UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      10-QSB







[X]
                Quarterly
                    report pursuant to Section 13 or 15(d) of the Securities Exchange
                    Act of
                    1934; For the quarterly period ended: October 31,
                    2006





[  
              ]
            Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934





Commission
      File Number: 0-24857





**POWER
      TECHNOLOGY, INC.**


(Exact
      name of registrant as specified in its charter)





Nevada
            88-0395816(State
                or other
                jurisdiction
            IRS
                Employerof
                incorporation or
                organization)
            Identification
                No.)





7101
      HIGHWAY 71 WEST, SUITE 200AUSTIN, TX 78735


(Address
      of principal executive offices, including zip code)





(512)
      288-8528


(Registrant's
      telephone number, including area code)








Check
      whether the issuer: (i) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (ii) has been
      subject to such filing requirements for the past 90 days. Yes [X]  No
      [  ]





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





**APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**


**PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS**




Check
      whether the Registrant filed all documents and reports required to be filed
      by
      Section 12, 13 OR 15(D) of the Exchange Act after the Distribution of securities
      under a plan confirmed by a court. N/A





**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





On
      December 19 , 2006, there were 149,391,694 shares of common stock, $.01 par
      value, outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes [  ] No [X]




**EXPLANATORY
          NOTE**
  The
          only
          changes in this Form 10-QSB/A for the quarterly period ended October 31,
          2006
          from the Form 10-QSB filed by the Issuer for the quarterly period ended
          October
          31, 2006, filed on December 20, 2006, are contained in the Consolidated
          Financial Statements, and in certain of the Notes to the Consolidated
          Financial Statements, specifically note 1, note 2, and note 7.
          The restated negative working capital, the restated loss from operations
          for the quarter ended October 31, 2006 and the restated accumulated deficit
          since inception are discussed in Item 2, Management's Discussion and
          Analysis or Plan of Operations, in the ”Liquidity” section on page 14.
          The restated negative working capital, the restated loss from operations
          for the quarter ended October 31, 2006 and the restated accumulated deficit
          since inception are discussed in Item 2, Management's Discussion and
          Analysis or Plan of Operations, the “Going Concern” section on page 14.


TABLE
      OF CONTENTS





PART
                    I
                FINANCIAL
                    INFORMATIONItem
                    1.
                Financial
                    StatementsConsolidated
                    Balance Sheets as of October 31, 2006 (unaudited)and
                    January 31, 2006 (audited)
                F-1Consolidated
                    Statements of Operations for the nine monthsended
                    October 31, 2006 and 2005 (unaudited)
                F-2Consolidated
                    Statements of Cash Flows for the nine monthsended
                    October 31, 2006 and 2005 (unaudited)
                F-3Notes
                    to Consolidated Financial Statements
                F-4Item
                    2.
                Management’s
                  Discussion and Analysis or Plan of Operations
                1Item
                    3.
                Controls
                  and
                  Procedures
                19PART
                    II
                OTHER
                  INFORMATIONItem2.
                Unregistered
                  Sales
                  of Equity Securities and Use of Proceeds
                19Item5.
                Other
                  Information
                19Item
6.
                Exhibits
                20Signatures
                21


**PART
      I**  **FINANCIAL
      INFORMATION**





ITEM
      1. FINANCIAL
      STATEMENTS.




**Power
      Technology, Inc.**


**Consolidated
      Balance
      Sheets**


**(Unaudited)**


October
                    31,
                
                January
                    31,2006
                
                2006(Restated)AssetsCurrent
                    assets:Cash
                    and equivalents
                
                $
                39,596
                
                $
                180,583Accounts
                    receivables
                
                
                5,268
                
                
                -Inventory
                
                
                84,450
                
                
                -Deposit
                    for equipment
                
                
                
                
                
                9,470Prepaid
                    expenses
                
                
                8,116
                
                
                1,278Total
                    current assets
                
                
                137,430
                
                
                191,331Fixed
                    assets, net of accumulated depreciation of $40,615 and
                    $27,156
                
                
                176,347
                
                
                821Goodwill
                
                
                1,174,107
                
                
                -Deposits
                
                
                31,037
                
                
                -Deferred
                    financing fees, net of accumulated amortization of $46,706 and
                    $3,562
                
                
                73,294
                
                
                61,438Total
                    assets
                
                $
                1,592,215
                
                $
                253,590Liabilities
                    and Stockholders' DeficitCurrent
                    LiabilitiesAccounts
                    payable
                
                $
                511,693
                
                $
                120,770Short-term
                    debt
                
                
                49,000
                
                
                49,000Derivative
                    liability
                
                
                1,043,659
                
                
                2,441,900Total
                    current liabilities
                
                
                1,604,352
                
                
                2,611,670Long-term
                    debtNote
                    payable
                
                
                235,000
                
                
                -Convertible
                    debentures, net of discount
                
                
                755,547
                
                
                194,279Total
                    liabilities
                
                
                2,594,899
                
                
                2,805,949Stockholders'
                    deficit:Preferred
                    stock, $0.01 par value, 1,000,000 sharesauthorized,
                    none issued or outstanding
                
                
                -
                
                
                -Common
                    stock, $0.001 par value, 750,000,000 shares authorized,149,391,694
                    and 135,495,745 shares issued and outstanding
                
                
                149,391
                
                
                135,495Additional
                    paid-in capital
                
                
                13,808,743
                
                
                12,082,640Other
                    comprehensive loss
                
                
                (1,561
                )
                
                (1,378
                )Accumulated
                    deficit
                
                
                (14,959,257
                )
                
                (14,769,116
                )Total
                    stockholders' deficit
                
                
                (1,002,684
                )
                
                (2,552,359
                )Total
                    liabilities and stockholders' deficit
                
                $
                1,592,215
                
                $
                253,590
  The
        accompany notes are an integral part of these financial
        statements.
 F-1




**Power
        Technology, Inc.**
 **Consolidated
        Statements of Operations**
 For
        the three and nine months ended October
        31, 2006 and 2005
 **(Unaudited)**


For
                  the three months ended
              
              For
                  the nine months endedOctober
                  31,
              
              October
                  31,2006
              
              2005
              
              2006
              
              2005(Restated)
              
              
              
              (Restated)Sales
              
              $
              6,385
              
              $
              -
              
              $
              17,853
              
              $
              -Cost
                  of goods sold
              
              
              20,261
              
              
              -
              
              
              26,628
              
              
              -Gross
                  profit (loss)
              
              
              (13,876
              )
              
              -
              
              
              (8,775
              )
              
              -Expenses:General
                  administrative expenses
              
              
              218,006
              
              
              149,558
              
              
              934,739
              
              
              439,315Research
                  & development
              
              
              98,908
              
              
              5,300
              
              
              192,165
              
              
              16,384Consulting
                  fee
              
              
              9,765
              
              
              192,132
              
              
              252,948
              
              
              563,809Depreciation
                  and amortization
              
              
              7,270
              
              
              1,509
              
              
              13,458
              
              
              5,370Total
                  operating expense
              
              
              333,949
              
              
              348,499
              
              
              1,393,310
              
              
              1,024,878Loss
                  from operations
              
              
              (347,825
              )
              
              (348,499
              )
              
              (1,402,085
              )
              
              (1,024,878
              )Other
                  income (expense)Interest
                  income
              
              
              2,223
              
              
              -
              
              
              10,900
              
              
              -Interest
                  expense
              
              
              (208,060
              )
              
              (6,795
              )
              
              (554,143
              )
              
              (19,192
              )Financing
                  fees
              
              
              -
              
              
              (73,860
              )
              
              -
              
              
              (198,860
              )Gain
                  on derivative liabilities
              
              
              1,025,285
              
              
              -
              
              
              1,755,187
              
              
              -Total
                  other income (expense)
              
              
              819,448
              
              
              (80,655
              )
              
              1,211,944
              
              
              (218,052
              )Net
                  income (loss)
              
              $
              471,623
              
              $
              (429,154
              )
              $
              (190,141
              )
              $
              (1,242,930
              )Other
                  comprehensive loss-foreign currency translation
              
              
              -
              
              
              -
              
              
              (183
              )
              
              -Total
                  comprehensive income (loss)
              
              $
              471,623
              
              $
              (429,154
              )
              $
              (190,324
              )
              $
              (1,242,930
              )Weighted
                  average number ofcommon
                  shares outstanding:Basic
              
              
              148,991,694
              
              
              132,004,555
              
              
              144,848,034
              
              
              130,232,699Diluted
              
              
              163,815,149
              
              
              132,004,555
              
              
              144,848,034
              
              
              130,232,699Net
                  income (loss) per share:Basic
              
              $
              0.00
              
              $
              (0.00
              )
              $
              (0.00
              )
              $
              (0.01
              )Diluted
              
              $
              0.00
              
              $
              (0.00
              )
              $
              (0.00
              )
              $
              (0.01
              )
 The
        accompany notes are an integral part of these
        financial statements.
 F-2




**Power
          Technology, Inc.**
 **Consolidated
          Statements of Cash Flows**
 For
          the nine months ended October 31, 2006 and
          2005
 **(Unaudited)**


For
                    the nine months endedOctober
                    31,2006
                
                2005(Restated)Cash
                    flows from operating activitiesNet
                    loss
                
                $
                (190,141
                )
                $
                (1,242,930
                )Adjustments
                    to reconcile net loss to net cashused
                    by operating activitiesDepreciation
                    and amortization expense
                
                
                13,458
                
                
                5,370Amortization
                    of debt discount
                
                
                368,214
                
                
                190,160Amortization
                    of deferred financing cost
                
                
                43,145
                
                
                -Gain
                    on derivative liabilities
                
                
                (1,755,187
                )
                
                -Stock
                    issued for executive compensation and expense
                    reimbursement
                
                
                300,000
                
                
                30,529Stock
                    issued for directors fees
                
                
                18,000
                
                
                -Stock
                    issued for consulting services
                
                
                72,000
                
                
                677,898Increase
                    in accounts receivable
                
                
                (2,003
                )
                
                -Increase
                    in inventory
                
                
                (84,451
                )
                
                -Decrease
                    in prepaid expense
                
                
                (3,928
                )
                
                -Increase
                    (decrease) in accounts payable
                
                
                390,924
                
                
                130,889Net
                    cash used by operating activities
                
                
                (829,969
                )
                
                (208,084
                )Cash
                    flows from investing activitiesPurchase
                    of equipment
                
                
                (179,968
                )
                
                -Increase
                    in deposits
                
                
                (15,867
                )
                
                -Net
                    cash used by investing activities
                
                
                (195,835
                )
                
                -Cash
                    flows from financing activitiesProceeds
                    from debt
                
                
                495,000
                
                
                87,000Issuance
                    of common stock
                
                
                390,000
                
                
                113,000Net
                    cash provided by financing activities
                
                
                885,000
                
                
                200,000Effect
                    of exchange rate changes on cash
                
                
                (183
                )
                
                -Net
                    increase (decrease) in cash
                
                
                (140,987
                )
                
                (8,084
                )Cash
                    and equivalents-beginning
                
                
                180,583
                
                
                44,961Cash
                    and equivalents-ending
                
                $
                39,596
                
                $
                36,877Supplemental
                    disclosuresInterest
                    paid
                
                $
                -
                
                $
                -Income
                    taxes paid
                
                $
                -
                
                $
                -Non-cash
                    investing and financing activitiesValue
                    of shares issued for acquisition
                
                $
                960,000
                
                $
                -
 The
        accompany notes are an integral part of these
        financial statements.
  F-3


**POWER
        TECHNOLOGY, INC.**
 **Notes
        to Consolidated Financial Statements**
 (Unaudited)


**NOTE
        1 - Basis of Presentation and Ability to Continue as a Going
        Concern**
 
 The
        consolidated interim financial statements included herein, presented in
        accordance with United States generally accepted accounting principles and
        stated in US dollars, have been prepared by Power Technology, without audit,
        pursuant to the rules and regulations of the Securities and Exchange Commission.
        Certain information and footnote disclosures normally included in financial
        statements prepared in accordance with generally accepted accounting principles
        have been condensed or omitted pursuant to such rules and regulations, although
        management believes that the disclosures are adequate to make the information
        presented not misleading.
 
