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: April 30,
                2007





[ 
              ]
            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 of incorporation or
                organization)
            (IRS
                Employer Identification
                No.)**7101
                HIGHWAY 71 WEST, SUITE 200**
              **AUSTIN,
                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]





On
      June
      11, 2007, there were 161,903,230 shares of common stock, $.01 par value,
      outstanding.





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










TABLE
      OF CONTENTS








PART
                  I
              FINANCIAL
                  INFORMATIONItem
                  1.
              Financial
                StatementsConsolidated
                  Balance Sheets as of April 30, 2007 (unaudited)
                and
                    January 31, 2007 (audited)
              F-1Consolidated
                  Statements of Operations for the six months
                ended
                  April 30, 2007 and 2006 (unaudited)
              F-2Consolidated
                  Statements of Cash Flows for the six months
                ended
                    April 30, 2007 and 2006 (unaudited)
              F-3Notes
                  to Consolidated Financial Statements (unaudited)
              F-4Item
                  2.
              Management’s
                  Discussion and Analysis or Plan of Operations
              1Item
                  3.
              Controls
                and Procedures
              19PART
                  II OTHER INFORMATIONItem
                  1.
              Legal
                  Proceedings
              
              20Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              20Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              21Item
                  5.
              Other
                  Information
              
              21Item
                  6.
              Exhibits
              
              21Signatures
              
              22








i


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





ITEM1.
            FINANCIAL
                STATEMENTS.




April
                  30,
              
              January
                  31,2007
              
              2007(Restated)AssetsCurrent
                  assets:Cash
                  and equivalents
              
              $
              7,374
              
              $
              80,649Accounts
                  receivable
              
              
              1,372
              
              
              1,372Inventory
              
              
              144,563
              
              
              144,563Other
                  current assets
              
              
              3,022
              
              
              19,606Total
                  current assets
              
              
              156,331
              
              
              246,190Fixed
                  assets, net of accumulated depreciation of $71,101 and
                  $62,254
              
              
              135,945
              
              
              142,266Deposits
              
              
              2,708
              
              
              2,708Deferred
                  financing fees
              
              
              43,377
              
              
              58,336Total
                  assets
              
              $
              338,361
              
              $
              449,500Liabilities
                  and Stockholders' DeficitCurrent
                  LiabilitiesAccounts
                  payable
              
              $
              766,690
              
              $
              714,612Short-term
                  debt
              
              
              449,000
              
              
              366,000Short-term
                  debt - related party
              
              
              -
              
              
              10,500Derivative
                  liability
              
              
              1,164,227
              
              
              1,733,570Total
                  current liabilities
              
              
              2,379,917
              
              
              2,824,682Convertible
                  debentures net of discount
              
              
              998,510
              
              
              908,440Total
                  liabilities
              
              
              3,378,427
              
              
              3,733,122Stockholders'
                  deficit:Preferred
                  stock, $0.01 par value, 1,000,000 sharesauthorized,
                  none issued or outstanding
              
              
              -
              
              
              -Common
                  stock, $0.001 par value, 750,000,000 sharesauthorized,
                  157,736,563 and 149,391,694 sharesissued
                  and outstanding
              
              
              157,736
              
              
              149,391Additional
                  paid-in capital
              
              
              14,263,785
              
              
              13,808,744Accumulated
                  deficit
              
              
              (17,458,691
              )
              
              (17,238,861
              )Other
                  comprehensive loss
              
              
              (2,896
              )
              
              (2,896
              )Total
                  stockholders' deficit
              
              
              (3,040,066
              )
              
              (3,283,622
              )Total
                  liabilities and stockholders' deficit
              
              $
              338,361
              
              $
              449,500








For
                the three months endedApril
                30,2007
            
            2006Sales
            
            $
            339
            
            $
            -Cost
                of goods sold
            
            
            -
            
            
            -Gross
                profit
            
            
            339
            
            
            -Expenses:General
                administrative expenses
            
            
            191,036
            
            
            230,447Research
                & development
            
            
            93,881
            
            
            40,432Consulting
                fees
            
            
            190,953
            
            
            222,000Depreciation
                and amortization
            
            
            8,846
            
            
            309Total
                operating expense
            
            
            484,716
            
            
            493,188Net
                operating loss
            
            
            (484,377
            )
            
            (493,188
            )Other
                income (expense)Interest
                income
            
            
            2
            
            
            2,948Interest
                expense
            
            
            (245,166
            )
            
            (103,996
            )Financing
                fees
            
            
            (15,000
            )
            
            (50,626
            )Net
                change in fair value of derivative liabilities
            
            
            524,711
            
            
            (2,093,752
            )Total
                other income (expense)
            
