            -Joshua
                Tosteson
            2006
            6,451
            7,500Scott
                M. Schecter
            2006
            18,842
            8,800Scott
                Wilshire
            2006
            16,223
            6,837




The
      following table sets forth information concerning the outstanding equity awards
      granted to the named executive officers at December 31, 2006.




**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
            18,333
            36,667
            36,667
            4.50
            12/11/2011Joshua
                Tosteson
            15,833
            31,667
            31,667
            4.50
            12/11/2011Scott
                M. Schecter
            66,567
              8,000
            47,548
              16,000
            47,548
              16,000
            4.34
              4.50
            04/01/2014
              12/11/2011Scott
                Wilshire
            52,414
            33,354
            33,354
            4.34
            03/01/2014-
            28,347
            28,347
            5.15
            06/15/20106,667
            13,333
            13,333
            4.50
            12/11/2011







-43-





**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 February 28, 2007 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, assuming the vesting of options granted to Messrs.
      Schecter and Wilshire through April, 2007. 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)
            
            
            429,919
            
            
            3.36
            %Joshua
                Tosteson(1)(3)
            
            
            559,430
            
            
            4.38
            %Scott
                Schecter(1)(4)
            
            
            179,077
            
            
            1.39
            %Scott
                Wilshire(1)(5)
            
            
            68,610
            
            
            0.53
            %Brian
                Bailys(1)(6)
            
            
            120,406
            
            
            0.94
            %John
                J. Freeh(1)(6)
            
            
            11,500
            
            
            --Howard-Yana
                Shapiro(1)(6)
            
            
            11,500
            
            
            --Michael
                E. Basham(1)
            
            
            1,000
            
            
            --Philip
                J. Kranenburg(1)
            
            
            -0-
            
            
            --Brian
                T. McGee(1)
            
            
            -0-
            
            
            --FuelCell
                Holdings, LLC(7)
            
            
            757,445
            
            
            5.93
            %Alysheba
                Funds(8)
            
            
            875,000
            
            
            6.76
            %Ardsley
                Partners Funds(9)
            
            
            1,100,000
            
            
            8.48
            %Federated
                Investors, Inc.(10)
            
            
            1,250,000
            
            
            9.60
            %Magnetar
                Capital Master Fund, Ltd.(11)
            
            
            1,498,305
            
            
            11.51
            %Pequot
                Capital Management, Inc.(12)
            
            
            866,313
            
            
            6.78
            %Security
                Management Company, LLC(13)
            
            
            1,945,846
            
            
            15.24
            %All
                Executive Officers and Directors as a group (seven persons)(14)
            
            
            1,381,442
            
            
            10.62
            %




*
            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
                15025.




(2)
            Includes
                18,333 shares of common stock subject to options that vest as of
                April 31, 2007, but does not include 36,667 shares of common stock
                that are subject to options that may vest in the future.




(3)
            Includes
                15,833 shares of common stock subject to options that vest as of
                April 31, 2007, but does not include 31,667 shares of common stock
                that are subject to options that may vest in the future.







-44-







(4)
            Includes
                87,246 shares of common stock subject to options that vest as of
                April 31, 2007, but does not include 50,869 shares of common stock
                that are subject to options that may vest in the
                future.




(5)
            Includes
                68,610 shares of common stock subject to options that vest as of
                April 31, 2007, but does not include 65,505 shares of common stock
                subject to options that may vest in the
                future.




(6)
            Includes
                11,500 fully vested stock options that were received upon joining
                the
                Board of Directors, as well as a subsequent annual grant.




(7)
            FuelCell
                Holdings, LLC has an address at 3201 Enterprise Parkway, Suite 460,
                Beachwood, Ohio 44122. Mr. Saul Siegel has investment authority over
                these shares.




(8)
            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.




(9)
            Ardsley
                Partners Fund II, L.P., Ardsley Institutional Fund, L.P. and Ardsley
                Offshore Fund, Ltd. are managed by Ardsley Partners, a partner of
                which,
                Steven N. Napoli, has the dispositive and voting authority of all the
                shares held by the aforementioned investors. Amount includes 200,000
                shares of common stock subject to
                warrants.




(10)
            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.




(11)
            Magnetar
                Financial LLC is the investment advisor of Magnetar Capital Master
                Fund,
                Ltd. (“Magnetar Master Fund”) and consequently has voting and investment
                discretion over securities held by Magnetar Master Fund. Magnetar
                Financial LLC disclaims beneficial ownership of the shares held by
                Magnetar Master Fund. Alec Litowitz has voting control over Supernova
                Management LLC, the general partner of Magnetar Capital Partners
                LP, the
                sole managing member of Magnetar Financial LLC. As a result,
                Mr. Litowitz may be considered the beneficial owner of any shares
                deemed to be beneficially owned by Magnetar Financial LLC.
                Mr. Litowitz disclaims beneficial ownership of these shares. Amount
                includes 250,000 shares of common stock subject to
                warrants.




(12)
            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.




(13)
            Security
                Management Company, 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 Management
                Company, LLC may be deemed to be the beneficial owner of such
                securities.







-45-







(14)
            Includes
                244,522 shares of common stock subject options that vest as of
                April 31, 2007, but does not include 184,708 shares of common stock
                that are subject to options that may vest in the
                future.




**Item
                  12.**
                **Certain
                    Relationships and Related
                    Transactions**




HydroGen
      has a relationship with Blomenco B.V., a Dutch management services company
      organized under Dutch law and making available, among other things, the
      management services of Dr. Leo Blomen, along with the necessary support
      staff, office and infrastructure. Dr. Blomen spends a minimum of 80% of his
      time on HydroGen business activities.




From
      January 2006 to April 2006, Blomenco B.V. charged a management fee of €185,000
      per annum, but was paid in US dollars at a conversion rate equal to 50% of
      the
      difference between the dollar and the euro. From April 2006 to October 2006,
      Blomenco B.V. charged a management fee of €225,000 per annum, but was paid in US
      dollars at a conversion rate equal to 50% of the difference between the dollar
      and the euro. From November 2006 to December 2006, Blomenco B.V. charged a
      management fee of €252,000 per annum and was paid in US dollars at the market
      conversion rate between the dollar and the euro. In 2006, Blomenco B.V earned
      fees totaling $349,188, which includes a bonus earned of $115,239.




