SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

                                  ANNUAL REPORT

                       Pursuant to Section 13 or 15 (d) of
                     the Securities and Exchange Act of 1934

For the fiscal year ended                                    Commission File
June 30, 1996                                                Number 0-15379


                                                                          
                                Power-Cell, Inc.
               (Exact name of registrant as specified in charter)

                Colorado                                      84-1029701
--------------------------------------------------------------------------------
      (State or other jurisdiction of     (I.R.S. Employer Identification No.)
      incorporation or organization)                         
      


       660 Preston Forest Center, Box 200
       Dallas, Texas                                          75230
--------------------------------------------------------------------------------
      (Address of principal executive offices)               (Zip Code)

                             (214) 373-1887
               (Registrant's telephone number including area code)

Securities registered pursuant to Section 12(b) or 12(g) of the Act:
                                           $.0001 par value common stock

Indicated  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 and (2) has been  subject to such  filing
requirements for the past 90 days.

                                          Yes      X        No
                                                  ---              ---

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant is approximately $630,000. This calculation is based upon the average
of the bid and asked prices of the Registrant's Common Stock on June 30, 1996.

The  number  of  shares  of the  Registrant's  $.0001  par  value  Common  Stock
outstanding as of September 30, 1996 was 6,216,875.


<PAGE>



                                     PART I

Item 1.       Business
              --------

     (a)      General Development of Business.
              --------------------------------

              On December  27,  1988,  the United  States  Patent and  Trademark
              Office issued a United States' Letter Patent to Power-Cell,  Inc.,
              a  Colorado   corporation  (the  "Company")  relating  to  certain
              features of the Company's  replaceable  low-cost  reserve  battery
              charger unit. The patent  entitles the Company to prohibit  others
              from making,  using or selling the invention  claimed for a period
              of seventeen (17) years from the date of issue.  The Company filed
              a Divisional Patent  Application on September 19, 1988 relating to
              other aspects of the battery charger unit. The Company was advised
              on August 22,  1989 that  certain of its claims  contained  in its
              Divisional  Patent  Application  are allowable by the U.S.  Patent
              Examiner  and the patent  will  advance  to issue.  Based upon the
              results  of a search  conducted  of the Untied  States  Patent and
              Trademark  Office  records in March 1987, it was  determined  that
              there  were  no  U.S.  patents  that  would  be  infringed  by the
              manufacturing  and  marketing of the Product,  and no patents have
              subsequently  come to the  attention of the Company which would be
              infringed.   In  addition,   the  Company  has  filed  for  patent
              protection  relating  to the  battery  charger  unit  in  thirteen
              foreign  countries  and was  advised  on  August  8, 1989 that its
              patent application in Spain,  Italy, Great Britain,  Australia and
              Argentina has been  approved for issue.  There can be no assurance
              that such additional patent protection can or will be obtained.

              On May 27, 1989, the Company  entered into a letter of intent (the
              "Letter of Intent") with Daewoo Heavy Industries,  Inc., of Seoul,
              Korea ("DHI") to complete the development  program for the Company
              reserve battery charger unit (the "Product"). The Letter of Intent
              provided  that DHI would bear most costs and  expenses  related to
              development  of the Product.  The Company would provide  technical
              assistance and pay regulatory costs. Upon satisfactory development
              of the Product  pursuant to the development  program,  the parties
              intended to negotiate a definitive  agreement for the  manufacture
              and distribution of the Product on a worldwide basis.

              Negotiations  pursuant to the Letter of Intent were  terminated in
              September,  1990.  DHI  informed the Company that DHI's prime bank
              would not  approve a loan to DHI for the Product on the grounds of
              government  policies to regulate the business  diversification  of
              conglomerates in Korea. In addition, DHI informed the Company that
              DHI's Board of Directors  decided to postpone  indefinitely  DHI's
              participation  in the project due to  increased  wage and material
              costs for cases and plates,  the  strength of the Korean won,  and
              the general problem of oil price increases caused by the crises in
              the Persian Gulf.

                                        2

<PAGE>




              Power Cell, Inc. entered into an Agreement of Limited  Partnership
              on October 9, 1992, by and among Reserve Battery, Inc., a Colorado
              corporation  as general  partner (the name of the general  partner
              was amended to read  "Reserve  Cell  Limited  Liability  Company",
              General Partner of Reserve Battery Cell,  L.P.), and other parties
              at interest.

              The parties,  as above, formed a limited partnership with the name
              of "Reserve  Battery Cell,  L.P" subject to the  provisions of the
              Colorado Uniform Limited  Partnership Act of 1981, as amended,  to
              develop, manufacture,  market and sell the reserve battery product
              lines;  to obtain  financing and  refinancing  to  accomplish  the
              foregoing purposes and other provisions  normally required in such
              projects.

              Power  Cell,  Inc.  has a  participation  of 7.35%  percent in the
              Reserve  Battery Cell,  L.P.,  that may be increased or decreased,
              due to certain events pending,  namely the legal action of Reserve
              vs. Osmic et al.(See item 3, page 5).  Should  Reserve  prevail in
              this  matter,   the  5.34%   interest  of  Osmic  in  the  limited
              partnership  will be canceled and re-allocated on a pro rata basis
              between  Reserve,  Power Cell, Inc. and the  international  rights
              holders.  Further,  the right to  participate  in 41% of the Power
              Cell, Inc. domestic  royalties should also be canceled.  The three
              year option of Osmic to acquire 200 thousand PCI common  shares at
              $1.00 per share expired on March 5, 1995.  (originally  20 million
              shares at a one cent per share cost,  adjusted for a 100/1 reverse
              split of the  common  shares  effective  November  21,  1994).  In
              addition,  PCI will receive royalty payments on all units produced
              and  sold  in the  United  States  and  its  possessions.  Royalty
              payments  on  international  sales  of the  unit  will  be paid to
              individual  international rights holders or their designees,  some
              of which  are  affiliates  of PCI,  and all of which  are  limited
              partners in the partnership, on the following basis: one-third (33
              1/3%)  to J. C.  Rambin;  one-third  (33  1/3%)  to  Rudy  Marich;
              one-third  to Howard  Farkas  (75% of 1/3) and Burt Kanter (25% of
              1/3).

              Power Cell,  Inc.  entered into a License  Agreement on October 9,
              1992, by and among Reserve Battery Cell,  L.P., a Colorado limited
              partnership (Reserve),  the International Rights Holders and other
              parties at  interest.  The  license  agreement  granted to Reserve
              included  the rights to the patents,  technology  and the Domestic
              and International Rights, to develop, produce, market and sell the
              product.

