UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



Form 10-Q



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended June 30, 2007



OR



TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from  to



Commission file number 000-12374



---

Hydrogen Power, Inc.

(Exact name of Registrant as specified in its charter)



Delaware
(State or other jurisdiction of
incorporation or organization)
        
        84-0905189
(I.R.S. EmployerIdentification No.)


201 Elliott Avenue, Suite 400

Seattle, Washington 98112

(206) 223-0506

(Address, including zip code, and telephone number,

including area code, of Registrants principal executive office)



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



Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, or non-accelerated filer.  See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer
        
        Accelerated Filer
        
        Non-Accelerated Filer




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes
        
        No


Number
of shares of common stock outstanding at August 13, 2007:  30,027,603



---

HYDROGEN POWER, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS EQUITEX, INC.)



PART I
        FINANCIAL INFORMATION
        Page




Item 1.
        Financial statements:




Condensed consolidated balance sheets 

June 30, 2007 (unaudited) and December 31, 2006
        3  4




Condensed consolidated statements of operations-

three and six months ended June 30, 2007 and 2006 (unaudited)
        5




Condensed consolidated statement of changes in

stockholders equity (deficiency) - six months ended

June 30, 2007 (unaudited)
        6




Condensed consolidated statements of cash flows 

six months ended June 30, 2007 and 2006 (unaudited)
        7  8




Notes to condensed consolidated financial statements (unaudited)
        9  19




Item 2.
        Managements discussion and analysis of financial condition and


results of operations
        20  24




Item 3.
        Quantitative and qualitative disclosures of market risk
        25




Item 4.
        Disclosure controls and procedures
        26




PART II
        OTHER INFORMATION




Item 1.
        Legal proceedings
        27




Item 1A.
        Risk Factors
        27




Item 2.
        Changes in securities and use of proceeds
        27




Item 3.
        Defaults upon senior securities
        28




Item 4.
        Submission of matters to a vote of security holders
        28




Item 5.
        Other information
        28




Item 6.
        Exhibits
        28




Signatures
        29




2

---

# HYDROGEN POWER, INC.
AND SUBSIDIARIES
(FORMERLY KNOWN AS EQUITEX, INC.)

# CONDENSED CONSOLIDATED
BALANCE SHEETS

|                                                                                                              |  |               
|------------------------------------------------------------------------------------------------------------- |  | --------------
|                                                                                                              |  |               
|                                                                                                              |  | June 30,      
|                                                                                                              |  | 2007          
|                                                                                                              |  |               
|                                                                                                              |  | (unaudited)   
|ASSETS                                                                                                        | 
|Current assets:                                                                                               | 
|Cash and cash equivalents                                                                                     |  | $   1,507,529 
|Cash held in trust                                                                                            |  | --            
|Receivables, net                                                                                              |  | --            
|Prepaid expenses and other                                                                                    |  | 215,692       
|Assets of discontinued operations                                                                             |  | --            
|                                                                                                              |  |               
|Total current assets                                                                                          |  | 1,723,221     
|                                                                                                              |  |               
|Notes and interest receivable, net                                                                            |  | --            
|Property, equipment and leaseholds, net                                                                       |  | 59,824        
|Investment in equity-method investee                                                                          |  | 1,146,387     
|Goodwill                                                                                                      |  | 6,648,381     
|Other assets                                                                                                  |  | --            
|                                                                                                              |  |               
|Total long-term assets                                                                                        |  | 7,854,592     
|                                                                                                              |  |               
|                                                                                                              |  | $   9,577,813 
|                                                                                                              |  |               
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)                                                             | 
|Current liabilities:                                                                                          | 
|Accounts payable                                                                                              |  | $      303,894
|Current portion of sub-license fee payable to related party                                                   |  | 942,454       
|Accrued expenses and other liabilities, including related party accruals of $68,878 (2007) and $56,422 (2006) |  | 147,925       
|Note payable to related party                                                                                 |  | 37,500        
|Current portion of long-term debt                                                                             |  | 1,342,975     
|Liabilities of discontinued operations                                                                        |  | --            
|Derivative liabilities                                                                                        |  | --            
|                                                                                                              |  |               
|Total current liabilities                                                                                     |  | 2,774,748     
|                                                                                                              |  |               
|Sub-license fee payable to related party, net of current portion                                              |  | --            
|Long-term debt, net of current portion                                                                        |  | --            
|                                                                                                              |  |               
|Total long-term liabilities                                                                                   |  | --            
|                                                                                                              |  |               
|                                                                                                              |  | 2,774,748     
|                                                                                                              |  |               

3

---

# HYDROGEN POWER, INC.
AND SUBSIDIARIES
(FORMERLY KNOWN AS EQUITEX, INC.)

# CONDENSED CONSOLIDATED
BALANCE SHEETS (CONTINUED)

|                                                                                                                                                                                                    |  |              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|                                                                                                                                                                                                    |  |              
|                                                                                                                                                                                                    |  | June 30,     
|                                                                                                                                                                                                    |  | 2007         
|                                                                                                                                                                                                    |  |              
|                                                                                                                                                                                                    |  | (unaudited)  
|Commitments and contingencies                                                                                                                                                                       | 
|Redeemable preferred stock                                                                                                                                                                          | 
|Series K convertible, 6% stated value $1,000 per share; $0.01 par value; 3,100 shares Authorized; 0 shares (2007) and 445 shares (2006) issued and outstanding, net of Discount of $278,700 (2006)  |  | --           
|                                                                                                                                                                                                    |  |              
|Stockholders' equity:                                                                                                                                                                               | 
|Preferred stock, Series L convertible; $0.01 par value; 300,000 shares authorized, issued and outstanding 100,000 (2007) and 300,000 (2006); liquidation preference
$1,000 (2007) and $3,000 (2006) |  | 1,000        
|Common stock, $0.01 par value; 50,000,000 shares authorized; 29,363,002 shares (2007) and 16,262,571 (2006) issued; 29,357,444 shares (2007) and 14,710,976 shares (2006) outstanding               |  | 293,631      
|Note receivable                                                                                                                                                                                     |  | --           
|Additional paid-in capital                                                                                                                                                                          |  | 79,329,461   
|Accumulated deficit                                                                                                                                                                                 |  | (72,706,990  
|Common treasury stock at cost; 5,558 shares(2007) and 1,551,595 shares (2006)                                                                                                                       |  | (114,037     
|                                                                                                                                                                                                    |  |              
|Total stockholders' equity (deficiency)                                                                                                                                                             |  | 6,803,065    
|                                                                                                                                                                                                    |  |              
|                                                                                                                                                                                                    |  | $   9,577,813
|                                                                                                                                                                                                    |  |              

See notes to condensed
consolidated financial statements.

4

---

# HYDROGEN POWER, INC.
AND SUBSIDIARIES
(FORMERLY KNOWN AS EQUITEX, INC.)

# CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

|                                                                                                                                                                    |  |                            |                          |                   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------------------------ | ------------------
|                                                                                                                                                                    |  |                            |                          |                   
|                                                                                                                                                                    |  | Three months endedJune 30, | Six months endedJune 30,
|                                                                                                                                                                    |  | 2007                       |                          | 2006              
|Cost incurred related to acquired technology, trade name and sub-license agreement                                                                                  |  | $               --         |                          | $               --
|Corporate selling, general and administrative                                                                                                                       |  | 470,841                    |                          | 1,267,465         
|Research and development costs                                                                                                                                      |  | 372,187                    |                          | 275,220           
|                                                                                                                                                                    |  |                            |                          |                   
|                                                                                                                                                                    |  | (843,028                   | )                        | (1,542,685        
|                                                                                                                                                                    |  |                            |                          |                   
|Other income (expense):                                                                                                                                             | 
|Interest income                                                                                                                                                     |  | 23,399                     |                          | 56,789            
|Interest expense, including related party interest for the three months of $15,000 (2007) and $2,012 (2006) and $30,000
(2007) and $9,492 (2006) for the six months |  | (48,047                    | )                        | (292,105          
|Loss on disposal of subsidiaries                                                                                                                                    |  | --                         |                          | --                
|Equity in loss of equity method investee                                                                                                                            |  | (175,686                   | )                        | --                
|                                                                                                                                                                    |  |                            |                          |                   
|                                                                                                                                                                    |  | (200,334                   | )                        | (235,316          
|                                                                                                                                                                    |  |                            |                          |                   
|Loss from continuing operations before income taxes                                                                                                                 |  | (1,043,362                 | )                        | (1,778,001        
|Income tax expense                                                                                                                                                  |  | --                         |                          | (424,000          
|                                                                                                                                                                    |  |                            |                          |                   
|Loss from continuing operations                                                                                                                                     |  | (1,043,362                 | )                        | (2,202,001        
|(Loss) income from discontinued operations, net of income taxes                                                                                                     |  | --                         |                          | (1,047,170        
|                                                                                                                                                                    |  |                            |                          |                   
|Net loss                                                                                                                                                            |  | (1,043,362                 | )                        | (3,249,171        
|Accretion of preferred stock                                                                                                                                        |  | --                         |                          | (164,500          
|Deemed preferred stock dividends                                                                                                                                    |  | --                         |                          | (35,200           
|                                                                                                                                                                    |  |                            |                          |                   
|Net loss applicable to common stockholders                                                                                                                          |  | $(1,043,362                | )                        | $(3,448,871       
|                                                                                                                                                                    |  |                            |                          |                   
|Basic and diluted net loss per common share:                                                                                                                        | 
|Loss from continuing operations                                                                                                                                     |  | $         (0.04            | )                        | $         (0.21   
|(Loss) income from discontinued operations                                                                                                                          |  | --                         |                          | (0.09             
|                                                                                                                                                                    |  |                            |                          |                   
|Basic and diluted net loss per share                                                                                                                                |  | $         (0.04            | )                        | $         (0.30   
|                                                                                                                                                                    |  |                            |                          |                   
|Weighted average number of common shares outstanding:                                                                                                               | 
|Basic and diluted                                                                                                                                                   |  | 29,357,444                 |                          | 11,421,344        
|                                                                                                                                                                    |  |                            |                          |                   

See notes to condensed
consolidated financial statements.

