UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2001

                         Commission File Number 333-19584

                             POWERCOLD  CORPORATION
             (Exact name of registrant as specified in its charter)

         Nevada                                           23-2582701
(State  of  Incorporation)                  (IRS  Employer  Identification  No.)

               115 Canfield Road, La Vernia, Texas              78121
          (Address of principal executive offices)           (Zip Code)

               Registrant's  telephone  number:     210  659-8450


Securities  registered  under  Section  12(b)  of  the  Exchange Act:  None
Securities  registered  under  Section  12(g)  of  the  Exchange Act:  None

     Common  Stock,  $0.001  Par  Value     OTC  Electronic  Bulletin  Board


Indicate by check mark whether the registrant (1) has filed all reports required
to  be  filed by Section 13  or  15(d)  of the  Securities  Exchange Act of 1934
during the preceding 12 months (or for such  shorter period that  the registrant
was required to file such reports),  and  (2)  has been subject  to such  filing
requirements for the past 90 days.  [ x ]  Yes       [  ]  No

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K.  [  x  ]

State the aggregate market value of the voting and non-voting common equity held
by  non-affiliates  of  the  registrant.  The  aggregate  market  value shall be
computed  by  reference to the price at which the common equity was sold, or the
average  bid  and  asked  prices  of  such common equity, as of a specified date
within  60  days  prior  to  the  date  of  filing.  $22,545,000.00

Indicate the number of shares outstanding of each of the registrant's classes of
common  stock,  as  of  the  latest  practicable  date.     16,027,882

                     Documents  Incorporated  by  Reference:  None








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                                      INDEX

PART  I                                                                    Page

Item  1.     Business                                                         3
Item  2.     Property                                                        11
Item  3.     Legal  Proceedings                                              11
Item  4.     Submission  of  Matters  to  a  Vote  of  Security  Holders     11

     PART  II

Item  5.     Market for Registrant's Common Equity and Related Stockholder
             Matters                                                         12
Item  6.     Selected  Financial  Data                                       12
Item  7.     Management's  Discussion and Analysis of Financial Condition
             and  Results  of  Operation                                     13
Item  8.     Financial  Statements  and  Supplementary  Data                 18
Item  9.     Changes  in and Disagreements with Accountants on Accounting
             and  Financial  Disclosure                                      18

PART  III

Item  10.    Directors  and  Executive  Officers  of  the  Registrant        18
Item  11.    Executive  Compensation                                         19
Item  12.    Security  Ownership  of  Certain  Beneficial Owners
             and Management                                                  19
Item  13.    Certain  Relationships  and  Related  Transactions              20

PART  IV

Item  14.    Exhibits, Financial Statement Schedules, and Reports
             on Form 8-K                                                     20

Signatures                                                                   49




























<page> 2
PART  I

ITEM  1.     BUSINESS

GENERAL

PowerCold  Corporation  is  a solution provider of energy efficient products for
the  refrigeration,  air  condition  and  power industries. The Company operates
across  many  market  sectors,  from  large  industrial food processors to small
commercial  air  conditioning  system  applications. The firm's focus is to give
customers  products  and systems that allow them to benefit from current changes
occurring  in  the natural gas and electrical utility marketplace. Air Condition
and refrigeration is the most energy intensive operation most business operators
face.  PowerCold  has  the  opportunity  to  provide  products  and systems that
customers require to take advantage of these changes to improve profitability by
reducing  their  operating  costs.

Deregulation  of  the  gas  and  electric   utilities  will  provide  continuing
opportunities,  creating   new  markets  for   more  efficient  air   condition,
refrigeration  and  power  systems.  PowerCold  has the products, experience and
creative  ability  to package unique energy saving systems for the multi-billion
dollar  refrigeration  market.  To  enhance  this market the Company is pursuing
synergistic  businesses  and  marketing  alliances  are  being formed with major
utility  companies  and  established  industry  companies for these products and
services.

The  Company's mission is to be a solution provider of energy efficient products
for  the  multi-billion  dollar refrigeration, air condition and power industry.
The  Company's  goal  is  to  achieve profitable growth and increase shareholder
value  by forming business alliances and providing superior technology, products
and  services.

Subsequent  to  filing  this  Form  10K,  the  company has reorganized into four
subsidiary  companies,  effective  January  1,  2002:  PowerCold Products, Inc.,
supporting  all  "Cold"  related  products,  Power Sources, Inc., supporting all
"Power" related products, Ultimate Comfort Systems, Inc., supporting proprietary
applications  for  heating, ventilating and air conditioning systems (HVAC), and
Technicold  Services,  Inc.  provides engineering consulting services to the air
condition,  refrigeration  and  power  industries.

COMPANY  HISTORY

International Cryogenics Systems Corporation (ICSC) was established as a private
company  in  1988 to fabricate and market freezer systems. The Company developed
and  patented  the most advanced, cost-effective and environmentally safe "quick
freeze"  systems in the industry. In January l993 ICSC's assets were merged into
a  public  entity.  The name was changed to PowerCold Corporation (PowerCold) in
April 1997, currently trading on the OTC Bulletin Board - symbol (PWCL). In 1995
the  Company  acquired  four companies - currently three have operated as wholly
owned  subsidiaries  of PowerCold; RealCold Products, Inc., Technicold Services,
Inc. and Nauticon, Inc. RealCold Products designs and manufactures air condition
and  refrigeration  systems, Technicold Services provide consulting services for
commercial  refrigeration  and  freezing systems for use worldwide, and Nauticon
owns  a unique product line of patented evaporative condensers and heat exchange
systems  for  the  HVAC  and  refrigeration  industry.







<page> 3
On  December  28,  1992,  the  Board of Directors of the Company agreed to issue
2,414,083  shares of common stock to six individuals for the exclusive rights to
U. S. Patent No. 4,928,492 (May 29, 1990); which provided a method and apparatus
for  production  treatment  of a product through the usage of a cryogenic liquid
and  in  a manner such that minimum loss of the cryogenic liquid is encountered.
The  products that was be processed by this method includes, but not limited to,
food  products,  computer chips, tires for recycling, blood and plasma products,
and  medical  utensils  that  require  a  high  degree  of  sterilization.

The  total  value of the transaction was $724,224.90. Two of the six individuals
received  stock  in  this  transaction  as Directors of the Company. Terrence J.
Dunne  received  850,000  and Francis L. Simola received 340,041 shares of stock
respectively.  This  represented  49.3%  of  all the common stock issued for the
transaction.  Mr.  Dunne  is no longer is a director of the Company. The Company
has since written off the patent and dissolved the cryogenic business because of
the  lack  of  food  grade  Freon,  no longer a viable and economic refrigerant.

SUBSIDIARY  COMPANIES

During  1995, PowerCold acquired four companies in the refrigeration business in
a  stock  exchange  transaction.   These  entities,  complimented  and   secured
PowerCold's  position  in  the  industry, operated as wholly owned subsidiaries.
RealCold  Systems,  Inc.,  prior  to  its  sale to Wittcold Systems, a Wittemann
Company,  offered  custom  industrial refrigeration packages and merchant carbon
dioxide  plants  in  a joint venture with The Wittemann Company.  Nauticon, Inc.
offers  a  patented  product  line  of  evaporative condensers and heat exchange
systems  for  the  HVAC  and  refrigeration  industry. Technicold Services, Inc.
offers  consulting  engineering  services,  including  process safety management
compliance  and  ammonia  refrigeration  and  carbon   dioxide  system   design.
Technicold  also provides operation, maintenance and safety seminars for ammonia
refrigeration  technicians  and  supervisors.  Jordan  Vessel Corporation, which
merged into RealCold Systems, offered industrial refrigeration system components
such  as  liquid  recirculating packages and refrigeration system vessels of all
types.  RealCold  Maintenance  Systems,  Inc.  (renamed RealCold Products, Inc.)
designs  and  produces  unique  products  for  the  refrigeration  industry.

RealCold Systems Inc. signed a Joint Cooperative Agreement in July 1995 with The
Wittemann  Company, a wholly owned subsidiary of Dover Resources and Dover Corp.
(NYSE  -  DOV),  for  the  manufacture  and marketing of merchant carbon dioxide
plants  and  refrigeration  products.  The  cooperation  agreement  combined the
technical  expertise and experience of RealCold with the marketing experience of
Wittemann.  The  industry  combination  of  technology,  sales and manufacturing
experience  proved  to  be a successful venture. Subsequently, Wittcold Systems,
Inc.,  a  division of Wittemann Company, acquired RealCold Systems in July 1997.

In  August  1996,  PowerCold acquired Nauticon Inc., a company that manufactured
and  marketed  a  product line of innovative patented evaporative condensers and
heat exchange systems for the HVAC and refrigeration industry, representing over
five  years  of  development.  The assets include United States Patent 5,501,269
issued  on March 26, 1996, and entitled Condenser Unit, and United States Patent
5,787,722  issued  August  4,  1998,  and  entitled  Heat  Exchange  Unit.   The
new-patented  products  are  innovative  and  unique  in  design  and  simple to
manufacture. They use new material technology with high efficiency copper tubing
to  give  very high efficiency, low operating costs and minimal maintenance. The
evaporative  heat  exchangers  are  self-cleaning  in  most  applications   thus
eliminating  chemical cleaning. The outstanding Nauticon product features cannot
be  found  in  competitive  products.  Nauticon  evaporative condensers and heat
exchange  systems  serve  the  residential,  commercial  HVAC  sector  and   the
commercial  refrigeration  industry.  They  have many applications, varying from
traditional  commercial  refrigeration  to HVAC to industrial cooling. Customers


<page> 4
vary  from  supermarkets  to  ice  rinks  to  walk-in  coolers for refrigeration
systems.  HVAC applications are in smaller commercial buildings, for traditional
air  conditioning  systems  to highly efficient heat pumps. Industrial uses span
plastic  molding  and  extrusion  to  conventional  cooling  of process water to
cooling  of  cutting  oils. They are used for condensers, fluid coolers, booster
coolers, and cooling towers. The Company believes that the Nauticon products may
revolutionize the air condition industry; an industry that faces serious changes
for  the first time in years due to energy and environmental concerns worldwide.

The  three operating subsidiaries, Technicold Services, Inc., RealCold Products,
Inc.  and  Nauticon  Inc.,  supported  by  the  parent public entity, PowerCold,
supported  all  operating activities for the freezing systems, the refrigeration
systems  and  the  evaporative  heat  exchange  systems respectively. Technicold
provides  consulting  services  to  the  refrigeration  industry,  and  RealCold
Products,  Inc.  supports  all  refrigeration and freezer systems operating from
their  corporate facility in La Vernia, Texas. Nauticon supports all evaporative
heat  exchange  and  refrigeration  systems  and operations from their corporate
facility  in La Vernia, Texas. The corporate manufacturing facility supports all
technical  and  service  product  operations  including; design and engineering;
assemble  and  fabrication;   administration;   marketing,   sales  support  and
consulting  services.  Represented  agents  and  distributors  support sales and
marketing  activities.

Subsequently,  effective  January  1,  2002,  RealCold  Products,  Inc. name was
changed  to  PowerCold  Products,  Inc.  and  Nauticon, Inc. was dissolved as an
operating  entity.  The Nauticon product line is being supported under PowerCold
Products,  Inc.

PowerCold  Products,  Inc.  -  designs,  manufactures  and markets a proprietary
product  line  of  patented evaporative condensers and heat exchange systems for
the  heating,  ventilation  and air condition (HVAC) and refrigeration industry.
PowerCold Products supports the Company's Nauticon and EV Chill product lines by
engineering design, manufacturing and packaging its products. PowerCold Products
also  supports  custom  refrigeration  systems  by  engineering,  designing  and
packaging  special  customer  orders.  There  are  proposed alliances with other
refrigeration  companies,  whereas  PowerCold  Products  will  package   various
components  adding  value  for  a  total  turnkey air condition or refrigeration
system.

The  Nauticon  patented  products  are  innovative  in  design, use new material
technology,  are  simple to manufacture, and have a low operating cost. They are
used  for  evaporative  condensers,  fluid  coolers,  sub-coolers commercial and
industrial  refrigeration  system  components, liquid recirculating packages and
custom  refrigeration  products  for  commercial  and  industrial  use. Nauticon
products  can  reduce power cost in the air condition and refrigeration industry
by  up  to  40%  making these units contribute to the utilities' needs to reduce
power  demand.

The  Chiller  line of products includes: EV-Chill: water chillers, namely, water
chilling  and  refrigeration  systems utilizing water evaporative condensers for
commercial  and  industrial  use;  EV-Cool:  air  conditioning  units  utilizing
evaporative  condensers  for  commercial  and  industrial  use;  EV-Dry:
dehumidification system utilizing evaporative fluid coolers to cool warm dry air
for  commercial  and  industrial  use;  EV-Frig:  refrigeration condensing units
utilizing  evaporative  condensers  for  commercial  and  industrial  use.







<page> 5

Power  Sources,  Inc. - effective December 1, 2001, the Company acquired 100% of
Power  Sources,  Inc.  Power  Sources  designs and markets cogeneration systems,
which use engine-driven generators to produce both electricity and thermal power
as  a  way of cutting power costs. The business is a major cogeneration provider
in the New York metropolitan area. Technology and Assets assigned by UMRC to the
newly  formed  Power  Sources,  Inc. includes; pertinent selected technology and
relevant  intellectual  property  for  cogeneration  systems,  and all pertinent
outstanding  UMRC's  cogeneration  systems  customer contracts. The cogeneration
systems  technology will be marketed and sold direct to customers by and through
Power  Sources, Inc. and will also be supported, as needed, by PowerCold and its
related  subsidiary  companies.

Cogeneration  systems,  also  known as Distributed Generation, use engine driven
generators to produce both electric power and thermal energy that have typically
achieved  paybacks based on energy and electric cost savings in 18 to 36 months.
As  a  result  of  the  acquisition,  PowerCold  will be able to offer customers
complete self-contained heating/chilling units to reduce peak power requirements
as  well  as  the ability to self-generate all the power needed for a commercial
building.  Units range in size from 100 kilowatts to 2 megawatts.  Customers can
expect  to  reduce  power  or  energy  costs  by  40%  or  more.

Deregulation  of  gas and electric utilities is creating major changes in energy
use  and costs. The natural gas engines enhance the customers' economic benefits
by  reducing  energy costs while supporting the environment with a clean burning
energy  source.  Packaged industrial refrigeration systems produced by PowerCold
Products  will now use natural gas rotary engines instead of competitor engines.
A  packaged,  commercial  air  conditioning  system using the natural gas rotary
engine  and the Nauticon evaporative condenser provides major energy savings for
large  commercial  building  facilities.

Subsequently,  effective  January  1,  2002,  Rotary  Power Enterprise, Inc. was
dissolved  as  an  operating entity.  The assets of Rotary Power Enterprise were
transfer  into  Power  Sources,  Inc.  acquired  in December 2001 to support the
Company's  "Power"  business  operations.

Rotary  Power  Enterprise,  Inc. was formed in September 1998 as a new PowerCold
entity to acquire the Natural Gas Business from Rotary Power International, Inc.
PowerCold  is  also  a  major  shareholder  of  Rotary Power International, Inc.
(OTCC:RPIN).  The agreement included: the business assets including intellectual
property, inventory and packaging capability; North American rights to the small
65  series Mazda natural gas engine block, subject to a new Mazda Agreement; and
a  Distributor  Agreement  for  the  Rotary Power 580 series engines form Rotary
Power  International,  Inc.  In  August  2000  Rotary  Power Enterprise signed a
non-exclusive  manufacturing  license  agreement  for the 580 series natural gas
engine  with  Rotary  Power  International.