              The separate license royalty agreement between the Company and the
              Partnership   provides  that  the  Company  will  receive  royalty
              payments on all Power Cell units  produced  and sold in the Untied
              States  and its  territories  from 5% to 20% of  annual  gross per
              unit. Royalty payments on international  sales of Power Cell units
              will be paid to individual  international rights holders,  some of
              which are affiliates of the Company  (director and/or  significant
              shareholders),  and  all of  which  are  limited  partners  in the
              Partnership.




                                        3

<PAGE>



     (b)      Financial Information About Industry Segments.
              ----------------------------------------------

              Not applicable.

     (c)      Narrative Description of Business.
              ----------------------------------

              The Company was  organized  in April 1986 to seek out and evaluate
              potential  business  opportunities.  It  received  $360,000 in net
              proceeds,  before offering expenses of approximately $44,000, from
              its initial  public  offering of 400,000 Units of its Common Stock
              and Class A Warrants  ("Units") that closed in December 1986. From
              the close of that offering  until the Spring of 1987,  the Company
              evaluated various business opportunities. In May 1987, the company
              and Balzac  Investments,  Inc.  ("Balzac")  entered  into a Merger
              Agreement. The Merger was completed on February 19, 1988 after the
              declaration  of  effectiveness  of the  Company's  Post  Effective
              Amendment  Number 6 to its  Registration  Statement  of Form S-18.
              Upon  consummation of the Merger,  the Company changed its name to
              Power-Cell,  Inc.  The  reason  for this name  change was that the
              primary  business of the Company was the  development for eventual
              manufacture and marketing of the Product.

              In January 1987,  Balzac purchased the rights to a battery charger
              product (the "Product").  As a result of the Merger, the rights to
              manufacture,  market and  distribute  the  Product and all related
              technology in the Untied States and its  territories now belong to
              the  Company.  Other  individuals  and entities who are all former
              shareholders of Balzac,  own all the  international  rights to the
              Product.  The Product is a reserve battery  approximately 6 inches
              by 8 inches  encased in hard form  plastic  that is designed to be
              carried in a car and used to charge a "dead"  automotive  battery.
              The  Product  utilizes  a lead acid cell  commonly  used in marine
              batteries.  Marine  batteries  have been reported to have retained
              full capacity after storage for up to nine years. Approximately 12
              minutes after plugging the Product into the cigarette lighter of a
              car,  the Product is designed  to  transfer  enough  energy to the
              "dead" battery to allow a normal restart.  The Product is designed
              to be used  once  and  then be  replaced.  The  Company  does  not
              consider the Product to be hazardous.


                                        4

<PAGE>




              The Company believes the potential market for the Product includes
              every  operator  of a car,  truck or boat that uses a battery  for
              starting purposes. The Company intends to develop, manufacture and
              market  the  Product  through  one or more  third-party  companies
              specializing  in the  manufacture  and  national  distribution  of
              batteries.   Prior  to  the  Merger,  Balzac  executed  a  royalty
              agreement  with its  shareholders  and assigned the  international
              rights to the  Product  to certain  of its  shareholders,  both of
              which were conditions  precedent to the Merger. The company is not
              entitled to  international  rights to the Product and,  therefore,
              has no right to  manufacture,  market or  distribute  the  Product
              outside the United States and its territories. The Company is also
              obligated to pay the expenses  incurred in filing  foreign  patent
              applications for the Product which expenses will be reimbursed out
              of a royalty  interest granted to the shareholders of Balzac prior
              to the Merger.  These international  rights are currently owned by
              four  individuals  and  entities,   all  of  which  are  principal
              shareholders of the Company.

              Management intends that the Product,  if marketed and distributed,
              will compete with many other products including batteries, battery
              chargers and jumper cables.  Many  manufacturers of these products
              are  established,  well-financed  entities with greater  financial
              resources than the Company,  well-established  products,  existing
              markets, customer lists and established distribution centers.

              The Company has no full-time or part-time  employees  but uses one
              consultant,  who  devotes  substantially  all of his  time  to the
              Company's business.

     (d)      Financial Information About Foreign and Domestic Operations and
              ---------------------------------------------------------------
              Export Sales.
              -------------

              Not applicable.

Item 2.       Properties
              ----------

               The Company owns no real  estate.  The Company  currently  shares
               office  space in Dallas,  Texas  with J. C.  Rambin on a deferred
               payment basis.

Item 3.       Legal Proceedings
              -----------------

              On  December  23,  1993,  a  complaint  was filed,  and amended on
              December 28, 1993, in District Court, County of Arapahoe, State of
              Colorado.


                                        5

<PAGE>




       *         The plaintiffs are Reserve Cell Limited  Liability  Company,  a
               Colorado limited  liability  company,  and as the General Partner
               for Reserve Battery Cell, L.P., a Colorado Limited Partnership.

       *         The defendants are National Digital Electronics,  Inc., a Texas
               corporation,  OSMIC, Inc., a Texas  corporation,  Onkar S. Modgil
               and  Ramon V.  Jarrell.The  allegations  and  claims  for  relief
               involve;  Disregard  of  Corporate  fictions,  civil  conspiracy,
               Breach of RBC Partnership contract,  Breach of License Agreement,
               Specific performance of License Agreement,  Breach of Development
               Contract,  Intentional Interference with Contractual obligations,
               Fraud  by  False  Representation,   Fraud  by  Non-disclosure  or
               Concealment,   Misappropriation  of  Trade  Secrets,   Breach  of
               Fiduciary Duty,  Aiding and Abetting Breach of Fiduciary Duty and
               Exemplary Damages.



Item 4.       Submission of Matters to a Vote of Security Holders
              ---------------------------------------------------


              A special meeting of the shareholders of Power Cell, Inc. was held
              in Dallas, Texas on June 30, 1993. Its purpose was to consider and
              vote to  ratify,  approve  and  adopt  the  Agreement  of  Limited
              Partnership and the License Agreement,  both dated October 9, 1992
              by and among Reserve  Battery Cell L.P. (the  partnership),  Power
              Cell,  Inc.  and other  parties  at  interest.  The  proposal  was
              approved, ratified and adopted.

                                     PART II

Item 5.       Market for the Registrant's Common Equity and Related Stockholder
              -----------------------------------------------------------------
 
              Matters.
              --------

              The initial public offering of Units of the Company's Common Stock
              and  Class A Warrant  was  completed  on  December  16,  1986 and,
              between  that  time  and May 16,  1988,  the  date  on  which  the
              Company's   Warrants  were  redeemed,   (Gross  Proceeds  received
              $1,284,000  - Note C)  Units of the  Company's  Common  Stock  and
              Warrants were traded in the over-the-counter market. The Company's
              Common Stock began trading in the over-the-counter market on March
              4, 1987. The Company's  outstanding common share were reduced by a
              reverse split at a ratio of 100-1, effective November 21, 1994. As
              of June 30, 1995, the Company had 886 shareholders of record.

