<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                      FOR FISCAL YEAR ENDED JANUARY 31, 2001

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                         COMMISSION FILE NUMBER: 0-24857

                             POWER TECHNOLOGY, INC.
                             ----------------------
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

             NEVADA                                      88-0395816
----------------------------------          ------------------------------------
 (STATE OR OTHER JURISDICTION OF            (I.R.S. EMPLOYER IDENTIFICATION NO.)
  INCORPORATION OR ORGANIZATION)


                 1000 WEST BONANZA ROAD, LAS VEGAS, NEVADA 89106
                 -----------------------------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

ISSUER'S TELEPHONE NUMBER:  (702) 382-3385

SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:

     TITLE OF EACH CLASS         NAME OF EACH EXCHANGE ON WHICH REGISTERED
     -------------------         -----------------------------------------
            N/A                                     N/A

SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

                        COMMON STOCK, PAR VALUE $.001

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X   No
                                                                      ---    ---

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]

         State issuer's revenues for its most recent fiscal year:
                  $ -0-.

         The aggregate market value of voting stock held by non-affiliates of
the registrant as of May 14, 2001:

                  Common stock, $.001 par value:  $8,063,610

         The number of shares of the registrant's common stock outstanding as of
January 31, 2001:

                  19,756,805 shares.

         Documents incorporated by reference:  None

         Transitional Small Business Disclosure Format:

                                       Yes                       No    X
                                           -------                  -------
<PAGE>

                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

         Power Technology, Inc. (the "Company"), a Nevada corporation, was
incorporated on June 3, 1996. However, the Company did not conduct any
significant operations until March 1998 when it acquired all of the issued and
outstanding capital stock and assets of PowerTek Technology Corporation, Inc.
(formerly called Power Technology, Inc.) which is presently a wholly-owned
subsidiary of the Company. The Company changed its corporate name from
"Zepplin Production Corp." to Power Technology, Inc. during March 1998 to
reflect the change in the purposes and nature of its business.

         The Company is a research and development company. It is presently
engaged in research and development activities regarding (i) batteries for the
automotive and electric car industries, (2) electronic sensors, (3) pipeline
connection technology, and (4) grain drying equipment.


BATTERIES

         The primary business of the Company has been to develop improved
technology for batteries to be used in the automotive and electric car industry,
and other uses. Its battery technology has passed from the "proof of principle"
stage to the "preliminary prototype" stage of development.

         The goal of the Company has been the development of batteries that (i)
are lighter than conventional car batteries, (ii) have a higher charge/ quicker
recharge rate, (iii) provide greater range, (iv) will be more cost effective,
and (v) will be more environmentally friendly.

         Electric cars currently being produced have battery packs that last
between 25,000 and 30,00 miles, weigh about 1,100 pounds, require a two to eight
hour recharge period using a 220-volt outlet (or six to ten hours using a
110-volt outlet) and cost about $3,000 to $20,000 to replace. These operating
and recharge statistics only apply to electric cars or batteries operating at
room temperature. At higher temperatures, like those found on sun-soaked asphalt
highways (approximately 50% of North America), battery life of conventional
batteries is drastically diminished. At lower temperatures (the other half of
North America), there is power loss in conventional batteries. Using today's
state-of-the-art technology, electric vehicles will run on lead-acid batteries
and carry two people about 50 miles on a hot day.

         The Company intends to continue its development efforts to be funded in
part through licensees and industrial joint venture partners in order to broaden
and build upon its products and technological base.

         The Company recognizes the need to protect its technology and has a
patent pending covering its battery structure and materials.

         The importance of electric vehicles in the United States and abroad
has increased because of concerns regarding air pollution, global climactic

                                       2
<PAGE>

changes, ozone layer depletion, noise abatement, the price of gasoline, and
dependence on imported oil. However, because of the costs and limited range of
currently available batteries, the production and sales of electric vehicles has
been very limited. There appears to be substantial demand for a high power,
durable, high charge/discharge rate battery for electric cars and other hybrid
electric vehicles (such as two and three wheeled vehicles that are numerous in
Europe and third world countries).

         The Company's future business prospects are substantially dependent
upon the ability of the Company, its joint venture partners and licensees to
develop, manufacture and sell products based on the Company's battery
technologies. Additional development efforts will be required before products
based on the Company's technologies can be manufactured and sold commercially.
There can be no assurance that certain products based on the Company's
technologies can be manufactured cost effectively on a commercial scale, that
such products will gain market acceptance or that competing products and
technologies will not render products based on the Company's technologies
obsolete or noncompetitive.

         In certain fields, the Company may enter into licensing or joint
venture agreements with established companies. Any revenues or profits which may
be derived by the Company from these arrangements will be substantially
dependent upon the willingness and ability of the Company's licensees and joint
venture partners to devote their financial resources and manufacturing and
marketing capabilities to commercialize products based on the Company's
technologies.

         The Company's ability to compete effectively with other companies will
depend, in part, on its ability to protect and maintain the proprietary nature
of its technology. There can be no assurance that the Company's patents or other
proprietary rights will be determined to be valid or enforceable if challenged
in court or administrative proceedings or that the Company's patents or other
proprietary rights, even if determined to be valid, will be broad enough in
scope to enable the Company to prevent third parties from producing products
using similar technologies or processes. There can also be no assurance that the
Company will not become involved in disputes with respect to the patents or
proprietary rights of third parties.


BATTERY TECHNOLOGY

         The battery being developed by the Company is an electrochemical
battery of the type having a positive plate, a negative plate, an electrolyte
contacting and bridging the plates, and a transducer in contact with the
plate(s) to apply electronic energy to the plate(s). Each plate is comprised of
a rigid metal structure which significantly increases the exposed surface area
of the plates for the electrolyte to be in contact. The metal structure of the
plates are specially coated with an electrically conductive metal.

         Electrochemical batteries typically include a pair of oppositely
charged plates (positive and negative) with electrolyte to convey ions from one
plate to the other when the circuit is completed. This is a well developed
technology, typically utilizing a lead-acid electrolyte which is more


                                       3
<PAGE>

expensive, more volatile, and environmentally unfavorable than the Company's
battery technology.

         Because the capability of a battery is directly related to the surface
area of its plates which is in contact with electrolyte, their capability is
usually enhanced by sculpting their surfaces to increase and open up their
surface areas. The technology of the Company further increases the surface areas
of the plates without compromising their strength or resistence to vibration,
erosion and loss of material. Because the Company's plates can be placed closer
together due to their rigidity, the size of the battery and the amount of
required electrolyte is significantly reduced. For this reason, it also
increases the power density for both the weight and size of the battery.

         The physical movement of electrolyte at the interface of the plates is
increased which materially enhances the ion migration and transfer between the
plates. Stagnation of electrolyte at the plates of conventional batteries is a
problem because it inhibits the transfer and migration of ions between the
plates, commonly known as ion depletion.


PROTOTYPE BATTERIES

         The Company is in the process of producing preliminary prototype
versions of its battery that will be built and tested in a variety of
configurations. Preliminary testing by the Company indicates that various
configurations of the battery meet or exceed some of the performance goals
established by major governmental and industry groups for electric vehicle
batteries. The Company also believes its battery has a number of applications
other than electric vehicles, such as hybrid powered vehicles, portable power
tools, electric power management, uninterruptible power and for starting,
lighting and ignition ("SLI") batteries for automobiles, aircraft and marine
craft. The Company is designing various prototype batteries for such
applications.

