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, 2005**


**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
      CORP.**


(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, 2005 were $40,042.




As
      of March 21, 2006, the aggregate market value of the common stock held by
      non-affiliates of the Registrant was approximately $21,832,905.




As
      of March 21, 2006, there were 7,614,904 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, 2005**


**Table
      of Contents**


Page
                  NoPART
                  I
              1Item
                  1
              Description
                  of Business
              1Item
                  2
              Properties
              19Item
                  3
              Legal
                  Proceedings
              20Item
                  4
              Submission
                  of Matters to a Vote by Security Holders
              20PART
                  II
              20Item
                  5
              Market
                  for Common Equity and Related Stockholder Matters
              20Item
                  6
              Management’s
                  Discussion and Analysis or Plan of Operation
              22Item
                  7
              Financial
                  Statements
              29Item
                  8
              Changes
                  In and Disagreements With Accountants on Accounting and Financial
                  Disclosure
              29Item
                  8A
              Controls
                  and Procedures
              29Item
                  8B
              Other
                  Information
              30PART
                  III
              31Item
                  9
              Directors,
                  Executive Officers, Promoters and Control Persons; Compliance With
                  Section
                  16(a) of the Exchange Act
              31Item
                  10
              Executive
                  Compensation
              37Item
                  11
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters
              39Item
                  12
              Certain
                  Relationships and Related Transactions
              40Item
                  13
              Exhibits
                  and Reports on Form 8-K
              40Item
                  14
              Principle
                  Accountants Fees and Services
              42





**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 (PAFC).




**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 15,000MW. 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, 393,000MW 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.






-1-




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 2-30MW class totaled approximately 3,500MW 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 20-30MW 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.




*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**
              
              **Current
                  estimated cost/kW**
              
              **Some
                  Companies Offering:**
              
              **Remark****PAFC**
              
              **$4,500
                  (UTC)**
              
              **UTC,
                  Fuji, HYDG**
              
              **More
                  than 350 systems delivered****<$3,000
                  (HYDG)*****<$1,500
                    (HYDG)****AFC
              
              >$10,000
              
              UTC
              
              Selected
                  applications onlyPEM
                  / SPFC
              
              >$3-5,000
              
              Plug
                  Power, Ballard
              
              Initially
                  stationary applications, leading to transportation
                  applicationsMCFC
              
              >$7,000
              
              FCEL
              
              Complicated
                  systems have long learning curveSOFC
                  [tubular]
              
              >$8,000
              
              Siemens-Westinghouse
              
              250
                  kW system successfully testedSOFC
                  [planar]
              
              n/a
              
              SECA
                  partners
              
              Small
                  [<10 kW] systems may go
                  fast




*
            First
                6MW system (projected)


**
            First
                25MW (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 $7000 - $10,000/kW or above. Over 250 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
      its PAFC plants were able to capture 10% of this market (250 MW) at a sales
      price of $1,500/kW, HydroGen’s 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 6-30MW market class, where annual demand
      is greater than 2000MW. To the extent that HydroGen gains market penetration
      and
      achieves high-volume production, it will then target larger-scale applications
      up to 50MW, with an addressable market size of 10,000MW 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;




·
            Refineries;




·
            Commercial
                facilities located close to hydrogen pipelines;
                and




·
            Desalination
                plants




-4-


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, monetizable advantages to the local utility.




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’.




**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. HydroGen believes that over $150,000,000 was
      spent
      on these efforts for air-cooled PAFC development.




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. Upon the acquisition of the PAFC
      technology and related assets, FuelCell Corporation began a United States
      Department of Defense funded project with Gilbert-Commonwealth to install a
      prototype demonstration plant in Johnstown, PA. Fuel Cell Corporation also
      won a
      World Bank competition to conduct a study sponsored by the Romanian Ministry
      of
      Industry to assess sitting fuel cell plants using waste gas generated by
      chemical process plants in the chlor-alkali industry. 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.




-6-


**HydroGen
      Fuel Cell Technology**




Management
      believes that phosphoric acid fuel cell technology is the most logical fuel
      cell
      for commercial, large scale stationary applications of greater than 100kW.
      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
      100-1,000kW 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.




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. Management believes that air-cooling the PAFC offers
      a
      number of advantages over the water-cooled systems offered by others. 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 400kW fuel cell module which is comprised of 4*100kW
      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
      product attributes and performance of HydroGen’s 400kW fuel cell technology are
      summarized below:




·
              Capacity:400kW
                  net output




·
              Efficiency:40%
                  (complete system with hydrogen plant) - 43%
                  (H2-available)




·
              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
                  hydrogen plant 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 10MW 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 are unique
      in
      two respects: air-cooled stack design and “unbundled” fuel processing. Moreover,
      the targeted size range of HydroGen’s multi-megawatt power plants introduces the
      benefit of economy of scale. Management anticipates that these characteristics
      will enable HydroGen to produce and deliver fuel cell systems less expensively
      than its customers and will have a commercially acceptable reliability rating.
      Future systems may include integrated plant designs, but only after we have
      achieved desired system reliability and cost.




-7-


As
      indicated before, management believes that the air-cooled design of HydroGen’s
      PAFC modules makes it considerably simpler and cheaper to manufacture than
      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.




HydroGen
      also takes advantage of the fact that the 400kW modules do not include an
      on-board fuel processing system (hydrogen plant). HydroGen builds complete
      PAFC
      power plants in the 6-30 MW range based presently on a standard building block
      of a 2MW ‘power island’ (each of which consists of five (5) 400kW 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 only few 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, HydroGen
      intends 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. Using the HydroGen
      ‘unbundled’ approach, management believes it will achieve low system costs by
      deploying its fuel cell systems using standard hydrogen technology and existing
      hydrogen infrastructure This approach is in contrast to other manufacturers
      of
      low and intermediate temperature fuel cells, which target smaller applications
      of 100-1,000kW with packaged power plants. The cost structure of these
      alternative installations suffers from significant diseconomies of scale and
      from the complex learning curve of integrating the hydrogen plants with the
      fuel
      cell stacks.




**HydroGen
      Manufacturing Facilities**




HydroGen
      currently occupies facilities in Versailles, PA (near Pittsburgh), and operates
      them 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. Management is currently using some
      of
      its working capital to make our manufacturing facilities fully operational
      at
      2MW/year capacity on single-shift production, or 4MW/year capacity on
      double-shift production. Later management intends to expand the production
      capacity incrementally to a 4-5 MW/year (single shift) or 8-10MW/year
      (double-shift), which expansion management believes will only require a minimal
      amount of additional capital investment.




The
      long-term business plan for HydroGen is to expand production by deploying an
      automated manufacturing plant capable initially of producing 25MW (62 modules)
      per year, and later 100MW (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 anticipated scope of work associated with the current
      business plan. This work is anticipated to be concentrated 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.




-8-


**HydroGen
      Manufacturing Activities**




HydroGen
      plans to engage 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. There are, therefore,
      two
      independent organizational structures within HydroGen.




HydroGen’s
      core operational activity will be the manufacturing of 400kW PAFC modules from
      raw materials at its Versailles, Pennsylvania manufacturing facilities. Each
      important manufacturing step will be 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 will
      provide a certain yield of PAFC cells, stacks and modules, which after testing
      can be transported as ready-to-install modules into the field
      sites.




Management
      expects to engage in subcontracting and outsourcing fuel cell stack components
      with experienced supply-chain partners once the manufacturing process is fully
      mastered internally, once the in-house know-how is on a superior level, and
      after partners or subcontractors have been identified who can perform the same
      steps better and cheaper at the same time.




**HydroGen
      Engineering Contracting Activities**




When
      the
      PAFC modules arrive in the field, they will 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 will 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 will require project and contract management
      by HydroGen, and will require special staff and high quality procurement and
      project managers. The risks of this approach will be different from the
      manufacturing risks, since here most of the actual work will be performed by
      third parties under contract.




HydroGen
      has in its executive and technology management team persons who have experience
      with most aspects of both the manufacturing and engineering contracting
      processes, and demonstrated organizational capabilities in these critical
      areas.




**HydroGen
      Marketing**




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






-9-


HydroGen
      will engage in marketing efforts early in its 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. HydroGen is in discussions with several generators of by-product hydrogen
      to become potential users of its fuel cell power 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 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.




Most
      of
      the HydroGen 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 the 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 has kept,
      and
      intends to continue to keep, these secrets closely guarded, distributing them
      on
      a need to know basis only, and implementing strict confidentiality and non-use
      agreements when disclosure is necessary.