 These
        consolidated financial statements reflect all adjustments, consisting of
        normal
        recurring adjustments, which, in the opinion of management, are necessary
        for
        fair presentation of the information contained therein. It is suggested that
        these consolidated interim financial statements be read in conjunction with
        the
        financial statements of Power Technology for the year ended January 31, 2006
        and
        notes thereto included in Power Technology's 10-KSB annual report. Power
        Technology follows the same accounting policies in the preparation of interim
        reports.
 
 Results
        of operations for the interim periods are not indicative of annual
        results.
 
 With
        the
        a cquisition
        of the assets of Sentry Power Systems, LLC ,
        Power
        Technology is no longer considered a development stage company as of May
        16,
        2006.
 
 The
        accompanying financial statements have been prepared assuming that Power
        Technology will continue as a going concern which contemplates the
        recoverability of assets and the satisfaction of liabilities in the normal
        course of business. Since its inception, Power Technology has been engaged
        substantially in financing activities and developing its product line, incurring
        substantial costs and expenses. As a result, Power Technology incurred net
        losses of $14,959,257 during the period from June 3, 1996 (inception) to
        October
        31, 2006. In addition, Power Technology’s development activities since inception
        have been financially sustained by debt and capital contributions from its
        affiliates and others.
 
 The
        ability of Power Technology to continue as a going concern is dependent upon
        its
        ability to raise additional capital from the sale of Common Stock and,
        ultimately, the achievement of significant operating revenues. The accompanying
        financial statements do not include any adjustments that might be required
        should Power Technology be unable to recover the value of its assets or satisfy
        its liabilities.
 
 **NOTE
        2 - Debt**
 
 In
        July
        2004, Power Technology borrowed $49,000 from a third party. This loan is
        non-interest bearing and is due on demand.
 
 Convertible
        Debentures-
 
 The
        Convertible Debentures are convertible (“Conversion Feature”) into the common
        stock of Power Technology at any time until repayment of the Convertible
        Debentures at the price per share equal to the lesser of:
 
 a.
              an
                  amount equal to 120% of the closing bid price of the common stock
                  (the
                  “Optional Redemption Feature”); or
 
 b.
              an
                  amount equal to 80% of the lowest closing bid prices of the common
                  stock
                  during the 5 trading days immediately preceding the conversion
                  date.
  F-4
  **POWER
            TECHNOLOGY, INC.**
 **Notes
            to Consolidated Financial Statements**
 (Unaudited)
 However,
        in no event shall Cornell convert the Convertible Debentures in such manner
        that
        would cause Cornell to beneficially own more than 4.99% of the then total
        issued
        and outstanding shares of Power Technology's common stock.
 
 If
        CCP-4
        is repaid under the Optional Redemption Feature, Power Technology must issue
        a
        warrant (the “Warrant Feature”) to Cornell to purchase 1,000,000 shares
        (formerly 50,000 shares for CCP-1 through CCP-3) of its common stock for
        each
        $100,000 redeemed, exercisable at 120% of the closing bid price of the common
        stock. CCP-4 is secured by substantially all of Power Technology's assets,
        is
        subject to a RRA, and includes default provisions.
 
 Also
        on
        December 22, 2005, Power Technology issued $500,000 of new Convertible
        Debentures due 2007 (“CCP-5”), bearing an annual interest rate of 10%, and
        providing for the same Conversion Feature, Optional Redemption Feature, Warrant
        Feature, RRA, default and other provisions as under the terms of
        CCP-4.
 
 For
        each
        of CCP-4 and CC-5, the Conversion Feature and Optional Redemption Feature
        were
        designated as embedded derivatives, and have been bundled together as a single
        compound embedded derivative liability. Power Technology utilized a layered
        discounted probability-weighted cash flow approach to determine the initial
        fair
        values of these Convertible Debentures at issuance date (December 22, 2005),
        which were as follows: CCP-4- $370,601 and CCP-5- $381,398. The fair value
        model
        comprises multiple probability-weighted scenarios under various assumptions
        reflecting the economics of CCP-4 and CCP-5, such as the risk-free interest
        rate, expected Company stock price and volatility, likelihood of conversion
        and/or redemption, and likelihood of default status and timely registration.
        At
        inception, the fair values of these single compound embedded derivatives
        were
        bifurcated from their respective debt host contracts and recorded as derivative
        liabilities, which resulted in a reduction of the initial notional carrying
        amount of the Convertible Debentures (as unamortized discount, which will
        be
        amortized over the two-year life of the notes under the effective interest
        method). For each of CCP-4 and CCP-5, the Warrant Feature has been designated
        as
        a freestanding derivative liability and has been fair valued utilizing the
        Black-Scholes method with a probability-weighted exercise price. At inception
        (December 22, 2005), the fair values of the Warrant Feature were as follows:
        CCP-4 - $641,478 and CCP-5 - $664,957.
 
 The
        assumptions used in both the layered discount probability-weighted cash flow
        approach for the compound single embedded derivatives within the Convertible
        Debentures and the Black-Scholes approach for the Warrant derivative liability
        comprised the following: risk-free interest rate of 4.4%, volatility of 100%,
        expected stock price average growth of 31.5%, no registration default, 2.5%
        default status, no assumption of alternative financing, expected Warrant
        term of
        5 years, dividend yield of zero percent, and a probability-weighted exercise
        price of $0.075.
 
 The
        Convertible Debentures (CCP-4, CCP-5 and CCP-6) balances at October 31, 2006
        as
        adjusted:
 CCP-4
                
                CCP-5
                
                CCP-6
                
                TotalConvertible
                    Debentures - January 31, 2006
                
                $
                171,317
                
                $
                22,962
                
                $
                -
                
                $
                194,279Issuance
                    of debt
                
                
                
                
                
                
                
                
                550,000
                
                
                550,000Adjustment
                    for Single CompoundEmbedded
                    Derivative with the Convertible Debenture
                
                
                
                
                
                
                
                
                (356,946
                )
                
                (356,946
                )Amortization
                    of discount
                
                
                96,945
                
                
                174,173
                
                
                97,096
                
                
                368,214Convertible
                    Debentures - October 31, 2006
                
                $
                268,262
                
                $
                197,135
                
                $
                290,150
                
                $
                755,547
  F-5
  **POWER
        TECHNOLOGY, INC.** **Notes
          to Consolidated Financial Statements**
 (Unaudited)
 For
        the
        nine months ended October 31, 2006, the amortization of unamortized discount
        on
        the Convertible Debentures (CCP-4, CCP-5 and CCP-6) was $368,214 which has
        been
        classified as interest expense in the accompanying consolidated statements
        of
        operations.
 
 The
        Compound Embedded Derivatives within Convertible Debentures (CCP-4, CCP-5
        and
        CCP-6) derivative liability reflects the following activity for the nine
        months
        ended October 31, 2006:
 CCP-4
                
                CCP-5
                
                CCP-6
                
                TotalBalance
                    - January 31, 2006
                
                $
                452,221
                
                $
                457,257
                
                $
                -
                
                $
                909,478Additions
                
                
                
                
                
                
                
                
                356,946
                
                
                356,946Mark
                    to market for the nine months ended October 31, 2006
                
                
                (328,924
                )
                
                (344,779
                )
                
                (181,571
                )
                
                (855,274
                )Balance
                    - October 31, 2006
                
                
                123,297
                
                
                112,478
                
                
                175,375
                
                
                411,150
  The
        Derivative-Compound Embedded Derivatives within Warrants reflect the following
        activity for the three months ended October 31, 2006
 CCP-4
                
                CCP-5
                
                TotalBalance
                    - January 31, 2006
                
                $
                752,441
                
                $
                779,981
                
                $
                1,532,422Additions
                
                
                
                
                
                
                
                
                -Mark
                    to market for the nine months ended October 31, 2006
                
                
                (441,819
                )
                
                (458,094
                )
                
                (899,913
                )Balance
                    - October 31, 2006
                
                $
                310,622
                
                $
                321,887
                
                $
                632,509
  **NOTE
        3 - Stockholders' Equity**
 
 During
        the nine months ended October 31, 2006, Power Technology issued 1,200,000
        shares
        of common stock for services rendered with a value of $72,000
 
 During
        the nine months ended October 31, 2006, a warrant holder exercised 1,500,000
        warrants for an aggregate price of $90,000.
 
 During
        the nine months ended October 31, 2006, an option holder exercised 5,000,000
        options for an aggregate price of $300,000.
 
 During
        the nine months ended October 31, 2006, Power Technology issued 120,000 shares
        of common stock to directors in payment of their fees, the shares were valued
        at
        $18,000.
 
 During
        the nine months ended October 31, 2006, Power Technology issued 6,075,949
        shares of common stock for the purchase of the assets of Sentry Power LLC
        valued
        at $960,000.
 
 At
        October 31, 2006, Power Technology had a stock payable of $191,166, recorded
        for
        the accrual of 606,667 common shares valued at $127,966 to be issued to Power
        Technology’s president under his employment agreement.
  **NOTE
        4 -Warrants and Options**
 
 Warrants
 
 Warrants
        issued by Power Technology are valued on the date of grant using the
        Black-Scholes pricing model using certain assumptions.
 
 F-6
  **POWER
        TECHNOLOGY, INC.** **Notes
          to Consolidated Financial Statements**
 (Unaudited)
  Activity
        of warrants during the nine months ended October 31, 2006 and 2005 is as
        follows:
  2006
                
                
                2005Weighted
                
                
                
                
                
                WeightedAverage
                
                
                
                
                
                AverageWarrants
                
                
                Share
                    Price
                
                
                Warrants
                
                
                Share
                    PriceOutstanding
                    at beginning of period
                
                
                1,500,000
                
                $
                0.060
                
                
                -
                
                $
                -Granted
                
                
                20,094,875
                
                
                0.078
                
                
                -
                
                
                -Exercised
                
                
                (1,500,000
                )
                
                0.060
                
                
                -
                
                
                -Forfeited
                
                
                -
                
                
                -
                
                
                -
                
                
                -Outstanding
                    at end of period
                
                
                20,094,875
                
                $
                0.078
                
                
                -
                
                $
                -
  The
        weighted average fair value of the warrants granted during the nine months
        ended
        October 31, 2006 was $0.065. The estimated fair value was determined by
        using the Black-Scholes option-pricing model assuming a life of 5 years,
        volatility of 100%, no dividends and a risk free rate of 4.4%.
 