**Item
                  13.**
                **Exhibits
                    and Reports on Form
                    8-K**




a. The following Exhibits
      are filed as part of this Report:




**Exhibit
                No.**
            **Description**3.1
            Articles
                of Incorporation - under the name TSI (Incorporated by reference
                from Form
                10-KSB for fiscal year ended March 31, 2003, Exhibit
                3.1)3.2
            Certificate
                of Amendment to the Articles of Incorporation (Incorporated by reference
                from Form 10-KSB for fiscal year ended March 31, 2003, Exhibit
                3.2)3.3
            Certificate
                of Designation - Series A 10% Cumulative Convertible Preferred Stock
                (Incorporated by reference from Form 10-KSB for fiscal year ended
                March
                31, 2005, Exhibit 3.3)3.4
            Certificate
                of Designations, Preferences, Rights and Limitations of Series B
                Convertible Preferred Shares 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)3.7
            By-laws
                - under the name TSI (Incorporated by reference from Form 10-KSB
                for
                fiscal year ended March 31, 2003, Exhibit 3.4)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






-46-


**Exhibit
                No.**
            **Description**10.4
            Employment
                Agreement - Joshua Tosteson (Incorporated by reference from Form
                8-K dated
                July 7, 2005, Exhibit 10.4)10.5
            Employment
                Agreement - Scott Schecter (Incorporated by reference from Form 8-K
                dated
                July 7, 2005, Exhibit 10.5)10.6
            Employment
                Agreement - Scott Wilshire (Incorporated by reference from Form 8-K
                dated
                July 7, 2005, Exhibit 10.6)10.7
            Employment
                Agreement - Greg Morris (Incorporated by reference from Form 8-K
                dated
                July 7, 2005, Exhibit 10.7)10.8
            Option
                Agreement - Scott Schecter (Incorporated by reference from Form 8-K
                dated
                July 7, 2005, Exhibit 10.8)10.9
            Option
                Agreement - Scott Wilshire (Incorporated by reference from Form 8-K
                dated
                July 7, 2005, Exhibit 10.9)10.10
            Option
                Agreement - Greg Morris (Incorporated by reference from Form 8-K
                dated
                July 7, 2005, Exhibit 10.10)10.11
            Form
                of General Investor Stock Purchase Agreement, including voting agreement
                (Incorporated by reference from Form 8-K dated July 7, 2005, Exhibit
                10.11)10.12
            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)10.13
            Preferred
                Shares Investor Registration Rights Agreement for institutional investors
                (Incorporated by reference from Form 8-K dated July 7, 2005, Exhibit
                10.13)10.14
            Stock
                Option Plan (Incorporated by reference from Form 8-K dated July 7,
                2005,
                Exhibit 10.15)10.15
            Agreement
                Department of Development of the State of Ohio dated August 26, 2005
                (Incorporated by reference from Form 8-K dated July 26, 2005, Exhibit
                10.1)10.16
            Patent
                License from US Department of Energy dated August 26, 2005 (Incorporated
                by reference from Form 8-K dated July 26, 2005, Exhibit
                10.2)14.1
            Code
                of Ethics (Incorporated by reference from Form 10-KSB for fiscal
                year
                ended December 31, 2005)21.1
            Subsidiaries
                of HydroGen Corp.(Incorporated
                by reference from Form 10-KSB for fiscal year ended December 31,
                2005)31.1
            Certificate
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Leo
                Blomen*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*






-47-


**Exhibit
                No.**
            **Description**32.1
            Certificate
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Leo
                Blomen*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




*
      Filed
      herewith




b. Reports
      on Form 8-K.




On
      October 12, 2006 the Company filed a Form 8-K stating that it had issued a
      press
      release in connection with the installation of a 400kW fuel cell demonstration
      power plant at the ASHTA Chemicals chlor-alkali manufacturing plant in
      Ashtabula, Ohio. A copy of the press release was filed with the 8-K.




On
      December 22, 2006, HydroGen filed a Form 8-K stating that it had elected three
      new independent directors of the Company. All three persons are financially
      literate, and each is considered a financial expert by the Company.




**Item
                  14.**
                **Accountants
                    Fees and
                    Services**




Through
      September 30, 2005, Goldstein Golub Kessler LLP (the Firm) had a continuing
      relationship with American Express Tax and Business Services Inc. (TBS), from
      which it leased auditing staff who were full time, permanent employees of TBS
      and through which its partners provide non-audit services.  Subsequent to
      September 30, 2005, this relationship ceased and the firm established a similar
      relationship with RSM McGladrey, Inc. (RSM). The Firm has no full time employees
      and therefore, none of the audit services performed were provided by permanent
      full-time employees of the Firm. The Firm manages and supervises the audit
      and
      audit staff, and is exclusively responsible for the
      opinion rendered in connection with its examination.




The
      following table shows the fees paid or accrued for the audit and other services
      provided by Goldstein Golub Kessler LLP for the years ended December 31, 2006
      and 2005:




December
                31,
              2006
            
            December
                31,
              2005Audit
                Fees
            
            $
            92,387
            
            $
            71,616Audit
                Related Fees
            
            
            -
            
            
            -Tax
                Fees
            
            
            -
            
            
            -All
                Other Fees
            
            
            -
            
            
            -$
            92,387
            
            $
            71,616




-48-




Audit
      services of Goldstein Golub Kessler LLP for the years 2006 and 2005 consisted
      of
      the audit of the year end financial statements and the review of the quarterly
      financial statements of HydroGen and registration statements and other SEC
      filings.




Because
      the board of directors of HydroGen does not have an audit committee, the above
      services and engagements were approved by the Chairman of the board of
      directors.





-49-





**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 March 15, 2007.









HYDROGEN
              CORPORATIONBy:
            /s/ Leo
              BlomenLeo
              BlomenChairman
              and Chief Executive Officer




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 March 15, 2007.