         GLOSSARY OF TECHNICAL TERMS. Certain technical terms used herein
         have the following meanings:

         Cycle Life - the number of times a rechargeable battery can be charged
         and discharged.

         Electrode (battery) - the chemically active portions of a battery.

         Energy Density - the amount of energy stored in a specific volume or
         weight.

         EV (Electric Vehicle) - a vehicle propelled exclusively by an electric
         drive system powered by an electrochemical energy storage device,
         typically a rechargeable battery.

         HEV (Hybrid Electric Vehicle) - a vehicle that is propelled both by an
         electrochemical energy storage device coupled to an electric drive and
         an auxiliary power unit powered by a conventional fuel such as


                                       4
<PAGE>

         reformulated gasoline, direct injection diesel or compressed natural
         gas.

         Hydrides - solid materials that store hydrogen.

         Power Density - the amount of power a battery can delivery per unit
         volume or weight.


BATTERY COMPETITION

         The market for batteries and other proposed products of the Company is
highly competitive, subject to rapid change and significantly affected by new
product introductions and other market activities of industry participants. The
Company's proposed battery products are targeted at an emerging market of
electric powered automobiles and other vehicles, and the Company's competitors
offer a variety of products and services to address this market. Further, the
Company currently faces direct and indirect competition from traditional
batteries.

         The battery industry is mature, well-established and highly
competitive. The industry is characterized by a few major domestic and foreign
producers including Exide, Delphi, A.C. Delco, Johnson Controls, Inc., GNB,
Electrosource, Inc., Energy Conversion Devices, Inc., Hawker and Yuasa, all of
which have substantially greater financial resources than the Company.
Accordingly, the Company's ability to succeed in this market depends upon its
ability to demonstrate superior performance and cost attributes of its
technology. The Company has historically concentrated its activities in the
electric vehicle segment of the market with a view to demonstrating improved
energy to weight and longer battery life in comparison to traditional lead-acid
batteries. The principal competitors of the Company in the electric vehicle
market have directed their efforts to other battery types, such as
nickel-cadmium, nickel-metal hydride, nickel-iron and sodium-sulfur batteries,
rather than lead-acid formulations, although at least one major automobile
manufacturer and one major battery company are known to have research and
development projects underway to develop lead-acid batteries for electric
vehicles.

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


                                       5
<PAGE>

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

         The Company believes that the principal competitive factors affecting
its market include features such as functionality, weight, adaptability, ease of
use, product reputation, quality, price, performance, customer service and
support, effectiveness of sales and marketing efforts and company reputation.
Although the Company believes that it will compete favorably with respect to
such factors, there can be no assurance that the Company can establish a
competitive position against current and potential competitors, especially those
with greater financial, marketing, service, support, technical and other
resources than the Company.


PIPELINE CONNECTION TECHNOLOGY

         The Company is conducting research and development operations regarding
its patented pipeline connection technology. The Company is developing equipment
designed to join large diameter pipe utilizing magnetic pulse methods, a cold
form method joining a metal sleeve around the ends of two abutting pipes.

         A hinged magnetic work coil developed by the Company is clamped around
the sleeve joining two pipes to produce a ringed shaped crimping force forcing a
uniform joint with uniform stress distributions. The pipes may have annular
grooved ends, grooved to approximately 1/3 of its depth, to be gripped by the
grooves of the sleeve. A pressure sensitive adhesive may be applied to the pipe
ends to improve the performance and seal of the splice. When the magnetic pulse
is applied by the equipment, it instantly crushes the sleeve onto the pipe and
into the shallow grooves milled into the pipe ends, which improves its pullout
resistence.

         This pipeline connection technology is particularly useful for joining
oil and gas pipelines, oil and gas well casings, and other large pipe
connections such as those at refineries, chemical plants and other industrial
operations. Because arc welding or other forms of extreme heat are hazardous,
which are avoided by the Company's technology, there are substantial advantages
in safety, avoidance of property damage, and avoidance of microcracks that can
form splits and rupture under stress. The cold magnetic impulse method creates a
uniform joint connection between pipes. The process is significantly faster than
arc welding, requires less operator skill than welding, and avoids costly and
complicated post-welding inspections. The magnetic impulse method also has the
advantage that it can be performed in the field in any weather condition.

         The Company's pipeline connection technology is based upon the
principle that whenever a rapidly changing magnetic flux cuts across a
conductive material, such as the grooved sleeve to be used by the Company, a
current is induced in the material. The current is proportional to the initial


                                       6
<PAGE>

intensity and time rate of change of the magnetic flux. The induced current
creates an associated magnetic field of such polarity as to oppose the magnetic
field producing the current, creating very significant forces of repulsion. This
effect is commonly called "Lenz's Law of Repulsion". This repulsion force of the
Company's work coil pinches the conductive sleeve around the pipes.


ALLOY SENSOR TECHNOLOGY

         The Company is conducting research and development operations regarding
its patented alloy sensor technology.

         The Company has been developing its alloy sensor technology as a
permanently installed water detection device to check for the presence of water
in storage tanks, fuel tanks and other systems. The alloy sensor is mounted on
a valve socket that is connected to a meter. A plug inserted into the valve
permits periodic inspection and reads the meter. Only a short time is necessary
to check a number of fuel tanks, for example by the use of the plug and single
ammeter without opening a drain valve (unless it is necessary to drain detected
water out of the tank).

         The alloy sensors of the Company provides positive detection of water
wherever needed and can be connected to a flow system or moisture alarms to
detect leaks.


GRAIN DRYING TECHNOLOGY

         The Company is researching and developing microwave technology to
develop a method to dry grain to acceptable levels for storage and sale on
behalf of Fluidic/Microwave Systems, Inc., an affiliate of the Company. The
Company owns 20% of Fluidic/Microwave Systems, Inc. The MicroDry process is
being designed to move grain within harvesting machinery (ie, a combine) via air
pressure.

         For example, grain such as wheat, soybeans, and corn all have a certain
moisture content. To be properly stored, grain must be dried to the proper
moisture level to prevent spoilage and mold, some of which is toxic to humans
and livestock. While wheat and soybeans typically are harvested at lower
moisture levels and are therefore easier to dry to safe levels in the field and
after harvesting, corn in the United States is typically harvested at an average
of 25% moisture content and must be dried to 10% to 15% moisture content for
safe storage and acceptance at elevators for sale.

         A grain harvester has an elevator duct that lifts the grain into the
storage tank located at the top of the harvester. The MicroDry process would
replace this duct with an air lift structure that would begin the drying process
while lifting the corn, or other grain, to the tank by using the warm air.

RESEARCH AND DEVELOPMENT

         Research and development efforts are directed at improving the
performance and expanding the capabilities of its prospective products.


                                       7
<PAGE>

Although the Company expects that certain of its products will be developed
internally, the Company may, based on timing and cost considerations, acquire
technology and products from third parties or retain consultants.

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


PROPRIETARY RIGHTS AND LICENSING

         The Company's success is dependent upon proprietary technology. The
Company will rely primarily on a combination of patents, trade secrets,
confidentiality procedures and contractual provisions with its employees,
consultants and business partners and in its license agreements to protect its
proprietary rights. In addition to its patents, the Company seeks to protect its
products, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
reverse engineer or otherwise copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. While the
Company is not aware that any of its products infringe upon the proprietary
rights of third parties, there can be no assurance that third parties will not
claim infringement by the Company with respect to current or future products.