HydroGen,
      for the time being, will continue the Westinghouse policy of using trade secrets
      as the principal mode to protect its intellectual property. As HydroGen makes
      improvements to the existing technology or develops new technology, HydroGen
      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
      did, however, apply for and receive patents from time to time. These were all
      subsequently assigned to the DOE. However most of the DOE patents have expired
      or were allowed by the DOE to lapse. The DOE did, however, maintain four key
      patents, three 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 Department of Energy to license the four patents, one of which
      recently expired, for its business operations. The DOE has granted the license
      because it will promote the interests of the federal government and the public,
      and provide incentive to the company to bring these inventions to a practical
      application. The three remaining DOE patents subject to the license are as
      follows:




**Patent
                No.**
            
            **Subject
                Matter of Patent**
            
            **Expiration
                date**4978591
            
            Corrosion
                Free Phosphoric Acid Fuel Cells
            
            9/20094732822
            
            Fuel
                Cell Acid Supply System
            
            5/20065096786
            
            Integral
                Edge Seal for Phosphoric Acid Fuel Cells
            
            9/2009






-10-


The
      DOE
      patent license is irrevocable and exclusive to HydroGen LLC except to the extent
      the government may require it to issue sublicenses to parties for health and
      safety needs. The license is royalty free. HydroGen is obligated to spend not
      less than $1,000,000 in development of products using the patents during the
      first year of the license and to maintain the licensed inventions at the U.S.
      Patent and Trademark Office. HydroGen may grant sublicenses to third parties
      with the permission of the DOE. HydroGen commits that the products embodying
      the
      licensed inventions will be manufactured substantially in the United States.
      HydroGen is obligated to provide various reports to the DOE about its
      development of products. The license may be terminated in whole or in part
      if
      HydroGen does not execute its development plan as required under the license,
      fails to make any required reports, breaches the agreement or 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
      HydroGen. The inability to use one or more of the patents may impair HydroGen
      realizing 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.




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.




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 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 planned future facility is
      where the Company anticipates mass producing its standard 400-kilowatt (kW)
      air-cooled PAFC modules, which 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 Company has not yet received a
      copy of the Grant Agreement and therefore is unable to disclose additional
      details.




-11-


**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, and there is direct
      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, to terminate
      or
      modify the supply relationship with some of these suppliers, the customer must
      pay termination fees for long term contractual arrangements or fees for
      remaining a user of grid electricity on a back-up basis. These fees will be
      taken into account when evaluating an alternative source of
      electricity.




The
      HydroGen PAFC module 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 10MW 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. These latter two
      technologies are 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 $7000 to $10,000 per kW and are only available
      in
      250kW and 1MW units. The solid oxide fuel cell units are also only available
      in
      units up to 300kW 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.




-12-


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 and there are few manufacturers of PAFC
      modules. We will also compete on the basis of the fact that the price per kW
      installed for our multi-megawatt PAFC power plants is anticipated to be
      substantially less than other fuel cells, and that they are anticipated to
      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 29 full time employees and 7 consultants. The CEO, Dr. Leo
      Blomen, a resident of the Netherlands, is contracted for at least 50% of his
      business time and supports HydroGen’s management team in all facets of business
      operations. HydroGen has 4 members of executive management, 23 technical and
      management staff and 2 administrators. 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. 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.




-13-


**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 (one
      of
      which has 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 (one
      of
      which has 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.




-14-


**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.




-15-


**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.




-16-


**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 predisposed to adopt codes and regulations that
      enable hydrogen manufacturing, transportation and storage for use in fuel cells,
      there is 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.




-17-


**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 ales 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.








-18-


**HydroGen
      may be unable to manage its growth effectively which may result in improperly
      spent or managed resources or additional costs.**








**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.




**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.




-19-


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. We established this facility as part of
      our
      arrangements with the State of Ohio described elsewhere, and rent this space
      on
      a month to month basis for $280 per month.




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**




In
      September 2005, HydroGen’s predecessor company was named in a patent
      infringement claim related to technology that the predecessor company sold
      to
      the claimant. According to the pleadings (filed in a federal district court
      in
      California), in 2004 the buyer of the technology discovered that a former
      employee of our predecessor company was seeking investment dollars to
      commercialize the same technology that the buyer purchased. Further, the former
      employee continued to use the company’s predecessor company’s name in her
      efforts. Accordingly, the buyer filed suit in August 2004 seeking, among other
      relief, an injunction preventing the predecessor company’s former employee from
      continuing to use the technology. In September 2005, the buyer amended its
      pleadings to add a claim in patent infringement (thereby establishing subject
      matter jurisdiction) and naming the predecessor company.




The
      Company recently learned of this action against its predecessor company, and
      is
      investigating whether it needs to appear in the litigation in order to defend
      itself against any liability. As of the time of this writing, no service of
      process has been made on HydroGen or its predecessor company, and it is unclear
      if plaintiffs intend to make any attempt to undertake service. While the results
      of any litigation are inherently difficult to predict, HydroGen believes the
      claims made against its predecessor company have been made in error, and should
      it be required that HydroGen make an appearance in this matter, it will seek
      voluntary dismissal of the claims against the predecessor company by the
      claimant, and failing that, involuntary dismissal by the court. After reviewing
      the facts alleged in this action, management believes that its predecessor
      company has not been involved in any of the activities alleged in the complaint,
      amended complaint, or a counterclaim. Management does not, therefore, believe
      that this action, once resolved, will have a material impact on HydroGen’s
      financial statements.




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




During
      the fourth quarter of 2005, 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 is traded in the over-the-counter market and quoted on the OTC
      BB
      under the symbol “HYDG OB”.




The
      trading volume in the 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 Common Stock and perhaps without
      regard to our business activities. The market price of our common stock also
      may
      be subject to significant fluctuations in response to numerous factors,
      including: variations in our annual or quarterly financial results or those
      of
      our competitors; conditions in the economy in general; announcements of key
      developments by competitors; loss of key personnel; unfavorable publicity
      affecting our industry or us; adverse legal events affecting us; and sales
      of
      our common stock by existing stockholders.




-20-


Subject
      to the above limitations, we believe that during the two fiscal quarters
      reported upon below, the high and low bid information for the Common Stock,
      per
      share, during each quarter are as set forth in the table which prices are
      without retail mark-up, mark-down, or commissions. The information
      is as
      reported by the OTC Bulletin Board for each quarter since HydroGen commenced trading on the OTC Bulletin Board.




**Fiscal
                Quarters**
            
            **High**
            
            **Low****2005**September
                30, 2005(1)
            
            $
            21.25
            
            $
            3.30December
                31, 2005
            
            $
            5.55
            
            $
            3.30







**(1)**
            Trading
                information presented for the quarter ended September 30, 2005 presents
                the high and low bid price from July 8, 2005, the day after HydroGen
                concluded its Exchange Agreement with Chiste and commenced trading
                as a
                combined entity on the OTC Bulletin Board.Additionally,
                share prices presented are adjusted for a 25 to 1 reverse stock split
                that
                occurred in August 2005.




**Holders**




As
      of
      March 16, 2006 there were 294 holders of record of our common stock. Management
      believes that there are additional beneficial holders of the common stock who
      hold their shares through brokerage and similar accounts. The number of
      beneficial holders cannot be determined at this time.




**Dividends**




We
      have
      never declared or paid any dividends on our capital stock and do not anticipate
      paying any cash dividends on our capital stock in the foreseeable future. We
      currently expect to retain our future earnings, if any, for use in the operation
      and expansion of our business. Any future decision to pay cash dividends will
      be
      at the discretion of our board of directors and will be dependent upon our
      financial condition, results of operations, capital requirements and other
      factors our board of directors may deem relevant. There are currently no
      restrictions that limit our ability to pay dividends on our capital stock.




**Recent
      Sales of Unregistered Securities**




During
      the fourth quarter of fiscal year 2005, HydroGen did not sell any securities
      in
      unregistered transactions.




**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.




-21-


**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, 2005.




**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)
            
            
            78,535
            
            $
            5.10
            
            
            1,021,465Equity
                compensation plans not approved by security holders
            
            
            342,345
            
            
            4.34
            
            
            —Total
            
            
            420,880
            
            $
            4.48
            
            
            1,021,465





**(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.




**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 6-30MW turn-key power plants, based on a standardized 2 MW power island
      consisting of five of HydroGen’s 400kW modules. Additionally, HydroGen plans to
      attempt to generate recurring revenues from the sale of operations and
      maintenance services, and ongoing lease revenues for the 400kW 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 25MW per annum or greater.
      These costs compare favorably with its manufacturing competition of water cooled
      PAFCs, molten carbonate fuel cells, and solid oxide fuel cells.




-22-


**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 2MW per year single-shift
      production capacity.* HydroGen
      is investing approximately $1.5-2 million to ramp up its manufacturing
      facilities to achieve initial pilot production capacity of 2MW (five 400kW
      modules) per annum on single shift, or 4MW per year on double shift basis.
      These
      funds are being 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. Management estimates
      that it will take approximately 3-6 months to achieve production capacity at
      this initial level.




2.  *Manufacture
      400kW modules.* HydroGen
      intends to produce up to three (3) new 400kW air-cooled phosphoric acid fuel
      cell modules in our manufacturing facilities 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 to $3.5 million
      to
      the manufacturing activities.