 Warrants
        outstanding and exercisable as of October 31, 2006:
 Outstanding
                
                ExercisableNumber
                    of
                
                Remaining
                
                Number
                    ofExercise
                    Price
                
                Shares
                
                Life
                
                Shares$
                0.078
                
                
                20,094,875
                
                
                1.583
                
                
                20,094,875
 
 Stock
        options
 
 Power
        Technology has 1,000,000 options to an employee at October 31, 2006 with
        an
        average exercise price of $0.005. There are 100,000 of these options that
        are
        exercisable as of October 31, 2006.
 
 During
        the nine months ended October 31, 2006, Power Technology has issued 4,000,000
        options to two employees as of May 1, 2006. The exercise price is $0.1216
        per
        share. The total 4,000,000 options are exercisable as of October 31, 2006.
        Power
        Technology used the Black-Scholes method to value these options assuming
        the
        contract life, with a 78% volatility, no dividends and 5.24% risk free
        borrowing. Power Technology recorded a $200,000 expense for these
        options.
 
 During
        the nine months ended October 31, 2006 Power Technology issued 5,000,000
        options
        to a consultant with an exercise price of $0.06 per share. The options expire
        on
        February 27, 2007. Power Technology used the Black-Scholes method to value
        these
        options with 100% volatility and 4% risk free borrowing. Power Technology
        recorded a $100,000 expense for these options.
 
 The
        consultant has exercised 5,000,000 options at a price of $0.06 per option.
 
 **NOTE
        5 - Acquisition**
 
 On
        May
        16, 2006, our wholly owned subsidiary, Sentry Power Technology, Inc. (“SPT”)
        acquired the assets of Sentry Power Systems, LLC (“Sentry”). Sentry sells
        automatic battery back up uninterrupted power supply systems for commercial
        and
        residential use in states and municipalities throughout the northeast and
        southwest United States. The acquisition will strengthen Power Technology
        as a
        competitor in the alternative battery technology industry.
 
 The
        total
        purchase price was $1,195,000 which was paid by issuing 6,075,949 shares
        of our
        common stock valued at $960,000 (based on the closing price per share on
        the
        date immediately prior to the closing date) and by SPT assuming $235,000
        in debt
        owed by Sentry to CSI Business Finance, Inc. as evidenced by a secured
        promissory note. An additional 400,000 shares of common stock valued at $63,200
        were issued in September 2006 for the purchase.
 
 F-7
 **POWER
          TECHNOLOGY, INC.**
 **Notes
          to Consolidated Financial Statements**
 (Unaudited)
  The
        purchase price allocation based on the estimated fair values of the assets
        acquired at May 16, 2006 is as follows:
  Accounts
                  receivable
              
              $
              3,266Prepaid
                  expenses
              
              
              2,910Property
                  and equipment
              
              
              9,017Other
                  assets
              
              
              5,700Goodwill
              
              
              1,174,107Total
              
              $
              1,195,000
 
 Goodwill
        will be tested periodically for impairment as required by FASB Statement
        No.
        142, "Goodwill and other Intangible Assets."
 
 The
        results of this acquisition are included in the consolidated financial
        statements from the date of acquisition. Unaudited pro forma operating results
        for Power Technology, assuming the acquisition occurred at the beginning
        of each
        period, are as follows:
 Three
                    Months Ended October 31,
                
                Nine
                    Months Ended October 31,2006
                
                2005
                
                2006
                
                2005Revenue
                
                $
                6,385
                
                $
                4,806
                
                $
                32,097
                
                $
                47,187Net
                    income (loss)
                
                $
                471,623
                
                $
                (575,694
                )
                $
                (190,141
                )
                $
                (1,547,749
                )Net
                    income (loss) per common share
                
                $
                0.00
                
                $
                (0.00
                )
                $
                0.00
                
                $
                (0.01
                )
  The
        unaudited pro forma results are not necessarily indicative of what would
        have
        occurred if the acquisition had been in effect for the periods presented.
        In
        addition, they are not intended to be a projection of future results and
        do not
        reflect any synergies that might be achieved by combining the
        operations.
  **NOTE
        6 - Contingency**
 
 On
        July
        29, 2004, we increased the number of authorized shares of common stock from
        100,000,000 to 750,000,000 shares by amending our Articles of Incorporation.
        Subsequent to the filing of the Certificate with the office of the Nevada
        Secretary of State, we issued shares of common stock which caused the number
        of
        outstanding shares to exceed 100,000,000 shares. Currently, the number of
        shares
        issued and outstanding shares of common stock is 149,391,694.
 
 Power
        Technology has reviewed the procedures used to amend the Articles of
        Incorporation regarding the increase in the authorized number of shares of
        common stock. We believe that we did not fully comply with the requirements
        of
        the Nevada Revised Statues, and as a result, any shares of common stock issued
        in excess of 100,000,000 shares may be void or voidable in view of the lack
        of
        prior shareholder approval of the Amendment to the Articles of
        Incorporation.
 
 In
        order
        to correct and remedy these events, Power Technology intends to call a special
        meeting of the stockholders to authorize the increase of its authorized number
        of shares of common stock from 100,000,000 shares to 750,000,000 shares,
        and to
        amend the Articles of Incorporation accordingly.
 
 If
        the
        shareholders do not approve the increase in the authorized number of shares,
        Power Technology will face possible claims that there has been an overissuance
        of the common stock.
 **NOTE
            7 - Restatement**
 
 In
            June
            2007, Power Technology concluded that it was necessary to restate its
            financial
            results for the quarter ended October 31, 2006 to correct errors in the
            derivative liabilities as calculated by a third party specialist. Power
            Technology had previously recognized derivative liabilities of $870,393
            as of
            October 31, 2006. After further review, Power Technology has determined
            that the formulas in the valuation model used by the independent valuation
            expert to determine the estimated value of derivative liabilities were
            incorrect
            and thus overstated the value of the derivative liabilities. As a result,
            Power
            Technology has obtained a revised valuation report and has increased
            the
            derivative liabilities to $1,043,659 at October 31, 2006. There is no
            impact on
            the financial information for the nine months ended October 31,
            2005.
 
 A
            summary
            of the effects of this restatement as of October 31, 2006 and the three
            months
            and nine months then ended is shown in the following table:
 As
                        previouslyreported
                    
                    As
                        restatedDerivative
                        liabilities
                    
                    $
                    870,393
                    
                    $
                    1,043,659Total
                        current liabilities
                    
                    
                    1,431,086
                    
                    
                    1,604,352Accumulated
                        deficit
                    
                    
                    (14,785,991
                    )
                    
                    (14,959,257
                    )Total
                        stockholders' deficit
                    
                    
                    (829,418
                    )
                    
                    (1,002,684
                    )
  Three
                      months ended October 31,2006Gain
                      on derivative liabilities
                  
                  
                  1,356,813
                  
                  
                  1,025,285Net
                      income
                  
                  
                  803,151
                  
                  
                  471,623Six
                      months ended October 31, 2006Gain
                      on derivative liabilities
                  
                  
                  1,928,453
                  
                  
                  1,755,187Net
                      loss
                  
                  
                  (16,875
                  )
                  
                  (190,141
                  )
 F-8





ITEM
      2. MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.





The
      following discussion of the Company's financial condition and results of
      operations should be read in connection with the Company's consolidated
      financial statements and notes thereto appearing elsewhere in this report.
      This
      discussion contains statements reflecting the opinions of management as well
      as
      forward-looking statements regarding the market and the Company that involve
      risk and uncertainty. These statements relate to expectations and concern
      matters that are not historical facts. Works such as "believes", "expects",
      "anticipates" and similar expressions used throughout this document indicate
      that forward-looking statements are being made.




Although
      management of the Company believes that the expectations and opinions reflected
      in its forward-looking statements are reasonable, these statements are not
      guarantees of future performance. They are subject to risks, uncertainties
      and
      other factors that could cause actual performance to differ materially from
      projected results. Risk factors are disclosed in our annual report on Form
      10-KSB, as amended.




Power
      Technology, Inc., a Nevada corporation, was incorporated on June 3, 1996. We
      are
      in the development stage of designing and producing its batteries and other
      products. We are preparing to produce prototype versions of our battery to
      be
      built in a variety of sizes, amp hour capacities and configurations using
      methods that we anticipate will be practical for economically manufacturing
      batteries on a commercial scale. We have designed and are in the process of
      constructing a pilot plant capable of manufacturing our current collectors
      in
      commercial quantities for use in lead acid batteries. We have not commenced
      any
      commercial production or sales of our batteries or pipeline connection
      equipment. The business of our new wholly owned subsidiary, Sentry Power
      Technology, Inc. (“SPT”) includes the design and assembly of automatic battery
      backup power systems for commercial office space and residential new builder
      markets.




Historically,
      we have used the sale of our common stock, capital contributions and loans
      from
      various stockholders to fund our operations. To date, we have not had adequate
      funds to commercially produce, market, and sell our batteries or pipeline
      connection equipment. There can be no assurances that we will be able to obtain
      a profitable level of operations.





Because
      of the costs of development of our battery systems, the continuing costs of
      our
      battery prototype production and the anticipated costs relating to our pilot
      plant, unless we are able to sign a significant licensing agreement, we will
      incur a loss during our fiscal year ending January 31, 2007.





We
      believe that our cash needs will be satisfied from existing funds through the
      end of our fiscal year ending January 31, 2007. Additional debt or equity
      financing or licensing agreement proceeds will be required to accomplish our
      plan of operations during the next 12 months. As a result, we intend to sell
      additional shares of our common stock to further capitalize our operations.
      We
      may also borrow from banks and others to the extent necessary to provide
      liquidity for our operations, although no arrangements for any additional
      borrowings have been made. There is no assurance that funds will be available
      from any of these sources, or, if available, upon terms and conditions
      acceptable to us.





We
      intend
      to continue our research and development activities in order to develop our
      batteries for commercial production. We expect to incur substantial capital
      costs designing and building a pilot plant capable of manufacturing our current
      collectors in commercial quantities for our batteries. We intend to manufacture
      prototype versions of our batteries and we expect to incur substantial costs
      in
      manufacturing prototype batteries.


1




BATTERY
      PILOT PLANT





We
      have
      designed and are in the process of constructing a pilot plant capable of
      manufacturing our current collectors in commercial quantities for use in lead
      acid batteries. We use reticulated vitreous carbon (“RVC”) plates to create
      current collectors for use in our proprietary lead acid batteries. RVC is an
      electrically conductive, highly porous, rigid, open cell, pure carbon, foam
      structure with a high melting point, high chemical inertness, and low bulk
      thermal conductivity. RVC has an exceptionally high void volume (97%), a high
      surface area combined with self supporting rigidity, low resistance to fluid
      flow, an ability to hold infused materials, and superior resistance to very
      high
      temperatures in non-oxidizing environments. The manufacturing process to create
      a current collector will include manufacturing the RVC plates, casting a top
      frame and tab, bottom and side frames on the individual RVC plates, and
      depositing the lead tin alloy on the RVC plate by electroplating. Once this
      process has been completed, the individual plate is suitable for use as a
      current collector. We believe that the manufacturing process and machinery
      necessary for applying battery paste onto the individual RVC foam plate, curing
      the individual RVC foam plate, and insertion of them into a battery case and
      completing the manufacturing of our battery is substantially similar to existing
      processes, methods, and machinery commonly used in the manufacture of a typical
      lead acid battery.