5

---

# HYDROGEN POWER, INC.
AND SUBSIDIARIES
(FORMERLY KNOWN AS EQUITEX, INC.)

# CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIENCY)
SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)

|                                                                                                                    |  |                         |   |                  |   |                   |  |                 | 
|------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | - | ---------------- | - | ----------------- |  | --------------- | 
|                                                                                                                    |  |                         |   |                  |   |                   |  |                 | 
|                                                                                                                    |  | Series L PreferredStock |   | Common stock     |   | Additionalpaid-in |  | Common Treasury | 
|                                                                                                                    |  | Shares                  |   | Amount           |   | Shares            |  | Amount          | 
|                                                                                                                    | 
|Balances, January 1, 2007                                                                                           |  | 300,000                 |   | $          3,000 |   | 16,262,571        |  | $162,626        | 
|                                                                                                                    | 
|Issuance of common stock and options to Shareholders of old HPI in conversion of Series L-1 and L-2 Preferred Stock |  | (200,000                | ) | (2,000           | ) | 12,594,622        |  | 125,946         | 
|                                                                                                                    | 
|Issuance of common stock in satisfaction of long-term debt and accrued interest                                     |  |                         |   |                  |   | 22,556            |  | 226             | 
|                                                                                                                    | 
|Modification of warrants                                                                                            |  |                         |   |                  |   |                   |  |                 | 
|                                                                                                                    | 
|Conversion of Series K preferred stock and unpaid dividends to common stock                                         |  |                         |   |                  |   | 483,253           |  | 4,833           | 
|                                                                                                                    | 
|Accretion of Series K preferred stock                                                                               |  |                         |   |                  |   |                   |  |                 | 
|                                                                                                                    | 
|Disposition of subsidiary common stock ownership to FFFC                                                            |  |                         |   |                  |   |                   |  |                 | 
|                                                                                                                    | 
|Net loss                                                                                                            |  |                         |   |                  |   |                   |  |                 | 
|                                                                                                                    |  |                         |   |                  |   |                   |  |                 | 
|                                                                                                                    | 
|Balances, June 30, 2007                                                                                             |  | 100,000                 |   | $          1,000 |   | 29,363,002        |  | $293,631        | 
|                                                                                                                    |  |                         |   |                  |   |                   |  |                 | 

See notes to condensed
consolidated financial statements.

6

---

# HYDROGEN POWER, INC.
AND SUBSIDIARIES
(FORMERLY KNOWN AS EQUITEX, INC.)

# CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

|                                                                                                |  |             
|----------------------------------------------------------------------------------------------- |  | ------------
|                                                                                                |  |             
|                                                                                                |  | 2007        
|                                                                                                |  |             
|Cash flow used in operating activities from operating activities:                               | 
|Net loss                                                                                        |  | $(17,739,703
|                                                                                                |  |             
|Adjustments to reconcile net loss to net cash used in operating activities:                     | 
|Expenses incurred related to acquired technology , trade name and      sublicense agreement     |  | 12,779,926  
|Loss on disposal of subsidiaries                                                                |  | 2,516,157   
|Equity in loss of equity-method investee                                                        |  | 563,707     
|Gain on sale of assets                                                                          |  | --          
|Provision for losses on notes and interest receivable, including bad       debt expense         |  | --          
|Depreciation and amortization                                                                   |  | 73,622      
|Amortization of discounts related to warrants attached to notes       payable                   |  | 63,927      
|Expense incurred upon issuance or modification of stock and       warrants                      |  | 99,200      
|Deferred income taxes                                                                           |  | --          
|Non-cash compensation expense                                                                   |  | 300,000     
|Changes in assets and liabilities, net of effects of business       acquisition and asset sale: | 
|Decrease in accounts receivable                                                                 |  | 512         
|(Increase) decrease in other receivables                                                        |  | 28,462      
|Decrease (Increase) in interest receivable and other assets                                     |  | (50,664     
|Increase (decrease) in due to credit card holders                                               |  | --          
|Decrease in accounts payable and accrued liabilities                                            |  | (373,309    
|                                                                                                |  |             
|Total adjustments                                                                               |  | 16,001,540  
|                                                                                                |  |             
|Net cash used in operating activities                                                           |  | (1,738,163  
|                                                                                                |  |             
|Cash flows from investing activities:                                                           | 
|Cash acquired in business acquisition of HPI                                                    |  | --          
|Cash and cash equivalents disposed of pursuant to redemption agreement                          |  | (55,553     
|Purchase of furniture, fixtures and equipment                                                   |  | (4,808      
|Repayments of notes receivable, other                                                           |  | --          
|Proceeds received from FFFC asset sale, net of costs                                            |  | --          
|                                                                                                |  |             
|Net cash (used in)  provided by investing activities                                            |  | (60,361     
|                                                                                                |  |             

7

---

# HYDROGEN POWER, INC.
AND SUBSIDIARIES
(FORMERLY KNOWN AS EQUITEX, INC.)

# CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED) (CONTINUED)

|                                                                                                                                   |  |             
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|                                                                                                                                   |  |             
|                                                                                                                                   |  | 2007        
|                                                                                                                                   |  |             
|Cash flows from financing activities:                                                                                              | 
|Decrease in checks issued in excess of cash in bank                                                                                |  | --          
|Proceeds from private placement                                                                                                    |  | --          
|Purchase of treasury stock                                                                                                         |  | --          
|Borrowings of notes payable, related parties and other                                                                             |  | --          
|Repayments of notes payable, related parties and other                                                                             |  | (272,947    
|                                                                                                                                   |  |             
|Net cash used in financing activities                                                                                              |  | (272,947    
|                                                                                                                                   |  |             
|Increase (decrease) in cash and cash equivalents                                                                                   |  | (2,071,471  
|Cash and cash equivalents, beginning of year, including cash and cash equivalents included in assets held for sale (2006)          |  | 3,579,000   
|                                                                                                                                   |  |             
|Cash and cash equivalents, end of period, including cash and cash equivalents included in assets of discontinued operations (2006) |  | $  1,507,529
|                                                                                                                                   |  |             
|Supplemental disclosure of cash flow information:                                                                                  | 
|Cash paid for interest                                                                                                             |  | 21,514      
|                                                                                                                                   |  |             
|Cash paid for income taxes                                                                                                         |  | --          
|                                                                                                                                   |  |             
|Non-cash investing and financing activities:                                                                                       | 
|Issuance of common stock in satisfaction of note payable, long-term debt, accounts payable and accrued interest                    |  | 26,616      
|                                                                                                                                   |  |             
|Issuance of common stock in satisfaction of subsidiary liabilities                                                                 |  | --          
|                                                                                                                                   |  |             
|Conversion of Series K preferred stock to common stock                                                                             |  | 445,000     
|                                                                                                                                   |  |             
|Issuance of common stock to subsidiary in satisfaction of amounts owed                                                             |  | --          
|                                                                                                                                   |  |             

See notes to condensed
consolidated financial statements.

8

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

# 1. Organization and
basis of presentation and managements plans:

# Organization and basis
of presentation:

Hydrogen Power, Inc. (formerly
Equitex, Inc.), (the Company), a Delaware corporation, was formed in 1983 as a
business development company (BDC). In April 1998, the Companys
stockholders authorized a change in the nature of its business and withdrew its election
as a BDC, which became effective in January 1999. On February 28, 2006, the Companys
(then known as Equitex, Inc.) shareholders authorized the acquisition (the
Acquisition) of Hydrogen Power, Inc. (Old HPI). Effective March
14, 2006, pursuant to an Agreement and Plan of Merger and Reorganization as amended (the
Merger Agreement) and through a series of other transactions whereby the
result was Old HPI merged with and into the Company, with the Company remaining as the
surviving corporation to the merger. In connection with that merger, and as set forth in
the Certificate of Ownership, the Company changed its corporate name to Hydrogen Power,
Inc. Old HPI, a Seattle based company, performs hydrogen-related testing, research and
engineering, and has developed a patented system (Hydrogen Now TM)
that creates pure hydrogen from aluminum and water. The patented technology allows
hydrogen gas to be generated on-site and on-demand, and is designed to directly power any
fuel cell or internal combustion engine application. The Hydrogen Now process can supply
hydrogen at customized rates and pressures, and may provide safe, cost-effective and
stand-alone hydrogen solutions for small scale portable and stationary applications.

Old HPI in 2004 entered into a
sub-license agreement with Global Hydrofuel Technologies, Inc. (GHTI), its
former parent company and a shareholder of the Company, which gave Old HPI exclusive
rights to use the Hydrogen Now technology developed by the University of British Columbia
(UBC) and any improvements and to market, manufacture and distribute products
using the technology in the United States, Mexico and Central and South America. The
agreement also gave Old HPI non-exclusive rights to market and distribute products using
the technology and any improvements in Canada and to use any trademarks, service marks, or
logos associated with the technology in the United States, Canada, Mexico and Central and
South America. The sub-license agreement is effective, with certain provisions for early
termination, for as long as the underlying license agreement between its parent and UBC is
in effect. The underlying license agreement is effective through the latest expiration
date of the patents that are the subject of the licensed technology. At present, the
latest patent expiration date is February 2021.

Old HPI has not generated any
significant revenues since its formation in December 2003.