            
            264,547
            
            
            (2,245,426
            )Net
                loss
            
            $
            (219,830
            )
            $
            (2,738,614
            )Other
                comprehensive income-foreign currency translation
            
            
            -
            
            
            306Total
                comprehensive loss
            
            $
            (219,830
            )
            $
            (2,738,308
            )Weighted
                average number ofcommon
                shares outstanding-basic and fully diluted
            
            
            147,836,547
            
            
            135,042,862Net
                loss per share-basic and fully diluted
            
            $
            (0.00
            )
            $
            (0.02
            )









For
                  the three months endedApril
                  302007
              
              2006Cash
                  flows from operating activitiesNet
                  loss
              
              $
              (219,830
              )
              $
              (2,738,614
              )Adjustments
                  to reconcile net loss to net cashused
                  by operating activitiesDepreciation
                  and amortization expense
              
              
              8,846
              
              
              309Amortization
                  of debt discount
              
              
              215,070
              
              
              103,996Amortization
                  of deferred financing cost
              
              
              14,959
              
              
              13,226Net
                  change in fair value of derivative liabilities
              
              
              (524,711
              )
              
              2,093,752Share-based
                  compensation
              
              
              279,428
              
              
              275,133Changes
                  in operating assets and liabilities:Prepaid
                  expense
              
              
              16,584
              
              
              1,278Accounts
                  payable and accrued expenses
              
              
              66,404
              
              
              44,592Net
                  cash used by operating activities
              
              
              (143,250
              )
              
              (206,328
              )Cash
                  flows from investing activitiesPurchase
                  of equipment
              
              
              (2,525
              )
              
              (122,175
              )Net
                  cash used by investing activities
              
              
              (2,525
              )
              
              (122,175
              )Cash
                  flows from financing activitiesProceeds
                  from convertible debentures
              
              
              90,000
              
              
              550,000Payment
                  of deferred financing costs
              
              
              (17,500
              )
              
              (55,000
              )Issuance
                  of common stock
              
              
              -
              
              
              292,000Net
                  cash provided by financing activities
              
              
              72,500
              
              
              787,000Effect
                  of exchange rate changes on cash
              
              
              -
              
              
              306Net
                  increase (decrease) in cash
              
              
              (73,275
              )
              
              458,803Cash
                  and equivalents-beginning
              
              
              80,649
              
              
              180,583Cash
                  and equivalents-ending
              
              $
              7,374
              
              $
              639,386Supplemental
                  disclosuresInterest
                  paid
              
              $
              9,718
              
              $
              -Income
                  taxes paid
              
              $
              -
              
              $
              -Non-cash
                  investing and financing activitiesDiscount
                  on debt from derivatives
              
              $
              -
              
              $
              301,946Common
                  stock issued for debt
              
              $
              125,000
              
              $
              -Common
                  stock issued for payables
              
              $
              65,826
              
              $
              -Reduction
                  in derivative liability from extinguishment of debt
              
              $
              51,500
              
              $
              -









**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, 2007
        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 $17,458,691 during the period from June 3, 1996 (inception) to
        April
        30, 2007. 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**
 
 Convertible
        Debentures-
 
 The
        Convertible Debentures (CCP-4, CCP-5 and CCP-6) balances at April 30, 2007
        as
        adjusted:
 
 CCP-4
                
                CCP-5
                
                CCP-6
                
                TotalConvertible
                    Debentures - January 31, 2007
                
                $
                311,991
                
                $
                264,955
                
                $
                331,494
                
                $
                908,440Principal
                    payment
                
                
                (125,000
                )
                
                
                
                
                -
                
                
                (125,000
                )-
                
                
                -Amortization
                    of discount
                
                
                100,696
                
                
                70,769
                
                
                43,605
                
                
                215,070Convertible
                    Debentures - April 30, 2007
                
                $
                287,687
                
                $
                335,724
                
                $
                375,099
                
                $
                998,510
  F-4
 **POWER
          TECHNOLOGY, INC.**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**
 For
        the
        three months ended April 30, 2007, the amortization of unamortized discount
        on
        the Convertible Debentures (CCP-4, CCP-5 and CCP-6) was $215,070 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 three
        months
        ended April 30, 2007:
  CCP-4
                
                CCP-5
                
                CCP-6
                
                TotalBalance
                    - January 31, 2007 (restated)
                
                $
                189,439
                
                $
                188,454
                
                $
                202,602
                
                $
                580,495Extinguishment
                    of debt
                
                
                (44,630
                )
                
                
                
                
                -
                
                
                (44,630
                )Mark-to-market
                
                
                (21,989
                )
                
                (64,726
                )
                
                9,784
                
                
                (76,931
                )Balance
                    - April 30, 2007
                
                
                122,820
                
                
                123,728
                
                
                212,386
                
                
                458,934
 The
        Derivative-Compound Embedded Derivatives within Warrants reflect the following
        activity for the three months ended April 30, 2007:
  CCP-4
                