We
      are
      establishing a pilot plant facility in Richmond, British Columbia, Canada.
      We
      have leased from Sun Life assurance Company of Canada approximately 3150 square
      feet of space located at 5600 Parkwood Way, Richmond, British Columbia, Canada,
      for a minimum term of three years, beginning August 1, 2006, $2,825 per month.





The
      purpose of the Pilot Plant is to demonstrate to battery manufacturers the
      manufacturing process, machinery and procedure necessary to manufacture our
      proprietary RVC current collectors. The Pilot Plant will also manufacture our
      proprietary RVC current collectors for use in prototype batteries. The purpose
      of the Pilot Plant is not to manufacture current collectors in commercial
      quantities for sale to battery manufacturers.





We
      have
      completed the engineering, design and installation of equipment necessary to
      manufacture RVC plates. The consulting costs, equipment, and materials to enable
      us to begin manufacturing RVC plates totaled approximately $ 93,000. This system
      manufactures RVC in billets in a batch process and the blocks of RVC are then
      be
      cut and sliced into the proper size for individual current collectors. We have
      successfully manufactured RVC billets in our pilot plant.





In
      March
      2006, we signed a Consulting Services Agreement with Richard R. McCormick,
      a
      former employee of an engineering firm, Destech Corp., which specializes in
      manufacturing reticulated vitreous carbon (“RVC”) and other advanced materials.
      Mr. McCormick has fifteen years of experience in supervising the manufacture
      of
      RVC foam. We have acquired all equipment, supplies, materials, chemicals,
      instruments, utilities and machinery that are required for the production of
      RVC. Mr. McCormick has provided us a manufacturing procedures manual describing
      the process we utilized to manufacture RVC that meets our specifications for
      current collectors. Mr. McCormick has demonstrated in person to our Chief
      Technology officer, Joey Jung, and other personnel at our facility in Richmond,
      British Columbia, Canada, using our equipment, the proper manufacturing
      procedures for making RVC. Mr. McCormick supervised the hands-on manufacturing
      of RVC by our personnel. We have successfully manufactured RVC that meets our
      specifications in billets in a batch process. The blocks of reticulated vitreous
      carbon are cut and sliced into the proper size for individual current
      collectors. The system is designed to permit production of 5000 reticulated
      vitreous carbon plates of 6 inches by 6 inches by 3 mm per month. The
      manufacturing process and equipment we installed is manual rather than automated
      but we believe it will be fully capable of scale up with additional manpower
      and
      additional equipment. Mr. McCormick will provide Company with the information
      required to scale up the process for automation.




2




Wirtz
      Manufacturing Company, Inc., a company which specializes in designing and
      building equipment used to manufacture lead-acid batteries, has built us various
      prototype molds to cast the top lead frame and tab onto the uncoated RVC foam
      plates. Wirtz has completed the engineering and has machined a double panel
      casting mold designed to cast a lead top frame and tab, a bottom, and two side
      frames on uncoated RVC foam plates. Wirtz tested this casting mold in June
      of
      2006 and has used it to successfully cast lead top frame with lug and two side
      frames on uncoated RVC foam plates. We modified this casting mold and designed
      and built in our pilot plant a casting station that permits an operator to
      cast
      top, side and bottom lead frames on uncoated RVC foam plates. We have
      successfully performed casting operations with this casting station and mold.





Following
      testing of the mold, additional engineering and design appears to be necessary
      to adapt the mold to a manufacturing machine so that the top frame, lug and
      side
      frames may be cast at high speed on individual RVC foam plates. Wirtz has
      provided us with a proposal to design and manufacture a production grid mold,
      poring ladle, mold open and close mechanism casting machine which includes
      a
      grid handling system, grid trimming station, and trimmed grid stacker with
      a
      projected capacity to cast top, side and bottom lead frames on 240 uncoated
      RVC
      foam plates per hour. The price for the engineering and manufacturing of the
      casting machine would be approximately $169,000.





We
      entered into an agreement dated January 12, 2006, with Technic, Inc. for the
      purchase of machinery to apply lead tin plating to RVC plates for its battery
      systems. Technic, Inc. is an engineering and manufacturing firm which
      specializes in designing and manufacturing electroplating equipment we purchased
      a lead tin plating system which includes the necessary hoist with motorized
      trolley structural support steel with trolley track and electrical tag line,
      steel tanks with locating saddles and twin 60 inch air blow-off manifolds,
      rectifiers, and its accessories for the plating system. We also purchased air
      agitation blowers and air handling ducts for the system. The total price for
      lead tin system and air agitation equipment was approximately $108,000. The
      electroplating plating system and air agitation equipment has been delivered
      and
      installed in our facility in Richmond, British Columbia. The plating system
      is a
      manual line capable of plating 250 current collectors per eight hour shift.
      Management believes the plating system will demonstrate that the electroplating
      of the current collectors can be performed efficiently. Technic, Inc. has
      provided us with designs and proposals to increase the system capacity by adding
      nine additional plating stations, additional rectifiers, an automated hoist
      and
      a computer controlled, programmable, automation package that would increase
      the
      system capacity to plate approximately 1000 to 1200 current collectors per
      eight-hour shift. The price of automation package proposal is $278,000. By
      increasing the number of tanks and other equipment and machinery, the
      electroplating system's capacity could be further increased. We have operated
      the electroplating system and performed a series of test runs to deposit the
      lead tin alloy on RVC plates onto which the top frame and tab, bottom and side
      frames have been cast by our casting station and mold. Based on those test
      runs,
      we modified the equipment and following those modifications, during the month
      of
      December 2006 we have performed additional test runs and we believe we have
      developed the proper electrolysis bath chemistry and power settings to uniformly
      and consistently successfully deposit the lead tin alloy on our RVC current
      collectors.





3




We
      have
      engaged in discussion, planning, and negotiations with two engineering and
      manufacturing firms which specialize in designing and manufacturing battery
      plate pasting equipment to design and construct equipment capable of applying
      battery paste on lead-tin coated RVC current collectors. Based on the
      engineering and design that has been performed, we estimate that that the
      battery pasting machine needed to apply battery paste onto our individual
      current collectors will cost approximately $95,000 and that it will take two
      to
      three months to build.





To
      fund
      this pilot plant project we have used and intend to use general corporate funds,
      which include the proceeds from the sale of Secured Convertible Debentures
      to
      Cornell Capital Partners, L.P., and proceeds from the exercise of stock options
      and warrants, as discussed in the section entitled “Liquidity and Capital
      Resources” herein.





Our
      lead
      acid battery is not yet commercially successful because we have not yet
      completed the final design and construction of all the equipment necessary
      to
      manufacture our batteries in commercial quantities. RVC current collectors
      are
      more expensive and time consuming to manufacture than are current collectors
      manufactured by pouring molten lead into a grid patterns. Our battery will
      be
      more expensive to manufacture and its purchase price will be more than a
      traditional lead acid battery.





Management
      believes we will be able to design and build a pilot plant capable of
      manufacturing our current collectors cost effectively in commercial quantities;
      however, further design and engineering may be necessary before a pilot plant
      can be completed. The issues related to the successful commercial production
      of
      our current collectors and its battery include: whether we can manufacture
      RVC
      economically in mass produced commercial quantities; whether we can apply the
      top frame and tab to the plates economically in mass produced commercial
      quantities; whether we can economically electroplate the lead-tin alloy onto
      the
      RVC plates uniformly and consistently in mass produced commercial quantities;
      whether we can apply the side and bottom frame to the plates economically in
      mass produced commercial quantities; whether we can adapting the existing
      battery plate pasting equipment to paste lead-tin coated RVC current collectors
      in economically in mass produced commercial quantities. There can be no
      assurance that we can manufacture our current collectors or batteries cost
      effectively on a commercial scale.





There
      can
      be no assurance that we can establish a competitive position against current
      and
      potential competitors, especially those with greater financial, marketing,
      service, support, technical and other resources than us.





Our
      preliminary testing indicates that various configurations of the battery meet
      or
      exceed some of the performance goals established by major governmental and
      industry groups for electric vehicle batteries. Management’s discussions with
      various manufacturers lead us to believe that there would be a significant
      demand for our battery, if it can be manufactures economically on a commercial
      scale. We also believe our battery has a number of applications such as electric
      vehicles, hybrid powered vehicles, solar power systems, electric motorcycles,
      electric bicycles, electric power management, uninterruptible power supply
      systems, aircraft, marine, and submarine craft and for starting batteries for
      automobiles. We are designing various prototype batteries for such applications.





4




PROTOTYPE
      BATTERIES





We
      are
      preparing to produce prototype versions of our battery that will be built in
      a
      variety of configurations using methods that management anticipates will be
      practical for economically manufacturing batteries on a commercial scale. We
      intend to manufacture current collectors which will be used to manufacture
      prototype batteries. We have on hand a total of 110 RVC current collectors
      onto
      which a top lead frame and tab have been cast and which have had a lead-tin
      alloy applied. Seventy of these have lead side frames cast on them. We have
      manufactured approximately 560 RVC current collectors onto which a top lead
      frame and tab have been cast by our casting station and mold. We deposited
      lead
      tin alloy on approximately 80 of these during the test runs of our
      electroplating system. We also have on hand approximately 100 RVC foam plates,
      which measure 6 inches by 6 inches by 3mm, which are suitable for being made
      into current collectors for our batteries by having frames and tabs cast on
      them
      and having a lead tin alloy applied to them and having battery paste applied
      to
      them. Once we have manufactured RVC plates into current collectors and applied
      battery paste to them, we intend to use some of them to manufacture 12 volt
      prototype batteries and to use some of them in the process of designing
      modifications to existing battery plate pasting equipment so it will be capable
      of applying battery paste on our lead-tin coated RVC current collectors. The
      number of RVC plates used as current collectors in a single 12 volt battery
      will
      vary depending on the type, size and amp hour capacity of a battery.