Subsequently,  effective  January 1, 2002, Channel Freeze Technologies, Inc. was
dissolved  as an operating entity.  The Company is negotiating with the previous
owners  for  the  technology.  Channel  Freeze  Technologies, Inc. was formed in
September  1998, as a PowerCold subsidiary, to acquire certain assets of Channel
Ice Technologies. The technology includes a proprietary patent for an economical
multi-purpose  freezing system. The company is allocating all its resources into
its current product line, therefore, management decided there was no synergy for
the  Channel  Freeze technology and does not vision the product in the Company's
future  business  plans.






<page> 6
Ultimate  Comfort  Systems, Inc. - On December 1, 2000, the Company acquired the
technology  rights,  patent  rights, and license agreement for integrated piping
technology  for  a  heating  and  air  conditioning  system. This technology was
transferred  into  the  newly  formed  wholly  owned  subsidiary of the Company,
Ultimate  Comfort  Systems,  Inc.  This  acquisition gave the Company exclusive,
non-transferable United States transfer rights to the technology and all related
assets.

TRADEMARKS:  The  Company  filed  application  for  registration  of  a
trademark/service  mark  for  the  following  products:

Nauticon:  manufacturing and packaging of evaporative condensers, fluid coolers;
commercial  and industrial refrigeration system components, liquid recirculating
packages  and  custom  refrigeration products for commercial and industrial use.

EV-Chill:  water  chillers,  namely,  water  chilling  and refrigeration systems
utilizing  water  evaporative  condensers  for  commercial  and  industrial use.

EV-Cool:  air conditioning units utilizing evaporative condensers for commercial
and  industrial  use.

EV-Dry: dehumidification system utilizing evaporative fluid coolers to cool warm
dry  air  for  commercial  and  industrial  use.

EV-Frig:  refrigeration  condensing  units  utilizing evaporative condensers for
commercial  and  industrial  use.

EpowerRX.net:  providing  consulting  and  engineering  services in the field of
distributed  power  generation, electrical load management, air conditioning and
refrigeration  systems, namely, promoting and providing information on and links
to  the  resources  of  others  pertaining  to  distributed  power   generation,
electrical  load  management  of  commercial  and  industrial refrigeration, air
conditioning  and  dehumidification systems for commercial and industrial use by
means  of  a  global  computer  network

AFFILIATE  -  In  December 1996 the Company agreed in principal to merge/acquire
Rotary  Power  International,  Inc.  The Company initially acquired a 30% equity
interest  in  RPI  (2M shares of common stock for $1M), and proposed a merger of
the  companies  in  a  stock  for  stock transaction, whereby RPI would become a
wholly  owned  subsidiary  of  the  Company.  A Plan of Agreement and Merger was
signed  with  Rotary Power International, Inc. ("RPI") on March 21, 1997 subject
to RPI shareholder approval.  Each shareholder of RPI was to receive .363 shares
of  the  Company's  common  stock  (1.56M  shares)  upon  shareholder  approval.

On  July  21,  1997,  the Company and Rotary Power International, Inc. agreed to
amend  Section  1.2  -  The  Closing  by  extending  the Agreement an additional
forty-five  (45) days.  The First Amendment to the Plan and Agreement of Merger,
the extension on the Plan and Agreement of Merger between the Company and Rotary
Power  International,  Inc., expired on September 5, 1997, accordingly, the Plan
and  Agreement  of  Merger  is  no  longer  in effect. The Company wrote off the
original  investment  in  Rotary  Power,  and currently owns 1,940,000 shares of
Rotary  Power  International,  Inc.  (OTCC-RPIN)










<page> 7
STRATEGIC  ALLIANCE

Alturdyne - An innovative manufacturer of standby diesel generator sets, turbine
and  rotary  generator  sets,  pumps and natural gas engine-driven chillers. The
generator  set  market  is a major new and replacement market for rotary engines
where  Alturdyne  has  extensive  manufacturing experience. Alturdyne's strength
lies  in its power engineering personnel, who are knowledgeable in the generator
set  business,  telephone  company  applications,  small  turbines, rotaries and
chillers.  Their  capabilities  and  experience in developing low cost, customer
power  packages  that meet specific needs have established Alturdyne's excellent
reputation in the industry.  Alturdyne's added expertise is available to support
the  design  and  production  of  rotary  engines  and  gensets for the Company.

MANAGEMENT

PowerCold's management philosophy and structure supports decentralized authority
and operations, profit and loss accountability, incentive driven performance and
compensation,  and  total  customer  satisfaction. Management has over 175 years
business  experience.  Their  extensive  experience and background is adequately
related  to  the  business.  CEO  -  over  35  years experience in marketing and
management; COO - over 40 years experience in manufacturing and marketing in the
refrigeration  and  power  industry; CTO - over 50 years technical experience in
refrigeration  engineering  and  design;  a  well-known expert consultant in the
refrigeration  industry.  Related  management  has  over  60 years experience in
refrigeration  engineering  and  sales  and marketing.  The subsidiary companies
include  experienced  marketing  and technical management and support personnel.

The  Company's  management  objective  is  to  become  a  major  force   in  the
multi-billion  dollar  air condition, refrigeration industry and power business,
and  providing  proprietary  niche  products.  The  Company's goal is to achieve
profitable  growth  and  increase  shareholder  value  by increasing its line of
superior  products  and  services,  through  evolving  product  enhancements and
strategic  alliances  with  related  products  and  companies.

The  Company  maintains  corporate offices in La Vernia, Texas, and an office in
Philadelphia,  Pennsylvania.  Administrative,   engineering  and   manufacturing
facilities are located in La Vernia, Texas. Marketing offices are located in San
Antonio,  Texas,  Wood  Ridge,  New  Jersey,  Babb,  Montana,  and Tampa Florida

PRODUCTS:

NAUTICON  EVAPORATIVE  CONDENSERS  - The Company envisions an enormous worldwide
market  demand  for  its  proprietary  evaporative condensing systems use in air
conditioning  systems.  The Nauticon patented products are innovative in design,
use new material technology, are simple to manufacture, and have a low operating
cost.  They  are  used  for  evaporative  condensers, fluid coolers, sub-coolers
commercial  and industrial refrigeration system components, liquid recirculating
packages  and  custom  refrigeration products for commercial and industrial use.
Nauticon  products  can reduce power cost in the air condition and refrigeration
industry  by  up  to 40% supporting the utilities' needs to reduce power demand.
Unique  low  cost  manufacturing  processes  and techniques are common with both
material  and  low  cost  labor.  Nauticon  units are superior to other industry
products;  they  are  self-cleaning, chemically free low-maintenance evaporative
condensers.  Nauticon's  primary advantage is energy savings, yielding extremely
high  EER  ratings to not only better, but to offset the regulated change to low
efficiency refrigerants. Nauticon products could revolutionize the refrigeration
industry; an industry that faces serious changes for the first time in years due
to  energy  and  environmental  concerns  worldwide.




<page> 8
COMPETITION - varies from the small to the very large air condition manufactures
in  the  industry,  all  competing  for this multi billion-dollar industry.  The
Company  believes  that it has a truly unique product concept that serves a very
wide  arena  of commercial applications (20 - 1,000 ton) for the national market
as  well  as  the  international  market.  There  is  no  competition  from  one
manufacturer with this range of evaporative condensers. Initial marketing of the
Nauticon  systems  will be primarily the mid-range systems because there is much
less competition, a great advantage to Nauticon and its unique patented product.
Direct  competitive systems are marketed by some of the major competitors in the
industry;  large  systems  by  Evapco and BAC, smaller systems by Recold.  These
competitors  are  well  established and have substantially greater financial and
other  resources.  But no one has the patented features of the Nauticon unit; it
is the only self-cleaning, chemically free low-maintenance evaporative condenser
available.

EV  CHILLER  SYSTEMS  -  PowerCold Products designs, packages and markets unique
chiller  systems  utilizing  the  Nauticon evaporative condensers (EV Chillers).
Four  chiller  systems  are  made available that meet a wide variety of industry
requirements  for  HVAC  and refrigeration system installations. EV-Chill: water
chillers,  namely,  water  chilling  and  refrigeration  systems utilizing water
evaporative  condensers  for  commercial   and  industrial  use.   EV-Cool:  air
conditioning  units   utilizing  evaporative   condensers  for   commercial  and
industrial  use.  EV-Dry:  dehumidification  system  utilizing evaporative fluid
coolers  to  cool  warm  dry  air  for  commercial and industrial use.  EV-Frig:
refrigeration  condensing  units utilizing evaporative condensers for commercial
and  industrial  use.

COMPETITION - varies from the small to the very large air condition manufactures
in  the industry, all competing for this multi billion-dollar industry. There is
no  competition  from  one  manufacturer  with  this range of chillers using the
patented  Nauticon  evaporative  condensers.  Most of the 6 -7 industry vendor's
including  the  large  manufacturers  such  as  Carrier, Trans and York are well
established and have substantially greater financial and other resources. But no
one  has  the  specific  patented  features  of the Nauticon unit and the unique
design  features  of  the  EV  Chiller  line  of  products.

HVAC  SYSTEMS  -  PowerCold's  Ultimate  Comfort Systems owns the exclusive U.S.
technology  rights  for  an  integrated  piping  technology  system for heating,
ventilating  and  air  conditioning  systems  (HVAC). The first principle of the
patented  HVAC system are the existing pipes, as the delivery system, to provide
hot  and  chilled water to individual fan coil units. The proprietary technology
is  designed to utilize the fire sprinkler piping to circulate the cooling water
around  the building.  In addition, the domestic hot water lines also distribute
heating  energy.

The  dual  use  of  the  piping  system  provides  cost effective, high quality,
compressor-free  systems  to  the  hospitality  industry.  Guess rooms offer the
precise  comfort of four-pipe air conditioning without the capital cost expense.
Installation   and   construction   costs   are   comparable   to   conventional
through-the-window  Position  Terminal   Air  Conditioners  (PTAC)  units.   The
Ultimate Comforts System also avoids the discomfort of poor temperature/humidity
control  and  sleepless  nights  from  noisy  compressor  cycling.

High  quality  chiller  systems, manufactured by PowerCold Products provide even
more  economical  installations  with their energy efficient design features and
unsurpassed  reliability and  maintainability.  PowerCold's HVAC system provides
energy saving operating advantages; as electric deregulation increases the  cost
of  operating  air  conditioning,  its  efficient  use  of  energy  provides  an
increasing  competitive  cost  advantage.



<page> 9
COMPETITION  -  There  is  no  competition  from  a  one-source  vendor  for the
specialized  hospitality  market  to support a total integrated HVAC system.  No
one  has  a  patent  integrated  piping system combined with its own evaporative
chiller  systems  including  the patent Nauticon evaporative condenser.  Most of
the  6  -7  industry vendor's including the large manufacturers such as Carrier,
Trans and York are well established and have substantially greater financial and
other  resources  to  produce  a  chiller  system.  But  no one has the specific
patented  features  to  produce  and  install a complete turn key HVAC system; a
patented integrated piping system, patented Nauticon evaporative condensers, and
the  unique  design  features  of  the  EV  Chill  product.

PowerCold's  Ultra-Efficient  HVAC  and  Refrigeration  Technologies  Can
Significantly  Cut  Peak Power Demand and Costs:  Deregulated electricity during
the  hot  summer  peak-power-demand-days can cost 10-100 times more than normal.
Commercial  customers'  demand-surcharges,  which  are based on their peak-power
usage  during  the  20-30  days  per year when temperatures soar to 95  + F, can
represent  30-50%  of  their  total  electric bill in some parts of the country.
Consequently,  reducing  peak  power   demand  during   these  few  days   could
significantly  reduce or eliminate surcharge costs.  Commercial air conditioning
and refrigeration (accounting for $7 billion of 2000's $37 billion in peak-power
demand  costs)  are  the  Company's  initial  target  markets.  America  is well
entrenched  with  air  condition and refrigeration systems, but there is a great
niche  market for the Company's unique and innovative evaporative condensers and
chiller  products.  PowerCold  and  its  related entities have the refrigeration
engineering  expertise and new innovative products that are needed and in demand
today  to  save  significant  energy costs for an industry that hasn't seen many
changes  in  the  last  50  -  60  years.

ROTARY  POWER  NATURAL  GAS  ENGINES:

Natural  Gas  Rotary  Engine  (NGRE)  driven  rotating equipment and systems are
applicable  to  a  wide  variety  of  industrial uses, and offer customers large
savings  in  electrical  costs  from  both  energy  and  demand savings. A NGRE,
providing  on-site  utilities,  burns  the  minimum annual gas flows required to
allow sites to buy "transport" natural gas rather than more expensive commercial
gas. The combination of natural gas and electrical energy allows the customer to
balance its utility consumption on a daily, weekly, monthly or annual basis. The
Company  feels  that  the  unique characteristics of natural gas powered engines
allows  them to successfully compete in market sectors where low maintenance and
high  speed  rotating  equipment  is  predominant  or is rapidly taking over the
market  from  older  reciprocating  equipment.

Air  conditioning  -  screw  compressors
Refrigeration  -  screw  compressors
Plant  air  compression  systems  -  screw  compressors
Natural  Gas  compression  systems  -  screw  compressors
Mobile  power  units  -  Permanent  Magnet  Generators
Stationary  peaking  power  supplies  -  generators

65  SERIES  NATURAL  GAS  ENGINE

The  65  Series  twin  rotor  Natural  Gas Rotary Engine is a natural gas engine
derived  from  Mazda Motor Corporations RX-7 automotive rotary engine. The basic
block  incorporates  unique  internal  parts  and   features  for  meeting   the
20,000-hour  life  demanded  by the industrial market; i.e., ceramic apex seals,
strengthened  stationary  gears.  More  durable  water  pump  and  longer   life
elastomers.  The  engine  is  rated  at  8OHP  on  natural  gas  at  4200RPM. It
incorporates  an  IMPCO  natural  gas  carburetor  and  specially  tuned  intake
manifold.



<page> 10
580  SERIES  NATURAL  GAS  ENGINE

The 580 Series family of twin rotor Natural Gas Rotary Engine, which is produced
by  Rotary  Power  International  Inc.,  is  derived from the extensive military
development  of the 580 Series diesel/multi-fuel engines since 1977. The initial
580  Series  Natural  Gas  Rotary  Engine developments has been for a twin rotor
engine  rated at 500HP at 36OORPM. This will provide the power to generators for
peak  power  shaving.  The  four  rotor (composed of two 5OOHP modules) rated at
1000HP  and  the  six  rotor  (three  5OOHP  two rotor modules) rated at 1 5OOHP
complete the family. The 580 natural gas engine runs on low-pressure natural gas
and  does  not  use  expensive high-pressure fuel injection equipment and costly
turbochargers  found on diesel engines, thus offering a very competitive natural
gas  power  plant  for  industrial  applications.

ITEM  2.     PROPERTY

The Company maintains its corporate office in La Vernia, Texas, and an executive
office  in  Philadelphia, Pennsylvania. The La Vernia facility is 47,000 sq. ft.
and  houses administrative, engineering and manufacturing operations.  Sales and
marketing  offices  are  located  in San Antonio, Texas; Wood Ridge, New Jersey;
Babb,  Montana;  and  Tampa,  Florida.

The  Company  owns  and  maintains  no  properties.  Properties  are leased on a
short-term basis. Management believes that the Company's facilities are adequate
for its operations and are maintained in good condition. The Company is aware of
the  growth  potential  of  its  operating facilities and is currently reviewing
other  plant  facilities  near  respective  locations.