              The following table sets forth the range of quarterly high and low
              bid  quotations  for the Common  stock for the periods  indicated.
              Quotations are  inter-dealer  quotations,  without retail markups,
              markdowns or commissions, and may not necessarily represent actual
              transactions.


                                        6

<PAGE>

<TABLE>
<CAPTION>
<S>                               <C>                                                   <C>    <C>           <C>



                                  PERIOD                                                       COMMON STOCK

                                                                                           High              Low

     A.       July 1, 1994 to September 30, 1994                                           $.025           $.0001

              October 1, 1994 to December 31, 1994                                         $.750            $.250

              January 1, 1995 to March 31, 1995                                            $.625            $.250

              April 1, 1995 to June 30, 1995                                               $.310            $.120

     B.       July 1, 1995 to September 30, 1995                                           $.125            $.125

              October 1, 1995 to December 31, 1995                                        $.0625           $.0625

              January 1, 1996 to March 31, 1996                                          $.09375          $.08375

              April 1, 1996 to June 30, 1996                                              $.1875            $.125
</TABLE>


Item 6.       Management's Discussion and Analysis of Financial Condition
              -----------------------------------------------------------
              and Results of Operations Liquidity and Capital Resources
              ---------------------------------------------------------

              On  October  21,  1992,   the  company   entered  into  a  limited
              partnership agreement (see General Development of Business section
              for outline of various contract terms and conditions) with several
              other limited  partners and a sole general  partner to provide for
              management, funding, manufacturing and marketing of the Power Cell
              reserve battery unit on a worldwide basis.  The company  initially
              owned  an 11%  interest  in the  limited  partnership,  which  may
              increase or decrease due to the occurrence of certain events.  The
              interest decreased to 7.35% during fiscal 1996 due to the addition
              of  outside  investors,  resulting  in a  pro  rata  dilution.  In
              addition, a separate license royalty agreement between the Company
              and the limited partnership provides that the Company will receive
              royalty  payments on al Power Cell units  produced and sold in the
              United   States  and  its   territories.   Royalty   payments   on
              international sales of Power Cell units will be paid to individual
              international  rights holders,  or their designees,  some of which
              are  affiliates  of the  Company,  and all of  which  are  limited
              partners in the partnership, as follows: one-third (33 1/3%) to J.
              C. Rambin; one-third (33 1/3%) to Rudy Marich; one-third to Howard
              Farkas (75% of 1/3) and Burt Kanter (25% of 1/3).

              The  contract  agreement  has no provision  for direct  funding of
              Power Cell,  Inc. Its  earnings,  if any,  will be derived from an
              interest in the limited  partnership  together with royalties,  if
              any, from the license royalty agreement.

               On July 1, 1996,  Reserve  Battery Cell, L.P.  (Reserve  Battery)
               announced  initial  market  release in select cities of the Power
               Cell Reserve Battery unit. According to Reserve

                                        7

<PAGE>



              Battery,  the product will plug into a cigarette lighter or attach
              directly  to battery  terminals  and  recharge  a battery  even in
              extreme  weather  conditions (-10 degrees F to 100 degrees F) in a
              matter of  minutes.  Also,  these  small  units can be stored  for
              years,  do not need to be  recharged  and never lose  their  power
              prior to activation. The Power Cell has the strength to recharge a
              battery  more  than  once  for a  few  weeks  after  it  has  been
              activated.  It is a  powerful  5 amp Hour  battery  and,  with the
              additional  purchase  of a  Power  Inverter,  will  operate  small
              household and other electronic appliances for hours during a power
              outage or emergency situation.

              Reserve  Battery is currently  marketing  the product line through
              Direct Response  Television,  magazine print  advertising,  direct
              mail, and via their Web Site at www.safestart.com.

              Power Cell,  Inc. has received  information  from Reserve  Battery
              that, as of June 30, 1996,  funds in excess of $4,118,000 had been
              expended  on product  development,  capital  equipment,  operating
              capital, and marketing activities.

              Management is currently evaluating its future course of action. To
              improve its liquidity,  the Company is  negotiating  for a sale of
              common shares to an investor. Also, the developments herein should
              assist the Company in reviewing  the  possibility  of  affiliating
              with other companies  through  acquisition or merger  combinations
              that  would  provide a  financial  basis  for a public or  private
              placement  of debt or equity.  There are ongoing  discussions  and
              analysis  of several  potential  candidates  that could  provide a
              solution to the  financial  requirements  of Power  Cell,  Inc. to
              proceed as a viable  entity and/or an integral part of an existing
              operation.  The Company had a working  capital  deficit as of June
              30, 1996 of $15,889.

              Results of Operations
              ---------------------

              The company has been engaged in organizational and capital raising
              activities  since  inception  through  June 30,  1996.  It has not
              incurred major operational expenditures. The losses incurred since
              inception primarily reflect legal, accounting,  and administrative
              expenses  associated with the preparation of the merger  documents
              and registration statement,  product development and arranging for
              the  manufacture of its battery charger product for test marketing
              purposes.



                                        8

<PAGE>



Item 7.       Financial Statements

              INDEX TO FINANCIAL STATEMENTS
              -----------------------------

                                                                      Page

         Independent Auditor's Report                                  F-1

         Balance Sheets - June 30, 1996                                F-2

         Statements of  Operations - Years ended June 30, 1996
         and 1995 and for the period from January 21, 1987
        (date of incorporation) to June 30, 1996                       F-3

         Statements of Shareholders' Equity - For
         the period from January 21, 1987 (date
         of incorporation) through June 30, 1996                       F-4, F-5

         Statements of Cash Flows - Years  ended June 30, 1996
         and 1995 and for the period from January 21, 1987
        (date of incorporation) to June 30, 1996                       F-6
 
         Notes to Financial Statements                                 F-7


                                        9

<PAGE>



Item 8.       Changes in and Disagreements with Accountants on Accounting and
              ---------------------------------------------------------------
              Financial Disclosure Matters
              ----------------------------

              There were no changes in, nor disagreements  with,  accountants on
              accounting  and  financial   disclosure  matters  required  to  be
              disclosed in this Item.