EMPLOYEES

         As of January 31, 2001, the Company had ten (10) full-time employees
and two (2) consultants. Of the total, seven were engaged in product research
and development, and two (2) were in finance and administration. The Company
also had two part-time employees as of December 31, 2001. None of the Company's
employees is represented by a labor union with respect to his or her employment
by the Company. The Company has experienced no organized work stoppages and
believes its relationship with its employees is good. The Company believes that
its future success will also depend to a significant extent upon its ability to
attract, train and retain highly skilled technical, management, sales, marketing
and consulting personnel. Competition for such personnel in the industry in the
United States is intense. There can be no assurance that the Company will be
successful in attracting or retaining such personnel, and the failure to attract
or retain such personnel could have a material adverse effect on the Company's
business or results of operations.


BANKING ARRANGEMENTS


                                       8
<PAGE>

         The Company has no banking arrangements for a line of credit or other
borrowings to finance the Company. The Company intends to rely primarily upon
equity financing and joint ventures to finance its operations.

ITEM 2.  DESCRIPTION OF PROPERTY.

         The Company currently leases its executive and research and development
facilities located at 1000 West Bonanza Road, Las Vegas, Nevada 89106 on a
month-to-month basis. The lease covers approximately 5,000 square feet at a
monthly rental of approximately $2,000 per month. The Company believes that its
current facilities are adequate for its needs through 2001, and that, should it
be needed, suitable additional or alternative space is expected to be available
in the future on commercially reasonable terms.

ITEM 3.  LEGAL PROCEEDINGS.

         The Company was not engaged in any litigation as of January 31, 2001.
The Company may become engaged in various legal proceedings which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to those proceedings, if any, will not be
material to the Company's financial position or results of operations.

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

         The Company held the annual meeting of its shareholders on September
14, 2000. The shareholders (i) elected Messrs. Lee A. Balak, Alvin A. Snaper,
F. Bryson Farrill, William E. McNerney, and Hugo P. Pomrehn as directors of
the Company; (ii) approved the Company's 2000 Stock Option, SAR and Stock
Bonus Plan; (iii) approved the proposed amendment to the Articles of
Incorporation to increase the authorized shares of Common Stock to 100,000,000
shares; and (iv) ratified the appointment of G. Brad Beckstead as the
independent auditor of the Company for the fiscal year ending January 31, 2001.

                                    PART II

ITEM 5.  MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
         OTHER STOCKHOLDER MATTERS.

GENERAL

         The Common Stock of the Company is traded on the Electronic Bulletin
Board over-the-counter market, and is quoted under the symbol PWTC.

MARKET PRICE

         When the trading price of the Company's Common Stock is below $5.00 per
share, the Common Stock is considered to be "penny stocks" that are subject to
rules promulgated by the Securities and Exchange Commission (Rule 15-1 through
15g-9) under the Securities Exchange Act of 1934. These rules impose significant
requirements on brokers under these circumstances, including: (a) delivering to
customers the Commission's standardized risk disclosure document; (b) providing
customers with current bid and ask prices; (c) disclosing to customers the
brokers-dealer's and sales representatives compensation; and (d) providing to
customers monthly account statements.

         The following table sets forth the range of high and low sale prices


                                       9
<PAGE>

per share of the Common Stock of the Company as reported by National Quotation
Bureau, L.L.C. for the periods indicated. Prior to September 1997, there was no
public market for the trading of the Common Stock of the Company.

<TABLE>
<CAPTION>

Year Ended December 31, 1997                High Bid(1)(2)    Low Bid(1)(2)
----------------------------------------    --------          -------
<S>                                         <C>               <C>
         4th Quarter . . . . . . . . . .    $3.125            $.50

 Year Ended December 31, 1998
 ---------------------------------------
         1st Quarter (1) . . . . . . . .    $3.4375           $3.025
         2nd Quarter . . . . . . . . . .    $5.25             $1.625
         3rd Quarter . . . . . . . . . .    $2.50             $.625
         4th Quarter . . . . . . . . . .    $.83              $.25

Year Ended December 31, 1999
---------------------------------------
         1st  Quarter . . . . . . . . .     $.75              $.25
         2nd  Quarter . . . . . . . . .     $2.375            $.45
         3rd  Quarter . . . . . . . . .     $.86              $.375
         4th  Quarter . . . . . . . . .     $.82              $.34375

Year Ended December 31, 2000
--------------------------------------
         1st  Quarter . . . . . . . . .     $1.84375          $.40
         2nd  Quarter . . . . . . . . .     $1.65625          $.53125
         3rd  Quarter . . . . . . . . .     $1.40625          $.625
         4th  Quarter . . . . . . . . .     $1.01             $.40625
                                            High Bid(1)(2)    Low Bid(1)(2)
                                            --------------    -------------
Year Ending December 31, 2001
-----------------------------
         1st  Quarter . . . . . . . . .     $ .96875          $ .4375
</TABLE>

-------------------
(1)      During March 1998, the Company effectuated a one for five (1:5) reverse
         stock split. The above prices have been revised to reflect this split.

(2)      The Company is unaware of the factors which resulted in the significant
         fluctuations in the prices per share during the periods being presented
         although it is aware that there is a thin market for the Common Stock,
         that there are frequently few shares being traded and that any sales
         activity significantly impacts the market.

The closing price of the Common Stock of the Company on May 14, 2001, was $.___
per share.

                                CAPITALIZATION

         The following table sets forth information regarding our capitalization
as of January 31, 2001.


                                      10
<PAGE>

<TABLE>
<CAPTION>
                                                     January 31,
                                                         2001
                                                     -----------
<S>                                                  <C>
Long-term obligations, less current portion . . . .  $         0

Stockholders' equity:

Common Stock, $0.001 par value; 100,000,000
         shares authorized at January 31, 2001

Issued and outstanding Common Stock, actual;
         19,027,500 shares . . . . . . . . . . . .   $    19,028

Preferred Stock, $.001 par value; 1,000,000
         shares authorized; none issued. . . . . .   $         0

Additional paid-in capital . . . . . . . . . . . .   $ 2,722,573

Accumulated stockholders' deficit. . . . . . . . .   $(3,509,010)

Total stockholders' equity . . . . . . . . . . . .   $  (767,409)

</TABLE>

         The number of shares of Common Stock referenced above excludes as of
January 31, 2001:

       - 4,889,000 shares of Common Stock issuable upon exercise of outstanding
         options at prices ranging from $.40 to $4.00 per share.

       - 2,100,000 shares of Common Stock issuable upon the conversion of
         Series A Convertible Notes, convertible at $.50 per share.

       - 490,000 shares of Common Stock issuable upon the conversion of Warrants
         exercisable at $.66.

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.

MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

         The following discussion is intended to assist in an understanding of
the Company's consolidated financial position for its fiscal years ended January
31,2000 and 2001, and the results of its operations for the periods then ended.

         You should read the following discussion and analysis of financial
condition and results of operations of the Company together with the financial
statements and notes to the consolidated financial statements which appear
elsewhere herein. This discussion contains forward-looking statements that
involve risks and uncertainties. As a result of many factors, such as those set
forth in Item 1 "Description of Business",our actual results may differ
materially from those anticipated in these forward-looking statements.

GENERAL

         Power Technology, Inc. (the "Company"), a Nevada corporation, was
incorporated on June 3, 1996.


                                      11
<PAGE>

         The Company is in the development stage of developing its batteries and
other products. The Company is in the process of building its initial prototypes
of its batteries, but has not commenced any commercial production or sales of
batteries, pipeline connection equipment, or alloy sensors.