ITEM  3.     LEGAL  PROCEEDINGS

On  August  31,  2000,  The Company, Nauticon, Inc. and Robert E. Jenkins agreed
upon  a  full and final settlement of the lawsuit titled Nauticon, Inc. et al Vs
Robert  E.  Jenkins  Cause  No.  97-13035,  in the 53rd District court of Travis
County,  Texas.

ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

The  Annual  Meeting  of  Shareholders  was  held  on  November  15, 2000 at the
Company's  facility  in  La  Vernia,  Texas.  Proposal  No.  1 was to ratify the
selection  of  the  independent auditors of the Company.   Proposal No. 2 was to
ratify  the adoption of the 2002 Company stock option plan.   Proposal No. 3 was
to  authorize  to vote on other matters. Total voted shares represented by proxy
was  9,762,131  and  the  percentage of voted shares was 64.36%. The outstanding
voted  shares were 15,167,377. Election results where certified by the Company's
stock  transfer  agent,  Computershare  Investor  Services.

     Proposal  No.  1:     For           Against     Abstain
                           ---------     -------     -------
                           9,703,395       3,100      55,636

     Proposal  No.  2:     For           Against     Abstain     Not  Voted
                           ---------     -------     -------     ----------
                           7,649,737      58,618      35,568      2,018,208

     Proposal  No.  3:     For           Against     Abstain
                           ---------     -------     -------
                           9,672,645      49,648      39,838





<page> 11
PART  II

ITEM  5.     MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED
STOCKHOLDERS  MATTERS

(a)  Market  Information:

The  Registrant's  Common  Stock,  trading  symbol  PWCL,  is  traded on the OTC
Electronic  Bulletin  Board.

The  following  table  sets  forth the high and low sale prices of the Company's
Common  Stock as reported by one of the market makers for the periods indicated.

                            2000  BID          2000  ASK
                          HIGH      LOW      HIGH       LOW
                       --------  --------  --------  --------
     First  Quarter      2.28      .50       2.40      .56
     Second  Quarter     2.18      .75       2.31      .87
     Third  Quarter      2.43     1.12       2.50     1.31
     Fourth  Quarter     1.43      .56       1.56      .68

                           2001   BID           2001  ASK
                          HIGH      LOW      HIGH       LOW
                       --------  --------  --------  --------
     First  Quarter      1.28      .59       1.41      .59
     Second  Quarter     1.31      .66       1.35      .70
     Third  Quarter      1.25      .71       1.25      .71
     Fourth  Quarter     2.59      .75       2.59      .80

(b)  Holders:  As  of  December  31,  2001,  there were approximately 753 record
holders  of  the  Company's  Common  Stock.

(c)  The  Company  has paid no cash dividends to date, and it does not intend to
pay  any  cash  dividends  in  the foreseeable future. The present policy of the
Board  of  Directors  is  to  retain  any  future  earnings  and provide for the
Company's  growth.

During  the year ended December 31, 2001, the Company issued for cash, 1,836,214
shares  of common stock with 603,083 warrants attached.  The stock was valued at
$1,284,020  and  the  warrants  were valued at $405,480.  These warrants have an
average  exercise price of $1.10 and expire between May 31, 2002 and December 6,
2003.  An  additional  308,603  shares  of  common stock were issued for cash of
$150,833.  The  Company  issued  85,679 shares of common stock as commissions to
various  promoters  for  selling  its  stock.  This stock was valued at the fair
market value of $148,503.  The Company issued 385,500 shares of common stock for
consulting  services  valued at $115,000, general services valued at $25,000 and
compensation  valued  at  $56,500.  The  Company issued 372,081 shares of common
stock  to  repay loans in the amount of $207,500 and 240,419 common stock shares
for  interest  and  financing  expenses  of $122,250. Additionally 45,000 common
stock  shares were issued for $22,500 in prepaid rent, 35,000 shares were issued
to  satisfy $26,418 of accounts payable and 50,000 common stock shares valued at
$108,500  to  acquire  Power  Sources,  Inc.

ITEM  6.     SELECTED  FINANCIAL  DATA

The  following  table presents selected financial data for PowerCold Corporation
and  its  subsidiaries.  The financial data for fiscal years ending December 31,
1997  through  December  31,  2001  have been derived from the Company's audited
Consolidated  Financial Statements included elsewhere in this Report, and should
be  read in conjunction with those Consolidated Financial Statements and related
notes.

<page> 12
SUMMARY  STATEMENT  OF  OPERATIONS   (In  thousands,  except  per  share  data)

YEAR ENDED DECEMBER 31, 2001        2000        1999        1998        1997
                      --------    --------    --------    --------    --------
Revenues              $   882     $   395     $   562     $   442     $   393
Operating (loss)      $(2,260)    $(1,412)    $(1,199)    $(1,203)    $(1,713)
Net Income (loss)     $(2,238)    $(1,319)    $(1,253)    $(1,690)    $(2,720)
Net Income (loss)
per share             $ (0.16)    $ (0.13)    $ (0.18)    $ (0.27)    $ (0.46)
Weighted average
number of shares       15,005      10,157       7,107       6,377       5,893

SUMMARY  BALANCE  SHEET   (In  thousands,  except  per  share  data)

YEAR ENDED DECEMBER 31, 2001        2000        1999        1998        1997
                      --------    --------    --------    --------    --------
Total assets          $ 4,058     $ 1,999     $ 1,582     $ 2,322     $ 2,229
Total liabilities     $ 1,318     $   569     $ 1,220     $ 1,164     $   817
Long term debt        $     0     $     6     $     0     $     0     $     0
Shareholders' equity  $ 2,339     $ 1,255     $ 3,061     $ 1,158     $ 1,412

ITEM  7.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  FINANCIAL  CONDITION
             AND  RESULTS  OF  OPERATION

Forward-looking  statements made herein are based on current expectations of the
Company  that  involves  a  number  of risks and uncertainties and should not be
considered  as guarantees of future performance. These statements are made under
the  Safe  Harbor  Provisions of the Private Securities Litigation Reform Act of
1995.  The factors that could cause actual results to differ materially include;
interruptions  or  cancellation  of  existing  contracts,  impact of competitive
products  and  pricing, product demand and market acceptance risks, the presence
of  competitors  with  greater  financial  resources  than  the Company, product
development  and  commercialization risks and an inability to arrange additional
debt  or  equity  financing.

GENERAL  FINANCIAL  ACTIVITY

Subsequent to the filing of this Form 10K, the company has reorganized into four
subsidiary  companies,  effective  January  1,  2002:  PowerCold Products, Inc.,
supporting  all  "Cold"  related  products,  Power Sources, Inc., supporting all
"Power" related products, Ultimate Comfort Systems, Inc., supporting proprietary
applications  for  heating, ventilating and air conditioning systems (HVAC), and
Technicold  Services,  Inc.  provides engineering consulting services to the air
condition,  refrigeration  and  power  industries.

PowerCold  Products,  Inc.  -  designs,  manufactures  and markets a proprietary
product  line  of  patented evaporative condensers and heat exchange systems for
the  heating,  ventilation  and air condition (HVAC) and refrigeration industry.
PowerCold Products supports the Company's Nauticon and EV Chill product lines by
engineering design, manufacturing and packaging its products. PowerCold Products
also  support  custom  refrigeration  systems  by  engineering,   designing  and
packaging  special  customer  orders.  There  are  proposed alliances with other
refrigeration  companies,  whereas  PowerCold  Products  will   package  various
components  adding  value  for  a  total  turnkey air condition or refrigeration
system.  PowerCold  Products  currently  has  over  $2M  in  back log orders and
expected  final  customer  contracts  for  chiller  systems  and  evaporative
condensers.





<page> 13
The  Nauticon  patented  products  are  innovative  in  design, use new material
technology,  are  simple to manufacture, and have a low operating cost. They are
used  for  evaporative  condensers,  fluid  coolers,  sub-coolers commercial and
industrial  refrigeration  system  components, liquid recalculating packages and
custom  refrigeration  products  for  commercial  and  industrial  use. Nauticon
products  can  reduce power cost in the air condition and refrigeration industry
by  up  to  40%  making these units contribute to the utilities' needs to reduce
power  demand.  PowerCold  has  invested  over $1M in operating capital into the
Nauticon  product  over the last few years.  Initially major operating and legal
expenses  due  to  previous  inept   Nauticon  management  hindered   sales  and
production.  Therefore  Nauticon  did not meet its sales and revenue projections
over  the  past  few  years.  Subsequently  during  2001  the  Nauticon  product
technology  was greatly enhance from a single 40-ton evaporative condenser up to
five  multi  configured  units  producing  up  to 1,000 ton of air conditioning.
Management  believes that Nauticon evaporative condenser will more than meet its
sales  objectives  in  2002.  There are some $1.7 million of proposed quotations
currently  out  to  customers.  There  are  over  200 units installed in various
commercial  buildings.

The  Chiller  line of products includes: EV-Chill: water chillers, namely, water
chilling  and  refrigeration  systems utilizing water evaporative condensers for
commercial  and  industrial  use;  EV-Cool:  air  conditioning  units  utilizing
evaporative  condensers  for  commercial  and  industrial  use;  EV-Dry:
dehumidification system utilizing evaporative fluid coolers to cool warm dry air
for  commercial  and  industrial  use;  EV-Frig:  refrigeration condensing units
utilizing  evaporative  condensers  for  commercial  and  industrial  use.

Power  Sources,  Inc. - effective December 1, 2001, the Company acquired 100% of
Power  Sources,  Inc.  Power  Sources  designs and markets cogeneration systems,
which use engine-driven generators to produce both electricity and thermal power
as  a  way of cutting power costs. The business is a major cogeneration provider
in  the  New York metropolitan area, with 42 projects completed in the region in
the past four years.  Technology and Assets assigned by UMRC to the newly formed
Power  Sources,  Inc.  includes;  pertinent  selected  technology  and  relevant
intellectual  property  for  cogeneration systems, and all pertinent outstanding
UMRC's  cogeneration  systems  customer  contracts.   The  cogeneration  systems
technology  will  be  marketed and sold direct to customers by and through Power
Sources,  Inc.  and  will  also  be  supported,  as needed, by PowerCold and its
related  subsidiary  companies.  UMRC  may  also  support Power Sources, Inc. in
marketing  and  selling  the  cogeneration system technology. Customer contracts
will  be  subcontracted to UMRC for design, engineering and installation.  Power
Sources,  Inc.  will pay UMRC 85% of the customer contract for its services, and
Power  Sources,  Inc. will keep 15% of the customer contract, as its profit. The
parties have signed a mutual agreement on confidentiality, non-circumvention and
non-disclosure.

Acquired  in  the  transaction  for  Power  Sources  were  trade  receivables of
$921,050,  which were December 31, 2001 revenues, with $721,392 accounts payable
attached  and  contracts  in  place  of  $331,175 with $281,499 accounts payable
attached. The Company also acquired technology rights valued at $222,666.  There
is over $8 million in bid proposals out to fourteen prospective customers in the
New  York  metropolitan  area.  The  company anticipates that Power Systems will
generate major growth in revenue and profits from cogeneration business over the
next  few  years.








<page> 14
Cogeneration  systems,  also  known as Distributed Generation, use engine driven
generators to produce both electric power and thermal energy. Over the past four
years,  UMRC has completed 42 cogeneration projects in the greater New York area
that  have typically achieved paybacks based on energy and electric cost savings
in  18  to  36 months. As a result of the acquisition, PowerCold will be able to
offer  customers  complete  self-contained heating/chilling units to reduce peak
power  requirements as well as the ability to self-generate all the power needed
for  a  commercial  building.  Units  range  in  size  from  100  kilowatts to 2
megawatts.  Customers can expect to reduce power or energy costs by 40% or more.

During  2002,  Rotary  Power  Enterprise, Inc. will be dissolved as an operating
entity.  The assets of Rotary Power Enterprise were transfer into Power Sources,
Inc.  a new corporation formed in December 2001 to support the Company's "Power"
business  operations.

Rotary  Power  Enterprise,  Inc. was formed in September 1998 as a new PowerCold
entity to acquire the Natural Gas Business from Rotary Power International, Inc.
PowerCold  is  also  a  major  shareholder  of  Rotary Power International, Inc.
(OTCC:RPIN).  The agreement included: the business assets including intellectual
property, inventory and packaging capability; North American rights to the small
65  series Mazda natural gas engine block, subject to a new Mazda Agreement; and
a  Distributor  Agreement  for  the  Rotary Power 580 series engines form Rotary
Power  International,  Inc.  In  August  2000  Rotary  Power Enterprise signed a
non-exclusive  manufacturing  license  agreement  for the 580 series natural gas
engine  with  Rotary  Power  International.

The  Company  formed  Alturdyne  Energy Systems, Inc. (AES) in September 1999 to
support  the natural gas engine driven water chiller business.  Subsequently AES
has  been  dormant subject to further negotiations. The Company plans to acquire
the  chiller  business  from  Alturdyne,  which  has over (140) customer chiller
systems  installed  and  has  over $3 million in proposal bids out to customers.

The  Company  has  a  Strategic  Alliance  with  Alturdyne for manufacturing and
marketing  of  its respective products.  Alturdyne is an innovative manufacturer
of  standby  diesel generator sets, turbine and rotary generator sets, pumps and
natural  gas  engine-driven  chillers.  Alturdyne's  strength  lies in its power
engineering  personnel,  who  are  knowledgeable  in the generator set business,
telephone  company  applications,  small  turbines, rotaries and chillers. Their
capabilities and experience in developing low cost, customer power packages that
meet  specific  needs  have  established Alturdyne's excellent reputation in the
industry.  Alturdyne's added expertise is in the design and production of rotary
engines.

During  2002, Channel Freeze Technologies, Inc. may be dissolved as an operating
entity.  The  Company is negotiating with the previous owners of the technology.
Channel  Freeze  Technologies, Inc. was formed in September 1998, as a PowerCold
subsidiary,  to  acquire  certain  assets  of  Channel  Ice  Technologies.   The
technology  includes  a  proprietary  patented  for  an economical multi-purpose
freezing  system.  Because  the company is allocating all its resources into its
current  product  line,  management  decided  there  is limited synergy with the
Channel  Freeze  technology  and does not envision the continuing development of
these  products.

Ultimate  Comfort  Systems, Inc. - On December 1, 2000, the Company acquired the
technology  rights,  patent  rights, and license agreement for integrated piping
technology  for  a heating and air conditioning system. This technology was then
placed  into  a  newly  formed  wholly owned subsidiary of the Company, Ultimate
Comfort  Systems,  Inc.   This   acquisition   gave   the   Company   exclusive,
non-transferable United States transfer rights to the technology and all related
assets. There are 15 installations in hotel/motels and extended care facilities.


<page> 15
Some  of  the  installations  are  saving over 40% energy costs. During 2001 the
Company  invested some $300,00 supporting engineering and marketing programs for
major  hotel  projects.  Subsequently  there  is  an  order backlog of over $1.5
million in engineering design contracts and final equipment configuration orders
for  new  hotel  buildings.  There  are  over  $2.3  million  in  proposed sales
quotations  out  for  twelve new hotel sites for major hotel chains. The company
anticipates  that Ultimate Comfort Systems will have major growth in revenue and
profits  for  this  unique  proprietary  application  over  the  next few years.