In
      November 2005, our management traveled to Taiwan to meet with management and
      engineers from Kung Long Batteries Industrial Co., Ltd., (‘Kung Long”), a
      publicly traded expert manufacturer of lead acid batteries. Kung Long’s stock is
      listed on the Taiwan Stock Exchange under the symbol 1537.TW. Kung Long owns
      and
      operates two manufacturing facilities in Taiwan and one in Viet Nam. It
      manufactures more than 200 different types of batteries, including batteries
      for
      electric vehicles, uninterrupted power supply systems, alternative energy
      systems, solar energy systems, mobile energy, motorcycle and automotive uses.
      Kung Long exports its products to Asia, the U.S.A., Europe, and other countries.
      We discussed with Kung Long management and engineers our technology, and
      possible technology transfer, licensing, royalty and joint venture agreements.
      We signed a memorandum of understanding with Kung Long concerning the
      commercialization of Power Technology’s advanced lead acid battery technology.
      Pursuant to this agreement, on February 20, 2006 we delivered to Kung Long
      22
      positive and 28 negative current collectors for its testing and evaluation.
      During the week of April 24, 2006, our Chief Technology Officer, Joey Jung,
      who
      is fluent in Chinese, met in Taiwan with Kung Long engineers and managers to
      discuss Kung Long’s preliminary testing of our current collectors and technical
      issues relating to the manufacturing of our battery. Based on that testing,
      Kung
      Long has used our current collectors, our core patent pending technology, to
      manufacture a working prototype battery. The current collectors we provided
      to
      Kung Long had top, side and bottom lead frames that were not cast from the
      mold
      manufactured by Wirtz. Kung Long has requested that we provide it with current
      collectors that have top, side and bottom lead frames cast from the mold
      manufactured by Wirtz and we intend to do so. After we provide Kung Long with
      these current collectors, Kung Long intends to manufacture a working prototype
      battery and Kung Long intends to thoroughly test and evaluate our battery’s
      performance. Discussions with Kung Long included the negotiation of technology
      transfer, license, and royalty agreement or a joint venture agreement that
      would
      enable Kung Long to build a new manufacturing facility to produce Power
      Technology batteries.





5




Power
      Battery Co. (“Power Battery”), a privately held battery manufacturer, has
      requested that we provide it with our current collectors to test in a VRLA
      battery. We intend to do so. We may need to design and machine a separate double
      panel casting mold similar to the one previously provided to us by Wirtz to
      be
      able to provide Power Battery with current collectors that are compatible with
      its battery manufacturing equipment. Power Battery has three major corporate
      locations around the world. Its Corporate headquarters, R&D, manufacturing
      and USA distribution center are located in Paterson, New Jersey and that
      facility covers the U.S.A., Latin America and the Pacific Rim. Its high-tech
      automated manufacturing center in Iberville, Quebec covers the Canadian market
      and a third location in Romsey, England covers the European, Middle East and
      African markets. Power Battery has sales offices in Milan, Italy and Hong Kong
      with major distributors throughout South America, Europe, Africa and Asia.





We
      intend
      to supply the U.S. Army Tank Automotive Research, Development and Engineering
      Center, (“TARDEC”) a prototype NATO
      6T
      Size Lead battery **** manufactured
      with our current collectors. Part of the Army Materiel Command’s Research
      Development and Engineering Command, TARDEC the nation’s laboratory for advanced
      military ground systems and automotive technology. Its mission is to research,
      develop, engineer, leverage, and integrate advanced technology into ground
      systems and support equipment. It develops and maintains ground vehicles for
      all
      U.S. Armed Forces, numerous federal agencies, and more than 60 foreign
      countries. The NATO 6T Size Lead Battery is used in various tanks, trucks,
      and
      other military vehicles. We have discussed with the staff and power team leaders
      of TARDEQ our providing it with a prototype NATO 6T battery. TARDEC has provided
      us with performance specifications for the NATO 6T automotive valve regulated
      lead acid storage battery. TARDEC has advised us that, if we provide it with
      a
      NATO 6T battery, it will test and evaluate our prototype for possible use by
      the
      U.S. Army. We are in the process of designing and engineering the current
      collectors we will need to manufacture in order to be able to make a NATO 6T
      automotive valve regulated lead acid storage battery that meets the performance
      specifications. In order to manufacture suitable current collectors for use
      in a
      prototype NATO 6T battery, we must design and machine a separate double panel
      casting mold similar to the one previously provide to us by Wirtz to cast a
      lead
      top frame with lug and two side frames and a bottom frame on uncoated RVC foam
      plates. We estimate that the cost of designing and machining such a mold will
      be
      approximately $ 4,000.





Axion
      Power International Inc. (Axion) has requested that we provide it with our
      current collectors so that it may manufacture and test prototype batteries
      that
      feature our current collectors in combination with Axion’s proprietary
      e 3 Supercell technology. Axion has developed patented e 3 Supercell technology, which it describes as a multi-celled asymmetrically
      supercapacitive lead-acid-carbon hybrid battery.  We have designed and
      built a double panel casting mold that will enable us to manufacture and test
      compatibility with Axion's manufacturing capabilities and in conjunction with
      Axion’s e 3 Supercell technology. We have successfully cast double sided current collectors
      of RVC to Axion’s specifications and we intend to deposit the lead tin alloy on
      them in December of 2006 and deliver them to Axion in January of 2007.





6




We
      are in
      the process of manufacturing current collectors that will be compatible with
      the
      battery manufacturing equipment at a battery manufacturing plant. We believe
      that by the end of December 2006 we will have manufactured a sufficient number
      of our current collectors to enable us to build at least five prototype
      batteries at the battery manufacturing plant. We intend to manufacture these
      prototype batteries in January of 2007. Once these prototypes have been
      manufactured and we have tested them, assuming they meet our expectations,
      we
      intend to provide a prototype battery to Kung Long, a prototype battery to
      Toyota Tsusho Corporation, and to provide the remaining prototypes to other
      battery manufacturers and original equipment manufacturers.





LICENSING
      AGREEMENTS





We
      do not
      intend to manufacture and sell our batteries. We plan to license our technology
      to other entities. We intend to discuss and explore various possible business
      combinations or transactions with established battery manufacturers. These
      may
      include joint venture agreements, licensing agreements, technology transfer
      agreements or other agreements by which established manufacturers acquire the
      right to employ our technology to manufacture batteries. We plan to provide
      prototype batteries and demonstrate our pilot plant equipment to established
      battery manufacturers. We intend to negotiate licensing agreements with
      manufacturers by which we would permit established battery manufacturers to
      make
      batteries using our proprietary technology. The business model for these
      agreements would involve the payment to Power Technology of a substantial
      up-front licensing fee and a royalty payment for each reticulated vitreous
      carbon current collector manufactured pursuant to the licensing agreement.





EXPECTED
      PURCHASE OF SIGNIFICANT EQUIPMENT





During
      the next year we expect to make significant equipment purchases in order to
      complete construction of a pilot plant capable of manufacturing our current
      collectors in commercial quantities for use in lead acid batteries. Based on
      the
      preliminary engineering and design, discussions and negotiations with equipment
      manufacturers and suppliers, Management currently estimates that the total
      cost
      of the equipment necessary to a construct a pilot plant capable of manufacturing
      our current collectors in commercial quantities for use in lead acid batteries
      will be approximately $479,000. The equipment will include that needed to
      manufacture RVC plates, equipment to cast a top frame and tab and side frames
      on
      the individual RVC plates, equipment to deposit the lead tin alloy on the RVC
      plate by electroplating, and equipment to apply battery paste onto the
      individual RVC plates. Because the design and engineering of the manufacturing
      equipment has not been finalized, we cannot be certain that we can accurately
      predict the cost of each item of the equipment. Based on the preliminary
      engineering and design that has been performed, the machinery and equipment
      which has been purchased ,installed and operated, and discussions and
      negotiations with equipment manufacturers and suppliers, Management estimates
      that the engineering and equipment needed to manufacture RVC plates in a batch
      process will cost approximately $93,000; that the equipment needed to cast
      a top
      frame and side frames individual RVC plates will cost approximately $170,000;
      that the equipment needed to deposit the lead tin alloy on the RVC plate by
      electroplating will cost approximately $108,000; that the equipment needed
      to
      apply battery paste onto the individual RVC plates will cost approximately
      $95,000, and that additional miscellaneous equipment will cost approximately
      $16,000. Through the period ended October 31, 2006, we have paid approximately
      $180,000 for equipment for our pilot plant.





7





ACQUISITION





On
      May
      16, 2006, our wholly owned subsidiary, Sentry Power Technology, Inc. (“SPT”) and
      Power Technology, Inc. (the “Company”) completed a transaction under an Asset
      Purchase Agreement (the “Agreement”) with Sentry Power Systems, LLC (“Sentry”),
      Michael Julian and Robert Magyar. Upon closing, SPT acquired the assets of
      Sentry for a total purchase price of $1,195,000 which was to be paid at closing
      by issuing 6,075,949 shares of our restricted common stock (the “Power Shares”)
      valued at $960,000 (based on the closing price per share on the date immediately
      prior to the closing date as reported by Bloomberg, LP) and by SPT assuming
      $235,000 in debt owed by Sentry to CSI Business Finance, Inc. (“CSI”) as
      evidenced by a Secured Promissory Note (the “Note”). At closing we issued
      5,675,949 shares of restricted common stock and subsequently issued an
      additional 400,000 shares of restricted common stock in September 2006. The
      Power Shares are subject to a Lock-Up and Redemption Agreement (the “Lock-Up
      Agreement”) between the Company, SPT and Sentry.




With
      regard to the CSI debt, SPT assumed the debt to CSI and executed an Assignment,
      Assumption, Modification and Extension of Promissory Note. The Note bears
      interest at the rate of 18% per annum and is due and payable on May 15, 2007.
      Under the terms of the Note, SPT is required to make monthly interest payments
      beginning June 1, 2006. The Note is secured by the assets of SPT pursuant to
      a
      Security Agreement.





We
      guaranteed the Note and executed a Stock Pledge Agreement granting CSI a first
      lien on all capital stock of SPT which we hold. Our agreement to guarantee
      the
      debt to CSI was conditioned upon and subject to the terms and conditions of
      a
      Guaranty Agreement and a Stock Pledge Agreement between Sentry and us which
      provided that Sentry would guaranty up to $250,000 of any obligation that we
      may
      have under our guaranty agreement with CSI. The Stock Pledge Agreement provided
      for Sentry to pledge 1,582,279 of the Power Shares valued at $250,000 as
      security for the Guaranty Agreement.





The
      Lock-Up Agreement provides that Sentry will not sell, pledge, hypothecate,
      transfer, assign or in any other manner dispose of the Power Shares for a period
      of twenty-four (24) months from the Closing Date (except for the 1,582,279
      Power
      Shares pledged as collateral to us). The Lock-Up Agreement provides that if
      SPT
      is not “cash flow positive” twelve (12) months after the Closing Date that we
      have the right to call for redemption and exchange of all of the Power Shares
      held by Sentry in exchange for 65% of the shares then outstanding of SPT. In
      such event, we would then have the right, but not the obligation, to require
      that Sentry file, at our expense, a Registration Statement with the Securities
      and Exchange Commission (“SEC”) to register for re-sale the 35% remaining shares
      of SPT then held by us.





8




In
      the
      event that we do not elect to exercise our rights then after twenty-four (24)
      months from the Closing Date the lock-up restriction shall terminate. In
      addition, for a period of fifteen (15) days commencing twenty-four (24) months
      after the Closing Date, Sentry shall have the right to require us to exchange
      65% of the shares then outstanding of SPT for all of the Power Shares. In such
      event, we would have the right, but not the obligation, to demand that SPT
      file
      at their expense a Registration Statement with the SEC to register for re-sale
      the 35% remaining shares of SPT which we hold.