                                    PART III

Item 9.       Directors and Executive Officers of the Registrant
              --------------------------------------------------

              The  following  table sets forth the name and age of each director
              and their position and offices with the Company:

              Names                  Age        Current              Served as
                                               Position           Director Since
--------------------------------------------------------------------------------
              Howard L. Farkas        72        Director                 1988 
              Burton W. Kanter        66        Director                 1988
              Rudy Marich             70        Director                 1989
              James C. Rambin         72        Director, President      1988


              Howard L. Farkas has been a director of the Company since February
              1988. From 1981 to the present, he has been a part owner of Farkas
              Group, Inc., a general real estate brokerage company. In addition,
              Mr.  Farkas,  from 1962 to the  present had been a director of the
              Union Bank and Trust, Denver,  Colorado;  from 1964 to the present
              he has been a director of Windsor  Gardens  Realty,  Inc.,  a real
              estate  brokerage  firm;  from 1980 to the  present  he had been a
              director of  Northwest  Engineering  Company,  Rapid  City,  South
              Dakota, a quarry and asphalt and concrete contractor; from 1980 to
              1988 he was a director  of Robert  Halmi,  New York,  New York,  a
              motion picture production company; from 1983 to the present he has
              been a director and chairman of the board of Logic Devices,  Inc.,
              Sunnyvale,  California,  a semiconductor  design and manufacturing
              company;  from  1985 to the  present  he has  been a  director  of
              Synthetech,  Inc., Albany,  Oregon, a publicly held enzyme process
              manufacturing  company; Mr. Farkas is also an officer and director
              of Acquisition  Industries,  Inc., a blind pool company. From 1969
              through  1982,  Mr. Farkas served as president and chairman of the
              board  of   Environmental   Developers,   Inc.,  a  company  which
              established and built planned residential communities.  Mr. Farkas
              graduated  from the  University  of Denver and  received  his B.S.
              degree in 1948, and became a certified public  accountant in 1951.
              Mr.  Farkas was a vice  president of G.A.S.  Corp.,  the corporate
              general partner of a limited  partnership known as GAS Acquisition
              Services  Limited  Partnership,  which filed for protection  under
              Chapter 11 of the  Bankruptcy  Act on June 22, 1990.  On September
              23, 1992, Mr. Farkas filed for  protection  under Chapter 7 of the
              Bankruptcy Act.

                                       10

<PAGE>



               Burton  W.  Kanter  is not  currently  an  officer  or  principal
               shareholder  of  Company.  Mr.  Kanter has been a director of the
               Company since  February  1988.  Mr. Kanter has been of counsel to
               the law firm of Neal,  Gerber & Eisenberg  since  February  1986.
               Prior to 1986,  Mr.  Kanter was a senior  partner of the law firm
               Kanter & Eisenberg from 1980 to 1985. In addition,  Mr. Kanter is
               Chairman of the Board of Walnut  Capital  Corp., a Small Business
               Investment  Company which acts as a private venture capital firm.
               Mr.  Kanter  serves  as  a  director  of  Scientific  Measurement
               Systems,   Inc.,  a   manufacturer   of  industrial   tomographic
               equipment,  HealthCareCOMPARE  Corp. a health  utilization review
               company,  Channel  America,  LPTV,  Inc., a low-power  television
               company, and a number of privately held companies. Mr. Kanter has
               written  and spoken  extensively  on Federal tax matters and is a
               faculty member of the University of Chicago Law School.

               Rudy Marich has been a principal shareholder of Company since May
               1988.  On April 3, 1989 his  shareholdings  were  transferred  to
               Marich Investments,  Ltd. (a Colorado limited  partnership).  Mr.
               Marich has over 30 years of experience in investment banking. For
               the past  five  years,  Mr.  Marich  has been  President  of R.B.
               Marich,  Inc., an investment bank and venture  capital  brokerage
               firm which is a member of the National  Association of Securities
               Dealers and the Securities Investor Protection Corp. R.B. Marich,
               Inc. acted as underwriter for Company's  initial public offering.
               Mr.  Marich earned a Master of Arts degree and a Bachelor of Arts
               degree from the University of Northern Colorado in 1952 and 1950,
               respectively.  R.B.  Marich,  Inc.  ceased  operations in August,
               1990.  Mr.  Marich is currently  engaged as a private  Investment
               Banking Consultant.

              James C. Rambin was a director of Balzac since its  inception  and
              has been a director of Company since February 1988. Mr. Rambin has
              also been President of Company since  February 1988.  From 1982 to
              the  present,  he has been  President  and a  director  of  Sandia
              Financial,  Inc., a Dallas,  Texas  corporate  finance  consulting
              firm.  Mr.  Rambin  was  President  and a  director  of  Oil  City
              Petroleum, a publicly held oil production and development company,
              from  August  1978  through  September  1982,  when he resigned as
              president.  Mr.  Rambin  resigned  as a  director  of Oil  City in
              December 1983.

Item 10.      Executive Compensation
              ----------------------

              During the fiscal year ended June 30, 1995, no officer or director
              of the Company  received any  compensation  for their  services as
              such.  James  C.  Rambin  received  $13,092  compensation  for his
              services as an independent consultant to the Company.







                                       11

<PAGE>



Item 11.      Security Ownership of Certain Beneficial Owners and Management
              --------------------------------------------------------------

              The  following  table sets forth the number of shares of Company's
              Common Stock and percentage of the outstanding shares of Company's
              Common Stock owned beneficially (1) by each officer,  director and
              director nominee of Company;  (2) by all officers and directors of
              Company as a group;  and (3) by all other persons who are known to
              the Company to own more than 5% of Company's Common Stock.  Except
              as noted, each shareholder has sole voting and investment power of
              the shares listed.





                                       12

<PAGE>
<TABLE>
<CAPTION>

<S>                                         <C>                                <C>              <C>               <C>

Names and Addresses                           Number of Shares                                      Percentage of
                                            Beneficially Owned                                  Outstanding Shares
--------------------------------------------------------------------------------------------------------------------

Howard L. Farkas (1, 2)
5460 S. Quebec Street
Suite 300
Englewood, CO  80111-1918                                    0                                               0.00%

S.A. Hellerstein
Trustee for the Farkas Trusts (2)
1139 Delaware Street
Denver, CO  80204                                    1,089,235                                              17.25%

Burton W. Kanter (1, 3)
2 N. LaSalle St.
Suite 2410
Chicago, IL  60602                                           0                                               0.00%

Windy City, Inc. (3)
8300 Boone Blvd., Suite 780
Vienna, VA  22182                                      363,078                                               5.84%

Rudy Marich (1, 5, 6)
Marich Investments, Ltd.
6025 S. Quebec, Suite 150
Englewood, CO  80111                                         0                                               0.00%

Thomas M. Vickers (5)
Trustee of the Marich Family Trust
6025 S. Quebec, Suite 150
Englewood, CO  80111                                 2,904,627                                              46.72%

James C. Rambin (1, 4, 6)
5619 Ridgetown Circle
Dallas, Texas  75230                                 2,904,627                                              46.72%

All Current Officers and Directors
as a group (4 in number)                             2,904,627                                              46.72%

</TABLE>


     1.   Currently director of the company.

     2.   The  Farkas  Trusts  are a group of trusts of which the  beneficiaries
          include family members of Howard L. Farkas, a director of the Company.
          Mr. Farkas disclaims  beneficial  ownership of the shares owned by the
          Farkas Trusts.

                                       13

<PAGE>



     3.   Windy City,  Inc. is a  corporation  composed of certain  interests of
          family  member of Burton W.  Kanter,  a director of the  Company.  Mr.
          Kanter disclaims  beneficial  ownership of shares owned by Windy City,
          Inc.