3.  *Product
      and technology testing and validation* .
      HydroGen is in the process of constructing, and will operate test facilities
      at
      our manufacturing facilities. Management has allocated $1.5 to $2 million to
      the
      product and technology testing and validation activities. The test facilities
      under construction include:




(a)  400kW
      module test facility, to test finished product at full rated capacity prior
      to
      field delivery.




(b)  10-cell
      stack test facility, to validate design and material changes to the fuel cells
      as a final step before incorporating such changes into the full 400kW module.




(c)  2”x2”
      small scale test facility, to test new electrode materials prior to selection
      for 10-cell stack testing and validation.




4.  *Finish
      2MW power plant design and initiate accelerated 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 initiating development activities necessary to achieve
      targeted fuel cell production capacity of 25MW/year scheduled for 2008 and
      100MW/year scheduled for 2009 under the current business plan. The accelerated
      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. 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 as discussed above, was recently
      notified that it was awarded a $1 million grant by the TFFCP to support the
      Company’s advanced manufacturing development program.




5.  *Sales
      and marketing* .
      The
      initial sales goal is to achieve firm orders for 2-4MW 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 at
      least 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 2MW 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 has
      initiated discussions with several large generators of by-product hydrogen
      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 6-12 months. HydroGen management believes that it is in a
      position to conclude demonstration agreements with one or more hosts for the
      400kW commercial demonstration plants within the next six months.




-23-


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 is expected to last
      for approximately eight quarters, currently estimated to be through the end
      of
      2008. Management estimates that approximately $20-35 million in additional
      equity or other capital will be required to execute this phase of the business
      plan. The principal goals of this stage of development will be to:




1.  Complete
      automated design and process development for accelerated
      manufacturing.




2.  Construct
      an accelerated manufacturing facility capable of producing 25MW/year of fuel
      cell modules by the end of 2008, and reduce module production cost through
      high
      volume manufacturing and assembly.




3.  Manufacture
      and deliver to customers the first 10-20MW of commercial fuel cell power
      plants.




4.  Achieve
      positive net cash flow from operations between 2007-2008.




After
      successful completion of the objectives of the cost reduction phase of the
      business plan, HydroGen plans to expand the automated production facility to
      100MW/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.




*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.




-24-


Demonstration
      grant revenue is recognized as the Company incurs reimbursable costs as set
      forth under the contract. All of the Company’s revenue in 2005 is from a grant
      agreement with a State of Ohio government agency.




*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*




HydroGen
      accounts for equity-based compensation for employees and directors using the
      intrinsic value method prescribed in Accounting Principles Board Opinion
      No. 25, Accounting for Stock Issued to Employees, and related
      interpretations. Accordingly, compensation cost for stock, stock options or
      other similar instruments, granted to employees is measured as the excess,
      if
      any, of the quoted market price of HydroGen’s common stock at the measurement
      date (generally, the date of grant) over the amount an employee must pay to
      acquire the stock.




*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. 123(R), “Share-Based Payment.”  In
      December 2004, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards (SFAS) No. 123(R), “Share-Based Payment”,
      which is a revision of SFAS No. 123, “Accounting for Stock-Based
      Compensation”. SFAS 123(R) is effective for public companies that file as
      small business issuers as of the beginning of the first interim or annual
      reporting period that begins after December 15, 2005. SFAS 123(R)
      supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”,
      and amends SFAS 95, “Statement of Cash Flows”. SFAS 123(R) requires
      all share-based payments to employees, including grants of employee stock
      options, to be recognized in the income statement based on their fair values.
      Pro-forma disclosure is no longer an alternative. The new standard will be
      effective for HydroGen beginning January 1, 2006.




SFAS 123(R)
      permits public companies to adopt its requirements using one of two
      methods:




1.
            A
                “modified prospective” method in which compensation cost is recognized
                beginning with the effective date (a) based on the requirements of
                SFAS 123(R) for all share-based payments granted after the effective
                date and (b) based on SFAS 123 for all awards granted to
                employees prior to the effective date of SFAS 123(R) that remain
                unvested on the effective date.




2.
            A
                “modified retrospective” method which includes the requirements of the
                modified prospective method described above, but also permits entities
                to
                restate the amounts previously recognized under SFAS 123 for purposes
                of pro forma disclosures either for (a) all prior periods presented
                or (b) prior interim periods in the year of
                adoption.






-25-


We plan to
      adopt SFAS 123(R) using the modified prospective approach. Because
      SFAS 123(R) must be applied not only to new awards but to previously
      granted awards that are not fully vested on the effective date, compensation
      cost for some previously granted awards that were not recognized under
      SFAS 123 will be recognized under SFAS 123(R). Had we adopted
      SFAS 123(R) in prior periods, the impact of that standard would have
      approximated the impact of SFAS 123 as previously described in the
      disclosure of pro forma net income and earnings per share. SFAS 123(R) also
      requires that the benefits of tax deductions in excess of recognized
      compensation cost be reported as a financing cash flow, rather than as an
      operating cash flow as required under current literature.




This
      requirement will reduce net operating cash flows and increase net financing
      cash
      flows in periods after the effective date. We cannot estimate what those
      benefits will be in the future because they depend on, among other things,
      when
      employees exercise stock options.




**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
      Chiste. HydroGen recorded a non-cash charge of $875,000 in July, 2005, related
      to the lowering of the conversion price of these notes.




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.




-26-


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 $40,000 in the year ended December 31, 2005, 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.




HydroGen
      is using its working capital to ramp up its manufacturing facility, manufacture
      400kW modules, test and validate HydroGen’s product and technology, complete
      power plant design work, commence development work for an accelerated
      manufacturing facility and for other general corporate purposes. Management
      estimates that its working capital will last through the conclusion of calendar
      year 2006.




**Results
      of Operations**




*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; certain reclassifications have been made
      to the 2004 financial information to conform to the 2005
      presentation:




**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.




-27-


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, that 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.




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.




*Comparison
      of the Years Ended December 31, 2004 and 2003*




Revenue
      in 2004 decreased to $0 from $40,765 in 2003. HydroGen’s only source of revenue
      in these periods was from a research contract with a nonprofit government
      sponsored agency. This contract was completed and did not repeat in
      2004.




The
      following table sets forth certain of HydroGen’s operating data for the years ended December 31, 2004 and
      2003:




**December
                31, 2004**
            
            **December
                31, 2003**
            
            **Increase****(Decrease)**Research
                & development
            
            $
            248,000
            
            $
            20,000
            
            $
            228,000Payroll
                and related costs
            
            
            613,000
            
            
            —
            
            
            613,000Professional
                fees
            
            
            639,000
            
            
            6,000
            
            
            633,000Travel
                & entertainment
            
            
            97,000
            
            
            81,000
            
            
            16,000Other
            
            
            42,462
            
            
            84,881
            
            
            (42,419
            )Totals
            
            $
            1,639,462
            
            $
            191,881
            
            $
            1,447,581




The
      increase in research and development expenses was due to the ramp-up in
      HydroGen’s manufacturing and development activities in 2004. Most of these
      expenses relate to additional staff and consultants hired in 2004 to support
      these efforts.




HydroGen
      did not compensate its management team in 2003, and had no administrative
      support personnel on staff. In 2004, HydroGen, with the receipt of the working
      capital loan and private placement of bridge units described above, began to
      pay
      its management team and added additional personnel to support its
      commercialization and financing efforts. Additionally, HydroGen granted certain
      personnel membership units in lieu of cash compensation and recognized
      approximately $318,000 in compensation expense in 2004 related to these grants.






-28-




The
      increase in professional fees in 2004 versus 2003 relates primarily to the
      legal, accounting and consulting fees incurred in HydroGen’s financing efforts
      and commercialization activities. The expense in 2004 includes a grant of
      membership units to a financial consultant, and HydroGen recognized
      approximately $321,000 in expense related to this grant.




The
      increase in travel and entertainment expenses in 2004 versus 2003 was primarily
      due to travel by new personnel and consultants hired in
      2004.




**Item
      7.**  **Financial
      Statements**




The
      information required by this Item is incorporated herein by reference to the
      financial statements beginning on page F-1.




**Item
      8.** **Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure** ****




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.




-29-


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, 2005. 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 has been no
      change in the
      HydroGen internal controls over
      financial reporting that
      occurred in the
      quarter ended December 31, 2005, that has materially affected, or is reasonably likely to affect,
      the HydroGen internal controls over
      financial reporting.




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




None .




-30-


**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
            
            51
            
            Chairman
                and Chief Executive Officer
            
            2005Joshua
                Tosteson
            
            34
            
            President
                and Director
            
            2005Dr.
                Howard Shapiro(1)
            
            58
            
            Director
            
            2005Brian
                Bailys(1)
            
            46
            
            Director
            
            2005John
                Freeh(1)
            
            54
            
            Director
            
            2005




**Executive
                Officers**
            ****
            **Age**
            ****
            **Positions**
            ****
            **Officer
                Since**Scott
                M. Schecter
            
            49
            
            Chief
                Financial Officer
            
            2005Scott
                Wilshire
            
            43
            
            Chief
                Operating Officer
            
            2005







**(1)**
            Member
                of the Compensation 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.




-31-


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 deploys facilities
      to remediate organic waste streams and produce high-value organic soil
      amendments, and which consults 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 1994-97, 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, has been the president of LM Systems Management
      and an officer of Lockheed Martin since July, 2001. Mr. Freeh is 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.