**Signature**
            **Capacities**
            **Date**/s/
                Leo Blomen
              **Leo
                Blomen**
            Chairman
                and Chief Executive Officer (Principal Executive Officer)
            March 15,
                2007/s/
                Joshua Tosteson
              **Joshua
                Tosteson**
            President
                (Principal Executive Officer) and Director
            March 15,
                2007/s/
                Scott M. Schecter
              **Scott
                M. Schecter**
            Chief
                Financial Officer (Principal Financial and Accounting
                Officer)
            March 15,
                2007/s/
                Brian Bailys
              **Brian
                Bailys**
            Director
            March 15,
                2007/s/
                Michael E. Basham
              **Michael E.
                Basham**
            Director
            March 15,
                2007/s/
                John Freeh
              **John
                Freeh**
            Director
            March 15,
                2007/s/
                Philip J. Kranenburg
              **Philip J.
                Kranenburg**
            Director
            March 15,
                2007/s/
                Brian T. McGee
              **Brian
                T. McGee**
            Director
            March 15,
                2007/s/
                Howard Yana-Shapiro
              **Howard
                Yana-Shapiro**
            Director
            March 15,
                2007






-50-







**Financial
      Statements**




***INDEX*** **TO CONSOLIDATED FINANCIAL STATEMENTS**




**PAGE****Report
                of Independent Registered Public Accounting Firm**
            F-2**Consolidated
                Balance Sheet**-
                December 31, 2006
            F-3**Consolidated
                Statements of Operations**-
                For the Years Ended December 31, 2006 and 2005, and from November
                11, 2001
                (inception) through December 31, 2006
            F-4**Consolidated
                Statements of Shareholders’ Equity**-
                from November 11, 2001 (inception) through December 31,
                2006
            F-5**Consolidated
                Statements of Cash Flows**-
                For the Years Ended December 31, 2006 and 2005, and from November
                11, 2001
                (inception) through December 31, 2006
            F-7**Notes
                to Consolidated Financial Statements**
            F-8






**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**






To
      the
      Board of Directors


HydroGen
      Corporation




We
      have
      audited the accompanying consolidated balance sheet of HydroGen Corporation
      (a
      development stage company) as of December 31, 2006 and the related consolidated
      statements of operations, shareholders’ equity (deficiency) and cash flows for
      the years ended December 31, 2006 and 2005 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 financial position of HydroGen Corporation as of December
      31, 2006 and the results of its operations and its cash flows for the years
      ended December 31, 2006 and 2005, and for the period from November 11, 2001
      (inception) through December 31, 2006, in conformity with United States
      generally accepted accounting principles.




As
      discussed in Note 10, the Company changed its method of accounting for
      stock-based compensation effective January 1, 2006.






**GOLDSTEIN
      GOLUB KESSLER LLP**


New
      York,
      New York






February
      16, 2007








F-2





**HYDROGEN
      CORPORATION AND SUBSIDIARY**


**(A
      Development Stage Company)**


**CONSOLIDATED
      BALANCE SHEET**




**December
                31,**
              **2006****ASSETS****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            14,170,530Short-term
                investments
            
            
            9,889,603Accounts
                receivable
            
            
            262,408Other
                current assets
            
            
            1,289,995**TOTAL
                CURRENT ASSETS**
            
            
            25,612,536Property
                and equipment, net
            
            
            3,469,533Other
                assets
            
            
            57,017**TOTAL
                ASSETS**
            
            $
            29,139,086**LIABILITIES
                AND SHAREHOLDERS’ EQUITY****CURRENT
                LIABILITIES**Accounts
                payable and accrued expenses
            
            $
            1,659,441Capital
                lease obligations, current portion
            
            
            72,295**TOTAL
                CURRENT LIABILITIES**
            
            
            1,731,736**LONG-TERM
                LIABILITIES**Capital
                lease obligations, net of current portion
            
            
            119,773**TOTAL
                LIABILITIES**
            
            $
            1,851,509Common
                stock, par value $0.001, authorized 65,000,000shares,
              12,769,904
                and 7,614,904 issued and outstanding at December
              31,2006
                and 2005, respectively
            
            
            12,770Additional
                paid-in capital
            
            
            42,595,815Deficit
                accumulated during the development stage
            
            
            (15,321,008
            )**TOTAL
                SHAREHOLDERS’ EQUITY**
            
            
            27,287,577**TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY**
            
            $
            29,139,086








See
      accompanying notes to the financial statements





F-3


**HYDROGEN
      CORPORATION AND SUBSIDIARY**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS (Unaudited)**





**For
                the Years Ended**
              **December
                31,**
            
            **November
                11,**
              **2001
                (Inception)**
              **through
                December 31,**
              **2006****2006**
            
            **2005**Demonstration
                Grant Revenue
            
            $
            610,721
            
            $
            40,042
            
            $
            747,423Costs
                and expenses (including stock-based compensation expense of $561,331,
                $626,019, and $1,826,180, respectively)
            
            
            8,985,568
            
            
            4,538,347
            
            
            15,518,154**LOSS
                FROM OPERATIONS**
            
            
            (8,374,847
            )
            
            (4,498,305
            )
            
            (14,770,731
            )Interest
                and other income
            
            
            1,046,602
            
            
            196,253
            
            
            1,244,019Interest
                and other financing charges
            
            
            (95,055
            )
            
            (564,145
            )
            
            (770,485
            )Charge
                for repricing conversion price of convertible debt
            
            
            -
            
            
            (875,000
            )
            
            (875,000
            )**NET
                LOSS**
            
            $
            (7,423,300
            )
            $
            (5,741,197
            )
            $
            (15,172,197
            )Weighted
                average common shares outstanding (basic and diluted)
            
            
            11,060,986
            
            
            2,631,633
            
            
            -Net
                loss per share (basic and diluted)
            
            $
            (0.67
            )
            $
            (2.18
            )
            
            -**PRO
                FORMA**Pro
                forma weighted average common shares outstanding (basic and
                diluted)
            
            
            -
            
            
            5,380,180
            
            
            -Pro
                forma net loss per share (basic and diluted)
            
            $
            -
            
            $
            (0.49
            )
            
            -











See
      accompanying notes to the financial statements





F-4






**HYDROGEN
      CORPORATION AND SUBSIDIARY**


**(A
      Development Stage Company)**


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




**Common
                Stock**
            
            **Series
                B Preferred Stock**
            
            **Additional**
              **Paid-in**
            
            **Deficit
                Accumulated 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
            )
            
            -
            
            
            -





F-5




**Common
                  Stock**
              
              **Series
                  B Preferred Stock**
              
              **Additional**
                **Paid-in**
              
              **Deficit
                  Accumulated 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
              )
              $
              27,287,577




See
      accompanying notes to the financial statements





F-6





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




**For
                    the Year Ended**
                  **December
                    31****,**
                
                **November
                    11, 2001**
                  **(Inception)
                    through**
                  **December
                    31,****2006**
                
                **2005**
                
                **2006****CASH
                    FLOWS FROM OPERATING ACTIVITIES**Net
                    loss
                
                $
                (7,423,300
                )
                $
                (5,741,197
                )
                $
                (15,172,197
                )Adjustments
                    to reconcile net loss to net cash used in operating
                    activities:Depreciation
                
                
                230,956
                
                
                14,343
                
                
                245,790Amortization
                    of discount on convertible notes
                
                
                -
                
                
                491,242
                
                
                558,911Stock-based
                    compensation
                
                
                561,331
                
                
                626,019
                
                
                1,826,181Financing
                    cost recognized upon change in terms of convertible debt
                