The  following  table  sets  forth  the  company's  results  of  operation  as a
percentage  of  net  sales  for  the  periods  indicated  below:

                                  YEAR  ENDED  DECEMBER  31,

                              2001          2000          1999
                          ------------  -----------  ------------
Revenue                        100.0%      100.0%       100.0%
Cost  of  revenue               94.1        71.7        (0.07)
Gross  margin                    5.9        28.3        (0.07)
Operating  expenses           (262.1)     (385.6)      (213.4)
Operating  income  (loss)     (256.2)     (357.3)      (222.9)
Net  income  (loss)           (264.0)     (357.3)      (222.9)


COMPARABLE  FISCAL  2001,  2000  AND  1999  RESULTS

The  Company's  Consolidated  Statements of Operations for the fiscal year ended
December  31,  2001 compared to fiscal year ended December 31, 2000 and December
31,  1999:

Total revenue for 2001 increased 123.3% to $882,089 from $ 395,040 for 2000, and
in  1999  sales  were  $562,403;  operating  losses  for 2001 increased 43.7% to
($2,260,002)  from  ($1,572,214)  for  2000,  and  in 1999 operating losses were
($1,199,942);  the  net  loss  for 2001 increased 77% to ($2,328,402) or ($0.16)
from  ($1,319,195)  or  ($0.13) per share for 2000, and in 1999 the net loss was
($1,253,395)  or  ($0.18)  per  share.  Net loss per share was based on weighted
average  number  of  shares  of  15,005,371  for  2001,  10,156,76 for 2000, and
7,106,638  for  1999.

The  company's  revenue  increased 123.3% in 2001 to $882,089. Eliminated in the
consolidation of PowerCold was PSI revenue for December 2001, of $921,050, which
is  included  in trade receivables. Sales were stalled in the fourth quarter due
to  management's  decision to revamp the Nauticon product line. The outcome is a
newly  evolved Nauticon unit with nearly double its capacity - a patent has been
applied  for  on  the new more efficient unit.  Operating losses increased 43.7%
because  of a sharp increase in research and development (new Nauticon units and
new  EV  chiller  product  line) and  $125,000 in new advertising and marketing.
Increased  operating  expenses  were  also  due  to  moving and setting up a new
manufacturing  plant  and  operating  two facilities for part of the year. Total
cost  of  revenue  was primarily due to the increase in labor and material costs
for  three new innovative chiller systems that were delivered to three different
customers  requiring  unique  engineering  features.  The  benefit  of these new
systems  created  a  standard  modular chiller product line, whereas the company
expects  to  increase  its  operating  margins  by  some  12%  -  15%.

Included  in  the  Company's Consolidated Balance Sheet as of December 31, 2001,
December  31,  2000 and December 31, 1999 respectively are: Total current assets
which increased 284.7% to $2,670,808 for 2001 from $694,301 for 2000 and in 1999
currant  assets  which  were  $270,958;  total  assets  which  increased 103% to
$4,057,916 for 2001 from $1,998,595 for 2000 and in 1999 total assets which were


<page> 16
$1,582,139;  total liabilities which increased 131.8% to 1,318,010 for 2001 from
$568,650  for  2000  and  in 1999 total liabilities which were $1,210,694; total
stockholders'  equity  which  increased  86.4%  to   $2,339,193  for  2001  from
$1,254,819  for 2000 and in 1999 total stockholders' equity  which was $361,836.

The  primary  increase  in  current  assets  was  due  to  increases in accounts
receivable  and securities for sale, which also related to the increase in total
assets.  The  increase  in  liabilities  was  due primarily to accounts payable.
Acquired  in  the  acquisition  of  Power Sources, Inc were trade receivables of
$921,050,  and  $721,392  in  accounts payable, and unbilled revenue of $49,676.
The  Company  also  acquired  technology  rights  valued  at  $222,666.

During  the year ended December 31, 2001, the Company issued for cash, 1,836,214
shares  of common stock with 603,083 warrants attached.  The stock was valued at
$1,284,020  and  the  warrants  were valued at $405,480.  These warrants have an
average  exercise price of $1.10 and expire between May 31, 2002 and December 6,
2003.  An  additional  308,603  shares  of  common stock were issued for cash of
$150,833.  The  Company  issued  85,679 shares of common stock as commissions to
various  promoters  for  selling  its  stock.  This stock was valued at the fair
market value of $148,503.  The Company issued 385,500 shares of common stock for
consulting  services  valued at $115,000, general services valued at $25,000 and
compensation  valued  at  $56,500.  The  Company issued 372,081 shares of common
stock  to  repay loans in the amount of $207,500 and 240,419 common stock shares
for  interest  and  financing  expenses of $122,250.  Additionally 45,000 common
stock  shares were issued for $22,500 in prepaid rent, 35,000 shares were issued
to  satisfy $26,418 of accounts payable and 50,000 common stock shares valued at
$108,500  to  acquire  Power  Sources,  Inc.

During  the year ended December 31, 2000, the Company issued 4,792,742 shares of
its  common  stock of which 1,329,602 shares were issued for cash of $1,158,000,
615,000  shares  for prepaid consulting valued at $307,500, 593,355 for services
valued  at  $296,678, 100,000 shares for a technology license valued at $50,000,
and  800,000  shares for debt valued at $400,000. Included in the aforementioned
issuances  are  a  total  of  1,480,000 shares issued to officers, directors, or
affiliates of the Company, which are subject to transfer restrictions as defined
by  Rule  144 of the Securities Act of 1933.  In addition, 1,354,785 shares were
issued  for  the  conversion  of  100%  of  the Company's Series "A" Convertible
Preferred  Stock.

During  the year ended December 31, 1999, the Company issued 1,042,641 shares of
its  common  stock  of  which  483,641 shares were issued for services valued at
$162,110  and  559,000  shares  were  issued  for  cash  of  $348,750.

During  2001,  the  Company  authorized and issued 895,000 options at an average
exercise  price of $0.96 for services, compensation and the acquisition of Power
Sources,  Inc.

During  2000, the Company authorized and issued a total of 750,000 options at an
average  exercise  price of $1.20 for investment funding, and 250,000 options at
an  average  exercise  price  of $0.50 as compensation. During 1999, the Company
authorized and issued a total of 1,004,558 options at an exercise price of $0.50
for  employee  compensation.

Liquidity  and  Capital  Resources:  At December 31, 2001, the Company's working
capital  increased  to  $1,352,798 compared to $125,651 at December 31, 2000 and
($939,736)  at  December  31,  1999.   The  increase  in   cash  was   primarily
attributable  to  equity  capital  from  the  sale  the Company's stock. And the
increase  in  accounts  receivable was primarily due to the trade receivables of
$921,050  acquired  from Power Sources.  The Company raised some $1.8 million in
equity  capital  in  2001, and subsequently raised some $1.5 million in March of
2002.

<page> 17
Status of Operations:  Management intends to continue to utilize and develop the
intangible  assets  of  the  Company.  At  December  31, 2001, intangible assets
comprise  a  material  portion  of  the Company's assets.  The recovery of these
intangible  assets  is  dependent  upon  achieving  profitable operations. It is
Management's  opinion  that  the  Company's  cash  flow  generated  from current
intangible  assets  is not impaired, and that recovery of its intangible assets,
upon  which profitable operations will be based, will occur. Management believes
that  its  working  capital  is sufficient to support its current operations and
growth plans for 2002. The current status of future acquisitions is dependent on
continued  interest  between  the parties, successful due diligence and investor
funding.

Company  operating  revenues  and profits should increase in 2002 because of the
new  reorganization,  including  new  experienced personnel, a new manufacturing
facility  and  a  new  enhanced  product  line,  including  the Nauticon line of
products  (now  up  to  1,000  ton  condensing  units). Management expects major
revenue  growth  from its wholly owned subsidiary, Ultimate Comfort Systems, and
from its newly acquired Power Sources technology, which will lead to the overall
structure  necessary  to  fulfill  the  Company's  current  strategic  plans.

ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

Power  Cold  Corporation  and  subsidiaries  consolidated  financial  statements
incorporated  in  this  annual  report  Form  10K.

ITEM  9.     CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON
             ACCOUNTING  AND  FINANCIAL  DISCLOSURE

During  the registrant's fiscal year ending December 31, 2001 and the subsequent
period  up  to  the  date  of  the  former  accountants  release,  there were no
disagreements  with the former accountant nor with the current accountant on any
matter of accounting principles or practices, financial statement disclosures or
auditing  scope  of  procedure.

PART  III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The  directors  and  executive  officers  of  the  Company  are  as  follows:

NAME                  AGE     POSITION                      PERIOD SERVED SINCE
-------------------  ----  -------------------------------  -------------------
Francis L. Simola.     63     Chairman  of  the  Board        January  1,  1993
                              President  and  CEO

George  C.  Briley     76     Director,  CTO and Secretary    September 1, 1994

H.  Jack  Kazmar       69     Director,  COO  and  Treasurer  October  1,  1998

A  summary  of  the business experience and background of the Company's officers
and  directors  is  set  forth  below.

FRANCIS  L.  SIMOLA    Mr.  Simola  has  been  Chairman,  CEO  and  President of
PowerCold  since  the  Company's  inception  in  January 1993. Mr. Simola is the
founder  and  president  of  Simco Group Inc., a private investment company that
controls  a  major  interest  in  PowerCold.

GEORGE  C.  BRILEY    Mr.  Briley  has  been  a  director of the PowerCold since
September  1994,  and  is  President  of  Technicold Services, Inc., a PowerCold
subsidiary  company.  Mr.  Briley has over fifty years experience in engineering
and  marketing  in  the  refrigeration  industry.

<page> 18
H. JACK KAZMAR     Mr. Kazmar has been a director of the PowerCold since October
1998.  Mr.  Kazmar  has more than 40 years experience in the commercial heating,
ventilation  and  air  conditioning  equipment  industry.

Directors  of  the  Company  are  elected  every  three  years.  Officers of the
Company,  elected by the Board of Directors, serve annually. There are no family
relationships  among the Directors and Officers of the Company.  Mr. Simola, Mr.
Briley  and  Mr.  Kazmar  have  devoted 100% of their time for PowerCold's daily
operating  activities  during  the  last  fiscal  year  1999.

ITEM  11.     EXECUTIVE  COMPENSATION

No  executive officer or director of the parent Company received any cash salary
as continuous payroll compensation during the year ended 2001. No officer of the
parent  Company  was paid by any other source other than PowerCold for time that
was  actually  spent  in  furtherance  of  PowerCold's  affairs.

Mr.  Briley  has  received  less than $40,000 from Technicold Services. Inc. for
consulting  services.  Mr.  Kazmar  received  $60,000  for  consulting services.
Simco  Group/  Simola  received  120,000  shares  of common restricted stock for
services  rendered  the Company, and received $60,000 related to payment due for
corporate  operating  expenses.

ITEM  12.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT

The  following  table  sets forth information as of December 31, 2000, regarding
the number of shares of the Company's common stock beneficially owned by (i) all
beneficial  owners  of  five percent (5%) or more of common stock, and (ii) each
director.  (iii)  beneficial  owner  of  outstanding  preferred  stock.

NAME  AND  ADDRESS               AMOUNT  AND  NATURE           PERCENT
OF  BENEFICIAL  OWNER         OF BENEFICIAL OWNERSHIP (1)     OF CLASS (2)
----------------------------  ---------------------------     ------------
George  C.  Briley                     634,602                   3.96%
17  Pembroke  Lane
San Antonio, TX. 78240

H.  Jack  Kazmar                       262,000                   1.63%
36 West Beechcroft Road
Short  Hills,  NJ  07078

Francis L. Simola and (3)            1,092,432                   6.82%
Veronica  M.  Simola
9408 Meadowbrook Ave.
Philadelphia,  Pa.  19118

Simco  Group,  Inc.  (4)             1,800,664                  11.23%
1800  E.  Sahara,  Suite  107
Las  Vegas,  Nevada  89104

Henry  N.  Sanborn                   1,336,956                   8.34%
505  Charles  Street  Avenue
Towson,  MD  21204

Total  Common  Stock                 5,126,654                  31.99%

(1)     The nature of beneficial  ownership  for  all  shares is sole voting and
        investment  power.
(2)     The  per  cent  of  class  is  all  common  stock  and  preferred stock.
(3)     Includes  minor  children
(4)     Simco  Group  Inc., a privately held Nevada Corporation, (100%) owned by
        Francis  L.  Simola  and  Veronica  M.  Simola.
<page> 19
ITEM  13.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

The  Company  has  received  funding on several occasions from Simco Group, Inc,
("Simco"),  a  separate  legal entity wholly-owned by the Company's chairman and
chief  executive  officer.

During  2001,  Simco Group was issued 262,500 shares of common stock for payment
of  loans,  interest  and  financing  fees  and  consulting  services.

During  2000,  Simco  Group  converted $400,000 of its loans to the Company into
800,000  shares  of  the  Company's  common  stock.  See  Note  11.

During  1999,  the  Company's directors received an annual payment of $2,500 for
directors'  fees.  After  1999,  the  directors  were  not  compensated.

ITEM  14.     EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES AND REPORTS ON FORM 8-K

(a)     List  the  following  documents  filed  as  a  part  of  the  report:


Financial  Statements exhibited herein the Form 10-K Annual Report and are filed
as  a  part  hereof:

     Independent  Auditors'  Reports:

     Report  on  the  2001  Financial  Statements

     Consolidated  Financial  Statements:

     Balance  Sheets  -  December  31,  2001,  2000  and  1999

     Statements  of  Operations  -  Years ended December 31, 2001, 2000 and 1999

     Statements  of  Stockholders'  Equity - Years ended December 31, 2001, 2000
     and  1999

     Statements  of  Cash  Flows  - Years ended December 31, 2001, 2000 and 1999

     Notes  to  Consolidated  Financial  Statements

(b)     Reports  on  Form  8-K:

     8-K April  2, 2001       4/ 2/01 Legg Mason Wood Walker, Investment Banking
     8-K April  20,  2001     4/20/01 Lopez
     8-K October  3,  2001   10/03/01 Lopez
     8-K December  14, 2001  12/14/01 Power  Sources  Acquisition
     8-K November  11, 2001  11/ 9/01 Chesapeake Securities Research Corporation















<page> 20










                              POWERCOLD CORPORATION

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2001








                              WILLIAMS & WEBSTER PS
                          CERTIFIED PUBLIC ACCOUNTANTS
                        BANK OF AMERICA FINANCIAL CENTER
                           W 601 RIVERSIDE, SUITE 1940
                                SPOKANE, WA 99201
                                 (509) 838-5111





                              POWERCOLD CORPORATION

                                TABLE OF CONTENTS
                                December 31, 2001



INDEPENDENT  AUDITOR'S  REPORT                                                1


FINANCIAL  STATEMENTS

     Consolidated  Balance  Sheets                                            2

     Consolidated  Statements  of  Operations  and Comprehensive Loss         3

     Consolidated  Statement  of  Stockholders'  Equity                       4

     Consolidated  Statements  of  Cash  Flows                                5


NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS                                6






<PAGE> 21





To  the  Board  of  Directors
PowerCold  Corporation
La  Vernia,  Texas


                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------


We  have  audited  the  accompanying  consolidated  balance  sheets of PowerCold
Corporation  as  of  December  31,  2001  and 2000, and the related consolidated
statements  of operations, and comprehensive loss, stockholders' equity and cash
flows  for  the  years  then  ended.    These  financial   statements  are   the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  financial  statements based on our audits.  The consolidated
financial  statements  of  PowerCold  Corporation  as  of December 31, 1999 were
audited  by  other  auditors  whose  reports  dated  March 30, 2000, except with
respect  to  Note  3  to  which  the  date  is September  15, 2000, expressed an
unqualified  opinion  on  those  statements.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audits  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 PowerCold Corporation as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for  the  years  then  ended  in conformity with accounting principles generally
accepted  in  the  United  States  of  America.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue as a going concern.  As discussed in Note 3, the Company
has  sustained  substantial  operating  losses  in  recent  years  and  has used
substantial amounts of working capital in its operations.  At December 31, 2001,
intangible  assets  comprise  a material portion of the Company's assets.  These
factors  raise  substantial  doubt  about the Company's ability to continue as a
going concern.  Management's plans regarding those matters also are described in
Note  3.  The  financial  statements  do  not include any adjustments that might
result  from  the  outcome  of  this  uncertainty.