Prior to the acquisition of Old HPI,
the Company was a holding company, and through January 31, 2006, operated primarily
through its majority-owned subsidiary FastFunds Financial Corporation (FFFC).
As of June 30, 2007, the Company owned approximately 48% of FFFCs outstanding common
stock. FFFCs wholly-owned subsidiary Chex Services, Inc. (Chex), a
Minnesota corporation, provided financial services prior to the sale of substantially all
of Chexs assets, which primarily consisted of check cashing, automated tell machine
(ATM) access, and credit card advances to customers primarily at Native American owned
casinos and gaming establishments (the Asset Sale).

# Basis of presentation:

The condensed consolidated interim
financial statements of the Company as of June 30, 2007, and for the three and six months
ended June 30, 2007 and 2006, have been prepared by the Company without audit by the
Companys independent auditors. In the opinion of the Companys management, all
adjustments necessary to present fairly the financial position, results of operations, and
cash flows of the Company as of June 30, 2007, and for the periods ended June 30, 2007 and
2006, have been made. Those adjustments consist only of normal
and recurring adjustments.

Certain information and note
disclosures normally included in the Companys annual financial statements prepared
in accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted. These condensed consolidated financial statements
should be read in conjunction with a reading of the consolidated financial statements and
notes thereto included in the Companys Form 10-K annual report filed with the
Securities and Exchange Commission (SEC) on May 18, 2007. The results of
operations for the three and six months ended June 30, 2007, are not necessarily
indicative of the results to be expected for the full year.

The interim condensed consolidated
financial statements presented herein include the financial statements of the Company as
of and for the three and six months ended June 30, 2007. For the three and six months
ended June 30, 2006, the financial statements included herein are of the Company and also
include Old HPI effective March 14, 2006 (the date of the

9

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

1.    
          Organization and basis of presentation and managements plans
          (continued):

# Basis of presentation
(continued):

acquisition).    
          As a result of the Redemption Agreement (defined and described below), the
          operating results of FFFC and its wholly-owned subsidiaries, Key Financial
          Systems, Inc. (Key), Nova Financial Systems, Inc. (Nova)
          and its majority-owned subsidiary, Denaris Corporation (Denaris) are
          not consolidated as of June 30, 2007 and for the three and six months ending June 30, 2006
          have been retroactively restated and are included in income (loss) from discontinued
          operations on the consolidated statements of operations. As of June 30, 2007, the
          Company is accounting for its 48% ownership of FFFC on the equity method as a
          one-line presentation on the balance sheet (investment in equity-method
          investee) and on the consolidated statement of operations (equity in loss of
          equity-method investee). All significant intercompany accounts and transactions
          have been eliminated in consolidation.

Return of subsidiary
common stock:

On January 2, 2007, pursuant to the
terms of a Redemption, Stock Sale and Release Agreement (the Redemption
Agreement) by and between the Company and FFFC, FFFC (i) redeemed 8,917,344 shares
of its common stock held by the Company, (ii) acquired from the Company 5,000,000 shares
of common stock of Denaris, (iii) acquired from the Company 1,000 shares of common stock
of Key, and (iv) acquired from the Company 1,000 shares of common stock of Nova. Denaris
was a majority owned subsidiary of the Company, and Key and Nova were wholly owned
subsidiaries of the Company. Each of Denaris, Nova and Key are inactive entities with no
operating or intellectual property assets. The shares of common stock of each entity
transferred by the Company pursuant to the Redemption Agreement constituted all of the
Companys holdings in each entity. In consideration of the redemption and acquisition
of the shares of Denaris, Key and Nova, FFFC released the Company from all outstanding
payment obligations of the Company to FFFC, including obligations for a $5 million note
dated March 14, 2006 in favor of FFFC. The outstanding balance on the note, including
principal and interest accrued, as of the date of the Redemption Agreement was $5,402,398.
The Company recognized a loss of $2,516,157 on the Redemption Agreement due to losses of
FFFC based on the Companys ownership percentages being applied to reducing the
Companys investment account.

Subsequent to FFFC redeeming its
shares of common stock pursuant to the Redemption Agreement, the Company owned 3,500,000
shares of common stock of FFFC. As of June 30, 2007, this represents approximately 48% of
the outstanding common stock of FFFC. So long as the Company holds 10% or more of the
outstanding equity or voting interest in FFFC, it has agreed to vote its shares of capital
stock of FFFC in the same manner and proportion as other stockholders of FFFC vote their
shares (the Voting Arrangement). Due to the ownership percentage being below
50% and pursuant to the terms of the Voting Arrangement in the Redemption Agreement,
management of the Company has determined that they do not have any significant control of
FFFC. Accordingly, the Company is no longer consolidating FFFC and its subsidiaries (Key,
Nova and Denaris) in its financial statements, and is now accounting for its 48% ownership
of FFFC on the equity method as described above in basis of presentation.

The summarized financial results of
FFFC and its subsidiaries for the three and six months ended June 30, 2007 were as
follows:

|              |           |             
|------------- | --------- | ------------
|              |           |             
|              | 3 months  | 6 months    
|Revenues, net | $  24,710 | $     48,270
|Gross margin  | 12,241    | 13,373      
|Net loss      | 363,688   | 1,109,311   
|             

Acquisition of Old HPI:

Pursuant to the Merger Agreement the
Company, in March 2006, acquired 100% of Old HPI. The initial consideration consisted of
3,038,990 shares of the Companys common stock, 132,122 shares of our common stock
reserved for the exercise of options to purchase 1,550,000 shares of Old HPI common stock
and warrants issued to purchase up to 1,600,000 shares of the Companys common stock,
the initial terms of which included an exercise price of $3.00 and an expiration date of
February 2007. The total value of the initial consideration was $16,729,864 and the total
initially allocated to identifiable intangible assets was $19,316,074. In February 2007,
the Company modified the terms of the warrants by reducing the exercise price to $2.00 and
extending the expiration date to August 2007. As a result of these modifications, the
Company

10

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

1.    
          Organization and basis of presentation and managements plans
          (continued):

# Basis of presentation
(continued):

# Acquisition of Old HPI
(continued):

recognized an additional expense of
$99,200 based upon the Black-Scholes option pricing model and such expense is included in
corporate selling, general and administrative expense in the consolidated statement of
operations for the three and six months ending June 30, 2007.

The Company also issued to the
stockholders of Old HPI 300,000 shares of its Series L Preferred Stock (the
Preferred Stock). The Preferred Stock, issued in three equal amounts (referred
to as the L-1, L-2 and L-3 Preferred Stock, respectively), whereby each amount is
convertible into 40% of the Companys common stock on the 180th,
270thand 360thday following closing of the merger, respectively.
The conversion of the Preferred Stock is subject to the achievement by Old HPI of certain
performance benchmarks as defined in the Certificate of Designation of Series L Preferred
Stock, the satisfaction of which is to be determined by the Board of Directors of the
Company in its sole discretion. The benchmarks include HPIs use of its hydrogen
technology to develop prototype generators for various micro and portable power
applications and for various macro power applications such as fuel cells and internal
combustion engines (the Benchmarks). Based on the achievement of the
benchmarks, on January 3, 2007, the Company issued, upon the conversion of the L-1 and L-2
preferred stock, an aggregate of 12,594,622 shares of the its common stock, and an
additional 711,431 shares of its common stock have been reserved for issuance upon the
exercise of Old HPI outstanding options. The Company has valued the 12,594,622 shares (the
Additional Shares) of its common stock at $18,640,041 (based on the market
price of the common stock on the date the Company issued the shares). The value of the
711,431 shares of common stock reserved for issuance upon the exercise of Old HPI options
was $788,266 based on the Black Scholes option pricing model. Accordingly, $19,428,307 was
added to the purchase price allocation in January 2007.
Immediately following the conversion of the Series L-1 and L-2 Preferred Stock into common
stock on January 3, 2007, the former shareholders of Old HPI held an aggregate of
15,633,612 shares of the Companys common stock, constituting approximately 54.1% of
the Companys outstanding stock. The former majority shareholder of Old HPI, GHTI,
holds approximately 49.3% of the Companys outstanding common stock. Additionally,
former option holders of Old HPI hold options to purchase an aggregate of 843,553 shares
of the Companys common stock.

Coinciding with the issuance of the
Series L-1 and L-2 Preferred Stock, on January 2, 2007, the Company appointed four new
directors to the Company and the prior directors of the Company contemporaneously resigned
their positions.

During the six months ended June 30,
2007, based on the additional consideration of $19,428,307 the Company recorded an expense
of $12,779,926 and goodwill of $6,648,381. The goodwill recorded is a result of the total
amount to be allocated of $38,744,381 exceeding the identifiable intangible assets
acquired of $32,096,000 (as determined in a valuation report by an independent third
party). The following table represents the purchase price allocation as of June 30, 2007:

|                                      |              
|------------------------------------- | -------------
|                                      |              
|Cash and cash equivalents             | $   2,203,121
|Interest receivable                   | 38,339       
|Prepaid expenses                      | 85,681       
|Vehicle                               | 14,906       
|Technology and sub-license agreement  | 28,894,926   
|Trade name                            | 3,201,074    
|Goodwill                              | 6,648,381    
|Accounts payable and accrued expenses | (197,190)    
|Note payable                          | (3,000,000)  
|License fee payable                   | (1,731,067)  
|                                      |              
|                                      | $ 36,158,171 
|                                      |              

In conjunction with the issuance of
the Additional Shares of its common stock and change in control described above, the new
management of the Company, in completing an updated analysis of the underlying assumptions
and calculations used in the above allocation, determined that the additional costs of
$12,779,926 related to the acquired technology, trade name and

11

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

1.    
          Organization and basis of presentation and managements plans
          (continued):

# Basis of presentation
(continued):

# Acquisition of Old HPI
(continued):

sub-license agreement should be
expensed in the first quarter of 2007. Managements analysis included the
determination that the most viable potential market applications for the licensed
technology are a different subset than those originally being pursued by Old HPI, and
accordingly, the additional costs related to the acquired technology and potential
applications thereon have been expensed in the first quarter of 2007.