For
      purposes of the Lock-Up Agreement, SPT shall be considered “cash flow positive”
where, in the preceding twelve (12) months, SPT has accrued positive earnings
      when earnings are calculated in accordance with generally accepted accounting
      procedures (1) before the deduction of interest and the amortization of
      principal due on the Note in the amount of $235,000, payable to CSI; (2) before
      the deduction of Federal Income Taxes payable by SPT; and (3) before the
      deduction of depreciation expense.





As
      part
      of the transaction, SPT entered into an employment agreement with Robert Magyar
      to serve as SPT’s President and an employment agreement with Michael Julian to
      serve as SPT’s Vice President/Director of Operations.





SPT’s
      business includes the design and assembly of automatic battery backup power
      systems for commercial office space and residential new builder markets. The
      systems provide reliable backup power supply for essential appliance use during
      power outages and blackouts. Increasingly severe seasonal weather, growing
      periods of “above peak” electricity demand, constrained transmission and
      distribution of power, and the growth of high density population centers are
      impacting electrical supply reliability. SPT markets its Sentry systems to
      those
      customers who require backup power solutions but who either cannot or will
      not
      use fossil fuel based generators. Our goal has been the development of automatic
      backup power systems that (i) do not require the use of fossil fuels such as
      gasoline, propane or natural gas, (ii) do not require extensive maintenance
      or
      service costs, (iii) have a higher energy efficiency and conservation factor
      than generators, (iv) provide power on demand, (v) will be more cost effective,
      and (vi) will be more environmentally friendly. Our system consists of solid
      state electronic Direct Current (“DC”) to Alternating Current (“AC”) inverter
      combination power module connected to lead acid batteries contained inside
      a
      pre-wired and lockable steel cabinet. The system is permanently wired into
      the
      user’s main electrical service panel and provides emergency backup power
      protection to specific electrical branch circuits for essential appliance power
      use. In the event of a power outage, the system senses the loss of the (AC)
      utility power and automatically switches to the system’s (DC) batteries in less
      than 20 milliseconds. The DC battery power is converted into AC power for use
      in
      protecting the electrical circuits that are connected to the Sentry system.
      When
      the power outage is over, the system senses the return of the utility AC power
      and transfers the power to the specific electrical branch circuits wired to
      the
      system from the batteries (DC) back over to the utility power. The batteries
      are
      then automatically recharged back to full strength by the system’s internal
      battery charger and charge controller, which control the rate of voltage for
      safe recharging of the batteries. These same system components maintain the
      batteries at full charge level on a daily basis. We currently offer three
      systems for the marketplace; a 3000 watt, two battery system, providing up
      to 30
      hours of power depending on the wattage demand on the circuits that are
      connected to the system, a 6000 watt, four battery system, providing up to
      50
      hours of power depending on the wattage demand on the circuits that are
      connected to the system, and a 6000 watt, eight battery system, providing up
      to
      72 hours of power depending on the wattage demand on the circuits that are
      connected to the system Because of the dominance of fossil fuel based generators
      in the marketplace, the production and sales of automatic battery backup systems
      in the small business commercial and residential segments has been very limited.
      We believe there is substantial demand for quiet, clean and fully automatic
      battery systems in these markets.





9




SPT’s
      future business prospects are substantially dependent upon the ability of SPT
      its homebuilder, utility and dealer base to sell products based on our
      technological advantages over fossil fuel based technologies. There can be
      no
      assurance that the Sentry Power system products can be manufactured cost
      effectively on a commercial scale, that such products will gain market
      acceptance, or that competing products and technologies will not render products
      based on our technologies obsolete or noncompetitive.





In
      certain markets, SPT may enter into broker and/or other distribution agreements
      with established utility companies. Any revenues or profits which may be derived
      from these arrangements will be substantially dependent upon the willingness
      and
      ability of SPT’s broker and distribution partners to devote their financial
      resources and sales and marketing efforts of our systems.





SPT’s
      ability to compete effectively with other companies will depend, in part, on
      its
      ability to control the cost of system components and to ship and deliver systems
      in timely manner. There can be no assurance that SPT can achieve this because
      SPT remains dependent on outside vendors to supply critical components to its
      systems.




The
      automatic battery backup system SPT has developed is capable of accepting and
      using the Power Technology, Inc. battery technology. It is the objective of
      SPT
      to sell and market its system using the Power Technology, Inc. battery
      technology. SPT believes the use of the Power Technology battery design will
      greatly enhance the value proposition of the SPT system by providing an
      increased battery runtime and faster recharging speeds.





Met
      Laboratories, Inc. performed testing and certification process of the SPT 3000
      watt two battery system and the SPT 6000 watt four battery system. Met
      Laboratories, Inc. has certified that the SPT 3000 watt two battery system
      and
      the SPT 6000 watt four battery system comply with Underwriter Laboratories,
      UL
      Standard 1778, covering Uninterruptible Power Supply Equipment. This UL Standard
      covers remote battery supply cabinets with or without batteries, remote status
      panels, bypass switches, rectifier, power conversion units and power
      distribution panels; all key component functions used in the Sentry system.
      As
      of the date of this filing, the SPT 6000 watt eight battery system has passed
      nineteen of the seventeen tests required for the UL certification process by
      Met
      Laboratories, Inc. We are not aware of any material deficiency that will prevent
      us from obtaining the Met Laboratories, Inc. certification mark for the SPT
      6000
      watt eight battery system.





SPT
      executed a three year Manufacturing and Supply Agreement to manufacture the
      SPT
      Sentry systems in its mainland China facilities. B&W Tek, Inc. is an
      Original Equipment Manufacturer (“OEM”) which maintains ISO 13485/ISO 9001
      certification. It engineers and manufactures integrated photonic devices and
      instruments, laser and optical spectrometer systems, modules, and components.
      B&W Tek, Inc. employs over 30 electrical and electronic engineers and
      maintains 40,000 square feet of United States engineering and manufacturing
      facilities and an additional manufacturing facility in Shanghai,
      China.





10




The
      purpose of the SPT and B&W Tek, Inc. OEM agreement is to provide SPT with
      adequate production capability and inventory to fulfill the order demand for
      the
      Sentry systems. B&W Tek, Inc. will fabricate the systems’ metal cabinets,
      install the solid state electronic DC to AC inverter combination power module
      in
      the system, and provide all related wiring and cabling. SPT will purchase and
      install batteries into the Sentry systems in the United States. While Sentry
      expects to benefit from the proposed agreement by obtaining quality systems,
      cost saving and necessary production capabilities, the proposed arrangement
      is
      not without risk. There is no guarantee that B&W Tek, Inc. will be able to
      consistently ship the necessary quantities. Neither SPT nor B&W Tek, Inc.
      have the ability to control ocean shipments of product from mainland China
      to
      the United States. Pursuant to a purchase order, SPT has agreed to purchase
      and
      B&W Tek, Inc. has agreed to manufacture 50 Sentry Systems. Twenty one of
      these systems have been delivered, and the remaining twenty nine units are
      scheduled to be delivered in November 2006. SPT has and will continue to have
      its Sentry systems manufactured by Power Electronics, Inc. (“PEI”) of Clayton,
      DE. PEI is a contract electrical equipment fabricator and wiring assembler
      of
      high voltage switching equipment for the electric utility market. Among its
      clients are PECO (Philadelphia Electric Company) ConEd (Consolidated Electric
      of
      New York) and Connectiv (Delmarva Power and Light). PEI has been manufacturing
      the Sentry systems since January 2005 and will continue to do so until SPT
      shifts production to B&W Tek, Inc. PEI has the capacity to produce
      approximately 100 systems a year.





**SPT
      DISTRIBUTION STRATEGY**





SPT
      intends to focus its sales and marketing programs to single family, condominium,
      and town home builders and developers, electric utilities, small business
      owners, and independent dealers. SPT offers programs designed to allow builders
      to market and sell its Sentry systems to their customers. SPT offers programs
      designed to allow electric utilities to market and sell our Sentry systems
      directly to their customers. Electric utilities have an interest in offering
      backup power solutions to their customers as a way to relieve customer
      dissatisfaction resulting from power outages in their service areas. SPT is
      developing marketing programs to focus on selling Sentry systems to small
      business owners, such as doctors, lawyers, accountants and other professional
      service providers who own or lease commercial office space. Power outages
      disrupt these service providers’ ability to maintain critical access to computer
      data bases, computer server functions, internet access, and related email
      communications. SPT intends to seek and appoint authorized independent dealers
      to market, sell, and service the Sentry systems. SPT
      has
      signed an agreement with Dailey Nestor Homes of Virginia Beach, Virginia, a
      custom new home builder, to market the Sentry Automatic Battery Standby Power
      Systems in its luxury condominium development, Shore Breeze, in Virginia Beach,
      Virginia. Construction of the condominium development is currently underway
      and
      a SPT 6000 watt automatic wall mount battery backup system has been delivered
      to
      a model condominium.





11





**COMPETITION**





The
      automatic backup electric power systems industry is mature, well-established
      and
      highly competitive. There is competition from other automatic battery backup
      system suppliers and the fossil fuel generator industry. Xantrex
      Technology Inc. (“Xantrex”) a publicly traded company, of Vancouver, British
      Columbia, Canada, which develops, manufactures, and markets advanced power
      electronic products including back up and emergency portable power systems
      for
      homes and small businesses and auxiliary electrical power for boats,
      recreational vehicles, heavy duty trucks, commercial work vehicles, and
      automobiles. The
      fossil fuel generator industry is characterized by a major domestic and foreign
      producers, including Briggs & Stratton (Generarc), Kohler Power Systems,
      Coleman Emerson Electric, and Honda, all of which have established dealer
      networks and substantially greater financial resources than SPT. Accordingly,
      SPT’s ability to succeed in this market depends upon its ability to market its
      products and demonstrate they have competitive or superior performance
      characteristics and a competitive sales price. Generator product can provide
      significantly more power then inverter based systems based on the size of the
      generator and can have extensive runtimes provided gasoline, natural gas or
      propane is readily available. SPT’s focus is on the customer who wants backup
      power but either cannot or will not use fossil fuel based generators.





In
      the
      future, because there are relatively low barriers to entry in the backup power
      industry, we could experience additional competition from other established
      or
      emerging companies as the market continues to develop and expand. Many potential
      competitors may have well-established relationships with our potential
      customers; have extensive knowledge of the industry, better name recognition
      and
      significantly greater financial, technical, sales, marketing and other
      resources. It is also possible that new competitors or alliances among
      competitors may emerge and rapidly acquire significant market share. Competition
      may increase as a result of industry consolidations. Our competitors may be
      able
      to respond more quickly to new or emerging technologies and changes in customer
      requirements, or to devote greater resources to the development, promotion
      and
      sale of their backup power products.





Increased
      competition may result in price reductions, reduced gross margins and loss
      of
      market share, any of which could adversely affect our business, financial
      condition or results of operations. There can be no assurance that we will
      be
      able to compete successfully against current or future competitors or that
      competitive pressure will not adversely affect its business, financial condition
      or results of operations.





Management
      believes that the principal competitive factors affecting our market include
      features such as functionality, weight, adaptability, ease of use, product
      reputation, quality, price, performance, customer service and support,
      effectiveness of sales and marketing efforts and company
      reputation.