                
                -
                
                
                875,000
                
                
                875,000Loss
                    on disposal of property and equipment
                
                
                35,416
                
                
                -
                
                
                35,416Changes
                    in operating assets and liabilitiesIncrease
                    in accounts receivable
                
                
                (222,366
                )
                
                (40,042
                )
                
                (262,408
                )Increase
                    in other current assets
                
                
                (973,361
                )
                
                (314,118
                )
                
                (1,289,995
                )Increase
                    in other assets
                
                
                (42,644
                )
                
                (14,373
                )
                
                (57,017
                )Increase
                    in accounts payable and accrued expenses
                
                
                1,046,480
                
                
                322,989
                
                
                1,659,441**NET
                    CASH USED IN OPERATING ACTIVITIES**
                
                $
                (6,787,488
                )
                $
                (3,780,137
                )
                $
                (11,580,878
                )**CASH
                    FLOW FROM INVESTING ACTIVITIES**Purchase
                    of short-term investments
                
                
                (24,691,930
                )
                
                (6,493,482
                )
                
                (31,185,412
                )Maturity
                    of short-term investments
                
                
                21,295,809
                
                
                -
                
                
                21,295,809Purchase
                    of property and equipment
                
                
                (2,475,467
                )
                
                (1,042,196
                )
                
                (3,522,569
                )**NET
                    CASH USED IN INVESTING ACTIVITIES**
                
                $
                (5,871,588
                )
                $
                (7,535,678
                )
                $
                (13,412,172
                )**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
                
                
                12,979,443
                
                
                37,049,682Proceeds
                    from notes payable, related parties
                
                
                -
                
                
                (467,360
                )
                
                150,000Principal
                    payments on capital lease obligations
                
                
                (36,102
                )
                
                -
                
                
                (36,102
                )Proceeds
                    from issuance of convertible notes payable including amount allocated
                    to
                    equity component
                
                
                -
                
                
                370,000
                
                
                2,000,000**NET
                    CASH PROVIDED BY FINANCING ACTIVITIES**
                
                $
                24,033,282
                
                $
                12,882,083
                
                $
                39,163,580**NET
                    INCREASE IN CASH AND CASH EQUIVALENTS**
                
                
                11,374,206
                
                
                1,566,268
                
                
                14,170,530**CASH
                    AND CASH EQUIVALENTS, beginning of period**
                
                
                2,796,324
                
                
                1,230,056
                
                
                -**CASH
                    AND CASH EQUIVALENTS, end of period**
                
                $
                14,170,530
                
                $
                2,796,324
                
                $
                14,170,530**SUPPLEMENTAL
                    DISCLOSURES OF CASH FLOW INFORMATION**Cash
                    paid for interest
                
                $
                11,038
                
                $
                116,493
                
                $
                127,531**SUPPLEMENTAL
                    SCHEDULE OF NON-CASH INVESTING AND FINANCING
                    ACTIVITIES**Equipment
                    acquired under capital lease
                
                $
                228,170
                
                $
                -
                
                $
                228,170Capital
                    stock issued upon conversion of convertible notes
                
                $
                -
                
                $
                2,000,000
                
                $
                2,000,000Reduction
                    in note payable to related party credited to paid in
                    capital
                
                $
                -
                
                $
                150,000
                
                $
                150,000Issuance
                    of equity in connection with issuance of convertible notes
                
                $
                -
                
                $
                103,403
                
                $
                103,403Dividend
                    - roundup of odd-lot shareholders
                
                $
                -
                
                $
                148,811
                
                $
                148,811







See
      accompanying notes to the financial statements




F-7
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**


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




The
      business of HydroGen Corporation (the “Company”) commenced in November, 2001 to
      conduct the business of designing and manufacturing air-cooled Phosphoric Acid
      Fuel Cell (“PAFC”) power generation systems. On July 7, 2005, the Company
      became a wholly-owned subsidiary of Chiste Corporation, which was renamed
“HydroGen Corporation” on August 18, 2005.




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.




**NOTE
      2 -** ***RECAPITALIZATION***




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
      August 16, 2005, the Company’s shareholders voted to change its name from
      Chiste to HydroGen Corporation. In addition, shareholders also approved a 1:25
      reverse stock split and the Company’s 2005 Performance Equity Plan, as amended.
      Coincident with the reverse stock split, the Series B Preferred Stock was
      converted into common stock.




HydroGen
      LLC 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-8
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**


**NOTE
      2 -** ***RECAPITALIZATION
      - Continued***




As
      described in Note 9, the Company had outstanding $2,000,000 in principal
      amount of convertible notes which bore interest at 6% per annum. Although the
      conversion rate was $222,222 per membership unit of the Company, as part of
      the
      transactions described above, the Company extended an offer to the holders
      of
      the bridge notes to convert the outstanding principal for units in the Company
      at the conversion rate of $125,000 per Unit. The revised conversion price was
      equivalent to the price paid for membership units in the fund raise described
      above. All of the notes were subsequently converted on July 7, 2005, and
      the Company paid approximately $69,000 in interest expense to the note holders
      at that time. In the third quarter of 2005, the Company recorded a non-cash
      charge of $875,000 related to the repricing of the convertible
      notes.




**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.
      The
      Company was committed to file the registration statement within 45 days of
      closing and have it declared effective within 90 days of closing, or otherwise
      be subject to liquidated damages, not to exceed 10% of the subscription amount
      for the shares. Liquidated damages related to this private placement of
      securities were therefore not incurred by the Company. There was no requirement
      to pay liquidated damages in respect of the shares of common stock underlying
      the warrants if those shares were not registered. In connection with the
      liquidated damages provision of the registration rights agreement, HydroGen
      evaluated the classification of the equity subject to liquidated damages under
      Emerging Issues Task Force Topic D-98. It concluded that the equity should
      be
      classified as permanent equity because the damages were capped at 10% of the
      value of the common shares sold which is no more than a reasonable estimate
      of
      the difference in the fair values between registered shares and unregistered
      shares.




The
      Company intends to use 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.







F-9
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**




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




**Principles
      of Consolidation**




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




**Revenue
      Recognition**




The
      Company recognizes 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. Demonstration
      grant revenue is recognized as the Company incurs reimbursable costs as set
      forth under the contract. All of the Company’s revenue in 2006 and 2005 is from
      grant agreements with State of Ohio government agencies.