Based on the terms and conditions of
the Benchmarks in the Certificate of Designation of the Series L Preferred Stock, the
conversion of the Series L-3 did not occur and would not be convertible unless extended or
amended by the Company, which requires the approval of the majority shareholder (the
Majority Holder). Management believes that the eventual conversion of Series
L-3 may occur under the original terms (40% of the Companys common stock
outstanding) or other terms which would be satisfactory to the Company and the Majority
Holder. If the Series L-3 is converted to common stock and additional shares of common
stock are reserved for issuance upon the exercise of Old HPI options, the purchase price
of Old HPI and goodwill will increase by the aggregate market value of the common stock
issued and the Black-Scholes option pricing model on the common stock reserved,
respectively.

# Pro forma information:

The following pro forma information
has been prepared assuming the Acquisition of Old HPI had taken place at the beginning of
each of the periods presented. The pro forma information includes the full period results
of the Company and Old HPI and assumes that total costs of $32.1 million related to
acquiring its technology, trade name and sub-license agreement are expensed in each of the
periods presented.

The pro forma information is not
necessarily indicative of the results of operations as they would have been had the
transactions been consummated on the assumed date.

|                                                 |                             |                           |                    |                   
|------------------------------------------------ | --------------------------- | ------------------------- | ------------------ | ------------------
|                                                 |                             |                           |                    |                   
|                                                 | Three months ended June 30, | Six months ended June 30,
|                                                 | 2007                        | 2006                      | 2007               | 2006              
|Revenues                                         | $               --          | $               --        | $               -- | $               --
|Net loss from continuing operations before other
|expense and income taxes                         | (32,939,028)                | (33,638,685)              | (33,901,482)       | (34,730,384)      
|Net loss                                         | (33,139,362)                | (35,345,171)              | (37,055,703)       | (35,711,825)      
|Net loss applicable to common stockholders       | (33,139,362)                | (35,544,871)              | (37,334,404)       | (36,599,025)      
|Basic and diluted loss per common share          | (1.13)                      | (1.48)                    | (1.27)             | (1.54)            
|Weighted average shares used in loss per share  
|calculation                                      | 29,357,444                  | 24,015,966                | 29,306,793         | 23,763,993        
|                                                

# Going concern and
managements plans:

In the Companys Annual Report
on Form 10-K for the fiscal year ended December 31, 2006, the Report of the Independent
Registered Public Accounting Firm included an explanatory paragraph that described
substantial doubt about the Companys ability to continue as a going concern. The
Companys interim financial statements for the three and six months ended June 30,
2007 have been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of business.
The Company incurred a net loss of $17,740,000

12

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

1.    
          Organization and basis of presentation and managements plans
          (continued):

# Going concern and
managements plans (continued):

for the six months ended June
30, 2007, and incurred previous significant losses of $27,239,000 and $8,842,000 for the
years ended December 31, 2006 and 2005, respectively. Additionally, the Company has used
cash in operations of approximately $1,738,000 for the six months ended June 30, 2007 and,
$5,799,000 for the year ended December 31, 2006. Although the net losses included certain
non-cash expenses for the six months ended June 30, 2007 of approximately $16,397,000 and
$21,000,000 for the year ended December 31, 2006, the Company also incurred research and
development costs related to expenses in continuing to develop a commercial application of
its licensed technology and in the design and engineering of prototypes in addition to
corporate, selling, general and administrative expenses. Additionally, at June 30, 2007,
the Company has a working capital deficit of approximately $1,052,000 and an accumulated
deficit of approximately $72,707,000. Based on the losses that were being incurred at
FFFC, it was becoming increasingly difficult to continue to fund its operations.
Additionally, due to intense competition in the market and the lack of assurance that FFFC
would be able to obtain renewals of its existing casino contracts or to obtain contracts
with new customers and difficulty in attracting and retaining experienced employees, the
Company decided to complete the Asset Sale. Presently, the Company has no revenues and
limited resources.

On August 6, 2007, the company
received a notice of default from two of its lenders demanding immediate payment of all
monies due including costs incurred in collection. (See Note 4)

These factors raise substantial doubt
about the Companys ability to continue as a going concern. There can be no assurance
that the Company will have adequate resources to fund future operations, if any, or that
funds will be available to the Company when needed, or if available, will be available on
favorable terms or in amounts required by the Company. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of assets or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.

The Companys objective is to
continue to develop and eventually market its licensed proprietary hydrogen production
process for use in commercial applications the require hydrogen, but where hydrogen
storage and/or distribution is too costly or not feasible. Our management believes based
on their product and market review that our hydrogen production process may be a
commercially viable process. The Company plans on continuing its testing and evaluation of
the commercial application of the licensed technology and the design and engineering of
prototypes.

The Company will need additional
funds to continue the aforementioned work as well as to meet its existing obligations as
they become due. Sources of cash that may be available to the Company include the sale of
equity securities through private placements of our common stock and/or preferred stock,
as well as the exercise of stock options and/or warrants, all of which may cause dilution
to our shareholders. We may also be able to borrow funds from related and/or third
parties. Currently, the Company does not have a revolving loan agreement with any
financial institution, nor can the Company provide any assurance it will be able to enter
into any such agreement in the future, or be able to raise funds through further issuance
of debt or equity in the Company.

# 2. Summary of
significant accounting policies:

# Goodwill:

Goodwill represents the excess of the
purchase price over the estimated fair value of the net identified tangible and intangible
assets of the acquired business. In accordance with Statement of Financial Accounting
Standards (FAS) No. 142, Goodwill and Other Intangible Assets,the
Company tests goodwill for impairment on an annual basis, or if indicators of potential
impairment exist, using a fair-value based approach. The Company currently has one
operating segment and reporting unit. As such, the Company evaluates impairment based on
certain external factors, such as its market capitalization. No impairment of goodwill has
been identified during any of the periods presented.

13

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

# 2. Summary of
significant accounting policies (continued):

# Reclassifications:

In addition to retroactively
restating FFFC, Nova and Denaris as discontinued operations, certain minor
reclassifications of amounts reported in the 2006 consolidated financial statements have
been made to conform to the 2007 presentation.

# Recently issued
accounting pronouncements:

In June 2007, the Emerging Issues
Task Force of the Financial Accounting Standards Board issued EITF Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services to be Used in Future Research and Development
Activities, (EITF 07-3) which is effective for fiscal years beginning
after December 15, 2007. EITF 07-3 requires that nonrefundable advance payments for future
research and development activities be deferred and capitalized. Such amounts will be
recognized as an expense as the goods are delivered or the related services are performed.
The Company does not expect the adoption of EITF 07-3 to have a material impact on the
financial results of the Company.

# 3.  Discontinued
operations:

Income from discontinued operations
for the three and six months ended June 30, 2006 of FFFC, Key, Nova and Denaris were as
follows:

|                             |                            |  |                         
|---------------------------- | -------------------------- |  | ------------------------
|                             |                            |  |                         
|                             | Three monthsended June 30, |  | Six monthsended June 30,
|                             | 2006                       |  | 2006                    
|Revenues                     | $    211,505               |  | $ 2,259,750             
|Operating expenses           | (676,189)                  |  | (3,894,339)             
|                             |                            |  |                         
|Loss from operations         | (464,684)                  |  | (1,634,589)             
|Gain on sale of assets       | --                         |  | 4,145,835               
|Other expenses               | (1,006,486)                |  | (1,435,223)             
|                             |                            |  |                         
|Income before income taxes   | (1,471,170)                |  | 1,076,023               
|Income tax expense (benefit) | (424,000)                  |  | 604,000                 
|                             |                            |  |                         
|                             |                            | 
|Net income (loss)            | ($1,047,170)               |  | $    472,023            
|                             |                            |  |                         
|                            

# 4. Convertible and
other promissory notes and long-term debt:

Convertible and other promissory
notes and long-term debt at June 30, 2007 and December 31, 2006, consist of the following:

|                                                                                                                                                                                                                      |                    |  |                 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ |  | ----------------
|                                                                                                                                                                                                                      |                    |  |                 
|                                                                                                                                                                                                                      | June 30,2007       |  | December 31,2006
|                                                                                                                                                                                                                      |                    |  |                 
|Notes payable to individual investors (due February 2008)                                                                                                                                                             |                    |  | $ 2,108,000     
|Note payable to a former director (due September 30, 2007)                                                                                                                                                            | $      37,500      |  | 37,500          
|Convertible promissory notes; interest at 10% per annum; collateralized by all assets of Chex
and the Company's stock ownership in FFFC; due December 2007; net of discount of $52,693 (2007) and $115,921 (2006) [A] | 1,342,975          |  | 1,577,713       
|Convertible debentures; due in full December 2009; unsecured; net of discount of $20,419                                                                                                                              |                    |  | 29,581          
|                                                                                                                                                                                                                      |                    |  |                 
|                                                                                                                                                                                                                      | 1,380,475          |  | 3,752,794       
|Less amounts included in liabilities of discontinued operations (2006)                                                                                                                                                | --                 |  | (2,108,000)     
|Less current maturities                                                                                                                                                                                               | (1,380,475)        |  | (1,615,213)     
|                                                                                                                                                                                                                      |                    |  |                 
|Long-term debt, net of current portion                                                                                                                                                                                | $               -- |  | $     29,581    
|                                                                                                                                                                                                                      |                    |  |                 

14

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

4.    
          Convertible and other promissory notes and long-term debt (continued):

[A] In March 2004, the
Company closed on $5,000,000 of convertible promissory notes (the Notes) with
two financial institutions (the Lenders). The Notes carried a stated interest
rate of 7% per annum and have a 45-month term. Interest only payments were due April 2004
through June 2004. Beginning in July 2004, principal and interest payments amortize over
the remaining 42-month period. The Notes are senior to all other debt of the Company and
are collateralized by all assets of Chex as defined in the security agreement. The Notes
require the Company to maintain cash balances of 140% of the outstanding principal
balance. The Company is currently not in compliance with this requirement.