         Historically, the Company has used capital contributions from various
stockholders to fund its operations. To this point, the Company has not had
adequate funds to commercially produce, market and sell its batteries, pipeline
connection equipment and alloy sensors.

         There are no assurances that the Company will be able to obtain a
profitable level of operations.


                                      12
<PAGE>

YEAR ENDED JANUARY 31, 2001 COMPARED TO 2000

         The following table sets forth certain operating information regarding
the Company:

<TABLE>
<CAPTION>
                            Year Ended          Year Ended
                         January 31, 2000    January 31, 2001
                         ----------------    ----------------
<S>                      <C>                 <C>
Revenues                     $       0          $         0
General and adminis-
  trative expense            $ 803,311          $ 1,031,765
Research and
  development                $ 105,164          $   672,732

Net Loss                     $(908,475)         $(1,708,345)
Net Loss Per Share           $ (.05)            $   (.09)

</TABLE>

REVENUES.

         Total revenues for fiscal years 2001 and 2000 were $0, as the
operations of the Company continued to be focused on research and development.
To date, the Company has not established any commercial products nor commenced
any commercial production operations.

GENERAL AND ADMINISTRATIVE EXPENSES.

         General and administrative expenses increased from $803,311 in fiscal
year 2000 to $1,031,765 during the fiscal year ended January 31, 2001, an
increase of approximately 28.4%. The principal reason for the increase was the
issuance of common stock of the Company in exchange for consulting services, the
value of the stock ($466,450) being charged to administrative expense, compared
to $329,550 being charged during fiscal 2000.

RESEARCH AND DEVELOPMENT EXPENSES.

         Research and development expenses increased from $105,164 in fiscal
year 2000 to $672,732 during the fiscal year ended January 31, 2001, an increase
of approximately 640%, as a result of increased research activities regarding
the Company's battery development.

NET LOSS.

         The net loss of the Company increased from $908,475 during fiscal year
2000 compared to a net loss of $1,708,345 during the fiscal year ended January
31, 2001, an increase of approximately 88%. The increase in the net loss of the
Company is attributable primarily to an increase in its research and development
costs, its general and administrative expenses of the Company during the fiscal
year ended January 31, 2001, and its continued lack of revenues.

CAPITAL RESOURCES.


                                      13
<PAGE>

         The Company's capital resources have been provided primarily by capital
contributions, its stockholders loans, and from the exercise of stock options.
The Company raised $598,875 in capital during fiscal 2001 through a limited
offering of its Common Stock, convertible notes, and warrants which have been
used to purchase additional equipment, to further develop its products, and to
provide additional working capital to fund operations. During fiscal 2000, the
Company issued 2,900,000 shares of Common Stock for $290,000, and $258,500 in
stockholder debt and interest was exchange for 1,034,000 shares of Common
Stock and $40,000 was realized through the exercise of a stock option by a
consultant to the Company.

WORKING CAPITAL AND LIQUIDITY.

         At January 31, 2001, the Company had negative working capital of
approximately $878,232 compared to January 31, 2000, in the amount of $207,220
The Company believes that it will be necessary to increase it working capital to
continue its research and development activities which may be achieved by
incurring additional indebtedness from stockholders or others (see Note 6) or by
the sale of Common Stock or other securities of the Company.

         The ability of the Company to satisfy its obligations will depend in
part upon its ability to successfully complete the offer and sale of additional
shares of its Common Stock and in part upon its ability to reach a profitable
level of operations.

         On April 17, 2000, we entered into an Investment Agreement with the
Swartz Private Equity, L.L.C. ("Swartz") to raise up to $35,000,000 through a
series of sales of Common Stock. The dollar amount of each sale is limited by
the trading volume and the total number of issued and outstanding shares of
Common Stock of the Company. In order to sell shares to the Swartz there must be
an effective registration statement on file with the SEC covering the resale of
the shares by Swartz and we must meet certain other conditions.

PLAN OF OPERATIONS

         Because of the costs of development of its battery systems and other
products, and the continuing costs of its battery prototype production, the
Company expects that it will incur a loss during its fiscal year ending January
31, 2002.

         The Company believes that additional equity capital will be required to
accomplish its plan of operations during the next 12 months. As a result, the
Company is offering to sell its Common Stock to further capitalize the Company,
and may also borrow from banks and others to the extent necessary to provide
liquidity for its operations, although no arrangements for any additional
borrowings have been made.

         The Company has maintained its research and development activities and
the associated costs consistent with its plan of operations in order to develop
its batteries and other products for proposed commercial production. However,
the Company expects to continue the development of its batteries and other
products to incorporate technical changes and improvements. In addition, as the
Company establishes its marketing activities, the Company will incur additional
operating and equipments costs.


                                      14
<PAGE>

FORWARD LOOKING STATEMENTS

         When used in this Form 10-KSB annual report and in our other filings
with the SEC, in our press releases and in oral statements made with the
approval of one of our authorized executive officers, the words or phrases "will
likely result", "plans", "will continue", "is anticipated", "estimated",
"expect", "project" or "outlook" or similar expressions (including confirmations
by one of our authorized executive officers of any such expressions made by a
third party with respect to us) are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. We caution readers not to place undue reliance on any such statements,
each of which speaks only as of the date made. Such statements are subject to
certain risks and uncertainties, including but not limited to our history of
losses, our limited operating history, our need for additional financing, rapid
technological change, and an uncertain market, that could cause actual results
to differ materially from historical earnings and those presently anticipated or
projected. Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
factors described below and in Item 1 - "Description of Business". We undertake
no obligation to release publicly revisions we made to any forward-looking
statements to reflect events or circumstances occurring after the date of such
statements. All written and oral forward-looking statements made after the date
of this Form 10-KSB annual report and attributable to us or persons acting on
our behalf are expressly qualified in their entirety by this discussion.


UNCERTAINTIES:

DEVELOPMENT STAGE COMPANY.

         The Company is in the development stage. There is no assurance that the
Company's activities will be profitable. The likelihood of the success of the
Company must also be considered in light of the problems, expenses,
difficulties, complications, delays and all of the inherent risks frequently
encountered in the formation and operation of a relatively new business.

COSTS OF CONDUCTING BUSINESS.

         The Company will be required to incur substantial costs for research
and development and equipment, establishing production and marketing operations,
and related costs. A substantial portion of those costs must be paid whether or
not any of its batteries or other products prove to be commercially successful
on a broad scale. The ability to generate a profit depends, among other factors,
on the amount of equipment acquisition costs incurred, the amount of revenues
from the sale of batteries and other products by the Company, and its operating
costs.

COMPETITION.

         The battery business is highly competitive. Companies in the industry


                                      15
<PAGE>

have substantially greater financial, marketing, and technical resources than
the Company. Further, the entry into this industry does not necessarily require
a large capital expenditure and, accordingly, it can be expected that additional
competitors may enter the industry in the future. It may be particularly
difficult for a relatively small independent company to compete with larger
companies which have significantly greater resources. There can be no assurance
that the Company will be able to successfully compete if such an environment
develops.

TECHNOLOGICAL CHANGE.

         The Company expects that many new technologies and products will be
introduced in the battery industry over the next several years. The Company's
success will depend, among other things, on its ability to develop and maintain
a competitive position technologically. There can be no assurance that the
Company will have access to subsequently developed technology by other persons.
Technological advances by a competitor may result in the Company's present or
future products becoming noncompetitive or obsolete. The Company cannot be
assured that competitors will not develop functionally similar or superior
batteries, which event could have an adverse effect on the Company's business.