     4.   Currently an officer and director of the Company.

     5.   Marich Investments, Ltd. a Trust organized under the laws of the State
          of Colorado.

     6.   The Company has  received a copy of a statement  on Schedule 13D filed
          by Messrs. Marich and Rambin reporting that on September 3, 1988, they
          entered  into a voting  agreement  with the intent of acting  together
          concerning  the  voting  power  held by them  as  shareholders  of the
          Company.  Messrs.  Marich and Rambin  reported  that they have  shared
          voting power and shared  dispositive  power with respect to the shares
          owned by each of them of record.  Mr.  Marich owned or had  beneficial
          ownership of 1,452,313  shares,  and Mr. Rambin owned 1,452,313 shares
          of record.  Mr.  Marich has  informed  the Company  that he has placed
          these 1,452,313 shares in Marich Investments,  Ltd., a Trust organized
          under the laws of the State of Colorado.

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

              The Company is obligated to pay a royalty to various  individuals,
              including  James  C.  Rambin,  on  sales  of the  Product  and all
              products  produced  and/or sold in connection  with the technology
              related to the  Product.  This  royalty  pertains  to the  initial
              acquisition of the technology.


                                     PART IV

Item 13.      Exhibits, Financial Statement, Schedules, and Reports on Form 8-K
              -----------------------------------------------------------------

     (a)      (1)   List of Financial Statements
                    ----------------------------

                    See Item 8.

              (2)   List of Financial Statement Schedules
                    -------------------------------------

                    All schedules for which  provision is made in the applicable
                    accounting   regulations  of  the  Securities  and  Exchange
                    Commission are not required under the related instruction or
                    are inapplicable, and therefore have been omitted.

              (3)   Listing of Exhibits
                    -------------------

                    The Exhibits  listed on the  accompanying  Exhibit Index are
                    filed as part of this report.


                                       14

<PAGE>



     (b)      Reports on Form 8-K
              -------------------

              None.


     (c)      Exhibits
              --------

              The response to this portion of Item 14 is submitted as a separate
              section of this report.

     (d)      Financial Statement Schedules
              -----------------------------

              None.


                                       15

<PAGE>





                                   SIGNATURES


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

                                POWER-CELL, INC.
                                  (Registrant)


                            By:    ________________________________
                                      James C. Rambin, President


                                          Date:  __________________

Pursuant to the requirements of the Securities 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 dates indicated.



                                    ---------------------------------------
                                    James C. Rambin, President and Director
                                    (Principal Executive Officer)




                                    --------------------------------------------
                                    Howard L. Farkas, Director




                                    --------------------------------------------
                                    Rudy Marich, Director




                                    --------------------------------------------
                                    Burton Kanter, Director


                                       16

<PAGE>
                          INDEPENDENT AUDITOR'S REPORT

Board of Directors
Power Cell, Inc.
Dallas, Texas

We  have  audited  the  accompanying  balance  sheet  of  Power  Cell,  Inc.  (a
development stage enterprise) as of June 30, 1996, and the related statements of
operations,  shareholders'  equity  (deficit) and cash flows for each of the two
years in the period ended June 30, 1996 and the period from July 1, 1989 through
June 30, 1996, which is not separately presented. 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.


We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Power Cell, Inc. (a development
stage enterprise) as of June 30, 1996, and the results of its operations and its
cash flows for each of the two years in the period ended June 30, 1996,  and the
period  from  July 1,  1989  through  June 30,  1996,  which  is not  separately
presented, in conformity with generally accepted accounting principles.

We  have  also  audited  the  combination  of  the  accompanying  statements  of
operations  and cash  flows  for the  period  from  January  21,  1987  (date of
incorporation)  to June 30, 1989 into the period  from  January 21, 1987 to June
30, 1996. In our opinion, such statements have been properly combined.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  As discussed in Note A, the Company's
significant  operating losses and limited financial  resources raise substantial
doubt about its ability to continue as a going  concern.  Management's  plans in
regard to these matters are also described in Note A. The accompanying financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.



HEIN + ASSOCIATES LLP

Dallas, Texas
September 20, 1996

                                       F-1

<PAGE>



                                POWER CELL, INC.
                        (A Development Stage Enterprise)

                                  BALANCE SHEET

                               As of June 30, 1996




                    ASSETS
                    


CURRENT ASSET -  Cash and cash equivalents                        $      10,372

INVESTMENT IN LIMITED PARTNERSHIP, at cost                               31,787
                                                                    -----------

       Total Assets                                               $      42,159
                                                                   ============


                    LIABILITIES AND SHAREHOLDERS' DEFICIT


CURRENT LIABILITIES -  Accounts payable and
   accrued expenses                                               $      26,261

ADVANCES PAYABLE                                                         20,000

COMMITMENTS AND CONTINGENCIES
   (Notes D, F, G and H)

SHAREHOLDERS' EQUITY:
    Common stock, $.0001 par value, 750,000,000 shares
     authorized; 6,216,875 shares issued and outstanding                    622
    Additional paid in capital                                        1,541,883
    Deficit accumulated in the development stage                     (1,546,607)
                                                                     ----------

         Total Shareholders' Deficit                                     (4,102)

         Total Liabilities and Stockholders' Deficit             $       42,159
                                                                 ==============







                 See accompanying notes to financial statements.


                                       F-2

<PAGE>



                                POWER CELL, INC.
                        (A Development Stage Enterprise)

                            STATEMENTS OF OPERATIONS
                      

                                                        
                                                              For the period
                                                             from January 21,
                                                              1987 (Date of
                                                             Incorporation)
                                                             Year Ended June 30,
                                      1996         1995      to June 30, 1996
                                      ----         ----      ----------------
REVENUE
   Interest and other income     $     791     $   1,165      $      176,535

EXPENSES
   Product development                 -               -             225,478
   General and administrative       29,792        24,359           1,464,958
   Interest                            -               -              32,706
                                 ----------   ------------      -------------
                                    29,792        24,359           1,723,142
                                 ----------   ------------      -------------

       NET LOSS                  $ (29,001)   $  (23,194)     $   (1,546,607)
                                 ==========   ============    ================

NET LOSS PER SHARE               $       *    $        *
                                 ==========   ============

WEIGHTED AVERAGE SHARES
   OUTSTANDING                   6,216,875     6,199,000
                                 ==========    ===========


* Less than $ (.01)


                 See accompanying notes to financial statements.