Over
      the
      long term, SPT intends to compete by offering in its Sentry system the PWTC
      battery technology which provides higher utilization efficiency; a smaller
      and
      lighter battery; a battery with a specific energy increase and a battery that
      recharges significantly faster than traditional lead acid batteries.




There
      can
      be no assurance that we will be successful in developing or marketing product
      enhancements or new products that respond to technological change or evolving
      industry standards, that we will not experience difficulties that could delay
      or
      prevent the successful development, introduction and marketing of these products
      or that our new products or enhancements will adequately meet the requirements
      of the marketplace and achieve market acceptance. If we are unable, for
      technological or other reasons, to develop and introduce our new products or
      enhancements, our business, financial condition or results of operations will
      be
      adversely affected.




12




CHANGE
      IN
      NUMBER OF EMPLOYEES





We
      do not
      expect significant changes in the number of our employees prior to the time
      we
      complete the design and construction of our pilot plant.





CAPITAL
      EXPENDITURES, CAPITAL RESOURCES AND LIQUIDITY





CAPITAL
      EXPENDITURES. During the nine months ended October 31, 2006, we incurred
      material capital expenditures of approximately $180,000 for the purchase of
      pilot plant machinery and equipment. During the nine months ended October 31,
      2005, we did not incur any material capital expenditures for office equipment,
      office furniture or other fixed assets.





CAPITAL
      RESOURCES





During
      the fiscal year ended January 31, 2005, our capital resources were provided
      primarily by the sale of its $500,000 convertible debentures to Cornell Capital
      Partners, L.P. The net proceeds of these sales were $425,000 cash. During the
      fiscal year ended January 31, 2006, capital resources were provided by the
      sale
      of a $500,000 convertible debenture to Cornell Capital Partners, L.P. The net
      proceeds of this sale were $485,000 cash. Capital resources during the fiscal
      year ended January 31, 2006, were also provided by the sale of the Company’s
      common stock and the net proceeds of theses sales were $113,000.





In
      February 2006, we received $495,000 from the proceeds from the issuance of
      a
      convertible debenture with Cornell Capital Partners, L.P. (as discussed below).
      Additionally, in April 2006, we received $292,000 as the proceeds from the
      sale
      of our common stock by the exercise of stock options and warrants.





Our
      capital resources have historically been provided by the sale of our common
      stock, the exercise of warrants and options, conversion of convertible debt
      into
      common stock, and by short term loans.





We
      intend
      to raise additional capital and reduce debt through the sale or exchange of
      our
      common stock or other securities to provide additional working capital to fund
      future operations.





We
      will
      require substantial additional financing to complete the capitalization of
      our
      business plan. The additional financing will be used primarily for payment
      of
      liabilities and for expansion of further research and development and marketing.
      We can give no assurance that we will successfully negotiate or obtain
      additional financing, or that we will obtain financing on terms favorable or
      acceptable to us. Our ability to obtain additional capital depends on market
      conditions, the global economy and other factors outside our control. If we
      do
      not obtain adequate financing, or such financing is not available on acceptable
      terms, our ability to satisfy our liabilities, finance our expansion, develop
      or
      enhance our products and services, and respond to competitive pressures would
      be
      significantly limited. Our failure to secure necessary financing could have
      a
      material adverse effect on our business, prospects, financial condition, and
      results of operations.





13




LIQUIDITY





The
      following summary table presents comparative cash flows of the Company for
      the
      periods indicated:





NINE
                MONTHS ENDED OCTOBER 31,2006
            
            2005Net
                cash used by operating activities
            
            $
            (829,969
            )
            $
            (208,084
            )Net
                cash used by investing activities
            
            
            (195,835
            )
            
            -Net
                cash provided by financing activities
            
            
            885,000
            
            
            200,000





As
      of
      October 31, 2006, we had approximately $40,000 cash on hand.





At
      October 31, 2006, we had negative working capital of approximately $1,466,922
      compared to negative working capital of approximately $2,420,000 on January
      31,
      2006.





We
      had a
      loss from operations for the nine months ended October 31, 2006,
      of $1,402,085 and an accumulated deficit of $14,959,257 at October 31, 2006.





Our
      ability to satisfy our obligations will depend in part upon our ability to
      successfully complete the offer and sale of additional shares of our common
      stock and in part upon our ability to reach a profitable level of operations.
      In
      order to offer and sell additional shares of our common stock, we will need
      to
      obtain shareholder approval to authorize the increase of our authorized number
      of shares of common stock from 100,000,000 shares to 750,000,000 shares, and
      to
      amend the Articles of Incorporation accordingly, as more fully discussed in
      ITEM
      5, OTHER INFORMATION, below.




We
      plan
      to license our technology to other entities. We intend to discuss and explore
      various possible business combinations or transactions with established battery
      manufacturers. These may include joint venture agreements, licensing agreements,
      technology transfer agreements or other agreements by which established
      manufacturers acquire the right to employ our technology to manufacture
      batteries.





SUMMARY
      OF TRANSACTIONS WITH CORNELL CAPITAL PARTNERS, L.P.




We
      entered into a Securities Purchase Agreement (the "Agreement") with Cornell
      Capital Partners, L.P. (“Cornell”) effective December 22, 2005, for the sale of
      redeemable secured convertible debentures in the principal amount of $1,630,580
      (the "Debentures") and stock purchase warrants (the "Warrants") to buy
      20,904,875 shares of our Common Stock. Pursuant to the terms of the Agreement,
      we became obligated to file a registration statement with the Securities and
      Exchange Commission to register for the resale of the shares of our common
      stock
      underlying the Debentures and shares of our common stock underlying the
      Warrants.





14




Under
      the
      terms of our financing with Cornell, we have received net proceeds of
      $1,405,000. This financing was comprised of three separate segments of funding
      as follows:





1.
            In
                August and November 2004, we borrowed an aggregate of $500,000 from
                Cornell through two issuances of 5% Convertible Debentures which
                was
                secured by substantially all of our assets. On May 10, 2005, we refinanced
                the Convertible Debentures with a new Convertible Debenture in the
                principal amount of $514,657, which comprised the original $500,000
                principal plus accrued interest as of that date. On December 22,
                2005, the
                Convertible Debenture was replaced by a new Convertible Debenture
                which
                was issued in the principal amount of $530,580, comprising the original
                $500,000 principal plus accrued interest as of that date. This Convertible
                Debenture: (i) has a due date of December 22, 2007, (ii) bears interest
                at
                a rate of 10% per annum; (iii) was subject to a registration rights
                agreement; and (iv) is subject to certain conversion features. If
                this
                Debenture is repaid under an Optional Redemption Feature, we must
                issue a
                warrant (the “Warrant Feature”) to Cornell to purchase 1,000,000 shares of
                our common stock for each $100,000 redeemed, exercisable at 120%
                of the
                closing bid price of our common stock. This debenture is referred
                to
                herein as the “First Debenture.”





2.
            In
                December 2005, we issued a new Convertible Debenture in the principal
                amount of $500,000. This Convertible Debenture: (i) has a due date
                of
                December 22, 2007, (ii) bears interest at a rate of 10% per annum;
                (iii)
                was subject to a registration rights agreement; (iv) is subject to
                certain
                conversion features including the Optional Redemption Feature and
                Warrant
                Feature as under the terms of the First Debenture. This debenture
                is
                referred to herein as the “Second Debenture.”





3.
            Pursuant
                to the terms and conditions of the Securities Purchase Agreement,
                Cornell
                was obligated to promptly provide the Company with $550,000, less
                certain
                fees and expenses, and with an additional $550,000 within two business
                days before the filing date of a registration statement registering
                shares
                of our common stock underlying the Convertible Debentures and Warrants.
                On
                February 21, 2006, we issued Secured Convertible Debentures with
                Cornell
                in the principal amount of $550,000. This Convertible Debenture:
                (i) has a
                due date of February 21, 2008, (ii) bears interest at a rate of 10%
                per
                annum; (iii) was subject to a registration rights agreement; and
                (iv) is
                subject to certain conversion features including the Optional Redemption
                Feature and Warrant Feature as under the terms of the First Debenture.
                This debenture is referred to herein as the “Third
                Debenture”.





The
      First
      Debenture, Second Debenture and Third Debenture are referred to collectively
      as
      the “Convertible Debentures.”





Conversion
      Feature





The
      Convertible Debentures are convertible (“Conversion Feature”) into our common
      stock at any time until repayment of the Convertible Debentures at the price
      per
      share equal to the lesser of:




a.
              an
                  amount equal to 120% of the closing bid price of the common stock
                  (the
                  “Optional Redemption Feature”); or


b.
            an
                amount equal to 80% of the average of the lowest closing bid prices
                of the
                common stock during the 5 trading days immediately preceding the
                conversion date.




15




Pursuant
      to the terms of the agreements, in no event shall Cornell convert the
      Convertible Debentures in such manner that would cause Cornell to beneficially
      own more than 4.99% of the then total issued and outstanding shares of the
      Company's common stock.





Significant
      Accounting Estimates and Policies





Accounting
      for Stock-Based Compensation. We have elected to apply the disclosure-only
      provisions of SFAS No. 123, Accounting for Stock-Based Compensation. In
      accordance with the provisions of SFAS 123, we apply Accounting Principles
      Board
      Opinion No. 25, Accounting for Stock Issued to Employees, and will use related
      interpretations in accounting for stock option plans. We account for stock
      issued to non-employees in accordance with the provisions of SFAS 123 and the
      Emerging Issues Task Force consensus in Issue No. 96-18, Accounting for Equity
      Instruments That are Issued to Other Than Employees for Acquiring or in
      Conjunction with Selling, Goods or Services. Generally, under APB 25, if the
      option exercise price for a fixed award to an employee is equal to the fair
      value of the common stock at the date of the grant of the stock option, no
      compensation expense is recorded. Under SFAS 123 and EITF 96-18, the amount
      of
      compensation expense that is recorded is based on an option pricing model which
      incorporates such factors as the expected volatility of future movements in
      the
      price of the underlying stock, risk-free interest rates, the term of the options
      and any dividends expected to be paid. As a result, under SFAS 123 and EITF
      96-18, we would generally expect to record a greater amount of compensation
      expense than under APB 25.





Secured
      Convertible Debentures and Warrants- Derivative Financial
      Instruments





The
      Convertible Debentures and the Warrants have been accounted for in accordance
      with SFAS No. 133, “Accounting for Derivative Instruments and Hedging
      Activities,” and Emerging Issues Task Force Issue No. 00-19, “Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in, a
      Company’s Own Stock” (“EITF No. 00-19”). EITF No. 98-5, "Accounting for
      Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios", EITF No. 00-27, “Application of Issue 98-5 to
      Certain Convertible Instruments”, EITF No. 05-02 “Meaning of ‘Conventional
      Convertible Debt Instrument’ in Issue No. 00-19”, EIFT No. 05-04 “The Effect of
      a Liquidated Damages Clause on a Freestanding Financial Instrument Subject
      to
      Issue No. 00-19,” and EITF No. 96-19 “Debtor’s Accounting for a Modification or
      Exchange of Debt Instruments” were also considered.