                CCP-5
                
                TotalBalance
                    - January 31, 2007 (restated)
                
                $
                566,176
                
                $
                586,899
                
                $
                1,153,075-Mark-to-market
                
                
                (219,867
                )
                
                (227,915
                )
                
                (447,782
                )Balance
                    - April 30, 2007
                
                $
                346,309
                
                $
                358,984
                
                $
                705,293
  **NOTE
        3 - Stockholders' Equity**
 
 During
        the three months April 30, 2007, Power Technology issued 4,202,586 shares
        for
        payment of principal on Note CCP-4. The shares were valued at
        $125,000.
 
 During
        the three months April 30, 2007, Power Technology issued 666,666 shares for
        payment of accrued directors' fees. The shares were valued at
        $36,000.
 
 During
        the three months April 30, 2007, Power Technology issued 1,771,184 shares
        for
        services. The shares were valued at $79,703.
 
 During
        the three months April 30, 2007, Power Technology issued 1,704,433 shares
        for
        payment of accrued expenses. The shares were valued at $75,826.
 
 At
        April
        30, 2007, Power Technology had a stock payable of $123,789, recorded for
        the
        accrual of 1,861,783 common shares to be issued to Power Technology’s president
        under his employment agreement.
 
 During
        the three months ended April 30, 2006, Power Technology issued 1,200,000
        shares
        of common stock for services rendered with a value of $72,000
 
 During
        the three months ended April 30, 2006, a warrant holder exercised 1,500,000
        warrants for an aggregate price of $90,000.
 
 During
        the three months ended April 30, 2006, an option holder exercised 3,366,667
        options for an aggregate price of $202,000.
  F-5
 **POWER
          TECHNOLOGY, INC.**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**
 **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.
 
 Activity
        of warrants during the three months ended April 30, 2007 and 2006 is as
        follows:
  2007
                
                2006Weighted
                
                
                
                WeightedAverage
                
                
                
                AverageWarrants
                
                Share
                    Price
                
                Warrants
                
                Share
                    PriceOutstanding
                    at beginning of period
                
                
                20,094,875
                
                $
                0.078
                
                
                1,500,000
                
                $
                0.060Granted
                
                
                -
                
                
                -
                
                
                20,094,875
                
                
                0.078Exercised
                
                
                -
                
                
                -
                
                
                (1,500,000
                )
                
                0.060Forfeited
                
                
                -
                
                
                -
                
                
                -
                
                
                -Outstanding
                    at end of period
                
                
                20,094,875
                
                $
                0.078
                
                
                20,094,875
                
                $
                0.078
 The
        weighted average fair value of the warrants granted during the three months
        ended April 30, 2007 was $0.078. 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 April 30, 2007:
 
 Outstanding
                
                ExercisableNumber
                    of
                
                Remaining
                
                Number
                    ofExercise
                    Price
                
                
                Shares
                
                
                Life
                
                
                Shares$
                    0.078
                
                
                20,094,875
                
                
                0.853
                
                
                20,094,875
 
 Stock
        options
 
 Power
        Technology granted 1,000,000 options to an employee at April 2, 2007 with
        an
        exercise price of $0.005. The fair value of the options granted to the director
        was valued on the date of the grant using the Black-Scholes option-pricing
        model
        with the following weighted average assumptions, risk-free interest rate
        4.820%,
        expected life or two years, expected stock volatility of 148%, no expected
        dividends. A value of $50,000 was charged to research and development in
        the
        first quarter of fiscal 2008 **.**
 
 Power
        Technology granted 5,000,000 options to a consultant at April 2, 2007 with
        an
        exercise price of $0.04. The fair value of the options granted to the director
        was valued on the date of the grant using the Black-Scholes option-pricing
        model
        with the following weighted average assumptions, risk-free interest rate
        4.82%,
        expected life of one year, expected stock volatility of 148%, no expected
        dividends. A value of $150,000 was charged to expense in the first quarter
        of
        fiscal 2008 **.**
 F-6
 **POWER
          TECHNOLOGY, INC.**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**
 Activity
        of warrants during the three months ended April 30, 2007 and 2006 is as
        follows:
  2007
                  
                  
                  2006WeightedWeighted
                  
                  
                  
                  
                  
                  AverageAverage
                      Option
                  
                  
                  
                  
                  
                  OptionOptions
                  
                  
                  Price
                  
                  
                  Options
                  
                  
                  PriceOutstanding
                      at beginning of period
                  
                  
                  1,000,000
                  
                  $
                  0.005
                  
                  
                  1,000,000
                  
                  $
                  0.005Granted
                  
                  
                  6,000,000
                  
                  
                  0.034
                  
                  
                  
                  
                  
                  -Forfieted
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Outstanding
                      at end of period
                  
                  
                  7,000,000
                  
                  $
                  0.030
                  
                  
                  1,000,000
                  
                  $
                  0.005
 
 **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 5,675,949 shares
        of our
        common stock valued at $896,800 (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.
 