**Accounts
      Receivable**




Accounts
      receivable consist of obligations due from government agencies for the
      demonstration of our fuel cell power generator under a development grant.
      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, 2006 and 2005 the Company
      had outstanding accounts receivable of $262,000 and $40,000, respectively.
      The
      Company recorded no bad debt expense during the years ended December 31, 2006
      and 2005 for accounts receivable.





**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.




At
      December 31, 2006, substantially all of HydroGen’s cash and short-term
      investments are on deposit within three financial institutions.




**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:





F-10
 **HYDROGEN
              CORPORATION AND SUBSIDIARY**
 **(A
              Development Stage Company)**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
              31, 2006**


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




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, 2006 and 2005 and the
      period from November 11, 2001 (inception) to December 31, 2006, was
      approximately $4,081,000, $1,164,000, and $5,538,000, respectively.




**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.




**Loss
      and Pro Forma Loss Per Share**




Loss
      per
      common share is computed by dividing the 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 2,472,627 and 420,880,
      respectively, as of December 31, 2006 and 2005 are not included in the
      computation of loss per share as their effect is antidilutive. Prior to
      August 19, 2005, the Company had no common shares outstanding. From
      inception to July 7, 2005, the Company was a limited liability company and
      accordingly did not have any shares of common stock outstanding during that
      time
      period.




Effective
      August 19, 2005, the Company’s shareholders approved a 1 for 25 reverse
      stock split, whereby the number of outstanding shares of common stock was
      decreased and the outstanding Series B Preferred Shares were converted into
      an aggregate of 7,447,600 common shares. All share and per share amounts have
      been restated to retroactively reflect the reverse stock split. Additionally,
      individuals holding less than 100 shares after the reverse split were issued
      an
      additional dividend of shares to bring them up to 100 shares. The Company has
      reflected this as a dividend to these shareholders.




Pro
      forma
      weighted average shares for the year-ended December 31, 2005 assumes that
      all equity outstanding and/or issued during those periods that were subsequently
      converted into common shares on August 29, 2005, were common share
      equivalents at the original date of issuance.




**Equity-Based
      Compensation**




Prior
      to
      January 1, 2006, the Company accounted for stock option awards granted
      under the Company’s 2005 Performance Equity Plan in accordance with the
      recognition and measurement provisions of Accounting Principles Board Opinion
      No. 25, “Accounting for Stock Issued to Employees”, (“APB 25”) and related
      Interpretations, as permitted by Statement of Financial Accounting Standards
      No. 123, “Accounting for Stock-Based Compensation”, (“SFAS 123”).
      Share-based employee compensation





F-11
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**








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




expense
      was not recognized in the Company’s consolidated statements of operations prior
      to January 1, 2006, as all stock option awards granted had an exercise
      price equal to or greater than the market value of the common stock on the
      date
      of the grant. As permitted by SFAS 123, the Company reported pro-forma
      disclosures presenting results and earnings per share as if the Company had
      used
      the fair value recognition provisions of SFAS 123 in the Notes to Consolidated
      Financial Statements. Share-based compensation related to non-employees and
      modifications of options granted were accounted for based on the fair value
      of
      the related stock or options in accordance with SFAS 123 and its
      interpretations. 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. HydroGen 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).




The
      following table illustrates the effect on net loss for the year ended December
      31, 2005 as if we had applied the fair value method to our stock-based
      compensation:




December
                31, 2005Net
                loss, as reported
            
            $
            (5,741,197
            )Pro
                forma stock compensation expense, net of tax benefit
            
            
            (161,957
            )Pro
                forma net loss
            
            $
            (5,903,154
            )Net
                loss per share, basic and diluted, as reported
            
            $
            (2.18
            )Pro
                forma stock compensation expense
            
            
            (0.06
            )Pro
                forma
            
            $
            (2.24
            )




As
      a
      result of adopting SFAS 123R, the Company recorded pretax compensation expense
      of $561,331 for the year ended December 31, 2006. 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
      year ended December 31, 2006.







F-12
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**







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




**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 January 1, 2008. The Company is currently
      evaluating the impact of this new standard on its consolidated financial
      statements.




FASB
      Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes -
      interpretation of FASB Statement No. 109.” FIN 48
      clarifies the accounting for uncertainty in income taxes recognized in the
      financial statements and sets forth recognition, derecognition and measurement
      criteria for tax positions taken or expected to be taken in a tax filing. For
      HydroGen, this guidance will apply to all tax positions taken or expected to
      be
      taken beginning on January 1, 2007. We do not expect the adoption of FIN 48
      to
      have a significant impact on our financial statements.




The
      Company does not believe that any other recently issued, but not yet effective
      accounting standards will have a material effect on the Company’s consolidated
      financial position, results of operations or cash flows.




**Use
      of Estimates**




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the amounts reported in the financial statements and accompanying notes.
      Actual results may differ from those estimates.






**Reclassifications**




Certain
      reclassifications have been made to the 2005 Financial Statements to conform
      to
      the 2006 presentation.







F-13
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**




**NOTE
      5 -** ***INVESTMENTS***




At
      December 31, 2006, investments consisted of the following:






Security
            
            Carrying
                Amount
            
            Unrealized
              Gain/(Loss)
            
            Fair
                ValueFederal
                Home Loan Bank Bonds, 2.35%, January 16, 2007 maturity
            
            $
            224,716
            
            $
            (29
            )
            $
            224,687Federal
                Home Loan Bank Bonds, 3.25%, January 30, 2007 maturity
            
            
            199,679
            
            
            (18
            )
            
            199,661Federal
                National Mortgage Association Notes, 4.00%, February 23, 2007
                maturity
            
            
            1,497,666
            
            
            (915
            )
            
            1,496,751Federal
                National Mortgage Association Notes, 3.625%, March 15, 2007
                maturity
            
            
            2,990,605
            
            
            (2,324
            )
            
            2,988,281Federal
                National Mortgage Association Notes, 4.25%, July 15 2007
                maturity
            
            
            4,976,937
            
            
            (6,624
            )
            
            4,970,313$
            9,889,603
            
            $
            (9,910
            )
            $
            9,879,693




**NOTE
      6 -** ***PROPERTY
      AND EQUIPMENT***




Property
      and equipment consisted of the following at December 31, 2006.




December
                31, 2006Computer
                equipment and software
            
            $
            138,948Machinery
                and equipment
            
            
            1,836,982Leasehold
                improvements
            
            
            1,277,665Office
                equipment
            
            
            73,505Assets
                under construction
            
            
            677,8144,004,914Less
                accumulated depreciation
            
            
            535,381$
            3,469,533







Assets
      under construction include assets related to leasehold improvements of the
      Company’s manufacturing facility, manufacturing equipment, and equipment for the
      Company’s first commercial demonstration power plant. Depreciation of these
      assets will begin when they are placed in service.