CONTRACTS.

         The Company has no current contracts for the manufacture or sale of its
batteries or other products, and has no back-log. There can be no assurance that
the Company will be able to obtain sufficient and suitable contracts for its
business plan.

FLUCTUATIONS IN OPERATING RESULTS.

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

         There can be no assurance that the Company's products will achieve
broad market acceptance or that the Company will be successful in marketing its
products or enhancements thereto. In the event that the Company's current or
future competitors release new products that have more advanced features,


                                      16
<PAGE>

offer better performance or are more price competitive than the Company's
products, demand for the Company's products would decline. A decline in demand
for, or market acceptance of, the Company's batteries or other products as a
result of competition, technological change, or other factors would have
material adverse effects on the Company's business, financial condition and
results of operations.

RAW MATERIALS

         The basic raw materials and components for the batteries and other
products being developed by the Company are readily available. The Company does
not expect to experience any significant delays in obtaining timely delivery of
its materials and components.

SEASONALITY

         The Company does not expect to experience material seasonal variations
in revenues or operating costs, except that sales activity for its batteries may
increase in the summer and winter seasons which is expected to cause the
operations of the Company to increase during such periods.

RECENT ACCOUNTING PRONOUNCEMENTS

         SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, became effective January 1, 2001. This statement establishes
accounting and reporting standards requiring that every derivative instrument,
including certain derivative instruments imbedded in other contracts, be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement also requires that changes in the derivative's fair
value be recognized in earnings unless specific hedge accounting criteria are
met. We believe the adoption of SFAS No. 133 will not have an effect on our
financial statements because we do not engage in derivative or hedging
activities.

         In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, which
provides guidance on the recognition, presentation and disclosure of revenue
having a material impact on our financial statements.

ITEM 7.  FINANCIAL STATEMENTS.

         The consolidated financial statements for its fiscal years ended
January 31, 2001 and 2000, are provided with this Form 10-KSB.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         There have been no disagreements regarding accounting and financial
disclosure matters with the independent certified public accountants of the
Company.


                                       17
<PAGE>





                                       18
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

DIRECTORS AND OFFICERS

         The directors and officers of the Company are as follows:

<TABLE>
<CAPTION>
         Name(1)(2)                Age      Position
         ----------                ---      --------
         <S>                       <C>      <C>
         Lee A. Balak              46       Director and President
         Alvin A. Snaper           71       Director, Vice President - Development,
                                            Secretary and Treasurer
         William E. McNerney       68       Director and Executive Vice President
         Ulf J. Lindqwister        41       Vice President - Business Development
         F. Bryson Farrill         73       Director
         Hugo P. Pomrehn, Ph.D.    62       Director
</TABLE>
---------------
(1)      The Company presently has no executive committee, nominating committee
         or audit committee of the Board of Directors.

(2)      The officers of the Company hold office until their successors are
         elected and qualified, or until their death, resignation or removal.

The background and principal occupations of each director and officer of the
Company are as follows:

         Mr. Balak became a director and the President of the Company during
February 1996. From February 2000 to the present Mr. Balak has been a director
and the President of Fluidic/Microwave Systems, Inc., an affiliated Nevada
corporation, that conducts farm equipment research and development activities.
From 1993 to the present, Mr. Balak has been the owner and President of No. 90
Corporate Ventures, a Canadian corporation located in Vancouver, B.C., that
makes and holds personal investments made by Mr. Balak. From 1983 to 1993, he
was a corporate finance consultant. From 1977 to 1982, he was a registered
representative of Canarim Investment Corporation (currently named Canacord
Investment Corporation). While employed by Canarim Investment Corporation, Mr.
Balak was the subject of an administrative proceeding by the British Columbia
Securities Commission regarding various alleged violations of the Securities
Act, S.B.C. 1985, c.83 of British Columbia (the "Act"); and in November 1990, he
undertook and agreed that certain trading exemptions under the Act would not
apply or be available for a period of three years and that he would not be a
director or officer of any reporting issuer for a period of three years, which
period was subsequently reduced to February, 1992, by a variance order. In 1991,
he was discharged in bankruptcy by the Supreme Court of British Columbia. Mr.
Balak attended the University of Winnipeg.

         Mr. Snaper became a director, Vice President-Development, Secretary
and Treasurer of the Company in March 1998; and has been a director and


                                      19

<PAGE>

President of PowerTek Technologies Corporation, Inc., a subsidiary of the
Company, since its incorporation in 1996. From February 2000 to the present,
Mr. Snaper has been a director and Treasurer of Fluidic/Microwave Systems,
Inc., a Nevada corporation. From 1979 to 1983, he was a director of American
Methyland Homogenized Fuels Corporation. From 1980 to the present, he has been
the Vice President of Neo-Dyne Research, Inc., a research and development
company. From 1985 to the present, he has also been the Vice President of
Inventrex Corp. Mr. Snapper was a founder of Advanced Patent Technology, Inc., a
public company now known as Alliance Gaming, and was its Vice President and
Director of Research and Development from 1968 to 1980. From 1952 to 1955, he
was the chief Chemist for McGraw Colorgraph Company, a division of the Carnation
Company. From 1949 to 1951, he was employed by the Bakelite Division of Union
Carbide, where he assisted in its development of the pilot plant for plastics
manufacture. During his 30 years of scientific research and development, Mr.
Snapper's interdisciplinary technology activities have resulted in over 600
patents, products, processes and innovations. He has been awarded the Design
News Best Patent of the year award on three separate occasions. Mr. Snaper
graduated from McGill University with a bachelor of science degree in 1950. He
is a registered professional engineer in the State of California.

         Mr. McNerney became a director and Executive Vice President of the
Company in March 1998. From February 2000 to the present, Mr. McNerney has been
a director and Secretary of Fluidic/Microwave Systems, Inc., a Nevada
corporation. From 1993 to the present, he has been the owner and Chief Executive
Officer of Revolutionary Technology Industries, Inc. From 1984 to 1993, he was
retired. From 1974 to 1984, Mr. McNerney owned an oil and gas operating company,
Golden Exploration, Inc. From 1954 to 1976, Mr. McNerney was a pilot employed by
Northwest Airlines.

         Mr. Farrill became a director of the Company on October 25, 1999.
From 1990 to the present, Mr. Farrill has been a financial consultant to high
technology companies and other companies. Mr. Farrill is a director of
Future link Distributing, Inc. From 1968 to 1964, he was the President and
Chairman of McLeod Young Weir International, a brokerage firm until it was
acquired by Scotia Capital Markets. From 1962 to 1979, he was employed by
McCleod Young Weir Ltd in Toronto, and was a director and member of its
executive committee from 1964 to 1989. Mr. Farrill received a B.A. decree
in political science and economics from the University of Toronto in 1951.

         Mr. Lindqwister became the Vice President - Business Development of
the Company in May 2000. From 1997 to the present, he has been the President
of Gist Incorporated, a consultant regarding corporate valuations, negotiation
of mergers and acquisitions and management services. From September 1999 to
April 2000, he was the president and a director of Mirage Computers, Inc., a
publicly traded computer company (symbol MIRG). From 1988 to July 1999, Mr.
Lindqwister was employed by the Jet Propulsion Laboratory in Pasadena,
California, engaged in the development of global GPS network stations. Mr.
Lindqwister received a B.A. degree in physics from Temple University in 1982,
a Ph.D. in physics from Princeton University in 1988, and a MBA degree from
U.C.L.A. in 1999.