 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 entire amount of Goodwill
        was
        impaired as of January 31, 2007.
 
 F-7
 
 **POWER
            TECHNOLOGY, INC.**
 **Notes
            to Consolidated Financial Statements**
 **(Unaudited)**
 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 the
        three months ended April 30, 2006 is as follows:
  Three
                    Months EndedApril
                    30, 2006Revenue
                
                $
                6,385Net
                    income (loss)
                
                $
                813,934Net
                    income (loss) per common share
                
                $
                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 period 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 - Restatement**
 
 In
        June
        2007, Power Technology concluded that it was necessary to restate its financial
        results for the fiscal year ended January 31, 2007 to correct errors in the
        derivative liabilities as calculated by a third party specialist. Power
        Technology had previously recognized derivative liabilities of $1,172,784
        as of
        January 31 2007. 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
        understating the value of the derivative liabilities. As a result, Power
        Technology has obtained a revised valuation report and has increased the
        derivative liabilities to $1,733,570 at January 31, 2007. There is no impact
        on
        the financial information for the three months ended April 30,
        2006.
 
 As
        summary of the effects of this restatement as of January 31, 2007 is shown
        in
        the following table:
 
 As
                  previouslyreported
              
              As
                  restatedDerivative
                  liabilities
              
              $
              1,172,784
              
              $
              1,733,570Total
                  current liabilities
              
              
              2,263,896
              
              
              2,824,682Total
                  liabilities
              
              
              3,172,336
              
              
              3,733,122Accumulated
                  deficit
              
              
              (16,678,075
              )
              
              (17,238,861
              )Total
                  stockholders' deficit
              
              
              (2,722,836
              )
              
              (3,283,622
              )
 
 **NOTE
        7 - Subsequent Event**
 
 On
        June
        12, 2007, Power Technology amended the option agreement with a consultant
        to
        provide for the right to purchase up to 5,000,000 shares of our common stock
        exercisable at $0.0065 per share instead of $0.04 per share.
   F-8


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







PLAN
      OF OPERATIONS





The
      following discussion of our plan of operations and financial condition should
      be
      read in connection with our consolidated financial statements and notes thereto
      appearing elsewhere in this quarterly 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
      our management 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. Factors that could cause or contribute to differences between actual
      and projected results include, but are not limited to, the current lack of
      funding need for working capital.





PILOT
      PLANT





We
      have
      designed and have partially constructed a pilot plant capable of manufacturing
      our current collectors in commercial quantities for use in lead acid batteries.
      The manufacturing process to create a current collector will include
      manufacturing the RVC plates, casting a top frame and tab and side frames on
      the
      individual RVC plates, depositing the lead tin alloy on the RVC plate by
      electroplating, applying battery paste onto the individual RVC foam plate,
      and
      curing them. 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 insertion of our current collector 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 our 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, at the rate of
      approximately $2,951 per month.





The
      purpose of the Pilot Plant is not to manufacture current collectors in
      commercial quantities for sale to battery manufacturers. 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.





We
      have
      completed the engineering, design and installation of equipment necessary to
      manufacture RVC plates. The consulting costs, equipment, and materials to
      manufacture 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.


1


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 were 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.




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.


2


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.





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 designed
      and built 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 finally 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. We began
      successfully manufacturing current collectors. During August of 2006 we began
      to
      successfully manufactured RVC. During October of 2006, we began to successfully
      cast and apply the top side and bottom frames to the hundreds of RVC plates
      we
      had manufactured and we have successfully electroplated the lead-tin alloy
      onto
      those RVC plates uniformly. We used some of these plates to manufacture
      prototype batteries.


3


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.





PROTOTYPE
      BATTERIES





Pursuant
      to a Technology Development and Support Agreement, during 2001 scientists
      employed by BC Research, Inc. (“BCR”) manufactured four prototype batteries for
      us that included current collectors composed of RVC plates on which a lead-tin
      alloy had been deposited by electroplating. Two prototypes were 50 ampere hour
      capacity, 12 volt batteries that were 4.5 inches wide, 6.5 inches long, 6 inches
      high and weighed 11 Kilograms. These two prototype batteries each took
      approximately 21 man hours to construct. One prototype was a 75 ampere hour
      12
      volt battery that was 5 inches wide, 8.5 inches long, 6 inches high, weighed
      14
      Kilograms and it took approximately 25 man hours to construct. One prototype
      was
      a 310 ampere hour, 2 volt battery that was 5.7 inches wide, 8.5 inches long,
      6
      inches high, weighed 14 Kilograms and it took approximately 32 man hours to
      construct. In the fall of 2005, we manufactured a 30 amp hour, 12 volt prototype
      battery that was 5 inches wide, 7.5 inches long, 6 inches high, weighed 9.5
      Kilograms.