In contemplation of the Redemption
Agreement (Note 1), on December 29, 2006, the Company obtained the consent of the Lenders
to complete the transactions contemplated by the Redemption Agreement. Contemporaneously
with receipt of the consent, the Company entered into a Note and Security Amendment
Agreement (the Amended Note) dated December 29, 2006 with the Lenders,
pursuant to which the Company agreed to amend certain terms of the Notes, including
increasing the interest rate applicable to the Notes from 7% per annum to 10% per annum,
resulting in an increase to the monthly payment amount of approximately $14,300.
Additionally, the default interest rate increased from 10% to 13%.

The Notes are convertible into
common stock of the Company at $6.885 reduced to $5.50 on September 15, 2005 per
share up to an amount equal to 4.99% of the Companys outstanding common stock. The
Company has the right to make any monthly payment of principal and interest in shares of
its common stock. If the Company exercises its rights, the common stock is to be issued
based on 80% of the average bid price for the lower of the three or twenty days prior to
the payment due date. The maximum number of shares that can be delivered as payment is to
be equal to 10% of the average monthly trading volume for the month prior to the payment
due date. The Company may also issue common shares each month in an amount not to exceed
10% of the prior months total share volume as payment, to be applied to the
outstanding principal balance up to a value of $100,000. For the six months ending June
30, 2007, the Company issued 22,556 shares of its common stock valued at $26,616 as
partial payment for principal and interest to the Lenders, with additional principal
amounts paid in cash to the Lenders. However, the total paid in the six months ended June
30, 2007 was approximately $486,000 less than the principal and interest due for the
period. The Company made a payment on the Notes in the Month of July of $575,000,
bringing the balances due current thru July 2007. The Company did not make the required
payment for August 2007 of approximately $149,000 and is currently in default.

On August 6, 2007, the Company
received a notice of default from the Lenders demanding immediate payment of all monies due under
the notes due to multiple events of default, including failure to make payments when due.  The Company
currently does not have adequate assets to satisfy its obligations and must either obtain a waiver from its Lenders
or raise additional funds in the very near future.  Even if the Company were able to obtain a waiver from the Lender
of this default, the Company will need to raise funds to continue operation before the end of 2007.  There can be
no assurance that the Company will be able to raise funds on favorable terms, or at all.  Failure to raise
funds in the near term will significantly impact its ability to continue as a going concern and may result
in the Company ceasing operations and could possibly result in the need to file for bankruptcy.

The Notes contain certain standard
anti-dilution provisions requiring the Company to pay the Lenders as collateral, the
pro-rata number of shares the Lenders would receive in any spin-off or dividend from the
Company as if the remaining principal balance under the Note was fully converted at $6.885
per share. The Lenders also received warrants to acquire up to 133,334 shares of the
Companys common stock at an exercise price of $9.00 per share. The warrants are
exercisable for a period of five years, and include a cashless exercise provision. These
warrants were valued at $358,400 based upon the Black-Scholes option-pricing model, and
therefore $358,400 of the total costs was allocated to the warrants, resulting in an
imputed interest rate of 7.5%. In June 2004, the Company reduced the exercise price of
these warrants to $7.65 per share. In August 2004, the Company reduced the exercise price
of these warrants to $4.26 per share. As a result of the additional allocation resulting
from these reductions in exercise price, the Company allocated an additional $102,800 to
these warrants. The Company reduced the carrying value of the Notes by this amount and is
amortizing the discount to interest expense over the 45-month term of the Notes.
Accordingly, $31,614 has been recorded as interest expense in the consolidated condensed statements
of operations during the three months ended June 30, 2007 and 2006, respectively and
$63,228 was recorded as interest expense for the six months ended June 30, 2007 and 2006,
respectively. In addition, warrants to acquire up to 50,000 shares of common stock of the
Company, exercisable at $6.00 per share for a period of two years, were issued to an
advisory firm in connection with the transaction. These warrants were valued at $164,700
based upon the Black-Scholes option-pricing model. The Company also paid cash of $320,000
for legal services and finders fees in connection with the transaction. The Company
recorded the value of these warrants and the cash paid as deferred loan costs and is
amortizing these costs over the 45-month term of the Notes. Accordingly, $32,313 and
$64,626 is included in corporate selling general and administrative expense in the consolidated condensed statements
of operations during the three and six months ended June 30, 2007 and 2006, respectively.
At June 30, 2007 and December 31, 2006, deferred loan costs were $64,626 and $129,252,
respectively, which are included in prepaid expenses and other on the Condensed
Consolidated Balance Sheets.

15

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

# 5. Commitments and
contingencies:

# Sub-license agreement:

As discussed in Note 1, Old HPI
entered into a sub-license agreement (the SL Agreement) with GHTI (a related
party) in 2004. The SL Agreement included substantially all the rights of the original
underlying license agreement between GHTI and UBC. The SL Agreement gives the Company
exclusive rights to use the Hydrogen Now technology developed by UBC and any improvements
and to market, manufacture and distribute products using the technology in the United
States, Mexico, and Central and South America. The SL Agreement also gives the Company
non-exclusive rights to market and distribute products using the technology and any
improvements in Canada and to use any trademarks, service marks, or logos associated with
the technology in the United States, Canada, Mexico and Central and South America.

The SL Agreement is effective, with
certain provisions for early termination, for as long as the underlying license agreement
is in effect. The underlying license agreement is effective through the latest expiration
date of the patents that are the subject of the licensed technology. At present, the
latest patent expiration date is February 2021. GHTI acquired the license with UBC under a
royalty arrangement and is not currently in default under its license agreement with UBC.

Amounts owed under the SL Agreement
with GHTI are non-interest bearing. The obligation was originally stated at its net
present value of $2,615,200 using an effective interest rate of 6%. Remaining minimum
payments required under the SL Agreement are due as follows:

|         |  |             |  |                            |  |                      | 
|-------- |  | ----------- |  | -------------------------- |  | -------------------- | 
|         |  |             |  |                            |  |                      | 
|June 30, |  | Total       |  | Amountrepresentinginterest |  | Principal amount due | 
|         |  |             |  |                            |  |                      | 
|2007     |  | $   387,903 |  | $  58,129                  |  | $329,774             | 
|2008     |  | 666,667     |  | 53,987                     |  | 612,680              | 
|         |  |             |  |                            |  |                     
|         |  | $1,054,570  |  | $112,116                   |  | $942,454             | 
|         |  |             |  |                            |  |                     

The 2007 payment of
principal and interest aggregating approximately $388,000 was due in March 2007 and is delinquent, and since all
amounts owed are payable within the next twelve months, $942,454 of principal amount due
and $52,555 of unpaid interest is included in current liabilities in the condensed
consolidated balance sheet at June 30, 2007. Included in interest expense for the six
months ended June 30, 2007 and 2006 (from March 14, 2006, the date of the acquisition of
Old HPI) in the consolidated condensed statements of operations is $30,000 and $32,365,
respectively, related to this obligation. The Company made a payment of $150,000
in July 2007. The Company is currently in discussions with GHTI regarding payment of the
past due obligation of approximately $238,000.

# Litigation:

The Company is involved in various
claims and legal actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material adverse
impact either individually or in the aggregate on consolidated results of operations,
financial position or cash flows of the Company.

# Other transactions with
officers and directors:

In February 2006, the Company entered
into an agreement with KN Consulting, a company owned by John Martin, a director
(effective January 2007 director of the Company, director of Old HPI for 2006 through
September), to purchase technical and management advisement on engineering programs and
prototype development. The agreement is on a month-to-month basis and $12,000 and $24,000
is included in research and development costs in the consolidated condensed statements of operations
for the three and six months ending June 30, 2007.

16

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

# 5. Commitments and
contingencies (continued):

# Other transactions with
officers and directors (continued):

On December 29, 2006, the Company
entered into a consulting agreement (the Consulting Agreement) with HF
Services, LLC (HF Services). HF Services is owned by Henry Fong, who at the
time of the Consulting Agreement was entered into, was a director of the Company. Pursuant
to the Consulting Agreement, HF Services will assist the Company in securities matter and
compliance with applicable securities rules and regulations. The Consulting Agreement has
a one-year term and provides for a $20,000 per month fee. Accordingly, $60,000 and
$120,000 is included in selling, general and administrative expense for the three and six
months ended June 30, 2007 in the consolidated condensed statement of operations.