                                      20
<PAGE>

         Dr. Pomrehn became a director of the Company during July 1998. Dr.
Pomrehn is the Chairman of the Board and a director of Stayhealthy
Incorporated, a closely held health products company. From November 1997 to
August 1999, he was the Executive Vice President of Special Projects of
American Technologies Group, Inc. ("ATG"), a public company engaged in
research and development activities; and has been a consultant to ATG since
August 1999 to the present. Dr. Pomrehn previously served as President, Chief
Operating Officer, Vice Chairman and a director of ATG from April 1995 to
November 1997. He was appointed as Under Secretary of Energy by President George
Bush in 1992. He was employed by Bechtel Corporation from 1967 to 1992, and was
a Vice President and Manager of its Los Angeles regional office from 1990 to
1992. Dr. Pomrehn graduated from the University of Southern California with a
bachelor of science degree in mechanical engineering in 1960; received a masters
degree in mechanical engineering from George Washington University in 1965;
received a masters degree in industrial engineering from the University of
Southern California in 1969; and received a doctorate in engineering from the
University of Southern California in 1975. Dr. Pomrehn is a member of the
American Nuclear Society and American Society of Mechanical Engineers, and is a
registered professional mechanical and nuclear engineer in the State of
California.

ITEM 10.  EXECUTIVE COMPENSATION

         The following table sets forth the total cash compensation, paid or
accrued, by the Company during its fiscal year ended January 31, 2001, to each
executive officer and all executive officers as a group for services in all
capacities to the Company.

<TABLE>
<CAPTION>
                                                        CASH COMPENSATION(1)(2)   STOCK COMPENSATION(4)
                                                        -----------------------   ---------------------
         <S>                                            <C>                       <C>
         Lee A. Balak . . . . . . . . . . . . . . . .   $     0                   $120,000
         William E. McNerney (3). . . . . . . . . . .   $     0                   $ 60,000
         Alvin A. Snaper (3) . .  . . . . . . . . . .   $     0                   $120,000
         Ulf J. Lindqwister (3) . . . . . . . . . . .   $21,250                   $ 60,000
         All executive officers as a group (4 persons)  $     0                   $360,000
</TABLE>

----------------------------
(1)      Personal benefits received by the Company's executive officers are
         valued below the levels which would otherwise require disclosure under
         the rules of the U.S. Securities and Exchange Commission.

(2)      The Company does not currently provide any contingent or deferred forms
         of compensation arrangements, annuities, pension or retirement
         benefits.

(3)      The Company has no employment contracts with its executive officers or
         employees; however, the Company has a consulting agreement with William
         E. McNerney, the Executive Vice President and a director of the
         Company, with Hugo P. Pomrehn, a director of the Company, and Ulf J.
         Lindqwister, the Vice President-Business Development of the Company.


                                       21

<PAGE>

(4)      Represents stock bonuses of shares of Common Stock that were awarded by
         the Board of Directors as compensation, in lieu of salary and cash
         bonuses.


COMMITTEES OF THE BOARD OF DIRECTORS

STOCK PLAN COMMITTEE

         A Stock Plan Committee of the Board of Directors administers the
Company's stock option, SAR and stock bonus plans (the "Plans"). Messrs. Lee A.
Balak, Alvin A. Snaper, and William E. McNerney serve as members of the
Committee.

OTHER COMMITTEES

         The Company does not have an audit committee, compensation committee,
nominating committee, an executive committee of the Board of Directors, or any
other committees. However, the Board of Directors may establish various
committees in the future.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

         Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who beneficially own more than ten percent
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than ten percent shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.

         Based on its review of the copies of such forms received by it, the
Company believes that during the year ended January 31, 2001, all such filing
requirements applicable to its officers and directors (the Company not being
aware of any ten percent holder other than Lee A. Balak, the President and a
director of the Company) were complied with.

BENEFIT PLANS

          The Company does not have any pension plan, profit sharing plan, or
similar plans for the benefit of its officers, directors or employees. However,
the Company may establish such plans in the future.

BOARD COMPENSATION

          Each non-employee director will receive $500 for each Board meeting
attended, and for each committee meeting attended on days other than those on
which the Board meets, and will receive reimbursement of travel expenses.
Directors of the Company have not received any compensation in their capacity as
directors as of the date hereof, except reimbursement of travel expenses.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The total number of shares of Common Stock of the Company beneficially
owned by each of the officers and directors, and all of such directors and
officers as a group, and their percentage ownership of the outstanding Common
Stock of the Company as of January 31, 2001, are as follows:


                                      22
<PAGE>

<TABLE>
<CAPTION>
                                                      SHARES            PERCENT OF
         MANAGEMENT                                   BENEFICIALLY      COMMON
         SHAREHOLDERS(1)                              OWNED(1)          STOCK
         ---------------------------                  ------------      -----------
         <S>                                          <C>               <C>
         Lee A. Balak. . . . . . . . . . . . . . . .  4,702,000         23.8%
         15 Ocean View Road
         Lions Bay, B.C.  V0N2XE0
         Canada

         F. Bryson Farrill . . . . . . . . . . . . .          0            0%
         77 Verplank Avenue
         Stanford, Connecticut 06902

         William E. McNerney (2) . . . . . . . . . .    637,203          3.2%
         953 E. Sahara, #9B
         Las Vegas, Nevada 89104

         Hugo P. Pomrehn, Ph.D.  . . . . . . . . . .     80,000          0.4%
         1017 South Mountain
         Monrovia, California 91016

         Alvin A. Snaper . . . . . . . . . . . . . .    854,156          4.3%
         2800 Cameo Circle
         Las Vegas, Nevada 89107

         Ulf Lindqwiester. . . . . . . . . . . . . .     51,250          .13%
         9717 Royal Lamb Drive
         Las Vegas, Nevada 89145

         Directors and officers as a group
           (6 persons, including the above). . . . .  6,299,608           31.9%
</TABLE>

-------------------
(1)      Except as otherwise noted, it is believed by the Company that all
         persons have full voting and investment power with respect to the
         shares indicated. Under the rules of the Securities and Exchange
         Commission, a person (or group of persons) is deemed to be a
         "beneficial owner" of a security if he or she, directly or indirectly,
         has or shares the power to vote or to direct the voting of such
         security, or the power to dispose of or to direct the disposition of
         such security. Accordingly, more than one person may be deemed to be a
         beneficial owner of the same security. A person is also deemed to be a
         beneficial owner of any security which that person has the right to
         acquire within 60 days, such as options or warrants to purchase the
         Common Stock of the Company.

         The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock by each shareholder who
beneficially owns more than five percent (5%) of the Company's Common Stock, the
number of shares beneficially owned by each and the percent of outstanding
Common Stock so owned of record as of January 31, 2001. It is believed by


                                      23
<PAGE>

the Company that all persons listed have sole voting and investment power with
respect to their shares, except as otherwise indicated.