In
      February of 2007 we applied battery paste to positive and negative current
      collectors we had manufactured and electroplated in our pilot plant. The battery
      paste was manually applied to each current collector at which time it
      technically became an electrode.





During
      April of 2007, a commercial battery plant used our positive and negative
      electrodes to manufacture five Valve Regulated, Absorbed Glass Matt, Maintenance
      Free, Lead Acid batteries for
      customer evaluation and testing. The prototype batteries were manufactured
      using
      existing standard processes and machinery necessary for insertion of our
      electrodes collector into the battery case. The completion of the manufacturing
      of our prototype batteries used existing standard processes, methods, and
      machinery commonly used in the manufacture of a typical lead acid battery.
      Our
      prototype batteries were tested at the manufacturing plant. The batteries were
      pressure tested and did not leak, The battery cases were properly filled with
      electrolyte. The batteries had no internal shorts.





We
      have
      charged these batteries and following the completion of our preliminary
      testing, a battery will be delivered for testing and evaluation to Kung Long
      Batteries Industrial Co. Ltd., a publicly traded expert manufacturer of lead
      acid batteries and to Power Battery Co., a privately owned battery manufacturer
      which has major locations in Patterson, New Jersey, Iberville, Quebec, Canada,
      and Romsey, England. In addition, prototype batteries will be delivered to
      other
      independent battery manufacturers for evaluation and testing. We anticipate
      completing the preliminary testing of these prototype batteries by July 1,
      2007
      and intend to post data relating to that preliminary testing on our website,
      http://www.pwtcbattery.com/.


4


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. We have entered into discussed with two established
      battery manufacturers concerning a joint project to manufacture prototype NATO
      6T batteries for evaluation and testing by TARDEC.





EXPECTED
      PURCHASE OF SIGNIFICANT EQUIPMENT





We
      expect
      to make significant equipment purchases in order to construct a pilot plant
      capable of manufacturing our current collectors in commercial quantities for
      use
      in lead acid batteries. 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. 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 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.





5




LICENSING
      AGREEMENTS




We
      do not
      intend to manufacture and sell our batteries on a commercial scale. We do plan
      to manufacture our proprietary current collectors which would be a component
      part of a lead acid battery. We own the rights to U.S. Patent Serial Number
      7,060,391 B2 titled Current Collector Structure and Methods to Improve the
      Performance of a Lead-Acid Battery, which relates to a current collector for
      use
      in lead-acid batteries comprising a reticulated carbon substrate having
      circuitous pores and a layer of lead tin alloy applied to the reticulated carbon
      substrate. This patent was issued on June 13, 2006 and will provide patent
      protection until March 25, 2024. We consider the rights to this Patent
      Application to be our core technology. 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.





The
      distribution method for batteries employing our unique current collectors will
      be by third parties who manufacture and sell the batteries pursuant to include
      joint venture agreements, licensing agreements, technology transfer agreements
      or other agreements. We have not yet executed any licensing agreements,
      technology transfer agreements or other similar agreements. Any revenues or
      profits which we may derive from these arrangements will be substantially
      dependent upon the willingness and ability of our licensees and joint venture
      partners to devote their financial resources and manufacturing and marketing
      capabilities to commercialize products based on our technologies.





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 Lon’s preliminary testing of our current collectors and technical
      issues relating to the manufacturing of our battery. We intend to deliver on
      of
      our recently manufactured prototype batteries to Kung Long for testing and
      evaluation 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.





6





EXPECTED
      PURCHASE OF SIGNIFICANT EQUIPMENT





We
      expect
      to make significant equipment purchases in order to construct a pilot plant
      capable of manufacturing our current collectors in commercial quantities for
      use
      in lead acid batteries. 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. 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 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.





AUTOMATIC
      BATTERY BACKUP POWER SYSTEMS





ACQUISITION
      - SENTRY POWER TECHNOLOGY, INC.





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 were 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 was due and payable on May 15, 2007
      at
      which time CSI agreed to extend the due date on the Note to June 30, 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.





7




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.





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.





8




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.





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.




9




**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.





10


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.





EVENTS
      CONCERNING SENTRY POWER TECHNOLOGY, INC.