F-14
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**




**NOTE
      6 -** ***PROPERTY
      AND EQUIPMENT - Continued***




Depreciation
      expense of property and equipment for the years ended December 31, 2006 and
      2005
      and for the period November 11, 2001 (inception) to December 31, 2006 was $
      $231,000, $14,000, and $246,000, respectively.




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




At
      December 31, 2006, accounts payable and accrued expenses include the
      following:




Accounts
                payable
            
            $
            769,874Accrued
                payroll & bonuses
            
            
            638,795Other
            
            
            250,772$
            1,659,441




**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, the
      Company is being treated as a C corporation rather than a limited liability
      company. At this time, the Company 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.




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




December
                31,2006
            
            2005Deferred
                tax assetsNet
                operating losses
            
            $
            4,455,000
            
            $
            1,488,000Compensation
                & Benefits
            
            
            228,000
            
            
            0Other
            
            
            49,000
            
            
            0Total
                deferred tax assets
            
            
            4,732,000
            
            
            1,488,000Deferred
                tax liabilitiesDepreciation
            
            
            112,000
            
            
            0Total
                deferred tax liabilities
            
            
            112,000
            
            
            0Net
                deferred tax asset
            
            $
            4,620,000
            
            $
            1,488,000Valuation
                allowance
            
            
            4,620,000
            
            
            1,488,000Net
                deferred tax asset
            
            $
            0
            
            $
            0





F-15
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**


**NOTE
      8 -** **** ***INCOME
      TAXES - Continued***




A
      reconciliation between the statutory and effective tax rates
      follows:




Years
                ended December 31,2006
            
            2005Statutory
                tax rate
            
            
            (34.0
            )%
            
            (34.0
            )%Increases
                (decreases) resulting fromState
                taxes, net of federal benefit
            
            
            (6.6
            )
            
            (5.3
            )Permanent
                Differences
            
            
            1.1
            
            
            5.3Loss
                incurred as a Limited Liability Company
            
            
            0
            
            
            14.3Increase
                in valuation allowance
            
            
            39.5
            
            
            19.7Effective
                Tax Rate
            
            
            0
            %
            
            0
            %




The
      Company has accumulated federal operating losses of approximately
      $11.2 million and $3.8 million as of December 31, 2006 and
      December 31, 2005 respectively, which will expire between 2012 and 2026, if
      not utilized. The Company has accumulated state operating losses of
      approximately $9.8 million and $3.8 million as of December 31,
      2006 and December 31, 2005 respectively, which will expire between 2015 and
      2016, if not utilized. The Company’s recapitalization, described in Note 2,
      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, 2006, 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
      realizable.




**NOTE
      9 -** ***CONVERTIBLE
      NOTES***




The
      Company completed a $2,000,000 private placement of securities whereby, for
      each
      $10,000 received, it issued investment units consisting of a $10,000 convertible
      note and a .045 membership unit. The Company received proceeds of $370,000
      and
      $1,630,000 during the years ended December 31, 2005 and 2004, respectively.




The
      convertible notes bore interest at the rate of 6% per annum and were convertible
      into membership units of the Company on the basis of .045 units per $10,000
      of
      convertible amount. If not converted into membership units, the convertible
      notes, including accrued interest, were payable in full on June 30,
      2005.




A
      value
      of approximately $559,000 was allocated to the issuance of membership units
      which was based on the value of LLC Units previously sold in a private
      transaction. This amount was reflected as a discount to the convertible notes
      payable and was amortized over the life of the loan. For the year ended
      December 31, 2005, $491,000 was amortized to the debt component and
      included as additional interest expense. As discussed in Note 2 above, the
      convertible notes were converted into membership units as part of HydroGen’s
      private placement, which closed on July 7, 2005.







F-16
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**


**NOTE
      10 -** ***SHARE-BASED
      COMPENSATION*** ****




HydroGen
      has granted stock options under its 2005 Performance Equity Plan, as amended
      (“2005 Plan”). Under the 2005 Plan, awards may be granted to participants in the
      form of Non-Qualified Stock Options, Incentive Stock Options, Restricted Stock,
      Deferred Stock, Stock Reload Options and other stock-based awards. Subject
      to
      the provisions of the plan, 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 us or our subsidiaries and who are deemed
      to
      have contributed or to have the potential to contribute to our success.
      Incentive stock options may only be awarded to individuals who are our employees
      at the time of grant. According to the 2005 Plan, the amount of shares that
      may
      be issued or reserved for awards to participants is 1,100,000.




In
      2005,
      78,535 stock options were granted to employees under the 2005 Plan, leaving
      1,021,465 remaining stock options available for grant. Prior to the adoption
      of
      the 2005 Plan, the Company’s members voted to issue options on membership units
      to key employees and advisors, the agreements of which were subsequently amended
      to represent common stock options on 342,345 shares. No options of any kind
      were
      granted or outstanding at December 31, 2004.




As
      discussed in Note 3, Basis of Presentation and Summary 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 for the year ended December 31, 2006 of
      $561,331 of which $237,205 was recorded to research and development and $324,127
      to selling, general and administrative expenses. These expenses increased basic
      and diluted loss per share by $0.05 for the year ended December 31,
      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. Because the Company’s common shares have only traded publicly
      since July, 2005, expected volatility for the years ended December 31, 2006
      and
      2005 is estimated based on an arithmetic average of the volatility of 5
      publicly-traded companies that operate in HydroGen’s space or sell into similar
      markets. As the Company was not a publicly traded company before July 7,
      2005, 0% volatility was used in accordance with SFAS 123 for options issued
      to employees prior to becoming a public company. We have insufficient history
      by
      which to estimate the expected term of the options, but used an estimate for
      grants of “plain vanilla” stock options based on a formula proscribed by the
      Securities and Exchange Commission’s Staff Accounting Bulletin No. 107. Because
      HydroGen’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 stock options.







F-17
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**




**NOTE
      10 -** ***SHARE-BASED
      COMPENSATION - Continued***




The
      following table summarizes the assumptions used for options granted during
      the
      years ended 2006 and 2005.