# 6. Redeemable
preferred stock:

# Series K convertible
preferred stock:

In August 2005, the Company issued
3,055 shares of 6% Series K convertible preferred stock (the Series K Preferred
Stock) along with warrants to purchase 175,000 shares of common stock in exchange
for all outstanding shares of Series G and I preferred stock (Note 12). The Company
reduced the carrying value of the Series K preferred stock by the relative fair value of
the warrants ($355,000), which was based on the Black-Scholes option-pricing model, with
an offset to additional paid-in capital. The Series K Preferred Stock is convertible at
the holders option at any time through June 2009 into shares of the Companys
common stock at a conversion price equal to the lesser of (i) $2.75 per share and (ii) 65%
of the 5 day average closing bid price of the Companys common stock as specified in
the agreement, provided that the percentage of the 5 day average closing bid price shall
increase to 75% upon the occurrence of certain events. The holder of each share of the
Series K preferred stock is entitled to cumulative dividends at 6% per annum, payable
quarterly, with an 18% dividend default rate. Dividends are payable in cash or shares (at
market value) of the Companys common stock. The beneficial conversion feature was
valued at $2,277,000 using the effective conversion price. As a result, the Company
reduced the carrying value of the Series K Preferred Stock for this amount with an offset
to additional paid-in capital. The warrants and beneficial conversion feature are being
accreted over the four-year term of the Series K Preferred Stock, and as a result, loss
applicable to common stockholders was increased by $852,000 and $164,500 respectively for
 the three and six months ended
June 30, 2006. In January 2007, based on the conversion of the remaining 445 shares of
Series K, the Company accreted $278,700, with an offset to additional paid-in capital. In
January 2007 the remaining 445 shares of Series K Preferred Stock, plus the unpaid
dividends, were converted to an aggregate of 483,253 shares of common stock of the
Company, at a conversion price of $0.97 for the 445 shares of Series K Preferred Stock and
cumulative unpaid dividends of $36,490 (accrued at December 31, 2006) were converted at
$1.49 per share.

# 7. Stockholders
equity (deficiency):

# Options:

A summary of the status of stock
options outstanding and exercisable and weighted average exercise prices at June 30, 2007
and December 31, 2006 are as follows:

|                                    |           |                              |         |                              |         |                             
|----------------------------------- | --------- | ---------------------------- | ------- | ---------------------------- | ------- | ----------------------------
|                                    |           |                              |         |                              |         |                             
|                                    | 2003 Plan | 2005 Plan                    | Total  
|                                    |          
|                                    | Shares    | Weightedaverageexerciseprice | Shares  | Weightedaverageexerciseprice | Shares  | Weightedaverageexerciseprice
|                                    |          
|                                    |           |                              |         |                              |         |                             
|December 31, 2006 and June 30, 2007 | 484,966   | $    5.23                    | 447,500 | $    1.64                    | 932,466 | $    3.51                   
|                                    |          

All options outstanding at June 30,
2007 are exercisable and expire from May 2008 through September 2011.

17

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

# 7. Stockholders
equity (deficiency) (continued):

# Options (continued):

The exercise prices of all options
outstanding at June 30, 2007 were in excess of the market price of the Companys
common stock at that date and thus there is no intrinsic value.

The following table sets forth the
exercise price range, number of shares, weighted average exercise price and remaining
contractual lives by groups of options as of June 30, 2007.

|                    |  |                             |  |                               |  |                              
|------------------- |  | --------------------------- |  | ----------------------------- |  | -----------------------------
|                    |  |                             |  |                               |  |                              
|Exerciseprice range |  | Numberof optionsOutstanding |  | WeightedAverageexercise price |  | Weightedaverageremaining life
|                    |  |                             |  |                               |  |                              
|                    |  |                             | 
|$1.60 - $2.00       |  | 447,500                     |  | $1.64                         |  | 4.48                         
|$4.08 - $6.18       |  | 484,966                     |  | $5.23                         |  | 1.95                         
|                    |  |                             |  |                               |  |                              
|                    |  |                             | 
|                    |  | 932,466                     |  | $3.51                         |  | 3.16                         
|                    |  |                             |  |                               |  |                              
|                   

# Warrants:

A summary of the status of common
stock warrant transactions for the six months ended June 30, 2007 are as follows:

|                               |           |  |                              
|------------------------------ | --------- |  | -----------------------------
|                               |           |  |                              
|                               | Shares    |  | WeightedAverageexercise price
|                               |           |  |                              
|Outstanding at January 1, 2007 | 2,982,775 |  | $      3.14                  
|Granted                       
|Exercised                     
|Expired                        | (183,209) |  | (3.88)                       
|                               |           |  |                              
|                               |           | 
|Outstanding at June 30, 2007   | 2,799,566 |  | $      2.52                  
|                               |           |  |                              

The following table sets forth the
exercise price range, number of shares, weighted average exercise price and remaining
contractual lives by groups of warrants as of June 30, 2007.

|                    |  |                             |  |                               |  |                              
|------------------- |  | --------------------------- |  | ----------------------------- |  | -----------------------------
|                    |  |                             |  |                               |  |                              
|Exerciseprice range |  | Numberof optionsOutstanding |  | WeightedAverageexercise price |  | Weightedaverageremaining life
|                    |  |                             |  |                               |  |                              
|                    |  |                             | 
|$1.50 - $3.00       |  | 2,338,833                   |  | $     1.98                    |  | 0.96                         
|$3.01 - $4.50       |  | 75,000                      |  | $     4.50                    |  | 1.16                         
|$5.00 - $6.00       |  | 385,733                     |  | $     5.41                    |  | 0.96                         
|                    |  |                             |  |                               |  |                              
|                    |  |                             | 
|                    |  | 2,799,566                   |  | $     2.52                    |  | 1.00                         
|                    |  |                             |  |                               |  |                              

18

---

---

# HYDROGEN POWER, INC.
(FORMERLY KNOWN AS EQUITEX, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

# 8. Income taxes:

Income tax expense for the three and
six months ended June 30, 2006 was $424,000 and $737,000, respectively. This amount is
primarily related to income taxes as a result of the Asset Sale in January 2006. In
addition, the Company has not recognized a tax benefit related to the net operating losses
generated during the three and six months ended June 30, 2007, as realization of the
deferred tax asset is not considered more likely than not and therefore an allowance has
been applied against this amount.

19

---

ITEM 2

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIS REPORT MAY CONTAIN CERTAIN FORWARD-LOOKING STATEMENTS AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 OR BY THE SECURITIES AND EXCHANGE COMMISSION IN ITS RULES, REGULATIONS AND RELEASES, WHICH REPRESENT THE COMPANYS EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED TO, STATEMENTS CONCERNING THE COMPANYS OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL CONDITION, GROWTH AND ACQUISITION STRATEGIES, INVESTMENTS AND FUTURE OPERATIONAL PLANS, FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS MAY, WILL, EXPECT, BELIEVE, ANTICIPATE, INTENT, COULD, ESTIMATE, MIGHT, OR CONTINUE OR THE
NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANYS CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON THE VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY RELATED TO THE COMPANYS OPERATIONS, MERGERS OR ACQUISITIONS, GOVERNMENTAL REGULATION, THE VALUE OF THE COMPANYS ASSETS AND ANY OTHER FACTORS DISCUSSED IN THIS AND OTHER COMPANY FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.

GENERAL

Hydrogen Power, Inc. (formerly Equitex, Inc.) (the Company) through January 31, 2006, operated primarily through its then majority-owned subsidiary FastFunds Financial Corporation (FFFC). As disclosed in the December 31, 2006 Form 10-K, the Company and FFFC also have several other non-operating wholly-owned subsidiaries. As of June 30, 2007, the Company owns approximately 48% of FFFCs outstanding common stock.

FFFCs wholly-owned subsidiary Chex Services, Inc. (Chex), a Minnesota corporation, provided financial services prior to the sale of substantially all of Chexs assets, which primarily consisted of check cashing, automated teller machine (ATM) access, and credit card advances to customers primarily at Native American owned casinos and gaming establishments (the Asset Sale).

The Asset Sale is discussed below. As a result of the Asset Sale, the 2006 operations of FFFC are presented as discontinued operations, and as of December 31, 2006, all of its operating assets, including liabilities, are presented as assets and liabilities of discontinued operations.

On March 14, 2006, the Company acquired Hydrogen Power, Inc. (Old HPI). This acquisition, which the Company accounted for as a purchase, is described below.

OVERVIEW

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto for the years ended December 31, 2006, 2005 and 2004. The financial results for the three and six months ended June 30, 2006 and 2007 are those of the Company and since March 14, 2006, Old HPI. Pursuant to the terms of a Redemption, Stock Sale and Release Agreement (the Redemption Agreement), FFFC, Denaris, Key and Novas results for 2006 are presented in a one-line presentation and are included in the results in income (loss) from discontinued operations.

20

---

BUSINESS ACQUISITION:

Acquisition of Old HPI

Pursuant to an Agreement and Plan of Merger and Reorganization, as amended, (the Merger Agreement) the Company, in March 2006, acquired 100% of Old HPI. The initial consideration consisted of 3,038,990 shares of our common stock, 132,122 shares of our common stock reserved for the exercise of options to purchase 1,550,000 shares of Old HPI common stock and warrants issued to purchase up to 1,600,000 shares of our common stock, the initial terms of which included an exercise price of $3.00 and an expiration date of February 2007. The total value of the initial consideration was $16,729,864 and the total initially allocated to identifiable intangible assets was $19,316,074. In February 2007, the Company modified the terms of the warrants by reducing the exercise price to $2.00 and extending the expiration date to August 2007. As a result of these modifications, the Company recognized an additional
expense of $99,200 based upon the Black-Scholes option pricing model and such expense is included in selling, general and administrative expense in the condensed consolidated statement of operations for the six months ending June 30, 2007.