-32-


**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 1994-2004, 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 consumer products company, 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 1986-1990, 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.




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 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 the 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.




-33-


**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 or 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, but
      formalization was postponed until an independent Compensation Committee was
      formed and its terms are still subject to approval of HydroGen’s Board of
      Directors. Blomenco’s fee totals approximately $200,000 per annum for 50% of Dr.
      Blomen’s time, which will be increased to approximately $250,000 upon the
      completion of a secondary offering. 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 for six months 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 six months severance pay.
      Mr. Tosteson will be paid an annual salary of $185,000, which will be
      increased to $225,000 upon completion of a secondary offering. Mr. Tosteson
      will
      be 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.




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
      at the rate of $200,000, increasing to $250,000 upon the completion of a
      secondary offering. 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 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.




-34-


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 at the
      rate
      of $150,000 per year, increasing to $180,000 upon completion of second offering
      of the post merger company. In addition, Mr. Wilshire 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 78,535 shares subject to
      stock option awards under the plan at an average weighted exercise of $4.26
      and
      there are 1,021,465 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 2004 were complied with, except that Mr. Shapiro was late
      in
      filing his Form 3 due to an automobile accident he was in overseas. He
      subsequently filed the Form 3 on March 30, 2006.




-35-


**Audit
      Committee and Financial Expert**




We
      are
      not required to have and we do not have an audit committee. The company’s
      chairman performs some of the same functions of an audit committee, such as;
      recommending a firm of independent certified public accountants to audit the
      financial statements; reviewing the auditors' independence, the financial
      statements and their audit report; and reviewing management's administration
      of
      the system of internal accounting controls. HydroGen does not currently have
      a
      written audit committee charter or similar document.




We
      have
      not designated a person as an “audit committee financial expert.” All of our
      directors have financial statement preparation and interpretation ability
      obtained over the years from past business experience and education. Mr. Bailys,
      one of the directors, would qualify as an “audit committee financial
      expert.”




**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**




HydroGen
      has neither a nominating committee for persons to be proposed as directors
      for
      election to the board of directors nor a formal method of communicating nominees
      from shareholders. It does not have any restrictions on shareholder nominations
      under our certificate of incorporation or by-laws. The only restrictions are
      those applicable generally under Nevada Corporate Law and the federal proxy
      rules. Currently the board of directors decides on nominees, on the
      recommendation of one or more members of the board. Two of the members of the
      board of directors are "independent." The board of directors will consider
      suggestions from individual shareholders, subject to evaluation of the person's
      merits. Stockholders may communicate nominee suggestions directly to any of
      the
      board members, accompanied by biographical details and a statement of support
      for the nominees. The suggested nominee must also provide a statement of consent
      to being considered for nomination. Although there are no formal criteria for
      nominees, the board of directors believes that persons should be actively
      engaged in business endeavors, have a financial background, and be familiar
      with
      acquisition strategies and money management.




-36-


The
      board
      of directors has determined not to adopt a formal methodology for communications
      from shareholders on the belief that any communication would be brought to
      the
      boards' attention by virtue of the co-extensive employment by two of the members
      of the board of directors as management persons.




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 August 16, 2005 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**


**Annual
                  Compensation**
              
              
              **Long-Term
                  Compensation****Year**
              
              
              **Salary**
              
              
              **Bonus**(5)
              
              
              **Restricted**
                **Stock**
                **Awards
                  ($)**
              
              
              **Security**
                **Underlying**
                **Options**
                **Granted
                  (#)**
              
              
              **LTIP**
                **Payouts**
              
              
              **All
                  Other Compensation**Leo
                  Blomen,(1)
                Chairman
                  and Chief Executive Officer
              
              
              2005
              
              
              —
              
              
              —
              
              $
              —
              
              
              —
              
              
              —
              
              
              —2004
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —2003
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Joshua
                  Tosteson,(2)
                President
              
              
              2005
              
              
              163,373
              
              
              54,575
              
              
              —
              
              
              —
              
              
              —
              
              
              —2004
              
              
              55,333
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —2003
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Scott
                  M. Schecter,(3)
                Chief
                  Financial Officer
              
              
              2005
              
              
              177,220
              
              
              28,250
              
              
              —
              
              
              114,115
              
              
              —
              
              
              —2004
              
              
              49,000
              
              
              —
              
              
              215,244
              
              
              —
              
              
              —
              
              
              —2003
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Scott
                  Wilshire,(4)
                Chief
                  Operating Officer
              
              
              2005
              
              
              126,511
              
              
              15,375
              
              
              —
              
              
              85,768
              
              
              —
              
              
              32,057
              (6)2004
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —2003
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —









(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
                50% of
                his time on HydroGen business activities. Blomenco B.V. charges a
                management fee of € 185,000 per annum, but is paid in US dollars at a
                conversion rate equal to 50% of the difference between the dollar
                and the
                euro. In 2005, Blomenco B.V earned fees totaling $257,245, which
                includes
                a bonus earned of $59,050 ($53,145 of which is deferred until HydroGen
                completes its next round of financing). Blomenco B.V. was paid a
                total of
                $46,388 and $0 in 2004 and 2003,
                respectively.




(2)
            In
                2004 Mr. Tosteson was paid $30,000 as a consultant through June,
                at which
                time he became a full-time employee and was paid $25,333 for the
                balance
                of the year




(3)
            Mr.
                Schecter served as a consultant to HydroGen from June 2004 - April
                2005,
                at which time he became a full-time employee. During the time he
                acted as
                a consultant, Mr. Schecter was paid $7,000 per month from June 2004
                -
                December 2004, and $9,000 per month from January 2005 - March 2005.
                Mr.
                Schecter was required to devote at least 50% of his time to HydroGen
                business activities during the time of his
                consultancy.




(4)
            Mr.
                Wilshire's employment commenced on March 1,
                2005.




(5)
            Bonus
                payments amounting to $49,118 and $19,775 were deferred for Mr. Tosteson
                and Mr. Schecter, respectively. Amounts deferred are to be paid upon
                the
                completion of HydroGen's next round of
                financing.




(6)
            Represents
                relocation expense reimbursement, grossed-up to reimburse Mr. Wilshire
                for
                taxes due on such reimbursement.






-37-


The
      following table sets forth information concerning stock options that were
      granted to the named executive officers during the year ended December 31,
      2005.




**Individual
                Grants****Name**
            
            
            **Number
                  of Securities Underlying Options/SARs
                  Granted**
            
            
            **Percent
                  of Total Options/SARs Granted to Employees in
                  2005**
            
            
            **Exercise
                or Base Price ($/Sh)**
            
            
            **Expiration
                  Date**Leo
                Blomen
            
            
            —
            
            
            —
            
            
            —Joshua
                Tosteson
            
            
            —
            
            
            —
            
            
            —Scott
                M. Schecter
            
            
            114,115
            (1)
            
            27.1
            
            
            4.34
            
            
            2/28/2015L.
                Scott Wilshire
            
            
            85,768
            (1)
            
            20.4
            
            
            4.34
            
            
            3/31/2015







(1)
            The
                2005 grants were all stock options. Grants vest 1/36theach month following the date of
                grant.




The
      following table sets forth information concerning the exercise of stock options
      during the fiscal year ended December 31, 2005 by the named executive officers
      and the aggregate value of stock options held by the named executive officers
      as
      of December 31, 2005.




**Aggregated
              Option Exercises in Last Fiscal Year and Fiscal Year End Option
              Values****Number
              of Securities Underlying**
              **Unexercised
                Options at**
              **December 31,
                2005**
            
            **Value
                of Unexercised In-The-Money**
              **Options
                at December 31, 2005 ($)(1)****Name**
            
            **Grant**
              **Type**
            
            **Shares**
              **Acquired
                on**
              **Exercise
                (#)**
            
            **Value**
              **Realized
                ($)**
            
            **Exercisable**
            
            **Unexercisable**
            
            **Exercisable**
            
            **Unexercisable**Leo
                Blomen
            
            Option
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —Joshua
                Tosteson
            
            Option
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —Scott
                M. Schecter
            
            Option
            
            —
            
            —
            
            23,824
            
            61,944
            
            45,504
            
            118,313L.
                Scott Wilshire
            
            Option
            
            —
            
            —
            
            28,529
            
            85,586
            
            54,490
            
            104,076







(1)
            These
                amounts represent the difference between the exercise price of the
                stock
                options and the December 31, 2005 closing price of HydroGen’s common stock
                on the OTC Bulletin Board of $6.25.




-38-


**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 March 30, 2006 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 May, 2006. The table assumes a total of 7,614,904
      shares of common stock outstanding.