                                       F-3

<PAGE>

<TABLE>
<CAPTION>
<S>                                           <C>             <C>            <C>         <C>           <C>               <C>


                                                          POWER CELL, INC.
                                                 (A Development Stage Enterprise)

                                              STATEMENT OF SHAREHOLDERS'  EQUITY (DEFICIT)
                                             For  the  Period  From  January  21,  1987  (Date  of Incorporation)
                                                               through June 30, 1996 


                                                 
                                                                                                                          Deficit
                                                                                                                         Accumulated
                                                                             Common Stock              Additional        in the
                                                   Common Stock                Subscribed               Paid in          Development
                                                   ------------                ----------                -------         -----------
                                              Shares          Amount         Shares      Amount          Capital          Stage
                                              ------          ------        --------   --------          -------           -----

Issuance of stock on January 21, 1987         4,356,942        $  436           -          -                $  564       $       -
Net loss                                          -                 -           -          -                     -         (255,419)
                                            ------------   ----------       --------   --------        -----------       -----------
    BALANCE, June 30, 1987                    4,356,942           436           -          -                   564         (255,419)

Issuance of stock for legal services
  on February 17, 1988                          163,385           16            -          -                 1,234                -
Stock recorded upon reverse
  acquisition of Magellan                       925,850           93            -          -               285,427                -
Exercise of warrants                            560,698           56            -          -             1,195,194                -
Net loss                                              -            -            -          -                     -         (271,610)
                                            ------------   ----------       --------   --------       ------------       -----------
    BALANCE, June 30, 1988                    6,006,875          601            -          -             1,482,419         (527,029)

Net loss                                              -            -            -          -                    -          (273,357)
                                            ------------   ----------       --------   --------       ------------       -----------
    BALANCE, June 30, 1989                    6,006,875          601            -          -             1,482,419         (800,386)
Net loss                                              -            -            -          -                     -         (310,335)
                                            ------------   ----------       --------   --------       ------------       -----------
    BALANCE, June 30, 1990                    6,006,875          601            -          -             1,482,419       (1,110,721)
Net loss                                              -            -            -          -                     -         (199,455)
                                            ------------   ----------       --------   --------       ------------       -----------
    BALANCE, June 30, 1991                    6,006,875          601            -          -             1,482,419       (1,310,176)



</TABLE>

                                                         -Continued-

                                                             F-4

<PAGE>
<TABLE>
<CAPTION>
<S>                                           <C>             <C>            <C>         <C>           <C>               <C>




                                                          POWER CELL, INC.
                                                 (A Development Stage Enterprise)

                                              STATEMENT  OF  SHAREHOLDERS'   EQUITY   (DEFICIT),
                                             Continued  For the Period From January 21, 1987 (Dateof Incorporation) 
                                                                            through June 30, 1996


                                                                                                                           Deficit
                                                                                                                         Accumulated
                                                                             Common Stock,                                 in the
                                                   Common Stock               Subscribed           Additional             Paid in 
                                              Shares            Amount       Shares      Amount      Capital               Stage
                                              ------           -------       ------      ------      --------            ----------
Net loss                                         -            $     -          -     $     -       $    -            $      (87,993)
                                           -----------------------------------------------------------------------------------------
     BALANCE, June 30, 1992                 6,006,875             601          -           -       1,482,419             (1,398,169)

Net loss                                            -               -          -           -            -                   (64,367)
                                           -----------------------------------------------------------------------------------------
     BALANCE, June 30, 1993                 6,006,875             601          -           -       1,482,419             (1,462,536)

Subscription of common stock
  on June 30, 1994                               -                 -        100,000      25,000       (2,500)                  -
Net loss                                         -                -            -           -            -                   (31,876)
                                           -----------------------------------------------------------------------------------------
     BALANCE, June 30, 1994                 6,006,875             601       100,000      25,000    1,479,919             (1,494,412)

Issuance of stock subscribed on
   July 14, 1994                              100,000              10      (100,000)    (25,000)      24,990                   -
Issuance of stock on July 14, 1994
   for commission on June 30, 1994
   stock offering                              10,000               1          -           -           2,499                   -
Issuance of stock on July 14, 1994            100,000              10          -           -          24,990                   -
Cost of stock issuance-legal fees
   and commissions                               -                 -           -           -          (3,500)                  -
Net loss                                         -                 -           -           -            -                   (23,194)
                                           -----------------------------------------------------------------------------------------
     BALANCE, June 30, 1995                 6,216,875         $   622          -           -       1,528,898              1,517,606

Issuance of stock options for
   legal fees                                    -                -            -           -          12,985                   -
Net loss                                         -                -            -           -            -                   (29,001)
                                           -----------------------------------------------------------------------------------------
     BALANCE, June 30, 1996                 6,216,875       $     622          -      $    -     $ 1,541,883         $  (1,546,607)
                                           =============     ============  =========   =========   ==============    ==============


                                              See  accompanying   notes   to   financial statements.
</TABLE>

                                                                   F-5

<PAGE>



                                                 POWER CELL, INC.
                                         (A Development Stage Enterprise)
                                             STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S>                                                                            <C>            <C>                
                                                                                                For the Period
                                                                                               from January 21,
                                                                                                 1987 (Date of
                                                                 Year Ended June 30,           Incorporation)
                                                               1996              1995          to June 30, 1996
                                                           ----------        -----------       ----------------
OPERATING ACTIVITIES:
    Net loss                                            $   (29,001)      $    (23,194)         $ (1,546,607)
    Adjustments to reconcile net loss to
       net cash used in operating activities: 
    Amortization and depreciation                              -                  -                   24,644
    Loss on theft of equipment                                 -                  -                      741
     Issuance of stock options for services                  12,985               -                   12,985
    Changes in operating assets and liabilities:
        Decrease in other current assets                        900               -                     -
        (Increase) in other assets                             -                  -                  (16,400)
        Increase (decrease) in accounts payable
        and accrued expenses                                 (1,800)           (6,555)                26,261
                                                           ----------        -----------          -----------
    NET CASH USED IN
     OPERATING ACTIVITIES                                   (16,916)           (29,749)           (1,498,376)
                                                           ----------        -----------          -----------

INVESTING ACTIVITIES:
 Investment in limited partnership                             -                  -                 (31,787)
 Purchase of office equipment                                  -                  -                  (8,985)
                                                           ----------        -----------          -----------
    NET CASH USED IN INVESTING
     ACTIVITIES                                                -                  -                 (40,772)
                                                           ----------        -----------          -----------

FINANCING ACTIVITIES:
 Advance received                                                -                -                  20,000
 Proceeds from issuance of common stock
  and exercise of warrants                                       -              50,000            1,533,020
Cost of stock issuance                                           -              (3,500)              (3,500)
                                                           ----------        -----------           ----------

     NET CASH PROVIDED BY
     FINANCING ACTIVITIES                                       -               46,500            1,549,520
                                                           ----------        -----------          -----------

INCREASE (DECREASE) IN CASH                                  (16,916)           16,751               10,372

CASH AND CASH EQUIVALENTS AT
 BEGINNING OF PERIOD                                             27,288         10,537                 -
                                                             ----------      -----------           -----------

CASH AND CASH EQUIVALENTS AT
 END OF PERIOD                                             $     10,372    $    27,288          $    10,372
                                                             ==========      =========             ==========

SUPPLEMENTAL INFORMATION - cash
 paid during the period for interest                     $       -           $     -            $    32,706
                                                           ============        ==========          =========
</TABLE>


NONCASH  TRANSACTIONS  -  Common  stock  was  issued  for  services  and for the
acquisition of Magellan (Note B) in fiscal year 1988.