On
      April
      11, 2006, our wholly owned subsidiary, Sentry Power Technology, Inc. (“SPT”) and
      we entered into an Asset Purchase Agreement (the “Agreement”) with Sentry Power,
      LLC (“Sentry LLC”). Pursuant to the terms of the Agreement, SPT acquired the
      assets of Sentry LLC for a total purchase price of $1,195,000 which was paid
      at
      closing by issuing $960,000 worth of our restricted common stock (the “Power
      Shares”). Additionally, SPT assumed $235,000 in debt presently owed by Sentry
      LLC to CSI Business Finance, Inc. (“CSI”).




With
      regard to the debt, SPT assumed the debt to CSI and executed a new security
      agreement and we guaranteed the note. At closing, we executed a stock pledge
      agreement granting CSI a first lien on all capital stock or other interest
      of
      SPT which we hold. Our agreement to guarantee the debt was conditioned upon
      and
      subject to the terms and conditions of a Guaranty Stock Pledge Agreement (the
      “Stock Pledge Agreement”) which was entered into at closing between Sentry LLC
      and us which provides for Sentry LLC to pledge as collateral for the Stock
      Pledge Agreement an amount equal to $250,000 of the Power Shares. As part of
      the
      transaction, SPT entered into employment agreements with Robert Magyar to serve
      as SPT’s President and Michael Julian to serve as SPT’s Vice President/Director
      of Operations. Following
      the execution of the Agreement, disagreements arose between us and SPT on one
      hand, and Mike Julian and Sentry LLC on the other hand, concerning certain
      matters relating to the transaction.




On
      May
      10, 2007, the Company, SPT, Mike Julian and Sentry LLC executed a Mutual Release
      (the “Sentry Release”) concerning the disagreements. Pursuant to the Sentry
      Release, Mike Julian resigned as Vice President/Director of Operations of SPT
      and released all claims for further compensation under the Employment Agreement.
      Mike Julian and Sentry LLC released the Company and SPT from and with respect
      to
      any and all claims Julian or Sentry LLC has had or may have, arising out of
      or
      in any way connected with the CSI Note (as hereinafter defined), the Assignment,
      the Asset Purchase Agreement, the Employment Agreement, and the Stock Pledge
      Agreement. The Company and SPT released Mike Julian and Sentry LLC from and
      with
      respect to any and all claims the Company and SPT have had or may have, arising
      out of or in any way connected with the CSI Loan, the Assignment, the Asset
      Purchase Agreement, the Employment Agreement, and the Stock Pledge Agreement.




11


As
      part
      of the transaction, Sentry LLC agreed to execute and executed a Stock Pledge
      Agreement between Sentry LLC and CSI (the “Sentry-CSI Stock Pledge”). Pursuant
      the Sentry-CSI Stock Pledge, Sentry LLC pledged and delivered to CSI its
      6,075,949 shares of our common stock for the payment of our obligations
      under the that
      certain Secured Promissory Note dated April 7, 2006 (the “CSI Note”) issued
      in
      favor of CSI by Sentry LLC pursuant
      to which the Company, as successor-in-interest to Sentry LLC, has promised
      to
      pay the principal sum of $235,000 and the obligations of the Company under
      that
      certain that certain Secured Promissory Note dated January 31, 2007 issued
      in
      favor of CSI, pursuant
      to which the Company promised to pay the principal sum of $165,000 to CSI.




On
      May
      10, 2007, the Company, SPT, and Robert Magyar executed a Mutual Release
      concerning any and all claims they had or may have against each other arising
      out of or in any way connected with the CSI Note and the Asset Purchase
      Agreement.




On
      May
      10, 2007 the Company and SPT executed an Amendment to the May 1, 2006 Employment
      Agreement of Robert Magyar pursuant to which Robert Magyar released any and
      all
      claims he may have to Power Technology, Inc. Share Certificates #10137, #10138,
      and #10156 in the name of Sentry Power Systems LLC, evidencing ownership of
      6,075,949 shares of common stock. We agreed to Issue to Robert Magyar 500,000
      shares of our restricted common stock.





With
      regard to the CSI debt, SPT assumed the $235,000 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 was due and payable on May
      15,
      2007 at which time CSI agreed to extend the due date on the Note to June 30,
      2007.








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 fiscal year ended January 31, 2007, we incurred
      material capital expenditures of $155,626 for the purchase of pilot plant
      machinery to manufacture Reticulated Vitreous Carbon foam (“RVC”); for the
      purchase of a double panel casting mold to cast a lead top frame and tab, a
      bottom, and two side frames on uncoated RVC foam plates; and for the purchase
      of
      machinery to apply lead tin plating to reticulated vitreous carbon plates.
      During the fiscal quarter ended April 30, 2007, we did not incur any material
      capital expenditures for office equipment, office furniture or other fixed
      assets.