**Name
                of Beneficial Owner**
            
            **Amount
                of Beneficial Ownership**
            
            **Percent
                of Class**Leo
                Blomen(1)
            
            
            411,586
            
            
            5.40
            %Joshua
                Tosteson(1)
            
            
            543,097
            
            
            7.13
            %Scott
                Schecter(1)(2)
            
            
            139,379
            
            
            1.82
            %Scott
                Wilshire(1)(3)
            
            
            35,737
            
            
            0.47
            %Brian
                Bailys(1)
            
            
            108,906
            
            
            1.43
            %John
                J. Freeh
            
            
            -0-
            
            
            —Howard-Yana
                Shapiro
            
            
            -0-
            
            
            —FuelCell
                Holdings, LLC(4)
            
            
            757,445
            
            
            9.95
            %Pequot
                Capital Management, Inc.(5)
            
            
            766,313
            
            
            10.06
            %SAC
                Capital Associates, LLC(6)
            
            
            392,146
            
            
            5.15
            %Security
                Management Company, LLC(7)
            
            
            1,568,593
            
            
            20.60
            %All
                Executive Officers and Directors as a group (seven persons)(2)(3)(8)
            
            
            1,238,703
            
            
            16.09
            %




*
            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
                47,548 shares of common stock subject options that vest as of May 31,
                2006, but does not include 66,567 shares of common stock that are
                subject
                to options that may vest in the future.




(3)
            Includes
                35,737 shares of common stock subject to options that vest as of
                May 31, 2006, but does not include 50,031 shares of common stock
                subject to options that may vest in the future.




(4)
            FuelCell
                Holdings, LLC has an address at 3201 Enterprise Parkway, Suite 460,
                Beachwood, Ohio 44122. Mr. Saul Siegel has investment authority over
                these shares.




(5)
            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.




(6)
            S.A.C.
                Capital Associates, LLC has an address at 158 Victoria House, The
                Valley,
                Anguilla, BWI. S.A.C. Capital Advisors LLC has the voting authority
                over
                these shares.




(7)
            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.




(8)
            Includes
                83,285 shares of common stock subject options that vest as of May 31,
                2006, but does not include 117,304 shares of common stock that are
                subject
                to options that may vest in the
                future.




-39-


**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 controlled by Dr. Leo Blomen. Blomenco makes
      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 50% of his time on HydroGen business activities. Blomenco B.V.
      charges a management fee of € 185,000 per annum, but is paid in US dollars at a
      conversion rate equal to 50% of the difference between the dollar and the euro.
      In 2005, Blomenco B.V earned fees totaling $257,245, which includes a bonus
      earned of $59,050 ($53,145 of which is deferred until HydroGen completes its
      next round of financing.) Blomenco B.V. was paid a total of $46,388 and $0
      in
      2004 and 2003, respectively.




**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.
                *3.6
            
            Amendment
                to Articles of Incorporation - Withdrawal of Certificate of Designations
                -
                Series B Preferred Stock *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)10.1
            
            Financial
                Advisory Agreement dated July 6, 2005, between Chiste Corporation.
                and
                Keating Securities, LLC (Incorporated by reference from Form 8-K
                dated
                July 7, 2005, Exhibit 10.1)10.2
            
            Exchange
                Agreement between Chiste Corporation and HydroGen LLC (Incorporated
                by
                reference from Exhibit 2.2 of Form 8-K filed May 18,
                2005)10.3
            
            Voting
                Agreement Form among Registrant, holders of Preferred Shares and
                others
                (Incorporated by reference from Form 8-K dated July 7, 2005, Exhibit
                10.3)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)






-40-






**Exhibit
              No.**
            
            **Description**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*21.1
            
            Subsidiaries
                of HydroGen Corp.*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*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
      December 8, 2005, the Board of Directors held a meeting at which it filled
      the
      three existing vacancies on the Board of Directors by appointing Messrs. John
      J.
      Freeh, Howard-Yana Shapiro and Brian D. Bailys as directors of HydroGen,
      commencing the date of appointment until their subsequent resignation or the
      election and qualification of their successors. Messrs. Freeh and Shapiro are
      considered independent directors. Messrs Freeh and Bailys are financially
      literate and Mr. Bailys is considered a financial expert by HydroGen.




-41-


On
      February 22, 2006, HydroGen filed a Form 8-K stating that, in connection with
      the reverse acquisition transaction of Hydrogen LLC by the predecessor
      corporation, Chiste Corporation, the Board of Directors on July 7, 2005, after
      the consummation of the acquisition, determined that the fiscal year of the
      corporation would be changed to December 31. The change reflected the accounting
      treatment of the acquisition. The Form 8-K dated July 7, 2005, included
      financial statements of Hydrogen LLC on the basis of a fiscal year end of
      December 31, and since the consummation of the transaction the registrant has
      filed financial statements on this basis.




**Item
      14.** **Principle
      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 2005 and 2004:




**FY
                2005**
            
            **FY
                2004**Audit
                Fees
            
            $
            71,616
            
            $
            15,000Audit
                Related Fees
            
            
            —
            
            
            —Tax
                Fees
            
            
            —
            
            
            —All
                Other Fees
            
            
            —
            
            
            —$
            71,616
            
            $
            15,000




Audit
      services of Goldstein Golub Kessler LLP for fiscal years 2005 and 2004 consisted
      of the audit of the year end financial statements and the review of the
      quarterly financial statements of HydroGen.




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.






-42-


**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 30, 2006.




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 28, 2006.




**Signature**
            
            **Capacities**
            
            **Date**/s/
                Leo Blomen
              
              **Leo
                Blomen**
            
            Chairman
                and Chief Executive Officer (Principal Executive Officer)
            
            March
                30, 2006/s/
                Joshua Tosteson
              **Joshua
                Tosteson**
            
            President
                (Principal Executive Officer)
            
            March
                30, 2006/s/
                Scott M. Schecter
              **Scott
                M. Schecter**
            
            Chief
                Financial Officer (Principal Financial and Accounting
                Officer)
            
            March
                30, 2006/s/
                Brian Bailys
              **Brian
                Bailys**
            
            Director
            
            March
                30, 2006/s/
                John Freeh
              **John
                Freeh**
            
            Director
            
            March
                30, 2006/s/
                Howard Yana-Shapiro
              **Howard
                Yana-Shapiro**
            
            Director
            
            March
                30, 2006







-44-


**Financial
      Statements**




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**PAGE****Report
                of Independent Registered Public Accounting Firm**
            F-2**Consolidated
                Balance Sheet**-
                December 31, 2005
            F-3**Consolidated
                Statements of Operations**-
                For the Years Ended December 31, 2005 and 2004, and from November
                11, 2001
                (inception) through December 31, 2005
            F-4**Consolidated
                Statements of Shareholders’ Equity**-
                from November 11, 2001 (inception) through December 31,
                2005
            F-5**Consolidated
                Statements of Cash Flows**-
                For the Years Ended December 31, 2005 and 2004, and from November
                11, 2001
                (inception) through December 31, 2005
            F-6**Notes
                to Consolidated Financial Statements**
            F-7









**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, 2005 and the related consolidated
      statements of operations, shareholders’ equity (deficiency) and cash flows for
      the years ended December 31, 2005 and 2004. 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, 2005 and the results of its operations and its cash flows for the years
      ended December 31, 2005 and 2004, in conformity with United States generally
      accepted accounting principles.






**GOLDSTEIN
      GOLUB KESSLER LLP**


New
      York,
      New York




February
      17, 2006, except for Note 14, as to which the date is March 7, 2006





F
          -2


**HYDROGEN
      CORPORATION AND SUBSIDIARY**


**(A
      Development Stage Company)**


**CONSOLIDATED
      BALANCE SHEET**




**DECEMBER
                  31, 2005****ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              2,796,324Short-term
                  investments
              
              
              6,493,482Accounts
                  receivable
              
              
              40,042Other
                  current assets
              
              
              316,634**TOTAL
                  CURRENT ASSETS**
              
              $
              9,646,482Property
                  and equipment, net
              
              
              807,372Equipment
                  deposits
              
              
              224,896Other
                  assets
              
              
              14,373**TOTAL
                  ASSETS**
              
              $
              10,693,123**LIABILITIES
                  AND SHAREHOLDERS’ EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable and accrued expenses
              
              $
              612,961**TOTAL
                  CURRENT LIABILITIES**
              
              
              612,961Common
                  stock, par value $0.001, authorized 65,000,000
                shares,
                  7,614,904 issued and outstanding
              
              
              7,615Series
                  B convertible preferred stock, par $0.001, authorized
                10,000,000
                  shares, no shares issued or outstanding
              