/s/ Williams & Webster, P.S.

Williams  &  Webster,  P.S.
Certified  Public  Accountants
Spokane,  Washington

March  24,  2001




<page> 22
POWERCOLD  CORPORATION
CONSOLIDATED  BALANCE  SHEETS


                                                   December  31,
                                    -------------------------------------------
                                        2001            2000          1999
                                    -------------  -------------  -------------
ASSETS

CURRENT  ASSETS

  Cash                              $    290,174   $    106,864   $     14,464
  Securities available for sale          970,000            -              -
  Trade accounts receivable,
    net  of  allowance                 1,094,919         38,665        152,154
  Receivables from related parties         1,686            -              -
  Inventory                              241,853        241,272         34,993
  Unbilled  revenue                       49,676            -              -
  Prepaid  expenses                       22,500        307,500         69,347
                                    -------------  -------------  -------------
Total  Current  Assets                 2,670,808        694,301        270,958
                                    -------------  -------------  -------------

Property  and  equipment,  net            77,660         73,570         29,229

Patent rights and related
  technology,  net                     1,282,937      1,195,627      1,166,554

Goodwill,  net                            16,866         27,392        115,398

Deposits                                   9,645          7,705            -
                                    -------------  -------------  -------------
TOTAL  ASSETS                       $  4,057,916   $  1,998,595   $  1,582,139
                                    =============  =============  =============

























The accompanying notes are an integral part of these financial statements

<page> 23
POWERCOLD  CORPORATION
CONSOLIDATED  BALANCE  SHEETS (CONTINUED)

                                                   December  31,
                                    -------------------------------------------
                                        2001            2000          1999
                                    -------------  -------------  -------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT  LIABILITIES

  Accounts payable and accrued
    expenses                        $  1,023,596   $   195,460   $     578,258
  Account payable - related party            -          10,567             -
  Commissionsand royalty payable          55,067        42,240          42,240
  Advances  from  affiliate                  -          73,636         365,254
  Notes  payable                          36,329        43,328          21,378
  Acquisition  payable                   200,000       200,000         200,000
  Current portion of capital
    lease  payable                         3,018         3,419            3,564
                                    -------------  -------------  -------------
Total Current Liabilities              1,318,010        568,650      1,210,694
                                    -------------  -------------  -------------

CAPITAL LEASE PAYABLE, net of
  current  portion                         5,413          6,826          9,609
                                    -------------  -------------  -------------

COMMITMENTS  AND  CONTINGENCIES          395,300        168,300            -
                                    -------------  -------------  -------------

STOCKHOLDERS'  EQUITY

  Convertible preferred stock
    Series A, $0.001 par value;
    5,000,000 shares authorized,
    0,  0, and 1,250,000 shares
    issued and outstanding,
    respectively                             -              -           1,250
  Common stock, $0.001 par value;
    200,000,000 shares authorized,
    16,027,882, 12,669,383, and
    7,876,641 shares issued and
    outstanding, respectively             16,027         12,669         7,876
  Additional paid-in capital          10,210,665      8,243,227     6,034,592
  Stock  options                         471,980            -             -
  Accumulated  deficit                (9,329,479)    (7,001,077)   (5,681,882)
  Accumulated other comprehensive
    Income                               970,000            -              -
                                    -------------  -------------  -------------
                                       2,339,193      1,254,819        361,836
                                    -------------  -------------  -------------
TOTAL  LIABILITIES  AND
  STOCKHOLDERS'  EQUITY             $  4,057,916   $  1,998,595   $   1,582,139
                                    =============  =============  =============




The accompanying notes are an integral part of these financial statements

<page> 24
POWERCOLD  CORPORATION
CONSOLIDATED  STATEMENTS  OF  OPERATIONS  AND  COMPREHENSIVE  LOSS

                                             Years  Ended  December  31,
                                    -------------------------------------------
                                        2001            2000          1999
                                    -------------  -------------  -------------
REVENUES
  Product  sales                    $    814,338   $    312,865   $    461,572
  Services                                67,751         82,175        100,831
                                    -------------  -------------  -------------
Total  Revenues                          882,089        395,040        562,403
                                    -------------  -------------  -------------
COST  OF  REVENUES
  Material                               325,914        164,480        377,935
  Direct  labor                          459,889         84,808        168,721
  Manufacturing  supplies                 25,045         16,994         37,132
  Shipping  and  handling                 19,489         16,955         18,282
                                    -------------  -------------  -------------
Total  Cost  of  Revenues                830,337        283,237        602,070
                                    -------------  -------------  -------------
GROSS  PROFIT  (LOSS)                     51,752        111,803        (39,667)
                                    -------------  -------------  -------------
OPERATING  EXPENSES
  Sales                                  183,271        312,571        168,003
  Advertising  and  marketing            127,690          2,021            -
  General and administrative             759,630        472,461        647,089
  Research  and  development             451,947            -          166,262
  Leased  equipment                       25,376            -              -
  Legal  and  accounting                 137,421        127,011            -
  Consulting                             310,000        335,489            -
  Occupancy                              108,599        110,031            -
  Provision (recovery) for doubtful
    Accounts                              22,505         10,379         (2,754)
  Depreciation and amortization          185,315        153,494        181,675
                                    -------------  -------------  -------------
Total  Operating  Expenses             2,311,754      1,523,457      1,160,275
                                    -------------  -------------  -------------
LOSS  FROM  OPERATIONS                (2,260,002)    (1,411,654)    (1,199,942)

OTHER  INCOME  (EXPENSES)
  Interest  income                         6,512          6,622          8,706
  Interest and financing expense        (122,250)        (2,763)       (70,249)
  Gain on settlement of litigation           -           88,600           -
  Other  income                           47,338            -           8,090
                                    -------------  -------------  -------------
Total  Other  Income  (Expenses)         (68,400)        92,459        (53,453)
                                    -------------  -------------  -------------

LOSS  BEFORE  INCOME  TAX             (2,328,402)    (1,319,195)    (1,253,395)

INCOME  TAX  EXPENSE                         -              -              -
                                    -------------  -------------  -------------
NET  LOSS                             (2,328,402)    (1,319,195)    (1,253,395)

OTHER  COMPREHENSIVE  INCOME
  Unrealized gain on investments         970,000            -              -
                                    -------------  -------------  -------------
Comprehensive  loss                 $ (1,358,402)  $ (1,319,195)  $ (1,253,395)
                                    =============  =============  =============

The accompanying notes are an integral part of these financial statements
<page> 25
POWERCOLD  CORPORATION
CONSOLIDATED  STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (CONTINUED)

                                             Years  Ended  December  31,
                                    -------------------------------------------
                                        2001            2000          1999
                                    -------------  -------------  -------------

LOSS  PER  COMMON  SHARE,
     BASIC  AND  DILUTED            $      (0.16)  $      (0.13)  $      (0.18)
                                    =============  =============  =============

WEIGHTED  AVERAGE  NUMBER  OF
     COMMON SHARES OUTSTANDING,
     BASIC  AND  DILUTED              15,005,371     10,156,716      7,106,638
                                    =============  =============  =============













































The accompanying notes are an integral part of these financial statements
<page> 26
POWERCOLD CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                         Accum-
                                                                                                          ulated
                         Preferred Stock          Common Stock                               Stock       Other       Total
                     ------------------------ ---------------------- Additional  Accum-      Sub-        Comphre-    Stock-
                     Number of                Number of              Paid-in      ulated      cription    hensive     holders'
                     Shares      Amount       Shares     Amount      Capital     Deficit     Receivable  Income      Equity
                     ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<C>                  <S>         <S>         <S>         <S>         <S>         <S>         <S>         <S>         <S>

Balance, December
 31, 1998              1,250,000      1,250    6,834,000      6,834   5,524,774   (4,428,487)       -           -     1,105,371
Issuance of common
 stock as follows:
 - for services at an
   average of $0.34
   per share                 -          -        483,641        483     161,627          -          -           -       162,110
 - for cash at an
   average of $0.62
   per share                 -          -        559,000        559     348,191          -          -           -       348,750
Net loss, December
 31, 1999                    -          -            -          -           -            -          -           -    (1,253,395)
                     ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, December
 31, 1999              1,250,000      1,250    7,876,641      7,876   6,034,592   (5,681,882)       -           -       362,836

Stock issued for
 cash at an average
 of $0.87 per
 common share                -          -      1,329,602      1,330   1,156,670          -          -           -     1,158,000
Stock issued as
 prepaid consulting
 fees at $0.50 per
 common share                -           -       615,000        615    306,885           -          -           -       307,500
Stock issued for
 services at an
 average of $.058
 per common share            -           -       593,355        593    296,085           -          -           -       296,678
Perferred stock
 converted to
 common stock at par  (1,250,000)     (1,250)  1,354,785      1,355       (105)          -          -           -         1,250
Stock issued and
 options exercised in
 exchange for
 technology license
 at $0.50 per
 common share                -           -       100,000        100     49,900           -          -           -        50,000
Stock issued and options
 exercised in
 exchange for debt at
 $0.50 per common share      -           -       800,000        800    399,200           -          -           -       400,000
Net loss, December
 31, 2000                    -           -           -          -          -      (1,319,195)       -           -    (1,319,195)
                     ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, December
 31, 2000                    -           -    12,669,383     12,669   8,243,227  (7,001,077)$       -           -     1,257,069
</table>

















The accompanying notes are an integral part of these financial statements
<page> 27
POWERCOLD CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                         Accum-
                                                                                                          ulated
                         Preferred Stock          Common Stock                               Stock       Other       Total
                     ------------------------ ---------------------- Additional  Accum-      Sub-        Comphre-    Stock-
                     Number of                Number of              Paid-in      ulated      cription    hensive     holders'
                     Shares      Amount       Shares     Amount      Capital     Deficit     Receivable  Income      Equity
                     ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<C>                  <S>         <S>         <S>         <S>         <S>         <S>         <S>         <S>         <S>
Balance carryforward,
 December  31, 2000          -           -    12,669,383     12,669   8,243,227  (7,001,077) $      -           -     1,257,069

Common stock issued
 for services at
 $0.59 per share             -           -        42,500         43      24,958         -           -           -        25,000

Common stock issued
 for consulting
 services at $0.50
 per  share                  -           -       230,000        230     114,770         -           -           -       115,000

Common stock issued
 for conversion of
 debt at $0.61
 per  share                  -           -       372,081        372     207,128         -           -           -       207,500

Common stock issued
 as pre payament of
 rent at $0.50
 per  share                  -           -        45,000         45      22,455         -           -           -        22,500

Common stock issued
 as interest and
 financing expense
 at $0.50 per share          -           -       240,419        240     122,010         -           -           -       122,250

Common stock issued
 as compensation at
 $0.50 per share             -           -       113,000        113      56,387         -           -           -        56,500

Common stock issued
 for payment of
 accounts payable at
 $0.75 per share             -           -        35,000         35      26,383         -           -           -        26,418

Common stock and
 options issued for
 acquisition of PSI
 at $2.16 per share          -           -        50,000         50     108,450         -        66,500         -       175,000

Common stock: 2,144,820
 shares issued with
 603,083 attached
 warrants for cash
 at $0.86 per share
 and 85,679 shares
 valued at $1.73 per
 share as issuing
 costs less total
 issuing costs of
 $296,142                    -           -     2,230,499      2,230   1,284,898         -       405,480         -     1,692,608

Other comprehensive
 income                      -           -           -          -           -           -           -       970,000     970,000

Net loss,
 December 31, 2001           -           -           -          -           -    (2,328,402)        -           -    (2,328,402)
                     ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
 December 31, 2001           -   $       -    16,027,882 $    16,027 $10,210,665 $(9,329,479)$  471,980  $  970,000  $2,341,443
                     =========== =========== =========== =========== =========== =========== =========== =========== ===========
</table>







The accompanying notes are an integral part of these financial statements
<page> 28
POWERCOLD  CORPORATION
CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS


                                              Years  Ended  December  31,
                                     -------------------------------------------
                                         2001            2000          1999
                                     -------------  -------------  -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                           $ (2,328,402)  $ (1,319,195)  $ (1,253,395)
  Adjustments to reconcile net
  loss to net cash used in
  operating  activities:
    Depreciation and amortization         185,315        153,494        181,675
    Gain on settlement of litigation          -          (88,600)           -
    Provision for doubtful accounts        22,505         10,379            -
    Issuance of common stock for
      services                            196,500        604,178        162,110
    Issuance of common stock for
      expenses                             26,418        108,383            -
    Issuance of common stock for
      interest and  inancing              122,250            -              -
  (Increase) decrease in assets:
    Accounts  receivable                 (157,709)       103,110       (145,841)
    Receivable from related party          (1,686)           -           72,618
    Interest  receivable                      -              -            9,918
    Refundable income taxes                   -              -           71,934
    Inventories                              (581)      (206,279)       121,706
    Prepaid  expenses                     307,500       (245,858)        (6,836)
  Increase (decrease) in liabilities:
    Accounts payable and accrued
      expenses                             10,326       (214,498)        53,215
    Accounts payable, related party       (10,567)           -              -
    Commissions payable                    12,827            -              -
                                     -------------  -------------  -------------
Net cash used in operating
  activities                           (1,615,304)    (1,094,886)      (732,896)
                                     -------------  -------------  -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment      (17,105)          (885)       (15,636)
  Proceeds from sale of securities
    available  for  sale                      -              -           32,500
  Release of restriction on cash              -              -          400,000
                                     -------------  -------------  -------------
Net cash provided by (used in)
  investing  activities                   (17,105)       (65,885)       416,864
                                     -------------  -------------  -------------












The accompanying notes are an integral part of these financial statements
<page> 29
POWERCOLD  CORPORATION
CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS

                                              Years  Ended  December  31,
                                     -------------------------------------------
                                         2001            2000          1999
                                     -------------  -------------  -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in advances from affiliate         -              -          365,254
  Principal payments on long-term
    debt                                   (1,814)        (2,527)        (2,464)
  Proceeds from short-term
    borrowings, related parties           232,500         97,698            -
  Repayment of short-term
    borrowings                                -              -         (402,825)
  Proceeds from issuance of
    shares under private placement      1,692,608      1,158,000        348,750
  Increase  in  deposits                   (1,940)           -              -
  Repayment of short-term
    borrowings, related parties          (105,635)       (65,000)           -
                                     -------------  -------------  -------------
Net cash provided by financing
  activities                            1,815,719      1,253,171        308,715
                                     -------------  -------------  -------------

Net increase (decrease) in cash           183,310         92,400         (7,317)
Cash  at  beginning  of  year             106,864         14,464         21,781
                                     -------------  -------------  -------------
Cash at end of year                  $    290,174   $    106,864   $     14,464
                                     =============  =============  =============

Supplemental cash flow information:
  Interest paid                      $        -     $      2,763   $     50,628
  Income taxes paid                  $        -     $        -     $        -

NON CASH TRANSACTIONS:
  Unrealized gain (loss) on
    securities available for sale    $    970,000   $        -     $        -
  Issuance of common stock and
    options for purchase of
    subsidiary                       $    175,000   $        -     $        -
  Issuance of common stock as
    prepayment for consulting
    services                         $        -     $    307,500   $        -
  Issuance of common stock for
    services                         $    196,500   $    296,678   $    162,110
  Issuance of common stock as
    payment of expenses              $     26,418   $    108,383   $        -
  Issuance of common stock for
    technology license               $        -     $     50,000   $        -
  Issuance of common stock for
    payment of debt                  $    207,500   $    291,617   $        -
  Issuance of common stock for
    payment of interest and
    financing expenses               $    122,250   $        -     $        -
  Reclassification of deposit to
    equipment                        $        -     $     50,000   $        -
  Issuance of common stock as
    stock offering costs             $    148,503   $        -     $        -


The accompanying notes are an integral part of these financial statements
<page> 30
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  1  -  ORGANIZATION  AND  DESCRIPTION  OF  BUSINESS

PowerCold  Corporation,  formerly  International  Cryogenic Systems Corporation,
(the  Company)  was  incorporated  on  October  7,  1987 in the State of Nevada.
PowerCold  is  a  solution  provider  of  energy  efficient   products  for  the
refrigeration,  air  conditioning  and  power  industries.  The Company operates
across  many  market  sectors  from  large  industrial  food processors to small
commercial  air  conditioning  systems.  The  Company develops, manufactures and
markets proprietary equipment to achieve significant electric power cost savings
for  commercial  and  industrial  firms.   PowerCold's   energy  efficient   and
environmentally  safe  products  are  designed  to  reduce  power  costs for air
conditioning,  refrigeration and on-site building power. The Company derives its
revenues from three principal product lines.  The first is a line of evaporative
heat  exchange  systems for the HVAC and refrigeration industry. The second line
is  the design and production of unique products for the refrigeration industry.
The  third  is  consulting  engineering  services,   including  process   safety
management  compliance,  and  ammonia  refrigeration  and  carbon dioxide system
design.