<TABLE>
<CAPTION>
                                                    SHARES OF             PERCENT
NAME AND ADDRESS               TITLE OF             OUTSTANDING           BENEFICIALLY
                               CLASS                COMMON STOCK          OWNED
-------------------            --------             -------------         ------------
<S>                            <C>                  <C>                   <C>
Lee A. Balak                   Common Stock         4,702,000             23.8%
15 Ocean View Road
Lions Bay, B.C. V0N 2E0
Canada

Global Alliance Partners       Common Stock         2,100,000(1)           9.6%
c/o Buser Management
Todistrasse 51
Postfach 1059
8039 Zurich
Switzerland

Cede & Co.                     Common Stock         12,498,083(2)         63.3%
P.O. Box 222
Bowling Green Station
New York, New York 10274

</TABLE>
---------------------------
(1)      Represents a warrant held by Global Alliance Partners to purchase
         1,050,000 shares of Common Stock of the Company, exercisable at $.50
         per share until January 28, 2002, and assumes the conversion of its
         Series A Convertible Note into 1,050,000 shares of Common Stock. The
         president and owner of Global Alliance Partners is Kay Linda
         Richardson.

(2)      Cede & Co. is a depository that holds securities as nominee for various
         broker-dealers and others to facilitate stock transfers.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The Company leases approximately 5,000 square feet of offices and
research facilities on a month-to-month basis for $2,000 per month from Mr.
Alvin A. Snaper, a director, Vice President, Secretary and Treasurer of the
Company and his partner. During the fiscal years ended January 31, 2001, the
Company paid $24,000 in lease payments for these facilities.


                                      24
<PAGE>

         In June 1999, the Company acquired rights to advanced microwave
technology designed to reduce the moisture content of agricultural products,
from Alvin A. Snaper and William E. McNerney, directors and officers of the
Company, who each received 100,000 shares of restricted Common Stock of the
Company in exchange for this technology. Effective April 1, 1999, the Company
entered into a consulting agreement for a term of one year with William E.
McNerney, a director and Vice President of the Company for $5,000 per month,
payable quarterly in the Common Stock of the Company, in lieu of cash, valued at
85% of its lowest closing bid price during the quarter. During the year ended
January 31, 2000, the Company issued 30,000 shares of Common Stock to Mr.
McNerney, and issued 53,055 shares of Common Stock to him during fiscal 2001,
under the terms of the consulting agreement. This consulting agreement was
renewed. Mr. McNerney receives no salary or other compensation from the
Company as a director and officer, except reimbursement of expenses.

         The Company entered into a consulting agreement with Mr. Hugo P.
Pomrehn, a director of the Company, effective September 1, 1998, for research
and development services. The consulting fee is charged at a rate of $150 per
hour, and he is reimbursed for travel and other expenses. During the year ended
January 31, 2000, Mr. Pomrehn received 50,000 shares of restricted Common Stock
as compensation from the Company. During the year ended January 31, 2001, Mr.
Pomrehn received 25,000 shares of restricted Common Stock as compensation.

         Effective April 15, 2000, the Company agreed to compensate Ulf J.
Lindqwister, Vice President - Business Development, through a salary of $5,000
per month and though the monthly issuance of 5,000 shares of restricted Common
Stock of the Company for his services, or to Gist Incorporated, his personal
consulting company. As of January 31, 2001, a total of $21,250 and 51,250
shares of Common Stock have been paid to Gist Incorporated, a consulting
company wholly owned by Mr. Lindqwister.

         During the year ended January 31, 2001, Mr. Lee A. Balak loaned
$110,000 to the Company. The loan is on demand with interest at 10% per annum.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

         Reports on Form 8-K were filed by the Registrant during its fiscal year
ended January 31, 2001:

         In April 2000, the Company filed a Form 8-K report regarding its change
of independent certified public accountants from Crouch, Bierwolf & Chisholm to
G. Brad Beckstead.

         In April 2000, the Company also filed a Form 8-K report regarding its
Investment Agreement and related agreements with Swartz Private Equity, L.L.C.


                                      25
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>

EXHIBIT
-------
<S>                                                 <C>
(i) Articles of Incorporation of the Registrant     The Articles of Incorporation are incorporated herein by
                                                    reference to Exhibit 3(i) to the Form 10-SB registration
                                                    statement of the Company (File No. 0-24857)

(ii) Amendment to Articles of Incorporation         The Amendment to the Articles of Incorporation is incorporated
                                                    herein by reference to Exhibit 3(ii) to the Form 10-SB
                                                    registration statement of the Company (File No. 0-24857)

(iii) By-Laws of the Registrant                     The By-Laws are incorporated herein by reference to Exhibit
                                                    3(iii) to the Form 10-SB registration statement of the Company
                                                    (File No. 0-24857)

10.  Material Contracts
         10(a)                                      Plan of Reorganization and Acquisition dated February 15, 1998
                                                    is incorporated herein by reference to Exhibit 6(a) to the Form
                                                    10-SB registration statement of the Company (File No. 0-24857)

         10(b)                                      Various consulting agreements with Registrant are incorporated
                                                    herein by reference to the Form S-8 registration statement (File
                                                    No. 333-66845) of the Company.

         10(c)                                      Consulting agreement with SeaWay Trading, Inc. dated April
                                                    19, 1999, is incorporated by reference to Exhibit 10(c) to the
                                                    Form 10-KSB annual report of the Company for its fiscal year
                                                    ended January 31, 1999.

         10(d)                                      Consulting agreement with William McNerney/RevTec dated
                                                    April 1, 1999, is incorporated by reference to Exhibit 10(d) to
                                                    the Form 10-KSB annual report of the Company for its fiscal
                                                    year ended January 31, 1999.

         10(e)                                      Various consulting agreements are incorporated by reference to
                                                    Exhibit 4.1 of the Form S-8 registration statement of the
                                                    Company (File No. 333-66845).

         10(f)                                      Investment agreement dated April 17, 2000, with Swartz Private
                                                    Equity, L.L.C. is incorporated herein by reference to the Form
                                                    8-K report of the Company filed on May 23, 2000.

         10(g)                                      Registration Rights Agreement with Swartz Private Equity, LLC
                                                    dated April 17,2000 is hereby incorporated by reference to
                                                    Exhibit 10(g) of the Form S-1 registration statement of the
                                                    Company (File No. 333-50220)

         10(h)                                      Warrant issued to Swartz Private Equity, LLC dated April 17,
                                                    2000, to purchase 49,000 shares of the Common Stock of the


                                                    26
<PAGE>

<S>                                                 <C>
                                                    Company is hereby incorporated by reference to Exhibit 10(h)
                                                    of the Form S-1 registration statement of the Company (File No.
                                                    333-50220).

         10(i)                                      Form of purchase Warrant(s) to be issued to Swartz Private
                                                    Equity, LLC under terms of Investment Agreement dated April
                                                    17, 2000 is hereby incorporated by reference to Exhibit 10(i) of
                                                    the Form S-1 registration statement of the Company (File No.
                                                    333-50220).

         10(j)                                      Series A Convertible Note in the amount of $75,000 and
                                                    Warrant to purchase 150,000 shares of Common Stock of the
                                                    Company is incorporated by reference to Exhibit 10(a) to the
                                                    Form 10-QSB quarterly report of the Company for the period
                                                    ended April 30, 2000.

         10(k)                                      Series A Convertible Note in the amount of $525,000 and
                                                    Warrant to purchase 1,050,000 shares of Common Stock of the
                                                    Company is incorporated by reference to Exhibit 10(b) to the
                                                    Form 10-QSB quarterly report of the Company for the period
                                                    ended April 30, 2000.

         10(l)                                      Technology Development and Support Agreement with B.C.
                                                    Research, Inc. dated May 3, 2000 is hereby incorporated by
                                                    reference to Exhibit 10(l) of the Form S-1 registration statement
                                                    of the Company (File No. 333-50220).