              
              —Additional
                  paid-in capital
              
              
              17,970,255Accumulated
                  deficit
              
              
              (7,897,708)**TOTAL
                  SHAREHOLDERS’ EQUITY**
              
              
              10,080,162**TOTAL
                  LIABILITIES AND SHAREHOLDERS’ EQUITY**
              
              $
              10,693,123










See
      accompanying notes to the financial statements


F
          -3


**HYDROGEN
      CORPORATION AND SUBSIDIARY**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**




**FOR
                  THE YEARS ENDED**
                **DECEMBER
                  31,**
              
              
              **NOVEMBER
                  11, 2001 (INCEPTION) THROUGH**
                **DECEMBER
                  31,****2005**
              
              
              **2004**
              
              
              **2005
                  (not covered by auditor’s report)****Demonstration
                  Grant Revenue**
              
              $
              40,042
              
              $
              —
              
              $
              136,702**Costs
                  and Expenses (including stock based compensation of $626,019,**
                **$638,830
                  and $1,264,849, respectively)**
              
              
              4,538,347
              
              
              1,639,138
              
              
              6,532,586**LOSS
                  FROM OPERATIONS**
              
              
              (4,498,305
              )
              
              (1,639,138
              )
              
              (6,395,884
              )Interest
                  income
              
              
              196,253
              
              
              1,164
              
              
              197,417Interest
                  expense
              
              
              (564,145
              )
              
              (96,680
              )
              
              (675,430
              )Charge
                  for repricing conversion price of convertible debt
              
              
              (875,000
              )
              
              —
              
              
              (875,000
              )**NET
                  LOSS**
              
              $
              (5,741,197
              )
              $
              (1,734,654
              )
              
              (7,748,897
              )Weighted
                  average common shares outstanding (basic and diluted)
              
              
              2,631,633
              
              
              —
              
              
              —Net
                  loss per share (basic and diluted)
              
              $
              (2.18
              )
              
              —
              
              
              —


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
              
              
              —
              
              
              —
              
              
              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
              
              
              —
              
              
              —
              
              
              28,012
              
              
              28
              
              
              638,802
              
              
              **—**
              
              
              638,830Issuance
                  of equity in connection with issuance of convertible notes
              
              
              —
              
              
              —
              
              
              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
              
              
              —
              
              
              —
              
              
              21,731
              
              
              22
              
              
              513,319
              
              
              **—**
              
              
              513,341Equity
                  issued to existing shareholders electing antidilution
                  protection
              
              
              —
              
              
              —
              
              
              4,862
              
              
              5
              
              
              112,674
              
              
              **—**
              
              
              112,679Issuance
                  of equity in connection with issuance of convertible notes
              
              
              —
              
              
              —
              
              
              6,147
              
              
              6
              
              
              103,397
              
              
              **—**
              
              
              103,403Conversion
                  of convertible notes
              
              
              —
              
              
              —
              
              
              60,446
              
              
              60
              
              
              1,999,940
              
              
              —
              
              
              2,000,000Repricing
                  of convertible notes
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              875,000
              
              
              —
              
              
              875,000Forgiveness
                  of debt by significant shareholder
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              150,000
              
              
              —
              
              
              150,000Chiste
                  shareholders’ interest post-reverse merger
              
              
              375,865
              
              
              376
              
              
              —
              
              
              —
              
              
              (376
              )
              
              —
              
              
              —Sale
                  of equity securities
              
              
              —
              
              
              —
              
              
              427,072
              
              
              427
              
              
              12,394,137
              
              
              —
              
              
              12,394,564Conversion
                  of preferred securities into common stock
              
              
              7,071,735
              
              
              7,072
              
              
              (953,824
              )
              
              (954
              )
              
              (6,118
              )
              
              —
              
              
              —Dividend-round
                  up of odd-lot shareholders
              
              
              32,865
              
              
              33
              
              
              —
              
              
              —
              
              
              148,778
              
              
              (148,811
              )
              
              —Sale
                  of common shares
              
              
              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**
              
              **$**
              **(7,897,708**
              **)**
              **$**
              **10,080,162**


*****
            **Not
                covered by auditor’s
                report**






See
      accompanying notes to the financial statements


F
          -5


**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,****2005**
            
            **2004**
            
            **2005
                (not covered by auditor’s report)****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                loss
            
            $
            (5,741,197
            )
            $
            (1,734,654
            )
            $
            (7,748,897
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
            
            
            14,343
            
            
            491
            
            
            14,834Amortization
                of discount on convertible notes
            
            
            491,242
            
            
            67,669
            
            
            558,911Non-cash
                compensation expense
            
            
            626,019
            
            
            638,830
            
            
            1,264,849Financing
                cost recognized upon change in terms of convertible debt
            
            
            875,000
            
            
            —
            
            
            875,000Changes
                in operating assets and liabilitiesIncrease
                in accounts receivable
            
            
            (40,042
            )
            
            —
            
            
            (40,042
            )(Increase)
                decrease in other current assets
            
            
            (314,118
            )
            
            485
            
            
            (316,634
            )Increase
                in other non-current assets
            
            
            (14,373
            )
            
            —
            
            
            (14,373
            )Increase
                in accounts payable and accrued expenses
            
            
            322,988
            
            
            185,980
            
            
            612,964**NET
                CASH USED IN OPERATING ACTIVITIES**
            
            
            (3,780,137
            )
            
            (841,199
            )
            
            (4,793,388
            )**CASH
                FLOW FROM INVESTING ACTIVITIES**Purchase
                of short-term investments
            
            
            (6,493,482
            )
            
            —
            
            
            (6,493,482
            )Purchase
                of property and equipment
            
            
            (817,300
            )
            
            (4,906
            )
            
            (822,206
            )Equipment
                deposits
            
            
            (224,896
            )
            
            —
            
            
            (224,896
            )**NET
                CASH USED IN INVESTING ACTIVITIES**
            
            
            (7,535,678
            )
            
            (4,906
            )
            
            (7,540,584
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Issuance
                of common stock for cash including the exchange of member’s units and
                preferred stock
            
            
            12,979,443
            
            
            —
            
            
            12,980,297Proceeds
                from (repayment of) notes payable, related parties
            
            
            (467,360
            )
            
            445,710
            
            
            150,000Proceeds
                from issuance of convertible notes payable including amount allocated
                to
                equity component
            
            
            370,000
            
            
            1,630,000
            
            
            2,000,000**NET
                CASH PROVIDED BY FINANCING ACTIVITIES**
            
            
            12,882,083
            
            
            2,075,710
            
            
            15,130,297**NET
                INCREASE IN CASH AND CASH EQUIVALENTS**
            
            
            1,566,268
            
            
            1,229,605
            
            
            2,796,325**CASH
                AND CASH EQUIVALENTS, beginning of period**
            
            
            1,230,056
            
            
            451
            
            
            —**CASH
                AND CASH EQUIVALENTS, end of period**
            
            $
            2,796,324
            
            $
            1,230,056
            
            $
            2,796,324**SUPPLEMENTAL
                DISCLOSURES CASH FLOW INFORMATION**Cash
                paid for interest
            
            $
            116,493
            
            
            —
            
            $
            116,493**SUPPLEMENTAL
                SCHEDULE OF NON-CASH FINANCING ACTIVITIES**Capital
                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
          -6


**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**








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




The
      business of HydroGen Corporation, formerly HydroGen L.L.C. (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 (see Note 2).




**Company’s
      Business**




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.




FCA
      contributed assets and PAFC technology for a 55% interest in the Company.
      Founding management members received a 45% membership interest in the aggregate
      for services to be rendered. FCA, under the Operating Agreement, received a
      distribution preference from the Company in the amount of $2.2 million. On
      January 27, 2004, FCA and HMR, LP (“HMR”) a Connecticut limited
      partnership, entered into an option agreement granting HMR the option to
      purchase 1⁄2 of FCA’s 54.083 membership units. On May 14, 2004, HMR assignees
      acquired 27.042 of FCA’s units for $2,350,000 under this Option Agreement. Prior
      to exercise of the option by HMR, FCA owned 53.683% of the outstanding
      membership units of the Company, and at December 31, 2005 FCA owned 9.95%
      of the Company’s common shares.




As
      a part
      of this transaction, FCA cancelled its $2.2 million distribution preference
      as provided for in the operating agreement with the Company. Further, FCA agreed
      to lend the Company on an interest free basis evidenced by a line of credit
      note, a sum not to exceed $350,000. On July 7, 2005, the Company paid FCA a
      total of $512,833, which represents the total amount owing on working capital
      loans plus accrued interest through that date, less $150,000 of debt
      forgiveness.




**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.




F
          -7


**HYDROGEN
          CORPORATION AND SUBSIDIARY**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2005**






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




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 now own 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 hold 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.




As
      described in Note 7, 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 -** ***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.




F
          -8


**HYDROGEN
          CORPORATION AND SUBSIDIARY**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2005**






**NOTE
      3 -** ***SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED***




Demonstration
      grant revenue is recognized as the Company incurs reimbursable costs as set
      forth under the contract. All of the Company’s revenue in 2005 is from a grant
      agreement with a State of Ohio government agency.




**Accounts
      Receivable**




Accounts
      receivable consist of an obligation due from a government agency 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, 2005 the Company had
      outstanding accounts receivable of $40,042. The Company recorded no bad debt
      expense during the years ended December 31, 2005 and 2004 for accounts
      receivables.