On  December  28,  1992, the Company acquired the patent rights (U.S. Patent No.
5,501,269) and related engineering and technology to a process of quick-freezing
food  products, and cleaning and treating various nonfood products. This process
was accomplished by using a circulating cryogenic liquid in a closed pressurized
vessel system.  The patent acquisition was made in exchange for 2,414,083 shares
of the company's common stock.  Two directors of the Company were also directors
of  the  company  selling  the  patent  rights.

On  August  4,  1995, the Company acquired Nauticon, Inc., including its related
technology  and  assets for 900,000 shares and 300,000 options (expired July 31,
2000)  of  the  Company's  stock.  The  assets currently include U.S. Patent No.
5,501,269 issued on March 26, 1996, and entitled Condenser Unit, and U.S. Patent
No.  5,787,722  issued  August  4,  1998,  and  entitled  Heat  Exchange  Unit.

On  May  18,  1998,  the Company incorporated a wholly owned subsidiary, Channel
Freeze  Technologies,  Inc.,  to acquire intellectual property rights of Channel
Ice  Technologies.  The Company has produced its first unit with this technology
(see  Note  17)  and  is  awaiting  its  sale.

The  Company  formed Alturdyne Energy Systems, Inc. in September 1999 to support
the  natural  gas  engine  driven  water  chiller  business.  Subsequent  to its
formation,  the  entity  has  been  essentially  dormant.

On  December  1,  2000, the Company acquired assets of Ultimate Comfort Systems,
Inc.,  including  its  technology  rights,  patent   rights  (U.S.   Patent  No.
5,183,102), and license agreement for integrated piping technology for a heating
and  air  conditioning  system.  This  acquisition  gave  the Company exclusive,
non-transferable  United States transfer rights to the aforementioned technology
and  all  related  assets.  This technology was then placed into a newly formed,
wholly  owned  subsidiary of the Company, Ultimate Comfort Systems.  See Note 5.

On  December  1,  2001,  Powercold  acquired  all  of  the common stock of Power
Sources,  Inc.  (hereinafter  "PSI"),  a  newly  formed  entity  engaged  in the
development  and  marketing  of  cogeneration  systems  technology.  See Note 5.





<page> 31
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  2  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

This  summary  of  significant  accounting  policies  is  presented to assist in
understanding  the financial statements.  The financial statements and notes are
representations  of  the  Company's  management,  which is responsible for their
integrity  and  objectivity.  These  accounting  policies  conform to accounting
principles  generally  accepted  in  the  United States of America and have been
consistently  applied  in  the  preparation  of  the  financial  statements.

Accounting  Methods
-------------------
The  Company's  financial  statements  are  prepared using the accrual method of
accounting.

Use  of  Estimates
------------------
The  process  of  preparing  financial  statements in conformity with accounting
principles  generally  accepted in the United States of America requires the use
of  estimates  and  assumptions  regarding certain types of assets, liabilities,
revenues,  and  expenses.   Such  estimates   primarily   relate  to   unsettled
transactions  and   events  as  of   the  date  of  the   financial  statements.
Accordingly,  upon settlement, actual results may differ from estimated amounts.

Principles  of  Consolidation
-----------------------------
The  consolidated  financial  statements include the accounts of the Company and
its  wholly  owned  subsidiaries, after elimination of the intercompany accounts
and  transactions.  Wholly  owned subsidiaries of the Company are listed in Note
13.

Reclassification
----------------
Certain  amounts  from  prior  periods  have been reclassified to conform to the
current  period  presentation.  This reclassification has resulted in no changes
to  the  Company's  accumulated  deficit  or  net  losses  presented.

Cash  and  Cash  Equivalents
----------------------------
For  purposes  of the statements of cash flows, the Company considers all highly
liquid  investments  with original maturities of three months or less to be cash
equivalents.

Inventories
-----------
Inventories  are  stated at the lower of cost or market on a first-in, first-out
basis.  See  Note  6.

Fair  Value  of  Financial  Instruments
---------------------------------------
The  Company's  financial  instruments  as defined by SFAS No. 107, "Disclosures
about  Fair  Value  of Financial Instruments," include cash, advances to related
party,  trade  accounts receivable, accounts payable, accrued expenses and notes
payable.  All instruments are accounted for on the historical cost basis, which,
due  to  the  short  maturity  of these financial instruments, approximates fair
value  at  December  31,  2001



<page> 32
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  2  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

Derivative  Instruments
-----------------------
In  June  1998,  the  Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  No.  133  ("SFAS  No.  130"),  "Accounting for
Derivative  Instruments  and  Hedging  Activities,"  as amended by SFAS No. 137,
"Accounting  for Derivative Instruments and Hedging Activities - Deferral of the
Effective  Date  of  FASB  No.  133",  and SFAS No. 138, "Accounting for Certain
Derivative  Instruments  and Certain Hedging Activities", which is effective for
the  Company  as  of  January 1, 2001.  This standard establishes accounting and
reporting  standards  for  derivative  instruments, including certain derivative
instruments  embedded  in  other  contracts,  and  for  hedging  activities.  It
requires  that  an  entity  recognize  all  derivatives  as   either  assets  or
liabilities  in  the consolidated balance sheet and measure those instruments at
fair  value.

If  certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on  the  hedging  derivative with the recognition of (i) the changes in the fair
value  of the hedged asset or liability that are attributable to the hedged risk
or  (ii)  the  earnings  effect  of  the  hedged  forecasted  transaction. For a
derivative  not  designated  as  a  hedging  instrument,  the  gain  or  loss is
recognized  in  income  in  the  period  of  change.

Historically,  the  Company  has not entered into derivatives contracts to hedge
existing  risks  or  for  speculative  purposes.

At December 31, 2001, the Company has not engaged in any transactions that would
be  considered  derivative  instruments  or  hedging  activities.

Property  and  Equipment
------------------------
Property  and  equipment  are  stated  at  cost.  Depreciation  of  property and
equipment is calculated using the straight-line method over the estimated useful
lives  of  the  assets,  which  range  from  three  to  ten  years.  See Note 7.

Concentration  of  Credit  Risk
-------------------------------
The Company maintains its cash in several commercial accounts at major financial
institutions.  At  December  31,  2001,  the  Company's  cash  balance,  in  two
accounts,  exceeded  Federal  Deposit  Insurance  Corporation  (FDIC)  limits by
$24,824  and  $54,568.

Goodwill
--------
Goodwill  represents  the  excess of the purchase price and related direct costs
over  the  fair  value of net assets acquired as of the date of the acquisition.
Goodwill  is  amortized  on  a  straight-line  basis over 10 years.  The Company
periodically  reviews  its  goodwill to assess recoverability based on projected
undiscounted  cash  flows   from  operations.   Impairments  are  recognized  in
operating  results  when  a  permanent  diminution  in  value  occurs.






<page> 33
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  2  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

Revenue  Recognition
--------------------
The Company recognizes revenue from product sales upon shipment to the customer.
Service  revenue  is  recognized  when  services  are  performed  and  billable.

Bad  Debts
----------
The  Company estimates bad debts utilizing the allowance method, based upon past
experience  and  current  market  conditions.

Product  Warranties
-------------------
The  Company  sold the majority of its products to consumers along with one-year
unconditional repair or replacement warranties.  Warranty expense is included in
cost  of  sales.

Research  and  Development
--------------------------
Research  and  development  expenses  are charged to operations as incurred. The
cost  of  intellectual  property  purchased  from  others  that  is  immediately
marketable or that has an alternative future use is capitalized and amortized as
intangible  assets.  Capitalized  costs  are  amortized  using the straight-line
method  over  the  estimated  economic  life, typically 10 years, of the related
asset.  The  Company periodically reviews its capitalized patent costs to assess
recoverability  based  on the projected undiscounted cash flows from operations.
Impairments  are  recognized in operating results when a permanent diminution in
value  occurs.

Advertising  Expenses
---------------------
Advertising  expenses  consist  primarily  of  costs  incurred  in  the  design,
development,  and  printing  of Company literature and marketing materials.  The
Company  expenses  all  advertising  expenditures  as  incurred.

Stock  Based  Compensation
--------------------------
The  Company  accounts  for stock issued for compensation in accordance with APB
25,  "Accounting  for   Stock  Issued  to  Employee."   Under   this   standard,
compensation cost is the difference between the exercise price of the option and
fair  market of the underlying stock on the grant date.  In accordance with SFAS
No. 123, "Accounting for Stock Based Compensation," the Company provides the pro
forma  effects  on net income and earnings per share as if compensation had been
measured  using  the  "fair  value  method"  described  therein.

Compensated  Absences
---------------------
Employees  of the Company are entitled to paid vacation, sick, and personal days
off, depending on job classification, length of service, and other factors.  The
Company  accrues  vacation  expense throughout the year and, if employees do not
utilize  their  allotment,  the Company will cash out all unused pay on the last
calendar  day  of  the  year.





<page> 34
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  2  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

Income  Taxes
-------------
The  Company  accounts  for  income  taxes  in  accordance  with  SFAS  No. 109,
"Accounting  for  Income  Taxes,"  which  requires  recognition  of deferred tax
liabilities  and  assets for the expected future tax consequences of events that
have  been  included  in  the  financial  statements or tax returns.  Under this
method,  deferred  tax  liabilities  and  assets  are  determined  based  on the
difference  between  the  financial  statements  and  tax  basis  of  assets and
liabilities using statutory income tax rates in effect for the year in which the
differences  are  expected  to  reverse.

Investment  in  Securities
--------------------------
Investments  in debt and marketable equity securities are designated as trading,
held  to  maturity,  or  available  for  sale  in  accordance  with statement of
Financial  Accounting  Standards  (SFAS)   No.  115   "Accounting  for   Certain
Investments  in Debt and Equity Securities."  Trading securities are reported at
fair value, with changes in fair value included in earnings.  Available for sale
securities  are  reported  at  fair  value, with net unrealized gains and losses
included  as a component of equity.  Held-to-maturity securities are reported at
amortized cost.  Gains and losses on the sale of securities are determined using
the  specific  identification method.  For all investment securities, unrealized
gains  and losses that are other than temporary are recognized as a component of
earnings  in  the  period  incurred.  Market value is determined based on quoted
market prices.  At December 31, 2001, all of the Company's investment securities
were  classified  as  available  for  sale.  See  Note  8.

Earnings  Per  Share
--------------------
On  January  1,  1998,  the  Company  adopted  SFAS  No. 128, which provides for
calculation  of  "Basic"  and  "Diluted" earnings per share.  Basic earnings per
share  includes  no dilution and is computed by dividing net income available to
common  shareholders  by  the weighted average common shares outstanding for the
period.  Diluted earnings per share reflect the potential dilution of securities
that  could share in the earnings of an entity similar to fully diluted earnings
per share.  Although there were common stock equivalents outstanding at December
31,  2001,  they  were  not  included  in  the calculation of earnings per share
because  they  would  have  been  considered  anti-dilutive.

Accounting  Pronouncements
--------------------------
In  October  2001,  the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  144,  "Accounting  for  the Impairment or
Disposal  of  Long-Lived  Assets"  (SFAS  No. 144).  SFAS 144 replaces SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be  Disposed  Of."  This  new standard establishes a single accounting model for
long-lived  assets to be disposed of by sale, including discontinued operations.
Statement  144 requires that these long-lived assets be measured at the lower of
carrying  amount or fair value less cost to sell, whether reported in continuing
operations  or  discontinued  operations.  This statement is effective beginning
for  fiscal  years after December 15, 2001, with earlier application encouraged.
The  Company adopted SFAS 144 and does not believe that the adoption will have a
material impact on the financial statements of the Company at December 31, 2001.



<page> 35
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  2  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

Accounting  Pronouncements  (continued)
---------------------------------------
In  October  2001,  the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  143,  "Accounting  for  Asset  Retirement
Obligations" (SFAS No. 143).  SFAS No. 143 establishes guidelines related to the
retirement  of  tangible  long-lived  assets  of  the Company and the associated
retirement  costs.  This  statement  requires that the fair value of a liability
for  an  asset  retirement obligation be recognized in the period in which it is
incurred  if  a  reasonable  estimate of fair value can be made.  The associated
asset  retirement  costs  are  capitalized as part of the carrying amount of the
long-lived  assets.  This statement is effective for financial statements issued
for  the fiscal years beginning after June 15, 2002 and with earlier application
encouraged.  The  Company  adopted  SFAS  No.  143 and does not believe that the
adoption  will have a material impact on the financial statements of the Company
at  December  31,  2001.

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142,  "Goodwill  and  Other  Intangible  Assets".  SFAS No. 141 provides for the
elimination  of  the  pooling-of-interests  method  of  accounting  for business
combinations  with  an  acquisition  date of July 1, 2001 or later. SFAS No. 142
prohibits  the  amortization  of  goodwill  and  other  intangible  assets  with
indefinite  lives  and requires periodic reassessment of the underlying value of
such assets for impairment. SFAS No. 142 is effective for fiscal years beginning
after  December  15, 2001. An early adoption provision exists for companies with
fiscal   years   beginning   after   March   15,  2001.   Application   of   the
non-amortization  provision of SFAS No. 142 is expected to result in an increase
in  net income of approximately $10,000 in fiscal 2002. The Company is currently
evaluating  the  impact  of  the  transitional  provisions  of  the  statement.