We
      have
      identified the following instruments and derivatives:





Convertible
      Debentures


Conversion
      Feature


Company’s
      Optional Redemption right


Warrant
      Feature





We
      have
      identified the Conversion Feature and Power Technology’s Optional Redemption
      within the Convertible Debentures to represent embedded derivatives. These
      embedded derivatives have been bifurcated from their respective host debt
      contracts and accounted for as derivative liabilities because they are subject
      to a Registration Rights Agreement (“RRA”). The Conversion Feature and Power
      Technology’s Optional Redemption within the Convertible Debentures have been
      bundled together as a single hybrid compound instrument in accordance with
      SFAS
      No. 133 Derivatives Implementation Group Implementation Issue No. B-15,
“Embedded Derivatives: Separate Accounting for Multiple Derivative Features
      Embedded in a Single Hybrid Instrument.” We have identified the Warrant Feature
      to be detachable derivatives. The Single Compound Embedded Derivatives within
      Convertible Debentures and the Derivative Liability for Warrants have been
      recorded at their respective fair values at the date of issuance (December
      22,
      2005); and are marked-to-market each quarter with changes in fair value recorded
      to Power Technology’s consolidated statements of operations as “Net change in
      fair value of derivative liabilities.” We have utilized a third party valuation
      firm to fair value these derivative liabilities under the following methods:
      a
      layered discounted probability-weighted cash flow approach for the Single
      Compound Embedded Derivatives within Convertible Debentures; and the
      Black-Scholes model for the Derivative Liability for Warrants based on a
      probability-weighted exercise price.





16




The
      fair
      value of the derivative liabilities are subject to the changes in the trading
      value of our common stock. As a result, our financial statements may fluctuate
      from quarter-to-quarter based on factors, such as the price of our stock at
      the
      balance sheet date, the amount of shares converted by debenture holders and/or
      exercised by warrant holders. Consequently, our financial position and results
      of operations may vary from quarter-to-quarter based on conditions other than
      operating revenues and expenses.





UNCERTAINTIES





There
      is
      no assurance that our activities will be profitable. The likelihood of our
      success must also be balanced with considerations in light of the problems,
      expenses, difficulties, complications, delays and all of the inherent risks
      frequently encountered in the formation and operation of a relatively new
      business.





GOING
      CONCERN





The
      financial statements are presented on the basis that Power Technology is a
      going
      concern, which contemplates the realization of assets and the satisfaction
      of
      liabilities in the normal course of business over a reasonable length of time.





At
      October 31, 2006, we had negative working capital of approximately
      $1,466,922 a loss from operations for the nine months ended October 31,
      2006, of $1,402,085 and an accumulated deficit of $14,959,257.





Management
      believes that current plans to expand our operations and a combination of our
      financing and plans to raise capital through the sale of our common stock will
      provide sufficient working capital to allow us to continue as a going concern.





In
      February 2006, we received $495,000 from the proceeds of the issuance of a
      convertible debenture to Cornell Capital Partners, L.P. (as discussed above).
      Additionally, in April 2006, we received $292,000 cash from the sale of our
      common stock and for exercise of stock options and warrants. As of October
      31,
      2006, we had approximately $40,000 cash on hand.





17




COSTS
      OF
      CONDUCTING BUSINESS. We will be required to incur substantial costs for research
      and development and equipment, establishing production and marketing operations,
      and related costs. A substantial portion of those costs must be paid whether
      or
      not any of its batteries or other products proves to be commercially successful
      on a broad scale. Our ability to generate a profit depends, among other factors,
      on the amount of equipment acquisition costs incurred, the amount of revenues
      from the sale of batteries and other products, and control over our operating
      costs.





TECHNOLOGICAL
      CHANGE. We expect that many new technologies and products will be introduced
      in
      the battery industry over the next several years. Established battery
      manufacturers, such as Exide, Delphi, A.C. Delco, Johnson Controls, Inc., East
      Penn Manufacturing Co., Inc GNB, Electrosource, Inc., Energy Conversion Devices,
      Inc., Hawker and Yuasa, all of which have substantially greater financial
      resources than us. These other companies have larger staffs, more resources,
      more laboratories, more equipment, and more manufacturing and testing facilities
      than us. These other companies can also dedicate substantially more personnel
      and resources to research and developing new products than us. They may be
      able
      to develop more technologically advanced products that are less expensive and
      have a greater useful life and better operating performance than our products.
      Our success will depend, among other things, on our ability to develop and
      maintain a competitive position technologically. There can be no assurance
      that
      we will have access to subsequently developed technology by other persons.
      Technological advances by a competitor may result in our present or future
      products becoming non-competitive or obsolete. We cannot be assured that
      competitors will not develop functionally similar or superior batteries, which
      event could have an adverse effect on our business.





CONTRACTS.
      We have no current contracts for the manufacture or sale of our batteries or
      other products. There can be no assurance that we will be able to obtain
      sufficient and suitable contracts for our business plan.





FLUCTUATIONS
      IN OPERATING RESULTS. Our revenues and results of operations may vary
      significantly in the future. Our revenues and results of operations are
      difficult to forecast and could be adversely affected by many factors, some
      of
      which are outside our control, including, among others, the expected relatively
      long sales and implementation cycles for our products; the size and timing
      of
      individual license transactions and joint venture arrangements; seasonality
      of
      revenues; changes in our operating expenses; changes in the mix of products
      sold; timing of introduction or enhancement of products by us or our
      competitors; market acceptance of new products; technological changes in
      technology; personnel changes and difficulties in attracting and retaining
      qualified sales, marketing, technical and consulting personnel; changes in
      customers' budgeting cycles; quality control of products sold; and economic
      conditions generally and in specific industry segments, particularly the
      automotive industry.




There
      can
      be no assurance that our products will achieve broad market acceptance or that
      we will be successful in marketing our products or enhancements thereto. In
      the
      event that our current or future competitors release new products that have
      more
      advanced features, offer better performance or are more price competitive than
      our products, demand for our products would decline. A decline in demand for,
      or
      market acceptance of, our batteries or other products as a result of
      competition, technological change, or other factors would have material adverse
      effects on our business, financial condition and results of operations.





18




RAW
      MATERIALS. The basic raw materials and components for the batteries and other
      products being developed by us are readily available. We do not expect to
      experience any significant delays in obtaining timely delivery of our materials
      and components.





SEASONALITY.
      We do not expect to experience material seasonal variations in revenues or
      operating costs, except that sales activity for its batteries may increase
      in
      the summer and winter seasons which is expected to cause an increase in our
      operations.





ITEM
      3. CONTROLS
      AND PROCEDURES.





As
      of the
      end of the period of this report, our principal executive and principal
      financial officer carried out an evaluation of the effectiveness of the design
      and operation of our disclosure controls and procedures. This evaluation was
      carried out under the supervision and with the participation of our management,
      including our Chief Executive Officer and Chief Financial Officer. Based on
      that
      evaluation, our Chief Executive Officer and Chief Financial Officer concluded
      that our disclosure controls and procedures are effective. There have been
      no
      changes in our internal controls or in other factors, that have materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.





**PART
      II**  **OTHER
      INFORMATION**





ITEM
      2. UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.





During
      our quarter ended October 31, 2006, we completed the following transactions
      in
      reliance upon exemptions from registration under the Securities Act of 1933,
      as
      amended (the "Act") as provided in Section 4(2) thereof. All certificates issued
      in connection with these transactions were endorsed with a restrictive legend
      confirming that the securities could not be resold without registration under
      the Act or an applicable exemption from the registration requirements of the
      Act. None of the transactions involved a public offering, underwriting discounts
      or sales commissions. We believe that each person was a “qualified” investor
      within the meaning of the Act and had knowledge and experience in financial
      and
      business matters, which allowed them to evaluate the merits and risks of our
      securities. Each person was knowledgeable about our operations and financial
      condition.





In
      September 2006, we issued 400,000 shares of our restricted common stock to
      Sentry Power Systems, LLC pursuant to an Asset
      Purchase Agreement .





ITEM
      5. OTHER
      INFORMATION





On
      July
      27, 2004, our Board of Directors executed a written consent (the “Consent”) with
      a resolution authorizing an amendment of our Articles of Incorporation in order
      to increase the number of authorized shares of common stock of the Company
      from
      100,000,000 to 750,000,000 shares. The Consent authorized the preparation and
      filing of an amendment to the Articles by the officers of the
      Company.





19




On
      July
      29, 2004, a Certificate of Amendment to Articles of Incorporation for Nevada
      Profit Corporations (the “Certificate”) was filed in the office of the Nevada
      Secretary of State stating that the Articles had been amended pursuant to
      Section 78.207(1) of the Nevada Revised Statues for the increase in the number
      of authorized shares.





Subsequent
      to the filing of the Certificate with the office of the Nevada Secretary of
      State, we issued shares of common stock which caused the number of issued and
      outstanding shares of the Company to exceed 100,000,000 shares. Currently,
      the
      number of shares of the Company issued and outstanding shares of common stock
      is
      149,391,694.





We
      have
      reviewed the procedures used to amend the Articles of Incorporation regarding
      the increase in the authorized number of shares of common stock of the Company.
      We believe that the Company did not fully comply with the requirements of
      Section 78.207 of the Nevada Revised Statutes, and as a result, any shares
      of
      common stock issued by the Company in excess of 100,000,000 shares may be void
      or voidable in view of the lack of prior shareholder approval of the Amendment
      to the Articles of Incorporation of the Company.





In
      order
      to address these events, the Company has filed preliminary proxy material with
      the Securities and Exchange Commission and will call a special meeting of the
      stockholders of the Company to authorize the increase of its authorized number
      of shares of common stock from 100,000,000 shares to 750,000,000 shares, and
      to
      amend the Articles of Incorporation accordingly.





We
      have
      been advised by Nevada corporate counsel that existing shareholders may lose
      claims relating to the voidability of their shares if our shareholders approve
      the amendment to our Articles of Incorporation because the appropriate company
      action will effectively cure any overissues. If our shareholders approve the
      amendment to our Articles of Incorporation that will not serve as an absolute
      bar to such claims, but it will serve as an additional corporate defense to
      any
      potential claims. One of the purposes for seeking shareholder approval now
      to
      file an amendment to our Charter is to reduce the likelihood of potential claims
      against the Company relating to a possible overissuance and to mitigate the
      chances for success of any claims if they should be brought against the Company.
      In addition, without clarification of the issue, we will not have sufficient
      shares of authorized Common Stock to satisfy our present contractual obligations
      or to achieve any future financing or for mergers or acquisitions that we may
      wish to pursue. The inability to issue new shares in satisfaction of our
      contractual obligations would lead to defaults under such
      contracts.




ITEM
      6.EXHIBITS





Exhibit
      31.1 - Certification of Chief Executive Officer and Chief Financial Officer
      of
      Power Technology, Inc. required by Rule 13a - 14(1) or Rule 15d - 14(a) of
      the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.




Exhibit
      32.1 -- Certification of Chief Executive Officer and Chief Financial Officer
      of
      Power Technology, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002
      and Section 1350 of 18 U.S.C. 63.





20





**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.




**POWER TECHNOLOGY,
              INC.**Date:
July
              2, 2007
            By:
            /s/
              Bernard J.
              WalterBernard J. WalterPresident
              Chief
              Executive Officer andPrincipal Financial
              Officer




21