**2006**
            
            **2005**Expected
                life (in years)
            3.5
                - 5.0
            
            5.0Risk-free
                interest rate
            3.67%
                - 5.04%
            
            3.90%Volatility
            66.0%
                - 74%
            
            0.0
                - 119.0%Dividend
                yield
            --
            
            --




The
      following table summarizes the Company’s stock option activity for the years
      ended December 31, 2006 and 2005:




**Number
                of Options**
            
            **Weighted
                Average Option Price**
            
            **Aggregate
                Intrinsic Value**Outstanding
                at December 31, 2004
            
            
            --
            
            $
            --Granted
            
            
            420,880
            
            $
            4.48Exercised
            
            
            --
            
            
            --Forfeited/Cancelled
            
            
            --
            
            
            --Outstanding
                at December 31, 2004
            
            
            420,880
            
            $
            4.48
            
            $
            744,879Exercisable
                at December 31, 2005
            
            
            178,235
            
            $
            4.37
            
            $
            334,485Vested
                and expected to vest atDecember
                31, 2006
            
            
            399,836
            
            $
            4.48
            
            $
            707,635Outstanding
                at December 31, 2005
            
            
            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 atDecember
                31, 2006
            
            
            895,348
            
            $
            4.71
            
            $
            278,460





F-18
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**


**NOTE
      10 -** ***SHARE-BASED
      COMPENSATION - Continued***




A
      summary
      of the status of the Company’s non-vested stock options as of December 31, 2006,
      and of changes during the year ended December 31, 2006, is presented
      below:




**Number
                of Options**
            
            **Weighted
                Average********Option
                Price**Non-vested
                at December 31, 2005
            
            
            242,645
            
            $
            4.56Granted
            
            
            783,422
            
            
            4.96Vested
            
            
            (219,677
            )
            
            4.70Forfeited/Cancelled
            
            
            (149,300
            )
            
            5.32Outstanding
                at December 31, 2006
            
            
            657,090
            
            $
            4.84




As
      of
      December 31, 2006, there was $1,086,000 of total unrecognized compensation
      cost
      related to non-vested stock options which is expected to be recognized over
      a
      remaining weighted average life of 2.05 years.




The
      weighted average grant-date fair value of options granted during the year ended
      December 31, 2006 and 2005 was $2.52 and $1.40, respectively.




The
      following table summarizes information about stock options outstanding and
      exercisable at December 31, 2006:




**Options
                Outstanding**
            
            **Options
                Exercisable****Exercise
                prices**
            
            **Number
                outstanding**
            
            **Weighted
                average remaining contractual life**
            
            **Weighted
                average exercise price**
            
            **Number
                exercisable**
            
            **Weighted
                average exercise price**$4.34
            
            
            342,345
            
            
            8.13
            
            $
            4.34
            
            
            261,444
            
            $
            4.34$4.50
            
            
            200,260
            
            
            4.94
            
            
            4.50
            
            
            69,500
            
            
            4.50$4.90
            
            
            271,480
            
            
            4.81
            
            
            4.90
            
            
            7,500
            
            
            4.90$5.10
            
            
            68,535
            
            
            8.96
            
            
            5.10
            
            
            33,868
            
            
            5.10$5.15
            
            
            87,247
            
            
            4.54
            
            
            5.15
            
            
            -
            
            
            5.15$5.25
            
            
            44,500
            
            
            9.29
            
            
            5.25
            
            
            -
            
            
            -$5.56
            
            
            16,535
            
            
            3.25
            
            
            5.56
            
            
            3,100
            
            
            5.56$6.05
            
            
            22,500
            
            
            4.38
            
            
            6.05
            
            
            22,500
            
            
            6.05$6.20
            
            
            1,600
            
            
            4.38
            
            
            6.20
            
            
            -
            
            
            6.201,055,002
            
            
            6.31
            
            $
            4.73
            
            
            397,912
            
            $
            4.55





F-19
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**





**NOTE
      11 -** ***GRANTS FROM THE STATE OF OHIO***




**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 is given on the understanding that the Company will establish the
      corporation headquarters in Ohio within the next two years, locate manufacturing
      facilities in Ohio by 2008, and create new full-time jobs at both the skilled
      and unskilled level. The development work is expected to be undertaken during
      the period 2005 to 2008. The grant was also contingent on the Company raising
      its own capital, which it 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 runs 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.




The
      Company has submitted requests for payment under this grant totaling
      approximately $597,000, $372,000 of which was paid through December 31,
      2006.




**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 which
      instrument sets forth the terms and conditions 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. 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 to be located in Ohio. 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 megawatt (MW) power island.  Initial production
      capacity will be 25 MW per year of the Company’s 400 kW modules, and
      is subsequently expected to be expanded to 100 MW per year capacity.







F-20
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**





**NOTE
      11 -** ***GRANTS FROM THE STATE OF OHIO - Continued***




All
      disbursements from the Grant are on a reimbursement basis, after documentation
      has been provided evidencing the expenses were incurred in furtherance of the
      Grant.  The period for which Grant activities shall take place runs from
      April 10, 2006 until April 10, 2008; however, 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 late June of 2006. The Company has submitted
      requests for payment under this grant totaling approximately $53,000, $17,000
      of
      which has been paid through December 31, 2006.




**NOTE
      12 -** ***COMMITMENTS
      AND CONTINGENT LIABILITIES***




**Operating
      Leases**




Through
      January, 2005, the Company subleased its manufacturing facility in Jefferson
      Hills, PA, on a month to month basis. In February, 2005, an entity controlled
      by
      the same party that has a controlling interest in FCA purchased the industrial
      complex that includes this facility. In April, 2005, the Company increased
      the
      amount of space it rented from approximately 10,500 square feet to approximately
      35,000 square feet. In October 2005, subsequent to signing a lease on a new
      manufacturing facility (see below), the Company began to significantly decrease
      the amount of space it leased at this location. As of March 2006, the Company
      fully vacated these premises. The lease with the related party does not create
      any exposure with a variable interest entity.




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.







F-21
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**




**NOTE
      12 -** ***COMMITMENTS
      AND CONTINGENT LIABILITIES - Continued***




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 11). The Company is renting the space at a base rent of
      approximately $2,300 per month.




Rent
      expense for the years ended December 31, 2006 and 2005, and for the period
      from November 11, 2001 (inception) to December 31, 2006 were
      approximately $246,000, $168,000 and $528,000, respectively.




Future
      minimum lease payments under operating leases are as follows:




**Years
                Ending**
              **December
                31,**
            
            **Amount**2007
            
            $
            270,0002008
            
            
            251,0002009
            
            
            253,0002010
            
            
            190,000**Total**
            
            $
            964,000




**Capital
      Leases**




During
      November of 2006, the Company executed two capital leases for equipment that
      is
      expected to be delivered during March of 2007. The lease term will begin on
      the
      date the Company inspects and accepts receipt of the equipment. A capital lease
      obligation of $67,000 and $68,000 will result upon acceptance of the
      equipment.