The Company also issued to the stockholders of Old HPI 300,000 shares of its Series L Preferred Stock (the Preferred Stock). The Preferred Stock, issued in three equal amounts (referred to as the L-1, L-2 and L-3 Preferred Stock, respectively), whereby each amount is convertible into 40% of the Companys common stock on the 180th, 270thand 360thday following closing of the merger, respectively. The conversion of the Preferred Stock is subject to the achievement by Old HPI of certain performance benchmarks as defined in the Certificate of Designation of Series L Preferred Stock, the satisfaction of which is to be determined by the Board of Directors of the Company in its sole discretion. The benchmarks include HPIs use of its hydrogen technology to develop prototype generators for various micro and portable power applications and for various macro power
applications such as fuel cells and internal combustion engines (the Benchmarks). Based on the achievement of the benchmarks, on January 3, 2007, the Company issued, upon the conversion of the L-1 and L-2 preferred stock, an aggregate of 12,594,622 shares of the its common stock, and an additional 711,431 shares of its common stock have been reserved for issuance upon the exercise of Old HPI outstanding options. The Company has valued the 12,594,622 shares (the Additional Shares) of its common stock at $18,640,041 (based on the market price of the common stock on the date the Company issued the shares). The value of the 711,431 shares of common stock reserved for issuance upon the exercise of Old HPI options was $788,266 based on the Black Scholes option pricing model. Accordingly, $19,428,307 has been added to the purchase price allocation during the three months ending March 31, 2007. Immediately following the conversion of the Series L-1 and L-2 Preferred
Stock into common stock on January 3, 2007, the former shareholders of Old HPI held an aggregate of 15,633,612 shares of the Companys common stock, constituting approximately 54.1% of the Companys outstanding stock. The former majority shareholder of Old HPI, GHTI, holds approximately 49.3% of the Companys outstanding common stock. Additionally, former option holders of Old HPI hold options to purchase an aggregate of 843,553 shares of the Companys common stock.

The Company, currently based in Seattle, Washington, performs hydrogen-related testing, research and engineering, and has developed a patented system (Hydrogen NowTM) that creates pure hydrogen from the reaction of aluminum and water. The patented technology allows hydrogen gas to be generated on-site and on-demand, without electricity, thus offering the potential to overcome transportation and storage problems. This process has the potential to supply hydrogen at customized rates and pressures.

Our objective is to develop and market our licensed proprietary hydrogen production process for use in commercial applications that require hydrogen, but where hydrogen storage and/or distribution is too costly or not feasible. Our management believes, based on their product and market review, that our hydrogen production process may be a commercially viable process for: (1) small volume hydrogen production for various industrial applications; and (2) fuel cell applications where on-demand hydrogen is required or is an advantage such as for selected portable power, stationary and mobile back-up generator power, and small scale transportation applications. Our new Chief Executive Officer is currently assessing, with his advisors, the technology and possible applications thereof. Thus, possible application areas, and any others contained in this document should be considered tentative.

21

---

Our functional technology development laboratory is equipped to carry out hydrogen-related testing, research and engineering. We have working arrangements with two university laboratories - the Department of Metals and Materials Engineering at the University of British Columbia, Canada and the Department of Metals at the University of Washington, Seattle - to make use of the larger, more sophisticated pieces of equipment already available at those facilities. We are at the early stage of testing and evaluating the commercial application of the licensed technology and the design and engineering of prototypes.

Return of subsidiary common stock

On January 2, 2007, pursuant to the terms of a Redemption Agreement by and between the Company and FFFC, FFFC (i) redeemed 8,917,344 shares of its common stock held by the Company, (ii) acquired from the Company 5,000,000 shares of common stock of Denaris, (iii) acquired from the Company 1,000 shares of common stock of Key, and (iv) acquired from the Company 1,000 shares of common stock of Nova. Denaris was a majority owned subsidiary of the Company, and Key and Nova were wholly owned subsidiaries of the Company. Each of Denaris, Nova and Key are inactive entities with no operating or intellectual property assets. The shares of common stock of each entity transferred by the Company pursuant to the Redemption Agreement constituted all of the Companys holdings in each entity. In consideration of the redemption and acquisition of the shares of Denaris, Key and Nova, FFFC released the Company from all
outstanding payment obligations of the Company to FFFC, including obligations for a $5 million note dated March 14, 2006 in favor of FFFC. The outstanding balance on the note, including principal and interest accrued, as of the date of the Redemption Agreement was $5,402,398.

Subsequent to FFFC redeeming its shares of common stock pursuant to the Redemption Agreement, the Company owned 3,500,000 shares of common stock of FFFC. As of June 30, 2007, this represents approximately 48% of the outstanding common stock of FFFC. So long as the Company holds 10% or more of the outstanding equity or voting interest in FFFC, it has agreed to vote its shares of capital stock of FFFC in the same manner and proportion as other stockholders of FFFC vote their shares (the Voting Arrangement). Due to the ownership percentage being below 50% and pursuant to the terms of the Voting Arrangement in the Redemption Agreement, management of the Company has determined that they do not have any significant control of FFFC. Accordingly, the Company is no longer consolidating FFFC and its subsidiaries (Key, Nova and Denaris) in its financial statements.

SALE OF FFFC ASSETS

On December 22, 2005, FFFC and Chex entered into an Asset Purchase Agreement (the APA) with Game Financial Corporation (Game), pursuant to which FFFC and Chex agreed to sell substantially all of its cash access contracts and certain related assets, which represented substantially all the assets of Chex and FFFC.

On January 31, 2006, FFFC and Chex completed the Asset Sale for $14 million pursuant to the APA and received cash proceeds of $12,642,784 and realized a pre-tax book gain of $4,145,835.

In connection with the Asset Sale, FFFC and Chex entered into a Transition Services Agreement (the TSA) with Game pursuant to which FFFC and Chex agreed to provide certain transitional services to Game for the cash-access financial services business. Pursuant to the TSA, FFFC and Chex provided the necessary services for approximately three months and Game paid FFFC $150,000 per month. The TSA terminated May 19, 2006 and FFFC received $300,000 for the three months ended March 31, 2006 pursuant to the terms of the TSA.

LIQUIDITY AND CAPITAL RESOURCES

For the six months ended June 30, 2007, net cash used in operating activities was $1,738,000 compared to $3,751,000 for the six months ended June 30, 2006. The net loss for the six months ended June 30, 2007 increased to $17,740,000 from $3,291,000 for the six months ended June 30, 2006. The increase in net loss

22

---

was primarily  attributable  to costs of  $12,780,000  incurred in acquiring the
technology, trade name and sub-license agreement (Acquisition Costs)
of Old HPI and our loss of $2,516,000 from the transactions  provided for in the
Redemption  Agreement  and a loss of $564,000  on our  investment  in FFFC.  The
results for the six months ended June 30, 2006 included  gain from  discontinued
operations  of  $472,000,  which  was  comprised  of gain on the  Asset  Sale of
$4,146,000, offset by operating losses of FFFC of approximately $3,125,000 and a
decrease  in  deferred  income  taxes  of  $1,333,000   (including  $596,000  in
discontinued  operations).  Adjustments  to  the  current  periods  results
included non-cash expenses of approximately $16,397,000, significantly comprised
of   $12,780,000  of  Acquisition   Costs,   $2,516,000   loss  on  disposal  of
subsidiaries,  $564,000 loss on investments,  $399,000 of non-cash  compensation
expense  and   modification  of  warrants  and  $138,000  of  depreciation   and
amortization.  The 2006 adjustments were approximately  $640,000,  significantly
comprised  of  $1,739,000  of  expenses  related to stock and  warrants  issued,
$1,333,000  of  deferred   income  taxes,   $1,154,000  for   depreciation   and
amortization,  provision  for bad debt of $518,000  and
$4,146,000 gain on the sale of assets.

Net cash used in investing activities for the six months ended June 30, 2007 was $60,000 compared to net cash provided by investing activities of $14,910,000 for the six months ended June 30, 2006. Net cash provided in 2006 investing activities was primarily attributable to the net proceeds of $12,713,000 from the Asset Sale and $2,203,121 cash acquired in the  Old HPI acquisition.

Net cash used in financing activities for the six months ended June 30, 2007 was $273,000 compared to $10,474,000 for the six months ended June 30, 2006. The activity for the six months ended June 30, 2007 was the repayment of notes payable. The 2006 activity included the receipt of $635,000 from the borrowings of notes payable. In addition, the Company repaid $10,075,000 of notes payable and $1,081,000 of checks issued in excess of cash in bank from the proceeds of the Asset Sale.

For the six  months  ended  June 30,  2007,  net cash  decreased  by  $2,071,000
compared  to an increase of  $685,000  for the six months  ended June 30,  2006.
Ending cash at June 30, 2007, was $1,508,000 compared to $9,092,000 at June 30,
2006. The 2006 cash balance includes cash included in discontinued operations of
$3,124,000.

The Company  received  an  extension  on its Note and Loan  Payable to a related
party of $37,500 until  September 30, 2007. No other terms and conditions of the
note changed.

The  Company is  currently  in default of its payment  obligation  to lenders of
approximately  $486,000 as of June 30,  2007.  The Company made a payment on the
Notes in July 2007 of $575,000,  bringing the balances due current thru July
2007 which includes the payment due in July. The Company,  however, did not make
the required  payment for August of  approximately  $149,000 and is currently in
default.  On August 6, 2007,  the Company  received a notice of default from the
Lenders  demanding  immediate  of all monies due under the notes due to multiple
events of default,  including  failure to make  payments  when due.  The Company
currently  does not have  adequate  assets to satisfy its  obligations  and must
either  obtain a waiver from its Lenders or raise  additional  funds in the very
near future. Even if the Company were able to obtain a waiver from the Lender of
this default,  the Company will need to raise funds to continue operation before
the end of 2007.  The can be no assurance that the Company will be able to raise
funds on  favorable  terms,  or at all.  Failure to raise funds in the near term
will  significantly  impact its ability to  continue as a going  concern and may
result in the Company  ceasing  operations and could possibly result in the need
to file for bankruptcy.