The Company  paid a $2,500  commission  in fiscal year 1995  related to a common
stock subscription, by the issuance of shares of common stock (Note G).


                See accompanying notes to financial statements.




                                       F-6

<PAGE>


                                POWER CELL, INC.
                        (A Development Stage Enterprise)

                          NOTES TO FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

    Organization
    ------------

    Magellan  Corporation  (Magellan) was  incorporated in Colorado on April 28,
    1986 for the purpose of raising  capital to seek and participate in business
    opportunities. Effective February 19, 1988, Magellan completed a merger with
    Balzac  Investments,  Inc.  (Balzac)  (see Note B),  which was  incorporated
    January 21, 1987, and the resulting entity adopted the name Power Cell, Inc.
    (the  Company).  The  Company  has had no revenues  from  operations  and is
    considered to be in the development stage. The Company has certain rights to
    a battery charger product (see Notes D and G).

    Loss per Common Share
    ---------------------

    Loss per common  share is based upon the weighted  average  number of common
    shares  outstanding.  Warrants  prior to exercise are not  considered in the
    computation as their effect would be antidilutive.

    Office Equipment
    ----------------

    Office  equipment is recorded at cost.  Depreciation is calculated using the
    straight-line  method over the  estimated  useful life of the assets.  As of
    June 30, 1994, the equipment had been fully depreciated.

    Organization Costs
    ------------------

    Costs incurred in connection with the  organization of Balzac ($16,400) were
    capitalized and amortized over five years using the straight-line method.

    Cash Equivalents
    ----------------

    For purposes of reporting cash flows, the Company considers demand deposits,
    money market accounts and certificates of deposits with an original maturity
    of three months or less to be cash equivalents.

    Investment in Partnership
    -------------------------

    The  Company  has  an  approximate  7.35%  limited  partner  interest  in  a
    partnership and the investment is carried at cost.

    Income Taxes
    ------------

    The Company adopted Statement of Financial  Accounting  Standards (SFAS) No.
    109,  "Accounting  for Income Taxes" on July 1, 1993. SFAS 109 requires that
    deferred  income taxes be recorded on a liability  method and adjusted  when
    new tax rates are enacted.  Deferred income taxes are provided for temporary
    differences between financial statements and income tax reporting amounts.

    Long-Lived Assets
    -----------------

     The Company accounts for long-lived  assets in accordance with Statement of
     Financial Accounting Standards (SFAS) No. 121. The Company adopted SFAS No.
     121 in fiscal year 1995 and it had no effect on the financial  condition of
     the Company.




                                       F-7

<PAGE>


                                POWER CELL, INC.
                        (A Development Stage Enterprise)

                          NOTES TO FINANCIAL STATEMENTS


    Continuation as a Going Concern
    -------------------------------

    The  accompanying  financial  statements  and  related  footnotes  have been
    prepared assuming the Company will continue as a going concern.  The Company
    is in the  development  stage  and has  incurred  significant  losses  since
    inception  and  has  limited  financial   resources.   These  factors  raise
    substantial  doubt  about  the  Company's  ability  to  continue  as a going
    concern.  The Company will need to raise capital and/or  eventually  achieve
    profitable  operations in order for it to continue as a going  concern.  The
    Company  entered into a limited  partnership  agreement in October 1992 that
    management believes may result in successful  manufacturing and marketing of
    the Company's  product and the eventual  creation of a royalty stream to the
    Company  and  potential   earnings  from  the  Company's   interest  in  the
    partnership  (see note G). As of June 30,  1996,  the  general  partner  has
    reported to Company management that initial market release of the product in
    select cities will  commence in late 1996.  The Company has no obligation to
    provide  funding  to the  partnership  and  has no  management  role  in the
    partnership.


NOTE B - MERGER

    Effective  February 19, 1988,  Magellan exchanged shares of its common stock
    for all of the issued and  outstanding  common shares of Balzac.  The shares
    issued  represented  approximately 83% of the outstanding shares of Magellan
    after the merger,  and officers and  directors of Balzac became the officers
    and directors of Magellan.  Accordingly,  for financial  reporting purposes,
    Balzac is deemed to have acquired  Magellan.  The  transaction was accounted
    for using the purchase  method of accounting and was recorded based upon the
    value of Magellan's  identifiable  net assets,  net of offering  costs.  The
    accompanying  financial  statements,  during the period prior to the merger,
    reflect  the  historical  accounts  of  Balzac.  Magellan's  operations  are
    included in the accompanying  financial  statements  commencing February 19,
    1988.   Balzac's   equity  section  has  been  restated  from  the  date  of
    incorporation  to  reflect  the  number  of  shares  which  would  have been
    outstanding under Magellan's $.0001 par value capital structure.

    The merger agreement also entitles Balzac's  shareholders of record prior to
    the merger to a 10% royalty on gross sales of the battery charger product.

NOTE C - SHAREHOLDERS' EQUITY

    On December 6, 1986,  Magellan  received the net  proceeds  from the sale of
    400,000 units (each unit consisting of one share of Magellan's  common stock
    and one Class A warrant) at $.01 per unit. Each Class A warrant entitled the
    holder to  purchase  at a price of $.02,  one share of common  stock and one
    Class B warrant.  Each Class B warrant entitled the holder to purchase, at a
    price of $.03, one share of common stock and one Class C warrant. Each Class
    C warrant entitled the holder to purchase,  at a price of $.04, one share of
    common  stock and one Class D  warrant.  Each Class D warrant  entitled  the
    holder to purchase one share of common stock for $.05 per share.

    On April 13, 1988,  the Company  called all Class A, B, C and D warrants for
    redemption.  Certain  warrants  were  exercised  and  the  Company  received
    approximately  $1,284,000  net of escrow fees and the cost of redeeming  the
    remaining  warrants.  Other costs of  approximately  $88,000  related to the
    registration  of the  warrants  have been offset  against the  proceeds  and
    charged to additional paid in capital.  All outstanding  Class A, B, C and D
    warrants were redeemed on May 16, 1988.





                                       F-8

<PAGE>


                                POWER CELL, INC.
                        (A Development Stage Enterprise)

                          NOTES TO FINANCIAL STATEMENTS


    During fiscal 1995, the Company issued 20,000,000 shares of common stock for
    $50,000,  $25,000  of  which  had  been  subscribed  as of  June  30,  1994.
    Commissions  and other expenses  related to the stock issuances of 1,000,000
    shares of stock and $3,500 of cash were paid.