In  September  2000,  the FASB issued SFAS No. 140 "Accounting for Transfers and
Servicing  of  Financial  Assets  and  Extinguishment  of   Liabilities."   This
statement  provides  accounting  and  reporting  standards  for  transfers   and
servicing  of  financial  assets  and  extinguishment  of  liabilities  and also
provides  consistent  standards for distinguishing transfers of financial assets
that  are  sales  from  transfers  that are secured borrowings.  SFAS No. 140 is
effective for recognition and reclassification of collateral and for disclosures
relating  to  securitization transactions and collateral for fiscal years ending
after  December  15,  2000,  and  is  effective  for  transfers and servicing of
financial  assets  and  extinguishments of liabilities occurring after March 31,
2001.  The  Company  believes that the adoption of this standard will not have a
material  effect  on  the Company's results of operations or financial position.

Shipping  and  Handling  Fees  and  Costs
-----------------------------------------
The  Emerging  Issues Task Force ("EITF") issued EITF No. 00-10, "Accounting for
Shipping and Handling Fees and Costs", which was adopted during fiscal 2001. The
impact  of adopting EITF No. 00-10 was to increase revenues and cost of sales by
approximately  $19,489,  $16,955,  and  $18,282  in  fiscal 2001, 2000 and 1999,
respectively.  All  amounts  in  the  accompanying  Consolidated  Statements  of
Operations  and  Comprehensive  Loss  have  been  reclassified  to  reflect this
adoption





<page> 36
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  3  -  GOING  CONCERN

The  accompanying   consolidated   financial   statements,   which   contemplate
continuation of the Company as a going concern, have been prepared in conformity
with  accounting  principles generally accepted in the United States of America.
The Company has, however, sustained substantial operating losses in recent years
and  has  used  substantial  amounts  of  working capital in its operations.  At
December  31,  2001,  intangible  assets  comprise  a  material  portion  of the
Company's  assets.  The  recovery  of  these intangible assets is dependent upon
achieving  profitable  operations.  The  ultimate outcome of these uncertainties
cannot  presently  be  determined.  Management  is  actively  seeking additional
equity financing.  Additionally, management believes that prior acquisitions and
the  acquisition  of  Power  Sources,  Inc.  technology will lead to the overall
structure  necessary  to  fulfill  the  Company's  current  strategic  plans.

In  view  of  these matters, realization of a major portion of the assets in the
accompanying  balance  sheet  is  dependent  upon  continued  operations  of the
Company,  and  the  success  of its future operations.  Management believes that
actions presently being taken to obtain additional equity financing and increase
sales  provide  the  opportunity  to  continue  as  a  going  concern.

NOTE  4  -  RELATED  PARTY  TRANSACTIONS

The  Company  has  received  funding on several occasions from Simco Group, Inc,
("Simco"),  a  separate  legal entity wholly-owned by the Company's chairman and
chief  executive  officer.

During  2001,  Simco  was  issued  262,500 shares of common stock for payment of
loans,  interest  and  financing  fees  and  consulting  services.

During  2000,  Simco converted $400,000 of its loans to the Company into 800,000
shares  of  the  Company's  common  stock.  See  Note  11.

During  1999,  the  Company's directors received an annual payment of $2,500 for
directors'  fees.  After  1999,  the  directors  were  not  compensated.

See  Note  9  regarding  loans  from  shareholders.





















<page> 37
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  5  -  ACQUISITIONS

Acquisition  of  Heating  and  Air  Conditioning  System  Technology
--------------------------------------------------------------------
On  December 1, 2000, the Company acquired the technology rights, patent rights,
and  license  agreement  for  integrated piping technology for a heating and air
conditioning   system.   This   acquisition   gave    the   Company   exclusive,
non-transferable United States transfer rights to the technology and all related
assets.  In  this  transaction, the Company paid $65,000 cash, assumed two lines
of  credit  (see Note 9), forgave a payment of $28,571 from projects in process,
issued  100,000  shares  of  its  common stock (see Note 11), granted 150,000 of
stock  options  at  $1.00  per share (see Note 12), and agreed to the payment of
royalties  at  no  more  than  $3,000  per month for one year.  In addition, the
Company hired the seller of the technology for an annual salary of $70,000, with
annual  renewals,  based  upon  performance  as  defined  within  the   purchase
agreement.  This  technology  was  then placed into a newly formed, wholly owned
subsidiary  of  the  Company,  Ultimate  Comfort  Systems.

Acquisition  of  Rotary  Power  Enterprise,  Inc.
-------------------------------------------------
Pursuant  to  the  terms  of  the  Rotary  Power  Enterprise,  Inc.  acquisition
agreement,  effective  October  1,  1998,  the  Company issued 100,000 shares of
common  stock  in  exchange  for  100%  of the outstanding stock of Rotary Power
Enterprise,  Inc.  Rotary  Power Enterprise, Inc. was formed during 1998 for the
purpose  of  developing  a  new  product  line  for  PowerCold.

Acquisition  of  Power  Sources,  Inc.
-------------------------------------
On  December 1, 2001, PowerCold acquired all of Power Sources, Inc. (hereinafter
"PSI"),  a  privately  held  firm  engaged  in  the  developing and marketing of
cogeneration  systems  technology.  PSI was a wholly owned subsidiary of Utility
Metal  Research  Corp. (UMRC).  The business activity of PSI had previously been
part  of  the  activities  of  UMRC.

In  the acquisition, PowerCold agreed to issue over a two-year period a total of
150,000  shares  of  PowerCold  common stock and 150,000 common stock options to
UMRC.  At  December 31, 2001, the Company had issued 50,000 shares of its common
stock  (valued  at  $108,500)  and 50,000 of its common stock options (valued at
$66,500)  to  PSI,  and  had  recorded  a  commitment of $227,000 for the future
issuance of the remaining stock and options.  This acquisition was accounted for
under  the  purchase  method  of  accounting.

Acquired  in  the  transaction  were  trade  receivables of $921,050, which were
December  31,  2001  revenues,  with  $721,392  accounts  payable  attached  and
contracts  in  place  of  $331,175 with $281,499 accounts payable attached.  The
Company  also  acquired  technology  rights  valued at $222,666.  The assets and
liabilities of PSI had been transferred to PSI by UMRC upon the creation of PSI.
PSI  had no substantial operations prior to PowerCold's acquisition in the month
of  December  2001.









<page> 38
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  6  -  INVENTORY

Inventories  are  stated  at  the  lower  of average cost or market. The cost of
finished goods includes the cost of raw material, direct and indirect labor, and
other  indirect  manufacturing  costs.

Inventories  at  December  31,  2001,  December 31, 2000 and 1999 consist of the
following:
                         December 31, 2001  December 31, 2000  December 31, 1999
                         -----------------  -----------------  -----------------
Materials inventory      $        133,432   $        132,851   $         34,993
Finished goods inventory          108,421            108,421                -
                         -----------------  -----------------  -----------------
                         $        241,853   $        241,272   $         34,993
                         =================  =================  =================

Finished  goods inventory consists of the specialized quick-freezing unit of the
Company's  Channel  Freeze  Technology,  Inc.  subsidiary.

NOTE  7  -  PROPERTY,  EQUIPMENT  AND  INTANGIBLES

Property  and  equipment  is  summarized  as  follows:
                         December 31, 2001  December 31, 2000  December 31, 1999
                         -----------------  -----------------  -----------------
Machinery and equipment  $         93,272   $         87,342   $         32,877
Prototypes and molds               71,030             71,030             73,420
Furniture and fixtures             30,480              7,614              8,804
                         -----------------  -----------------  -----------------
Total Property
  and Equipment                   194,782            165,986            115,101
Less:  Accumulated
Depreciation                      117,122             92,416             85,872
                         -----------------  -----------------  -----------------
Net Property
  and Equipment          $         77,660   $         73,570   $         29,229
                         =================  =================  =================

Depreciation  expense  for  the years ended December 31, 2001, 2000 and 1999 was
$24,706,  $6,544  and  $7,616,  respectively.

The  Company's  intangible  assets  are  summarized  as  follows:
                         December 31, 2001  December 31, 2000  December 31, 1999
                         -----------------  -----------------  -----------------
Patents and related
  technology             $      1,907,567   $      1,684,001   $      1,532,486
Goodwill                          105,269            105,269            168,033
                         -----------------  -----------------  -----------------
Total Intangibles               2,012,836          1,789,270          1,700,519

Less: Accumulated
  Amortization                    713,033            566,251            418,567
                         -----------------  -----------------  -----------------
Net Intangibles          $      1,299,803   $      1,223,019   $      1,281,952
                         =================  =================  =================

Amortization  expense  for  the years ended December 31, 2001, 2000 and 1999 was
$146,782,  $147,684  and  $133,868,  respectively.

<page> 39
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  8  -  INVESTMENTS

In  1996,  as  part  of  a  planned  merger, which never took place, the Company
invested  $1,000,000  in Rotary Power International, Inc. (hereinafter "RPI") in
exchange  for  2,000,000  shares  of  RPI's  common  stock.   As  the  Company's
investment  in  RPI  represented more than 20% but less than 50% of RPI's common
stock  outstanding,  the  equity  method  was  used to account for the Company's
interest.  Although  the  Company  advanced additional funds of $216,768 to RPI,
deteriorating  financial  conditions  and  increasing  losses  in RPI caused the
Company  to  write  off  its  entire  investment  in  RPI  by  the  end of 1997.

During 2001, the Company's investment in RPI decreased to less than 20% of RPI's
stock  outstanding.  In  view  of  the  changed  circumstances,   the  Company's
management  elected  to  recognize  its  investment in RPI as available-for-sale
securities.  As  of December 31, 2001, the fair market value of these securities
was  $970,000,  which  has  been  recognized  as  other  comprehensive income in
accordance  with  SFAS  No.  115.

NOTE  9  -  NOTES  PAYABLE

At  December  31,  2001,  notes  payable  consisted  of  the  following:

A  note  payable  to  Southtrust  Bank,  secured  by  G.  Briley,  the Company's
president,  for  $1,940  with an annual interest rate of 14.99%.  This unsecured
note  is  payable  in  March  2002.

Two  lines  of credit were assumed as part of the consideration for the December
2000  acquisition  of  a technology license and intellectual property. (See Note
5.)  One line of credit is payable to Royal Bank of Canada for $34,014 U.S., and
the  second  to  T.  D.  Bank  for  $1,001  U.S was repaid during the year ended
December  31,  2001.

In  the  year  ended  December  31,  2001, the Company received $165,000 in loan
proceeds  from  its  shareholders.  The  loans,  which bear interest at 10%, are
unsecured  and  have  no  stated maturity.  The Company repaid $140,000 of these
loans  with  common  stock  and  $25,000  with  cash.

NOTE  10  -  PREFERRED  STOCK

The  Company  is  authorized  to  issue  5,000,000  shares  of  $0.001 par value
preferred  stock, which contain no voting privileges.  Shareholders are entitled
to cumulative dividends, and each share of preferred stock may be converted into
the  Company's  common  stock.

At December 31, 1999, the Company had 1,250,000 shares of preferred stock issued
and  outstanding.  This stock was designated as Series "A" Convertible Preferred
Stock  and  was  issued  to  a  single  investor.

On  June  30,  2000,  100%  of  the Company's outstanding Series "A" Convertible
Preferred  Stock  was  converted  to the Company's common stock.  The conversion
resulted in the issuance of 1,354,785 shares of the Company's common stock at an
approximate  conversion  rate of one share of preferred stock for 1.08 shares of
common  stock.  At  December  31, 2000 and at December 31, 2001, the Company did
not  have  any  shares  of  preferred  stock  outstanding.




<page> 40
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  11  -  COMMON  STOCK

Upon  incorporation,  the  Company was authorized to issue 200,000,000 shares of
its  $0.001  par  value  common  stock.

During  the year ended December 31, 2001, the Company issued for cash, 1,836,214
shares  of common stock with 603,083 warrants attached.  The stock was valued at
$1,284,020  and  the  warrants  were valued at $405,480.  These warrants have an
average  exercise price of $1.10 and expire between May 31, 2002 and December 6,
2003.  An  additional  308,603  shares  of  common stock were issued for cash of
$150,833.  The  Company  issued  85,679 shares of common stock as commissions to
various  promoters  for  selling  its  stock.  This stock was valued at the fair
market value of $148,503.  The Company issued 385,500 shares of common stock for
consulting  services  valued at $115,000, general services valued at $25,000 and
compensation  valued  at  $56,500.  The  Company issued 372,081 shares of common
stock  to  repay loans in the amount of $207,500 and 240,419 common stock shares
for  interest  and  financing  expenses of $122,250.  Additionally 45,000 common
stock  shares were issued for $22,500 in prepaid rent, 35,000 shares were issued
to  satisfy $26,418 of accounts payable and 50,000 common stock shares valued at
$108,500  to  acquire  Power  Sources,  Inc.  See  Note  5.

During  the year ended December 31, 2000, the Company issued 4,792,742 shares of
its  common  stock of which 1,329,602 shares were issued for cash of $1,158,000,
615,000  shares  for prepaid consulting valued at $307,500, 593,355 for services
valued  at $296,678, 100,000 shares for a technology license (see Note 5) valued
at  $50,000,  and  800,000  shares for debt valued at $400,000.  Included in the
aforementioned  issuances  are  a  total of 1,480,000 shares issued to officers,
directors,  or  affiliates  of  the  Company,  which  are  subject  to  transfer
restrictions as defined by Rule 144 of the Securities Act of 1933.  In addition,
1,354,785  shares were issued for the conversion of 100% of the Company's Series
"A"  Convertible  Preferred  Stock.  See  Note  10.

During  the year ended December 31, 1999, the Company issued 1,042,641 shares of
its  common  stock  of  which  483,641 shares were issued for services valued at
$162,110  and  559,000  shares  were  issued  for  cash  of  $348,750.

NOTE  12  -  STOCK  BASED  COMPENSATION  AND  STOCK  OPTIONS

During  2001,  the  Company  authorized and issued 895,000 options at an average
exercise  price  of $0.96 for services, compensation and the acquisition of PSI.
See  Note  5.

During  2000, the Company authorized and issued a total of 750,000 options at an
average  exercise  price of $1.20 for investment funding, and 250,000 options at
an  average  exercise  price  of  $0.50  as  compensation.

During  1999,  the Company authorized and issued a total of 1,004,558 options at
an  exercise  price  of  $0.50  for  employee  compensation.