RESULTS OF OPERATIONS

Financial statements for the three and six months ended June 30, 2006 have been retroactively reclassified to include Nova and Denaris in the previously reported discontinued operations of FFFC and Key.

23

---

CORPORATE SELLING, GENERAL AND ADMINISTRATIVE

For the three and six months ended June 30,  2007,  corporate  expenses  include
those of the  Company  and for the three and six months  ended June 30, 2006 are
those  of the  Company  and  from  March  14,  2006  Old  HPI  (the  date of the
acquisition).  Corporate Selling General and administrative  costs for the three
months ended June 30, 2007 were  $471,000,  a decrease of $797,000 from the same
period  last  year.  This was  primarily  due to the  significant  reduction  of
expenses  due to  relocation  of  corporate  headquarters  to Seattle in 2007 of
approximately  $251,000 and the reduction of management  fees of $147,000  which
were  eliminated in 2007.  For the six months ended June 30, 2007 these expenses
were $1,203,000 a decrease of  approximately  $906,000 from the same period last
year.  The  reduction in expenses for the six month period were due primarily to
the   significant   reduction  of  expenses  due  to   relocation  of  corporate
headquarters to Seattle in 2007 of $626,000 and the reduction in management fees
of approximately $294,000.

RESEARCH AND DEVELOPMENT COSTS

For the three months ended June 30, 2007, Research and Development costs were $372,000 an increase of approximately $97,000 when compared to the same period last year due primarily to the expenses associated with a contract for development of our technology with a University. For the six months ended June 30, 2007 these expenses were $602,000 or $327,000 higher than last year. The increase is primarily due to the contract mentioned above and no expenses were recognized in the first quarter of 2006 as the acquisition of Old HPI was not effective until March 14, 2006.

OTHER INCOME (EXPENSE):

Consolidated net other expenses for the three and six months ended June 30, 2007 were $200,000 and $3,154,000,  respectively, compared to $235,000 and $642,000 for the same three and six month periods in 2006. During the six months ended June 30, 2007, pursuant to transactions described in the Redemption Agreement, the Company recognized an expense of $2,516,000 related to the partial disposition of its investments in FFFC, and the disposition of Key, Nova and Denaris. For the three and six month periods ending June 30, 2007, the company recorded a loss on its investment in FFFC of $176,000 and $564,000 respectively. Interest expense decreased by $244,000 and $564,000, respectively for the three and six month periods ended June 30, 2007 when compared to the same periods in 2006. The decrease was primarily attributable to non-cash interest expense of approximately $400,000 related to the settlement of various
obligations to note holders for the six months ended June 30, 2006. Interest income increased by $3,000 for the six months ended June 30, 2007 compared to June 30, 2006 but declined by $33,000 for the second quarter of 2007 when compared to 2006. The decline for the second quarter 2007 when compared to the same period last year is due primarily to lower cash balances in interest bearing accounts.

INCOME TAX EXPENSE

Income tax expense for the three and six months ended June 30, 2006 were $424,000 and $737,000 respectively and is primarily related to the income taxes as a result of the Asset Sale in January 2006. In addition, the Company has not recognized a tax benefit related to net operating losses generated during the three and six months ended June 30, 2007, as realization of the deferred tax asset is not considered more likely than not and therefore an allowance has been applied against this amount.

CONTRACTUAL OBLIGATIONS

There were no new material contractual obligations during the quarter ended June 30, 2007.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2007,  the Emerging  Issues Task Force of the FASB issued EITF Issue No.
07-3,Accounting for Nonrefundable Advance Payments for
Goods   or   Services   to  be  Used  in   Future   Research   and   Development
Activities,  (EITF 07-3) which is effective
for fiscal years  beginning  after  December 15, 2007.  EITF 07-3  requires that
nonrefundable advance payments for future research and development activities be
deferred and  capitalized.  Such amounts will be recognized as an expense as the
goods are delivered or the related services are performed.  The Company does not
expect  the  adoption  of EITF 07-3 to have a material  impact on the  financial
results of the Company.

24

---

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company has limited exposure to market risk related to changes in interest rates. The Company does not currently invest in equity instruments of public or private companies for business or strategic purposes.

The principal risks of loss arising from adverse changes in market rates and prices to which the Company and its subsidiaries are exposed relate to interest rates on debt. The Company has only fixed rate debt, as follows:

June 30,
        December 31,Contractual obligation
        2007
        2006
        Interest rateNotes payable
        $ 37,500
        $ 2,145,500
        Fixed 10% - 15%Long-term debt
        1,395,669
        1,693,634
        Fixed 10%Operating lease obligations
        200,000
        224,000
        Fixed 10%Debt outstanding, before note discounts (1)
        $ 1,633,169
        $ 4,063,134




(1)
        Excludes discount of $52,693 (2007) and $115,921 (2006) to the carrying value of the notes that are included in the Companys balance sheet as of June 30, 2007 and December 31, 2006.


25

---

ITEM 4.

DISCLOSURE CONTROLS AND PROCEDURES

A review and evaluation was performed by the Companys management, including the Companys Chief Executive Officer and Treasurer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined under Rule 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the last day of the period of the accompanying financial statements. Based on that review and evaluation, management has concluded that the Companys current disclosure controls and procedures, as designed and implemented, were not effective at ensuring that the material information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported as required in applicable SEC rules and forms. There have been no changes in the Companys internal controls over financial reporting that have
materially affected, or are reasonably likely to materially affect, the Companys internal controls over financial reporting.

In connection with the 2006 audit, our independent registered public accounting firm has advised us and our Board of Directors that there are material weaknesses in our internal controls and procedures. The identified material weaknesses primarily relate to the limited number of Company employees engaged in the authorization, recording, processing and reporting of transactions, as well as the overall financial reporting process. These material weaknesses have caused significant delays in our financial reporting process. In addition, during the 2006 audit, we were not able to timely produce adequate documentation supporting all transactions underlying the financial statements. We are currently considering taking certain steps to correct the material weaknesses by enhancing our reporting process in future. Enhancing our internal controls to correct the material weaknesses will result in increased costs to us.

26

---

PART II.OTHER INFORMATION

Item 1.Legal Proceedings

None

Item 1A. Risk Factors

Except as set forth below, there have been no material changes from the risk factors disclosed in Section 1A. Risk Factors of our annual report on Form 10-K for the year ended December 31, 2006 but please carefully consider both the risk factors of our annual report on Form 10-K and the risk factors below. The risk factors described below were previously disclosed on the Form 10-K but have been updated to provide more recent financial and factual information as of June 30, 2007.

We are in default on certain secured convertible promissory notes which could seriously limit our future existence and development

We  currently  owe  certain  lenders  approximately  $0.9  million  on the Notes
described  in Note 4 A to the  financial  statements  that are payable  over the
balance of the year, which would substantially deplete working capital currently
available  to HPI. On August 6, 2007,  the Company  received a notice of default
from the Lenders  demanding  immediate  payment of all monies due under the Notes due to
multiple  events  of  default,  including  failure  to make  payments  when due.
Pursuant to the  declaration  of an event of default,  the Lenders have declared
the entire  outstanding and unpaid principal amount of the Notes,  together with
the accrued and unpaid  interest  immediately  due and payable.  As of August 3,
2007,  the total amount due to the Lenders is  $913,092.41  The Company does not
have the financial resources to pay the amounts due under the Notes. The Lenders
have also demanded  delivery of the original stock  certificate  for 3.5 million
shares of common stock of FastFunds Financial  Corporation pursuant to the terms
of a Stock Pledge  Agreement  dated September 15, 2005. As of June 30, 2007, the
Company  owns  approximately  48% of the  outstanding  common stock of FastFunds
Financial Corporation.  The Notes are collateralized by all of the assets of the
Company.  Please  also see the  Managements  Discussion  and  Analysis  of
Financial  Condition  in this document for more details on these and other
financial issues.

Chex is a guarantor of certain debt of HPI, and the Companys entire investment in Chex (i.e., its ownership of all outstanding Chex stock) is subject to a security interest securing such obligation. Furthermore, all of the assets of Chex are subject to a security interest for the same debt.

In March 2004, HPI closed on $5 million of debt financing and issued convertible promissory notes in that principal amount to two financial institutions (the Lenders). The proceeds from the promissory notes were immediately thereafter loaned to Chex. The promissory notes are collateralized, among other things, by all of the assets of Chex, and by the Company common stock owned by HPI. In conjunction with the Asset Sale, the holders of the promissory notes consented to the sale of assets that secured their notes. In contemplation of the Redemption Agreement described above, on December 29, 2006, HPI and FastFunds obtained the consent of the two financial institutions to complete the transactions contemplated by the Redemption Agreement. Contemporaneously with receipt of the consent, HPI and FastFunds entered into an Note and Security Amendment Agreement dated December 29, 2006 with the Lenders,
pursuant to which it was agreed to amend certain terms of the Convertible Promissory Note dated March 8, 2004 in favor of Lenders in the principal amount of $5,000,000 to increase the interest rate applicable to the Convertible Promissory Notes from 7% per annum to 10% per annum and the default interest rate from 10% to 13%. We have defaulted on the obligations specified under the promissory notes, and if we or Chex cannot cure such defaults, FastFunds remaining assets could be lost. Chex is not expected to have the reserves to pay any of such claims.

Item 2.Unregistered Sales of Securities

None

27

---

Item 3.Defaults upon Senior Securities

None.

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

None.

Item 5.Other Information

None.

Item 6.Exhibits

Exhibits

31.1
        Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
        Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




28

---

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 thereunto duly authorized.

Hydrogen Power, Inc.(Registrant)Date: August 14, 2007
        By: /s/ David J. CadeDavid J. CadeChief Executive Officer andPrincipal Accounting Officer


29

---