**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, 2005, substantially all of HydroGen's short-term investments are
      on
      deposit with one financial institution.




**Property
      and Equipment**




Property
      and equipment are stated at cost. Depreciation is computed using the straight
      line method over the estimated useful lives of related assets as follows:
      computer and office equipment - three to seven years; machinery and equipment-
      seven to ten years. Leasehold improvements are amortized over the shorter of
      the
      lease agreement or the useful lives of the related asset.




**Research
      and Development Expenses**




Research
      and development expenditures are expensed as incurred. Research and development
      expense for the years ended December 31, 2005 and 2004 and the period from
      November 11, 2001 (inception) to December 31, 2005, was approximately
      $1,164,000, $248,000 and $1,457,000 (not covered by auditor’s report),
      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.




F
          -9


**HYDROGEN
          CORPORATION AND SUBSIDIARY**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2005**






**NOTE
      3 -** ***SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED***




**Income
      Taxes**




The
      Company follows Statement of Financial Accounting Standards (SFAS) No. 109,
“Accounting for Income Taxes”, which requires an asset and liability approach to
      financial accounting and reporting for income taxes. Deferred income tax assets
      and liabilities are computed annually for differences between the financial
      statement and tax bases of assets and liabilities that will result in taxable
      or
      deductible amounts in the future based on enacted tax laws and rates applicable
      to the period in which the differences are expected to affect taxable income.
      Valuation allowances are established when necessary to reduce deferred tax
      assets to the amount expected to be realized. Income tax expense (benefit)
      is
      the tax payable or refundable for the period plus or minus the change during
      the
      period in deferred tax assets and liabilities.




The
      Company, which was formerly a limited liability company in Ohio, had elected
      to
      be treated as a partnership for federal and state income tax purposes. In lieu
      of paying taxes at the company level, the members of a limited liability company
      were taxed on their proportionate share of the company’s taxable income.
      Therefore, no provision or liability for federal or state income taxes has
      been
      included in the financial statements for the year ended December 31, 2004.
      See Note 4.




**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 420,880 as of December 31,
      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.




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.




**Equity-Based
      Compensation**




The
      Company accounts for equity-based compensation for employees and directors
      using
      the intrinsic value method prescribed in Accounting Principles Board Opinion
      No. 25, Accounting for Stock Issued to Employees, and related
      interpretations. Accordingly, compensation cost for stock, stock options or
      other similar instruments, granted to employees is measured as the excess,
      if
      any, of the quoted market price of the Company’s common stock at the measurement
      date (generally, the date of grant) over the amount an employee must pay to
      acquire the stock.




F
          -10


**HYDROGEN
      CORPORATION AND SUBSIDIARY** **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**




**NOTE
      3 -** ***SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED***




If
      compensation expense for HydroGen’s plans had been determined based on the fair
      value at the grant dates for awards under its plans, consistent with the method
      described in SFAS No. 123, “Accounting for Stock-Based Compensation,”
HydroGen’s net income and income per share would have been adjusted as follows
      for the years ended December 31, 2005 and 2004 (there would be no impact on
      the results for the year ended December 31, 2004):




For
                  the years ended December 31,2005
              
              
              2004Net
                  loss, as reported
              
              $
              (5,741,197
              )
              $
              (1,734,654
              )Pro
                  forma stock compensation expense, net of tax benefit
              
              
              (161,957
              )
              
              —Pro
                  forma net loss
              
              $
              (5,903,154
              )
              $
              (1,734,654
              )Net
                  loss per share, basic and diluted, as reported
              
              $
              (2.18
              )
              
              —Pro
                  forma stock compensation expense
              
              
              (0.06
              )
              
              —Pro
                  forma
              
              $
              (2.24
              )
              
              —




**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. 123(R), "Share-Based Payment.”  In
      December 2004, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards (SFAS) No. 123(R), "Share-Based Payment",
      which is a revision of SFAS No. 123, “Accounting for Stock-Based
      Compensation”. SFAS 123(R) is effective for public companies that file as
      small business issuers as of the beginning of the first interim or annual
      reporting period that begins after December 15, 2005. SFAS 123(R)
      supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”,
      and amends SFAS 95, “Statement of Cash Flows”. SFAS 123(R) requires
      all share-based payments to employees, including grants of employee stock
      options, to be recognized in the income statement based on their fair values.
      Pro-forma disclosure is no longer an alternative. The new standard will be
      effective for the Company beginning January 1, 2006.




F
          -11


**HYDROGEN
      CORPORATION AND SUBSIDIARY** **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**






**NOTE
      3 -** ***SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED***




SFAS 123(R)
      permits public companies to adopt its requirements using one of two
      methods:




3.
            A
                “modified prospective” method in which compensation cost is recognized
                beginning with the effective date (a) based on the requirements of
                SFAS 123(R) for all share-based payments granted after the effective
                date and (b) based on SFAS 123 for all awards granted to
                employees prior to the effective date of SFAS 123(R) that remain
                unvested on the effective date.




4.
            A
                “modified retrospective” method which includes the requirements of the
                modified prospective method described above, but also permits entities
                to
                restate the amounts previously recognized under SFAS 123 for purposes
                of pro forma disclosures either for (a) all prior periods presented
                or (b) prior interim periods in the year of
                adoption.




We plan to
      adopt SFAS 123(R) using the modified prospective approach. Because
      SFAS 123(R) must be applied not only to new awards but to previously
      granted awards that are not fully vested on the effective date, compensation
      cost for some previously granted awards that were not recognized under
      SFAS 123 will be recognized under SFAS 123(R). Had we adopted
      SFAS 123(R) in prior periods, the impact of that standard would have
      approximated the impact of SFAS 123 as previously described in the
      disclosure of pro forma net income and earnings per share. SFAS 123(R) also
      requires that the benefits of tax deductions in excess of recognized
      compensation cost be reported as a financing cash flow, rather than as an
      operating cash flow as required under current literature.




This
      requirement will reduce net operating cash flows and increase net financing
      cash
      flows in periods after the effective date. We cannot estimate what those
      benefits will be in the future because they depend on, among other things,
      when
      employees exercise stock options.




SFAS
      No. 153, “Exchanges of Nonmonetary Assets.” In
      December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets”,
      which changes the guidance in APB Opinion 29, “Accounting for Nonmonetary
      Transactions”. This Statement amends Opinion 29 to eliminate the exception
      for nonmonetary exchanges of similar productive assets and replaces it with
      a
      general exception for exchanges of nonmonetary assets that do not have
      commercial substance. A nonmonetary exchange has commercial substance if the
      future cash flows of the entity are expected to change significantly as a result
      of the exchange. SFAS 153 is effective during fiscal years beginning after
      June 15, 2005. The Company does not believe the adoption of SFAS 153
      will have a material impact on the Company’s financial statements.






F
          -12


****HYDROGEN
      CORPORATION AND SUBSIDIARY**** **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**






**NOTE
      3 -** ***SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED***




SFAS
      No. 154, “Accounting Changes and Error Corrections.” In May
      2005, the FASB, issued SFAS No. 154, “Accounting Changes and Error Corrections -
      a replacement of APB No. 20 and FASB Statement No. 3”. SFAS 154
      requires that a voluntary change in accounting principle be applied
      retrospectively with all prior period financial statements presented on the
      basis of the new accounting principle. SFAS 154 also requires that a change
      in method of depreciating or amortizing a long-lived non-financial asset be
      accounted for prospectively as a change in estimate, and corrections of errors
      in previously issued financial statements should be termed a restatement.
      SFAS 154 is effective for accounting changes and correction of errors made
      in fiscal years beginning after December 15, 2005. The Company does not
      believe the adoption of SFAS 154 will have a material impact on the
      Company’s financial statements.




**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.




**NOTE
      4 -** **** ***INVESTMENTS***




At
      December 31, 2005, investments consisted of the following:




Security
              
              Carrying
                  Amount
              
              Unrealized
                  Gain/(Loss)
              
              Fair
                  ValueFederal
                  Home Loan Mortgage Corp.
                Notes,
                  5.25% January 15, 2006 maturity
              
              $
              3,001,412
              
              $
              (482
              )
              $
              3,000,930Federal
                  Home Loan Bank Bonds, 2.0%
                February
                  13, 2006 maturity
              
              $
              3,492,070
              
              $
              (2,990
              )
              $
              3,489,080$
              6,493,482
              
              $
              (3,472
              )
              $
              6,490,010





**NOTE
      5 -** ***PROPERTY
      AND EQUIPMENT***




Property
      and equipment consisted of the following at December 31, 2005.




December
                31, 2005Computer
                equipment and software
            
            $
            48,939Machinery
                and equipment
            
            
            457,971Leasehold
                improvements
            
            
            268,880Office
                equipment
            
            
            107,188Assets
                under construction
            
            
            280,8251,163,803Less
                accumulated depreciation
            
            
            356,431$
            807,372






F
          -13


HYDROGEN
      CORPORATION AND SUBSIDIARY **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**




Machinery
      and equipment includes approximately $296,000 of assets that were transferred
      from a related party at historical cost (see Note 1) at the date of
      formation of the Company. All such assets were fully depreciated at
      December 31, 2005.