    The Company's board of directors approved a 100 for 1 reverse stock split on
    October 25, 1994, which was effective for shareholders of record on November
    21, 1994. All shareholders' equity information in the accompanying financial
    statements  has been  restated  to reflect  the  reverse  split as if it had
    occurred at inception.

    Subsequent to June 30, 1996, the Company  granted  options to purchase up to
    200,000 shares of its common stock for $100 in lieu of legal services valued
    at approximately $24,000. The options expire August 31, 2000. The portion of
    the  services  attributable  to fiscal  1996  amounted  to $12,985  and were
    charged to operations in the accompanying statement of operations.

NOTE D - ACQUISITION OF BATTERY CHARGER PRODUCT

    On January 22,  1987,  Balzac  entered  into an  agreement  to purchase  the
    product,  Power Cell, and all related technology from the developers.  Power
    Cell is the trade name of a reserve  battery  device  intended  to be stored
    until needed and immediately brought to full working capacity by activation.

    Balzac paid $150,000 cash  (including a total of $52,995 to a director and a
    former  officer of the  Company)  for the  product  and the  technology.  In
    addition,  Balzac agreed to make royalty payments to the former owners equal
    to $.10 per unit for the first 11.2 million units sold and $.05 per unit for
    the  next 18  million  units  sold  up to  $2,000,000.  The two  individuals
    referred to above are entitled to 45.2% of this royalty.
    The Company assumed this royalty obligation pursuant to the merger.

    The  purchase  price  was  funded by a note  payable  to a  director  of the
    Company.  The principal and accrued interest (total of $176,984) was paid in
    July 1988.

NOTE E - INCOME TAXES

    The components of the Company's deferred tax accounts are as follows:

                                                               June 30 ,
                                                        1996             1995
                                                      -------         -------

 Deferred tax asset - net operating loss
 carryforward                                      $  413,000       $ 402,000
 Deferred tax asset valuation allowance               413,000        (402,000)
                                                     ---------        -------
 Net deferred tax asset                            $     -       $       -
                                                   ============      =======

    For  Federal  income tax  purposes at June 30,  1996,  the Company had a net
    operating loss carryover of approximately  $1,200,000.  If not utilized, the
    net operating loss will begin expiring in 2002 through 2011.








                                       F-9

<PAGE>


                                POWER CELL, INC.
                        (A Development Stage Enterprise)

                          NOTES TO FINANCIAL STATEMENTS


NOTE F - RELATED PARTY TRANSACTIONS

    During 1988, the Company used Corporate  Stock  Transfer,  Inc. (CST) as its
    transfer  agent.  An officer,  director  and  shareholder  of CST was also a
    director of the Company in 1988.  Total  payments to CST by the Company (and
    Magellan  prior to the  merger)  through  June 30,  1988 were  approximately
    $13,000.  The Company discontinued using CST in 1989. Effective February 19,
    1988, the Company  entered into a consulting  agreement  with  International
    Marketing Visions, Inc. (IMV), which required monthly payments of $1,000 for
    a term of thirty  months.  This  agreement  expired during fiscal year ended
    June 30, 1991 and was not renewed.  A family member of a former  director of
    the Company is a principal shareholder of IMV.

    The  Company  does not have  international  rights  to its  battery  charger
    product.  However,  the Company is obligated to pay for expenses incurred in
    filing  foreign  patent  applications  for the  product on behalf of certain
    directors of the Company and other  individuals  who hold the  international
    rights.  These amounts are to be repaid out of the 10% royalty  discussed in
    Note B. The total paid by the Company  pursuant to this  obligation  for the
    period from  January 21, 1987 (date of  incorporation)  to June 30, 1996 was
    $72,057.  These amounts were paid  primarily  prior to fiscal year 1993, and
    the general partner has since assumed the obligation.

NOTE G - LIMITED PARTNERSHIP TERMS

    In October 1992, the Company  entered into a limited  partnership  agreement
    with several other limited partners (including  directors and/or significant
    shareholders  of the Company) and a sole general  partner to provide for the
    initial testing, and potentially, the management, funding, manufacturing and
    marketing  of  the  Power  Cell  reserve   battery  unit.  In  exchange  for
    contribution of rights to the Power Cell unit the Company initially obtained
    an approximate 11% interest in the limited  partnership (the Partnership) as
    a limited partner,  which is subject to certain preference  distributions to
    the general partner. The Company's initial Partnership interest decreased to
    approximately  7.35%  at June  30,  1996 due to the  admittance  of  outside
    investors  into  the  Partnership.  The  Company  is  not  involved  in  the
    management of the Partnership.

    A separate license royalty agreement between the Company and the Partnership
    provides that the Company will be entitled to royalty  payments on all Power
    Cell units produced and sold in the United States and its territories  equal
    to 5% to 20% of the annual gross sales of the Partnership. A portion of this
    royalty was  assigned to another  party as  described  below.  Royalties  on
    international  sales  of  Power  Cell  units  will  be  paid  to  individual
    international  rights  holders,  some of which are affiliates of the Company
    (directors and/or  significant  shareholders),  and all of which are limited
    partners in the Partnership.

    In  connection  with the  royalty and limited  partnership  agreements,  the
    Company  issued  options to acquire up to 200,000 shares of its common stock
    at $1.00  per  share to the  engineering  firm that  developed  the  battery
    product.  These options expired March 5, 1995. In addition,  the engineering
    firm  received an  approximate  41% of the Company's  royalty  rights and an
    approximate 8% interest in the Partnership.

    During fiscal 1993, the Company  incurred  legal fees of $31,787  related to
    the  acquisition  of its interest in the  partnership.  The general  partner
    advanced the Company  $20,000 to assist with the legal  costs.  The terms of
    the  agreement  between  the general  partner  and the  Company  require the
    advance to be repaid,  with interest at 10%, from the first royalty payments
    which the company may receive from the Partnership.





                                      F-10

<PAGE>


                                POWER CELL, INC.
                        (A Development Stage Enterprise)
                          NOTES TO FINANCIAL STATEMENTS


NOTE H - CONTINGENCIES

    In fiscal  1993,  a request for  additional  compensation  of  approximately
    $394,000  for the  president of the Company was  submitted to the  Company's
    board of directors for approval.  In addition,  the president of the Company
    intends  to  submit  to the  Company's  board of  directors  a  request  for
    additional  compensation  totaling  $186,590 for the fiscal years ended June
    30, 1994 through 1996.

    These amounts remain unpaid and are considered  contingent  liabilities  and
    have not been recorded in the accompanying financial statements,  because to
    date, none have been approved by the Company's board of directors.
               
                                   F-11