CAPITAL
      RESOURCES





On
      January 31, 2007, we executed a Secured Promissory Note with CSI Business
      Finance, Inc. (“CSI”) in the amount of $165,000, which was funded to us as
      follows: $75,000 on January 31, 2007, $45,000 on March 1, 2007 and a final
      funding of $45,000 on April 1, 2007. The Note bears interest at 18% per annum
      from the date of funding until paid in full. Accrued interest is due and payable
      on the first day of March 2007, and on the 1 st day
      of
      each subsequent month during the term of the Note. The Note matures on June
      30,
      2007. We may prepay the Note. In addition, the Note has been secured by a Stock
      Pledge Agreement between CSI and our Chief Executive Officer, Bernard Walter,
      covering 9,971,604 shares of our common stock held by Mr. Walter.





12


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.





LIQUIDITY





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





FISCAL QUARTER
      ENDED APRIL 30,




2007
              
              2006Net
                  cash used by operating activities
              
              $
              (143,250
              )
              $
              (206,328
              )Net
                  cash used by investing activities
              
              $
              (2,525
              )
              $
              (122,175
              )Net
                  cash provided by financing activities
              
              $
              72,500
              
              $
              787,000





At
      January 31, 2007, we had $80,649 of cash. As of April 30, 2007, we had $7,374
      of
      cash on hand.





At
      April
      30, 2007, we had negative working capital of approximately $2,223,586, a
      loss from operations for the three months ended April 30, 2007 of $219,830
      and an accumulated deficit of $17,458,691 since June 3, 1996, the date of our
      inception.





Our
      ability to satisfy our obligations will depend in part upon our ability to
      successfully complete the offer and sale of additional shares of its common
      stock and in part upon our ability to reach a profitable level of operations.
      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.





13




STRATEGIC
      ALTERNATIVES





Our
      board
      of directors has voted to explore potential strategic alternatives for the
      company aimed at maximizing shareholder value. These alternatives may include
      possible merger candidates, sale of the company's subsidiary operations, or
      the
      sale or strategic partnership with others of the company's patented technology.
      We have recently received inquiries from potential strategic partners regarding
      parts of the company's business, and the board is committed to exploring all
      alternatives to maximize shareholder value.








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.





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.”





14


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 100% of the average of the three lowest closing bid
                prices
                of the common stock for the 30 trading days immediately preceding
                the
                conversion date.


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.





On
      March
      8, 2007 Cornell exercised its conversion rights under the December 22, 2005
      Convertible Debenture relating to $25,000 of the principal due and was issued
      1,077,586 shares of our common stock. On April 18, 2007, Cornell exercised
      its
      conversion rights under the December 22, 2005 Convertible Debenture relating
      to
      $100,000 of the principal due and was issued 3,125,000 shares of our common
      stock. Subsequent to our April 30, 2007 fiscal quarter, on May 18, 2007, Cornell
      exercised its conversion rights under the December 22, 2005 Convertible
      Debenture relating to $100,000 of the principal due and is to be issued
      4,166,667 shares of our common stock.




Significant
      Accounting Estimates and Policies





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.


15




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.





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.





Share-Based
      Compensation





On
      February 1, 2006, Power Technology adopted SFAS No. 123(R), "Share-Based
      Payment". SFAS 123(R) replaced SFAS No. 123 and supersedes APB Opinion No.
      25.
      SFAS 123(R) requires all share-based payments to employees, including grants
      of
      employee stock options, to be recognized in the financial statements based
      on
      their fair values. Power Technology adopted SFAS 123(R) using the modified
      prospective method which requires the application of the accounting standard
      as
      of February 1, 2006. The consolidated financial statements reflect the
      impact of adopting SFAS 123(R).


16




UNCERTAINTIES





GOING
      CONCERN





The
      consolidated 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. However, there are conditions that raise substantial
      doubt about our ability to continue as a going concern.





At
      April
      30, 2007, we had negative working capital of $2,223,586 a loss from
      operations for the three months ended April 30, 2007 of $219,830 and an
      accumulated deficit of $17,458,691.





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.





On
      January 31, 2007, we executed a Secured Promissory Note with CSI Business
      Finance, Inc. (“CSI”) in the amount of $165,000, which was funded to us as
      follows: $75,000 on January 31, 2007, $45,000 on March 1, 2007 and a final
      funding of $45,000 on April 1, 2007. As of May 31,, 2007, we had approximately
      $20,000 cash on hand.





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.




17





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.





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.





Bernard
      J. Walter, our Chief Executive Officer and Chief Financial Officer, has
      concluded that our disclosure controls and procedures were
      not effective for the period ending April 30, 2007 due to the significant
      adjustments from the auditors related to the goodwill impairment and the
      derivative liability. He has evaluated these controls and procedures as of
      April
      30, 2007 and recommended changes to the audit committee. There were no changes
      in our internal controls over financial reporting that have materially affected,
      or are reasonably likely to materially affect, our internal controls over
      financial reporting.