Assets
      under construction principally include assets related to leasehold improvements
      of the Company’s new manufacturing facility (see Note 9), and will be
      placed in service in 2006.




Depreciation
      expense of property and equipment for the years ended December 31, 2005 and
      2004 and for the period November 11, 2001 (inception) to December 31, 2005
      was
      $14,343, $491, and $14,834 (not covered by auditor’s report),
      respectively .




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




At
      December 31, 2005, accounts payable and accrued expenses include the
      following:




Accounts
                payable
            
            $
            309,000Accrued
                payroll & bonuses
            
            
            247,000Other
            
            
            56,961$
            612,961




**NOTE
      7 -** **** ***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
      corporation. 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.




F
          -14


**HYDROGEN
        CORPORATION AND SUBSIDIARY**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**
  **NOTE
        7 -** **** ***INCOME
        TAXES - CONTINUED***




At
      December 31, 2005, the Company had accumulated net operating loss
      carryforwards for federal tax purposes of approximately $3,788,000 that are
      available to offset future taxable income, if any, which expire at various
      dates
      through 2026. The Company’s recapitalization, described in Note 2, may have
      significantly impaired the Company’s ability to utilize $1,333,215 of the net
      operating loss carryforwards due to limitations imposed by Section 382 of the
      Internal Revenue Code. Accordingly, subsequent to the recapitalization of the
      Company, management has recorded a full valuation allowance against deferred
      tax
      assets associated with net operating loss carryforwards realized prior to the
      execution of the Exchange Agreement. Additionally, valuation allowances have
      been recorded against deferred tax assets associated with net operating loss
      carry forwards realized after the execution of the Exchange Agreement, and
      will
      carry such valuation allowances until such time as management is reasonably
      assured that these deferred tax assets will be realizable.




Deferred
      tax assets related to the Company’s operations are comprised of the following at
      December 31, 2005:





Deferred
                tax assets (liabilities):Tax
                effect of federal and state loss carryforwards
            
            
            (1,488,000
            )Less
                valuation allowance
            
            
            (1,488,000
            )Net
                deferred tax assets
            
            $
            —




The
      net
      operating loss carryforward, if not utilized to reduce taxable income in future
      periods, will expire in the years 2012 through 2026.




Total
      income tax expense for the year ended December 31, 2005 differed from the
      amounts computed by applying the U.S. Federal statutory tax rates to pre-tax
      income as follows :




Statutory
                rate
            
            
            (34.0
            )%State
                income taxes, net of Federal income tax benefit
            
            
            (5.3
            )Permanent
                tax differences
            
            
            5.3Loss
                incurred as a limited liability company
            
            
            14.3Increase
                in valuation allowance
            
            
            19.7—
            %




**NOTE
      8 -** ***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. At December 31, 2004, the Company had received
      $1,630,000 of the proceeds and subsequent to December 31, 2004, the Company
      received the remaining $370,000.




F
          -15


**HYDROGEN
      CORPORATION AND SUBSIDIARY** **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**




**NOTE
      8 -** ***CONVERTIBLE
      NOTES - CONTINUED***




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 years ended
      December 31, 2005 and 2004, $491,000 and $68,000 have been amortized to the
      debt component and included as additional interest expense, respectively. 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.




**NOTE
      9 -** ***STOCK
      OPTIONS***




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.




A
      Black-Scholes option-pricing model was used to estimate the fair value of
      employee stock options for the SFAS No. 123 pro forma disclosure in
      Note 3. This model was developed for use in estimating the fair value of
      traded options that have no vesting restrictions and are fully transferable.
      In
      addition, option-pricing models require the input of highly subjective
      assumptions including the expected stock price volatility. 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
          -16


****HYDROGEN
      CORPORATION AND SUBSIDIARY**** **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**






**NOTE
      9 -** ***STOCK
      OPTIONS - CONTINUED***




The
      fair
      value of each option grant in 2005, for “As adjusted” disclosure proposed in
      Note 3, was estimated on the date of grant using a Black-Scholes option
      pricing model with the following weighted average assumptions:


Expected
                  dividend yield
              
              
              0.00
              %Risk-free
                  interest rate
              
              
              3.90
              %Expected
                  volatility
              
              
              119.0
              %Expected
                  life of option
              
              
              5
                  years




Note:
      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.




During
      the year ended December 31, 2005, options on 342,345 shares were granted at
      an exercise price of $4.34 and options on 78,535 shares were granted at an
      exercise price of $5.10. All 420,880 options granted during the year ended
      December 31, 2005 were outstanding at December 31, 2005. All options
      granted expire 10 years after grant, subject to the employment status of the
      grantee. There were no options or warrants granted in 2004, and no options
      or
      warrants were outstanding at December 31, 2004. At December 31, 2005,
      options on 178,235 shares were vested which have a weighted average remaining
      life of 9 years, and options on 242,645 shares were not exercisable, which
      have
      a weighted average remaining life of 9.15 years. The average fair value of
      options granted during the year ended December 31, 2005 was $1.40 per
      share.




**NOTE
      10 -** ***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.




F
          -17


HYDROGEN
      CORPORATION AND SUBSIDIARY **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**


**NOTE
      10 -** ***COMMITMENTS
      AND CONTINGENT LIABILITIES - CONTINUED***




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




In
      September 2005, the Company executed an 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 7). The Company is renting the space on a month to month basis
      for $280 per month.




Rent
      expense for the years ended December 31, 2005 and 2004, and for the period
      from November 11, 2001 (inception) to December 31, 2005 (not covered
      by auditor’s report) was approximately $168,000, $34,000 and $282,000,
      respectively.




Future
      minimum lease payments under operating leases are as follows:




**Years
                  Ending**
                **December
                  31,**
              
              
              **Amount**2006
              
              $
              230,3252007
              
              
              244,0712008
              
              
              245,8612009
              
              
              247,6952010
              
              
              206,456**Total**
              
              $
              1,164,831




**Litigation**




In
      September 2005, HydroGen’s predecessor company was named in a patent
      infringement claim related to technology that the predecessor company sold
      to
      the claimant. According to the pleadings (filed in a federal district court
      in
      California), in 2004 the buyer of the technology discovered that a former
      employee of our predecessor company was seeking investment dollars to
      commercialize the same technology that the buyer purchased. Further, the former
      employee continued to use the Company’s predecessor company’s name in her
      efforts. Accordingly, the buyer filed suit in August 2004 seeking, among other
      relief, an injunction preventing the predecessor company’s former employee from
      continuing to use the technology. In September 2005, the buyer amended its
      pleadings to add a claim in patent infringement (thereby establishing subject
      matter jurisdiction) and naming the predecessor company.




F
          -18


**HYDROGEN
      CORPORATION AND SUBSIDIARY** **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**






**NOTE
      10 -** ***COMMITMENTS
      AND CONTINGENT LIABILITIES - CONTINUED***




The
      Company recently learned of this action against its predecessor company, and
      is
      investigating whether it needs to appear in the litigation in order to defend
      itself against any liability. As of the time of this writing, no service of
      process has been made to HydroGen or its predecessor company, and it is unclear
      if plaintiffs intend to make any attempt to undertake service. While the results
      of any litigation are inherently difficult to predict, HydroGen believes the
      claims made against its predecessor company have been made in error, and should
      it be required that HydroGen make an appearance in this matter, it will seek
      voluntary dismissal of the claims against the predecessor company by the
      claimant, and failing that, involuntary dismissal by the court. After reviewing
      the facts alleged in this action, the Company believes that its predecessor
      company has not been involved in any of the activities alleged in the complaint,
      amended complaint, or a counterclaim. The Company does not, therefore, believe
      that this action, once resolved, will have a material impact on the Company’s
      financial statements.




**NOTE
      11 -** ***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 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
      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.




In
      December 2005, the Company recorded approximately $40,000 in revenue related
      to
      this grant agreement and included the same amount in accounts receivable at
      December 31,2005. Payment of this receivable was received by the Company in
      February, 2006.




F
          -19


**HYDROGEN
      CORPORATION AND SUBSIDIARY** **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**


**NOTE
      12 -** ***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, 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
      13 -** ***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 years ended December 31,
      2005 and 2004, interest expense to FCA approximated $11,000 and $19,900,
      respectively.




F
          -20


**HYDROGEN
      CORPORATION AND SUBSIDIARY** **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**




**NOTE
      13 -** ***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 and less than $1,000 for the years
      ended
      December 31, 2005 and 2004, respectively. 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 9). 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, has 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.




F
          -21


**HYDROGEN
      CORPORATION AND SUBSIDIARY** **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2005**


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




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.




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.




**NOTE
      14 -**  ***SUBSEQUENT
      EVENT***




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 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 Company has not yet received a copy of the Grant Agreement and
      therefore is unable to disclose additional details.




F
          -22