**NOTE
      13 -** ***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 year ended
      December 31, 2006 was $76,000.







F-22
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**





**NOTE
      14 -** ***DEVELOPMENT
      STAGE OPERATIONS, RISKS AND UNCERTAINTIES***




The
      Company commenced operations on November 11, 2001, with the transfer of
      assets and PAFC technology from FuelCell Corporation of America (FCA), the
      Company’s then majority member. The Company was formed to commercialize the PAFC
      technology developed by Westinghouse Corporation. In addition to the technology,
      the Company owns the manufacturing assets for production of commercial-ready
      400 kW air-cooled modules.




The
      Company is at an early stage of business development. As a result, the Company
      is subject to all the risks inherent in starting a new business. The Company
      has
      neither sold nor installed any fuel cell systems in its operating history.
      The
      Company will require additional financing to commercialize its fuel cell power
      plants. The Company’s ability to market its products and related technology and
      to obtain research and development contracts depend, in part, on its ability
      to
      attract and retain key scientific and management personnel. Market acceptance
      of
      fuel cells and related products is still uncertain. In addition, acceptance
      of
      the Company’s products will be determined in large part by the Company’s ability
      to demonstrate the safety and efficiency, cost effectiveness and performance
      features of such products. The Company may encounter significant competition
      in
      the markets for its products. Many of the Company’s competitors and potential
      competitors may have substantially greater resources, including capital, name
      recognition, research and development experience and manufacturing and marketing
      capabilities.




The
      Company has experienced losses from operations and anticipates incurring
      substantial losses in the future. The Company expects to continue to make
      significant capital expenditures and to increase expenses to build manufacturing
      operations, develop sales and distribution networks, improve manufacturing
      technologies, implement internal systems and infrastructure, and hire additional
      personnel.




Without
      additional financing, the Company would need to delay certain of these
      activities and defer certain capital expenditures.




**NOTE
      15 -**  ***RELATED
      PARTY TRANSACTIONS AND EQUITY ISSUED IN EXCHANGE
      FOR***  ***SERVICES***




FCA
      provided short-term working capital loans evidenced by promissory notes from
      the
      Company. These notes were payable on demand and accrued interest at 8% per
      annum. Outstanding borrowings were $267,360 as of December 31, 2004.
      Additionally, FCA provided an interest free line of credit to the Company of
      $350,000, all of which was drawn and was also outstanding at December 31,
      2004. FCA agreed that, upon repayment of the $350,000 non-interest bearing
      note,
      it would forgive the principal balance of the interest-bearing loans by
      $150,000. On July 7, 2005, upon the closing of the Exchange Agreement and
      the receipt of proceeds from the sale of equity, as described in Note 2,
      the $350,000 non-interest bearing note held by FCA was repaid in full, and
      the
      working capital notes held by the same party were also repaid, less $150,000
      which, as described above, was forgiven. For the year ended December 31,
      2005 interest expense to FCA approximated $11,000.







F-23
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**




**NOTE
      15 -**  ***RELATED
      PARTY TRANSACTIONS AND EQUITY ISSUED IN EXCHANGE
      FOR***  ***SERVICES
      - Continued***




Additionally,
      the Company made payments to a company controlled by the same party that has
      a
      controlling interest in FCA for laboratory and administrative support services,
      which amounted to approximately $17,000 for the years ended December 31,
      2005. The amount paid during the year ended December 31, 2005 was accrued
      by the Company in periods prior to the year ended December 31,
      2004.




In
      February, 2005, an entity controlled by the same party that has a controlling
      interest in FCA purchased the industrial complex that includes the Company’s
      former manufacturing facility. In April, 2005, the Company increased the amount
      of space it rented in its former facility from approximately 10,500 square
      feet
      to approximately 35,000 square feet. In October 2005, the Company moved its
      manufacturing operations and certain administrative functions to a new facility
      in Versailles, PA (see Note 12). In March 2006 the Company fully vacated
      the Jefferson Hills facility. The Company paid this entity approximately $92,000
      in rent expense during the year ended December 31, 2005.




The
      Company and HMR were parties to an agreement dated June 30, 2004 that
      provides for the payment to HMR of fees totaling $100,000 payable over a 5-month
      period beginning in September, 2004, in consideration of financial consulting
      services. Additionally, at that time, the Company issued to HMR 4 LLC Units
      in
      the Company, subject to a 12-month vesting schedule through January 2005. The
      value of the LLC Units at the date of issuance was charged to expense ratably
      over the vesting period. The fair value of the LLC Units at the date of issuance
      was based on the value of LLC Units previously sold in a private
      transaction.




The
      Company granted two executive officers an aggregate of 5.278 LLC Units for
      services to be rendered, subject to a 12 month vesting schedule. One individual
      received 2.0 LLC Units in January, 2004, and was fully vested in those units
      at
      December 31, 2004. The second individual received 3.278 LLC Units in June,
      2004 and, at December 31, 2005 and 2004, had a 100% and 50% vested interest
      in those units, respectively. The value of the LLC Units at the date of issuance
      was charged to expense ratably over the vesting period. The fair value of the
      LLC Units at the date of issuance was based on the value of LLC Units previously
      sold in a private transaction.




The
      vested portion of these units has been included in general and administrative
      expenses for the years ended December 31, 2005 and 2004,
      respectively.




In
      March
      and April, 2005, the Company issued options to certain employees and advisors
      for an aggregate of 12.22 Membership Units. The options had an exercise price
      of
      $121,500 per unit, which reflected fair market value at the time of the grant,
      and vest 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.




In
      May,
      2005, the Company amended an agreement with a consultant whereby the Company
      agreed to pay the consultant for services to be rendered for the 12 month period
      beginning November, 2004, by granting the consultant 3.888 LLC Units and,
      accordingly, recognized approximately $335,000 of consulting expense during
      the
      year ended December 31, 2005.







F-24
 **HYDROGEN
            CORPORATION AND SUBSIDIARY**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
            31, 2006**




**NOTE
      15 -**  ***RELATED
      PARTY TRANSACTIONS AND EQUITY ISSUED IN EXCHANGE
      FOR***  ***SERVICES
      - Continued***




Related
      to the amended agreement with a consultant, described above, the Company issued
      1.287 LLC Units to certain members who elected not to be diluted by the LLC
      Units issued to the consultant. The Company recognized approximately $112,000
      in
      expense in the second quarter of 2005 related to this issuance. The fair value
      of the LLC Units at the date of issuance was based on the value of LLC Units
      previously sold in a private transaction.






F-25