18


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




ITEM1.
            LEGAL
                PROCEEDINGS




On
      May 7,
      2007, Cosmo
      Barone (“Barone”) filed a civil action, CA No. 2007-05-090 against Sentry Power
      Systems, LLC, (“Sentry LLC”) Sentry Power Technology, Inc.(“Sentry Power”),
      Power Technology Inc. (“Power”) , Michael Julian, and Robert Magyar in the Court
      of Common Pleas of the State of Delaware in and for Newcastle County. Barone
      alleges that he performed services as a Technical Consultant for Sentry LLC
      during the period from September 2005 through October 2005 and that he is owed
      $5,750 for these services. Barone alleges that when Sentry Power acquired the
      assets of Sentry LLC in May of 2006, that Sentry Power assumed the liability
      to
      Barone. Barone has alleged that Sentry Power and Power are liable to him for
      breach of contract and pursuant to the doctrine of quantum meruit. Barone also
      seeks interest and attorney’s fees in an unspecified amount. The Company denies
      liability to Barone.








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





During
      our quarter ended April 30, 2007, 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
      March
      2007, we issued Thomas H. Hopwood, our director at the time, 333,333 shares
      of
      our common stock, valued at $18,000 as director's fees for the period from
      June
      220 through December 2006.





In
      March
      2007, we issued F. Bryson Farrill, our director, 333,333 shares of our common
      stock, valued at $18,000, as director's fees for the previous six months.





In
      April
      2007 we issued Grandview Holdings Corp. 707,405 shares of our common stock,
      valued at $33,147.





In
      March
      2007, we issued Cornell Capital Partners LP, 1,077,586 shares of our common
      stock, valued at $25,000 as a conversion of principal under the terms of our
      Secured Convertible Debenture No. CCP-4, dated December 22, 2005.





In
      April
      2007, we issued Cornell Capital Partners LP, 3,125,000 shares of our common
      stock, valued at $100,000 as a conversion of principal under the terms of our
      Secured Convertible Debenture No. CCP-4, dated December 22, 2005.





19





ITEM4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS.








As
      previously disclosed in our Form 8-K, at a Special Meeting of Shareholders
      held
      on February 22, 2007, our shareholders approved an Amendment to our Articles
      of
      Incorporation to increase the number of authorized shares of common stock from
      100,000,000 to 750,000,000 as approved by a shareholder vote of:





115,101,365
            
            VOTES
                FOR5,442,796
            
            VOTES
                AGAINST339,834
            
            ABSTAIN





On
      February 22, 2007, we filed an Amendment to our Articles of Incorporation with
      the Secretary of State of Nevada to reflect the approved increase in authorized
      shares.





Additionally,
      at the Special Meeting of Shareholders held February 22, 2007, our shareholders
      approved and ratified the issuance of the 49,391,694 excess shares issued by
      us
      since July 29, 2004, as approved by a shareholder vote of:





116,138,754
            
            VOTES
                FOR3,411,806
            
            VOTES
                AGAINST1,250,274
            
            ABSTAIN







ITEM
              5.
            OTHER
                INFORMATION




ITEM
              6.
            EXHIBITS





10.1
            Asset
                Purchase Agreement dated April 11, 2006 (filed as Exhibit 10.1 to
                our Form
                8-K filing on May 8, 2006.)





10.2
            Assignment,
                Assumption, Modification and Extension of Promissory Note with Sentry
                Power Systems, LLC dated May 16, 2006 (filed as Exhibit 10.1 to our
                Form
                8-K filing on May 22, 2006.)




10.3
            Lock-Up
                and Redemption Agreement with Sentry Power Systems, LLC dated May
                16, 2006
                (filed as Exhibit 10.2 to our Form 8-K filing on May 22, 2006.)




10.4
            Consulting
                Services Agreement with Timothy J. Connolly dated February 23, 2007
                (filed
                as Exhibit 10.15 to our Form 10-KSB filing on June 11,
                2007





10.5
            Consulting
                Services Agreement with Princeton Research, Inc. dated April 9, 2007
                (filed as Exhibit 10.16 to our Form 10-KSB filing on June 11,
                2007)





20


10.6
            CSI
                Business Finance, Inc. Note Extension letter
                agreement dated May 15, 2007 (filed as Exhibit 10.1 to our Form 8K
                filing
                on May 18, 2007)


.







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.




21





**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:
                June
                19, 2007
              By:
              /s/ Bernard
                J. WalterBernard
                  J. Walter
                President
                  Chief Executive Officer and
                Principal
                  Financial Officer




22