<page> 41
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  12  -  STOCK  BASED  COMPENSATION  AND  STOCK  OPTIONS  (CONTINUED)

The  Company  applies  APB  Opinion  No.  25  in  accounting  for  options  and,
accordingly, recognized no compensation cost for its stock options in 2001, 2000
and  1999.  The following reflects the Company's pro-forma net loss and net loss
per  share  had the Company determined compensation costs based upon fair market
values of options at the grant date, as well as the related disclosures required
by  SFAS  123:

Pro  forma  net  loss  and  earnings per share had the Company accounted for its
options  under  the  fair  value  method  of  SFAS  123  are  as  follows:


                                 Year Ended      Year Ended      Year  Ended
                                 December 31,    December 31,    December  31,
                                 2001            2000            1999
                                 --------------  --------------  --------------
Net loss as reported             $  (2,328,402)  $  (1,319,195)  $  (1,253,395)
Adjustment required by FAS 123        (345,277)       (287,273)       (524,890)
                                 --------------  --------------  --------------
Pro forma net loss               $  (2,673,679)  $  (1,606,468)  $  (1,778,285)
                                 ==============  ==============  ==============

Pro forma net loss per share,
  Basic and diluted              $       (0.18)  $       (0.16)  $       (0.25)
                                 ==============  ==============  ==============

                                     Number of Shares         Weighted Average
                                     Under Option             Exercise Price
                                     -----------------        -----------------
Outstanding, January 1, 1999                1,943,000         $         1.36
     Granted                                1,004,558                   0.50
     Exercised                                    -                     -
     Forfeited                                    -                     -
     Expired                                      -                     -
                                     -----------------        -----------------
Outstanding, December 31, 1999              2,947,558         $         1.01
                                     =================        =================
Exercisable, December 31, 1999              2,947,558         $         1.01
                                     =================        =================


















<page> 42
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  12  -  STOCK  BASED  COMPENSATION  AND  STOCK  OPTIONS  (CONTINUED)

                                     Number of Shares         Weighted Average
                                     Under Option             Exercise Price
                                     -----------------        -----------------
Outstanding, January 1, 2000               2,947,558          $        1.01
     Granted                               1,000,000                   0.77
     Exercised                              (450,000)                  0.50
     Forfeited                                   -                     -
     Expired                                (700,000)                  2.29
                                     -----------------        -----------------
Outstanding, December 31, 2000             2,797,558          $        0.74
                                     =================        =================
Exercisable, December 31, 2000             2,797,558          $        0.74
                                     =================        =================
Outstanding January 1, 2001                2,797,558          $        0.74
     Granted                                 895,000                   0.96
     Exercised                                   -                     -
     Forfeited                                   -                     -
     Expired                                     -                     -
                                     -----------------        -----------------
Outstanding December 31, 2001              3,692,558          $        0.84
                                     =================        =================
Exercisable December 31, 2001              3,692,558          $        0.84
                                     =================        =================
Weighted average fair value of
  options  granted  during  2001                              $        0.39
                                                              =================

At  December 31, 2001, exercise prices for outstanding options ranged from $0.50
to  $1.36.  The  weighted average contractual life remaining of such options was
2.7  years.

In  accordance with Statement on Financial Accounting Standard No. 123, the fair
value  of the options granted was estimated using the Black-Scholes Option Price
Calculation.  The  following  assumptions  were made to value the stock options:


Risk-free Interest Rate          5%
Expected Life                1 to 5 years
Expected Volatility             75%

The Black-Scholes option valuation model was developed for use in estimating the
fair  value  of traded options, which have no vesting restrictions and are fully
transferable.

In  addition,  option  valuation  models  require the input of highly subjective
assumptions  including  the   expected  stock  price  volatility.   Because  the
Company's  employee  stock  options have characteristics significantly different
from  those  of  traded  options,  and  because  changes in the subjective input
assumptions  can  materially  affect  the  fair  value estimate, in management's
opinion,  the  existing  models  do  not  necessarily  provide a reliable single
measure  of  the  fair  value  of  its  employee  stock  options.





<page> 43
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  13  -  REPORTABLE  SEGMENTS

PowerCold  currently  has  seven  reportable  segments:  Nauticon Inc., RealCold
Products,  Inc.,  Technicold  Services,  Inc.,  Rotary  Power  Enterprise, Inc.,
Channel  Freeze  Technologies,  Inc.,  Ultimate  Comfort Systems, Inc. and Power
Sources,  Inc.  Nauticon Inc. offers a product line of evaporative heat exchange
systems  for  the  HVAC  and  refrigeration industry.  Technicold Services, Inc.
offers  consulting  engineering  services,  including  process safety management
compliance  and  ammonia  refrigeration  technicians  and  supervisors. RealCold
Products,  Inc.  designs  and  produces  unique  products  for the refrigeration
industry.  Rotary  Power  Enterprise, Inc. provides customized rotary engines to
power  a  variety  of   chiller  and   refrigeration  systems.   Channel  Freeze
Technologies,  Inc.  generates revenue through the manufacture and  sale of bulk
freezing systems.  Ultimate Comfort Systems, Inc. holds  the  technology rights,
patent  rights  and  license  agreement  for an integrated piping technology for
heating  and air  conditioning  systems.  Ultimate Comfort  Systems,  Inc.  also
provides  consulting  services related  to this technology.  Power Sources, Inc.
(PSI) holds the technology rights to  design and engineer  cogeneration  systems
that use engine driven generators to produce both electrical and thermal energy.
PSI  will  also  package   and  market   this technology.

Segment  information  (after  intercompany  eliminations)  for  the  year  ended
December  31,  2001,  2000  and  1999  are  as  follows:

                                  Dec. 31, 2001   Dec. 31, 2000   Dec. 31, 1999
                                  --------------  --------------  --------------
Revenues:
  Ultimate Comfort Systems, Inc.  $     282,733   $         -     $         -
  Nauticon, Inc.                            -             3,754          91,006
  RealCold Products, Inc.               531,605         309,111         212,596
  Technicold Services, Inc.              67,751          82,175          50,611
  Rotary Power Enterprise, Inc.             -               -           187,025
  Channel Freeze Technologies, Inc.         -               -               -
  Power Sources, Inc.                       -               -               -
  Corporate                                 -               -            21,165
                                  --------------  --------------  --------------
TOTAL REVENUES                    $     882,089   $     395,040   $     562,403
                                  ==============  ==============  ==============
Operating  income  (loss):
  Ultimate Comfort Systems, Inc.  $    (209,908)  $         -     $         -
  Nauticon, Inc.                        (71,676)        (33,331)       (290,569)
  RealCold Products, Inc.              (944,997)       (504,144)       (243,429)
  Technicold Services, Inc.               7,295        (109,771)          7,538
  Rotary Power Enterprise, Inc.        (190,834)       (109,025)         (8,454)
  Channel Freeze Technologies, Inc.     (80,120)       (215,808)       (313,801)
  Power Sources, Inc.                       -               -               -
  Corporate                            (769,792)       (439,575)       (351,227)
                                  --------------  --------------  --------------
TOTAL OPERATING LOSS              $  (2,260,002)  $  (1,411,654)  $  (1,199,942)
                                  ==============  ==============  ==============








<page> 44
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  13  -  REPORTABLE  SEGMENTS  (CONTINUED)

                                  Dec. 31, 2001   Dec. 31, 2000   Dec. 31, 1999
                                  --------------  --------------  --------------
Identifiable  assets:
  Ultimate Comfort Systems, Inc.  $     150,429   $     152,415   $         -
  Nauticon, Inc.                        239,853         280,375         385,927
  RealCold Products, Inc.               336,398         132,371         144,650
  Technicold Services, Inc.              26,318         120,833         122,137
  Rotary Power Enterprise, Inc.          74,642          75,386         129,992
  Channel Freeze Technologies, Inc.     683,232         848,777         797,531
  Power Sources, Inc.                   921,150             -               -
  Corporate                           1,625,894         388,438           1,902
                                  --------------  --------------  --------------
TOTAL IDENTIFIABLE ASSETS         $   4,057,916   $   1,998,595   $   1,582,139
                                  ==============  ==============  ==============

                                  Dec. 31, 2001   Dec. 31, 2000   Dec. 31, 1999
                                  --------------  --------------  --------------
Depreciation  and  amortization:
  Ultimate Comfort Systems, Inc.  $      10,593   $         -     $      96,761
  Nauticon, Inc.                         67,075          83,046          96,761
  RealCold Products, Inc.                 4,657             900           2,419
  Technicold Services, Inc.              26,804          12,090          12,090
  Rotary Power Enterprise, Inc.             530             334             365
  Channel Freeze Technologies, Inc.      57,124          57,124          70,040
  Power Sources, Inc.                     1,865             -               -
  Corporate                              16,667             -               -
                                  --------------  --------------  --------------
TOTAL DEPRECIATION AND
  AMORTIZATION                    $     185,315   $     153,494   $     181,675
                                  ==============  ==============  ==============

All  of  the Company's assets are held within the United States and all material
revenue  was  generated  within  the  United  States.

PowerCold's  reportable  segments  are  strategic  business   units  that  offer
different  products  or  services.  They  are  managed  separately  because each
business  requires  different  technology  and  marketing  strategies.

NOTE  14  -INCOME  TAXES

Income taxes are provided based upon the liability method of accounting pursuant
to  SFAS  No.  109 "Accounting for Income Taxes."  Under this approach, deferred
income  taxes  are  recorded  to reflect the tax consequences in future years of
differences  between the tax basis of assets and liabilities and their financial
reporting  amounts  at each year-end.  A valuation allowance is recorded against
deferred tax assets if management does not believe the Company has met the "more
likely  than  not" standard imposed by SFAS No. 109 to allow recognition of such
an  asset.








<page> 45
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  14  -INCOME  TAXES  (CONTINUED)

At  December  31,  2001,  the Company had net deferred tax assets of $1,200,000,
principally  arising  from  net  operating  loss  carry  forwards for income tax
purposes.  As  management of the Company cannot determine that it is more likely
than  not  that  the  Company  will  realize the benefit of the net deferred tax
asset,  a  valuation  allowance  equal  to  the  net deferred tax asset has been
established  at  December  31,  2001.

The Company incurred accumulated net operating losses for income tax purposes of
approximately  $3,400,000 for the year ended December 31, 2000.  At December 31,
2001,  the Company's net operating losses increased by approximately $2,200,000.
The  Company's  net  operating  loss  carry forwards for income tax purposes are
approximately  $5,600,000,  which  will expire on various dates through the year
2020.

The Company recorded approximately $341,000 paid by the issuance of common stock
for  expenses  in  the  year  ended  December  31,  2001.

NOTE  15  -LEASES

Capital  Lease
--------------
In  1999,  the Company acquired a forklift, which was financed through a capital
lease.  This  capital  lease  is  payable  in monthly installments of $297, with
interest  at  9.5%,  through  April  2004.  Aggregate  yearly maturities of this
capital  lease  for  the  years  after  December  31,  2001  are  as  follows:

                           Year Ending          Amount
                           December 31,
                           ------------     -------------
                                2002        $      3,018
                                2003               3,298
                                2004               2,115
                                            --------------
                            Total           $      8,431
                                            ==============

Operating  Leases
-----------------
The  Company  leases  sales offices and plant space, in LaVernia, Texas under an
operating lease agreement, which expires March 30, 2004.  Total rent expense for
the  year  ended  December  31,  2001  was  $89,999.

Future  minimum  rental  commitments  as  of  December 31, 2001 were as follows:

                           Year Ending          Amount
                           December 31,
                           ------------     -------------
                               2002         $     36,000
                               2003               36,000
                               2004               12,000
                                            --------------
                            Total           $     80,000
                                            ==============



<page> 46
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  15  -LEASES  (CONTINUED)

The  Company's  subsidiary,  Technicold  Services, Inc. has a one-year lease for
office  space  in  San Antonio, Texas.  The rent is $675 per month and the lease
expires  September  30,  2002.

NOTE  16  -  LITIGATION

On  August  31,  2000, Nauticon Inc. and its former president agreed upon a full
and  final  settlement of the lawsuit mentioned above.  This settlement resulted
in  a  gain  for  the  Company  of  $88,600, which was recorded as other income.

NOTE  17  -  SUBSIDIARY  -  CHANNEL  FREEZE  TECHNOLOGIES,  INC.

On May 18, 1998, Channel Freeze Technologies, Inc. (CFTI) was formed as a wholly
owned  subsidiary  of the Company to accommodate the acquisition of intellectual
property  assets  related to Channel Ice Technology.  On September 15, 1998, the
Company  entered into an agreement to acquire eighty percent (80%) of the assets
(primarily patents) of Channel Ice Technologies from SIR Worldwide LLC (SIR) for
$850,000  and options for SIR to purchase 400,000 shares of PowerCold stock at a
price  of $2.50 per share, for a period not to exceed two years from the date of
closing.  After  the Company made cash payments of $550,000 in 1998 and $100,000
in  1999, the remaining acquisition liability was $200,000 at December 31, 2001.
The agreement also required the Company to issue two-thirds of the stock of CFTI
to  SIR,  which would leave the Company with only a one-third ownership in CFTI.
The board of directors of the Company passed a resolution approving the issuance
of  two-third  of  the  shares of stock of CFTI to SIR; however, the shares were
never  issued.  The  agreement provided the Company the ability to increase (buy
back) their ownership interest (up to 80%) in CFTI by making additional payments
totaling $5,950,000.  For each $1 million dollars in Channel Ice Technology unit
sales, PowerCold shall acquire an additional 1% equity interest in CFTI for each
payment  of  $85,000, up to a maximum ownership interest by PowerCold in CFTI of
80%.

Also,  as  part  of  the  purchase  agreement,  CFTI  has  agreed  to additional
compensation  to  SIR  by  payment  of either a 10% net fee payment or a 13% net
sales  fee payment.  Ten percent net fee payments are payments of 10% of the net
gross  invoice  price  on all Channel Ice Technology Units sold to distributors.
Thirteen  percent  net fee payments are payments of 13% of the net gross invoice
price  on  all  Channel  Ice  Technology Units of direct sales to end users.  At
December  31,  2001,  December 31, 2000 and 1999, no additional compensation was
paid  or  owed  to  SIR  in  connection  with  this  purchase  agreement.

Since  1999, the Company has maintained its investment in CFTI as a wholly owned
subsidiary.  The  patent  and  intellectual  property owned by the subsidiary is
consolidated  with  the  Company's  other  activities.

During  2002, Channel Freeze Technologies, Inc. may be dissolved as an operating
entity.  The  Company is negotiating with the previous owners of the technology.
Channel  Freeze  Technologies, Inc. was formed in September 1998, as a PowerCold
subsidiary,  to  acquire  certain  assets  of  Channel  Ice  Technologies.   The
technology  includes  a  proprietary  patent  for  an  economical  multi-purpose
freezing  system.  Since  the  company  is allocating all its resources into its
current  product  line, management has decided there is limited synergy with the
Channel  Freeze technology and does not envision continuing development of these
products.


<page> 47
                              POWERCOLD CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE  18  -  COMMITMENTS  AND  CONTINGENCIES

Accounts  Payable
-----------------
The  Company  has trade accounts payable that date back to 1996.  Management had
tried to contact these vendors to arrange settlement agreements. Included in the
caption  Commitments  and  Contingencies  on the Company's balance sheet are the
balances  in  the  aggregate  amount  of $168,300 from vendors that could not be
contacted  or  did  not  respond  to  management's  correspondence.

Royalty  Agreement
------------------
See  Note  5  regarding  December  1,  2001  royalty  agreement.

Additional  Compensation
------------------------
See  Note  17  regarding  potential  payments  to  SIR.









































<page> 48

SIGNATURES

Pursuant  to  the  requirements  of  Section  13  of 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its  behalf  by  the  undersigned,  thereunto  duly  authorized.


                                   POWERCOLD  CORPORATION



                                   By:  /s/  Francis  L.  Simola
                                        ------------------------
                                        Francis  L.  Simola
                                        President  and  Chief  Executive Officer

                                   Dated:     March  27,  2002


Pursuant  to  the  requirements of the Securities and Exchange Act of 1934, this
report  has  been  signed  below  by  the  following  persons  on  behalf of the
Registrant  and  in  the  capacities  and  on  the  date  indicated.



                                   By:  /s/  Francis  L.  Simola
                                        ------------------------
                                        Francis  L.  Simola
                                        Chairman  and  President
                                        Chief  Executive  Officer

                                   Dated:     March  27,  2002


                                   By:  /s/  George  C.  Briley
                                        -----------------------
                                        George  C.  Briley
                                        Director  and  Secretary
                                        Chief  Technology  Officer

                                   Dated:     March  27,  2002


                                   By:  /s/      H.  Jack  Kazmar
                                        -------------------------
                                        H  Jack  Kazmar
                                        Director  and  Treasurer
                                        Chief  Operating  Officer

                                   Dated:     March  27,  2002