         10(m)                                      Consulting Agreement with Hanover Engineering & Consulting
                                                    Limited dated November 15, 2000.

         10(n)                                      Letter Agreement with Goodbody International, Inc. - Joseph H.
                                                    Hale, dated January 28, 2000.

         10(o)                                      Contract Agreement with GDH Consultants Ltd. dated
                                                    September 12, 2000.

         10(p)                                      Memorandum of Intention to Create a Foreign Invested Joint
                                                    Venture Company with the Shuang Deng Group dated February
                                                    2, 2001

         10(q)                                      Partnership Agreement with Department of Science and
                                                    Technology Development of Peking University and PU Lead
                                                    Company dated February 15, 2001

         10(r)                                      Non-Disclosure/Non-Use Agreement with Bipolar Power
                                                    International and BC Research, Inc. dated March 3, 2001.

11. Statement re: computation of per share


                                                    27
<PAGE>

<S>                                                 <C>
        earnings                                    Reference is made to the Consolidated Statements of Operations
                                                    of the Consolidated Financial Statements which are incorporated
                                                    by reference herein.

21. A description of the subsidiary of the
        Company                                     A description of the subsidiary of the Company is incorporated
                                                    herein by reference to Exhibit 21 of the Form S-8 registration
                                                    statement of the Company (File No. 333-66845).

23.1 Consent of G. Brad Beckstead,
         independent auditor

27. Financial Data Schedule                         Not Applicable
</TABLE>


                                                 28
<PAGE>

                                   SIGNATURES

          In accordance with Section 13 or 15(d) of the Securities Exchange Act,
the registrant caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.


                                           POWER TECHNOLOGY, INC.


Date: May 15, 2001

<TABLE>
<S>                                                        <C>
By:   /s/ Lee A. Balak                                     /s/ Alvin A. Snaper
      --------------------------------------------         ----------------------------------------
      Lee A. Balak                                         Alvin A. Snaper
      Director, President, Chief Financial Officer         Director and Vice President-Development,
      and Principal Accounting Officer                     Treasurer and Secretary



      /s/ F. Bryson Farrill                                /s/ William E. McNerney
      --------------------------------------------         ------------------------------------------
      F. Bryson Farrill                                    William E. McNerney
      Director                                             Director and Executive Vice President
</TABLE>



                                                      29
<PAGE>

G. BRAD BECKSTEAD
--------------------------------------------------------------------------------
CERTIFIED PUBLIC ACCOUNTANT
                                                             330 E. Warm Springs
                                                             Las Vegas, NV 89119
                                                                    702.528.1984
                                                                425.928.2877efax


                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders
of Power Technology, Inc.

I have audited the accompanying consolidated balance sheets of Power Technology,
Inc. (a development stage company) as of January 31, 2001 and 2000 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.

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

In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Power Technology,
Inc. (a development stage company) as of January 31, 2001 and 2000, and the
results of its operations, stockholders' equity and cash flows for the years
then ended in conformity with generally accepted accounting principles.

The financial statements of Power Technology, Inc. for the period January 19,
1996 (date of inception) through January 31, 1999, were audited by other
auditors whose report dated April 19, 1999, expressed an unqualified opinion on
those statements.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has had recurring operating losses for the
past several years. These factors raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


/s/  G. Brad Beckstead, CPA


Las Vegas, Nevada
May 14, 2001


                                      F-1
<PAGE>

                             POWER TECHNOLOGY, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                                                                     JANUARY 31,             JANUARY 31,
                                                                                        2001                    2000
                                                                               ---------------------   ---------------------
<S>                                                                            <C>                     <C>
Assets

Current assets:
    Cash and equivalents                                                        $            25,301      $           76,015
    Due from related party                                                                    4,811                       -
                                                                               ---------------------   ---------------------
      Total current assets                                                                   30,112                  76,015

Fixed assets, net                                                                            12,323                  12,831

Other assets:
    Prepaid expenses                                                                         20,000                  20,000
    Organizational costs, net                                                                     -                   5,000
    Patents                                                                                  78,500                  65,000
                                                                               ---------------------   ---------------------
                                                                                $           140,935      $          178,846
                                                                               =====================   =====================
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                                            $            11,382      $            5,184
    Advances from MikroDri                                                                   45,279                  86,067
    Accrued expenses                                                                         10,200                  16,469
    Loans payable                                                                           240,723                 110,000
                                                                               ---------------------   ---------------------
      Total current liabilities                                                             307,584                 217,720
                                                                               ---------------------   ---------------------
Convertible debentures                                                                      600,760                  65,515
                                                                               ---------------------   ---------------------
                                                                                            908,344                 283,235
                                                                               ---------------------   ---------------------
Stockholders' equity:
    Common stock, $0.001 par value, 100,000,000 shares
      authorized, 19,027,500 and 16,817,500 shares issued
      and outstanding as of 1/31/01 and 1/31/00, respectively                                19,028                  16,818
    Additional paid-in capital                                                            2,722,573               1,659,458
    Earnings/Deficit accumulated during development stage                                (3,509,010)             (1,800,665)
    Prior period adjustment                                                                       -                  20,000
                                                                               ---------------------   ---------------------
                                                                                           (767,409)               (104,389)
                                                                               ---------------------   ---------------------
                                                                                $           140,935      $          178,846
                                                                               =====================   =====================
</TABLE>

  The accompanying notes are an integral part of these financial statements.


                                      F-2
<PAGE>

                            POWER TECHNOLOGY, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                     CONSOLIDATED STATEMENT OF OPERATIONS

       FOR THE YEARS ENDED JANUARY 31, 2001 AND 2000 AND FOR THE PERIOD
                  JUNE 3, 1996 (INCEPTION) TO JANUARY 31, 2001

<TABLE>
<CAPTION>
                                                        FOR THE YEARS ENDED                  JUNE 3, 1996
                                                            JANUARY 31,                     (INCEPTION) TO
                                             -----------------------------------------        JANUARY 31,
                                                     2001                  2000                  2001
                                             ------------------    -------------------   ------------------
<S>                                          <C>                   <C>                   <C>
Revenue                                      $               -     $                -    $           1,663
                                             ------------------    -------------------   ------------------

Expenses:
   General administrative expenses                   1,031,765                801,039            2,539,426
   Research & development                              672,732                105,164              944,832
   Depreciation and amortization                         3,848                  2,272                8,030
                                             ------------------    -------------------   ------------------
                                                     1,708,345                908,475            3,492,288

Other income (expense):
   Interest expense                                          -                      -              (16,469)
   Loss on foreign currency                                  -                      -               (1,916)
                                             ------------------    -------------------   ------------------

Net (loss)                                   $      (1,708,345)    $         (908,475)   $      (3,509,010)
                                             ==================    ===================   ==================

Weighted average number of
   common shares outstanding                        19,027,500             16,817,500           19,027,500
                                             ==================    ===================   ==================

Net (loss) per share                         $           (0.09)     $           (0.05)    $          (0.18)
                                             ==================    ===================   ==================
</TABLE>


                                                 F-3
<PAGE>

                             POWER TECHNOLOGY, INC.

          CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR
             THE PERIOD JUNE 3, 1996 (INCEPTION) TO JANUARY 31, 2001
<TABLE>
<CAPTION>
                                                                                         Deficit
                                               Common Stock                            Accumulated
                                           ---------------------     Additional           During          Prior           Total
                                                                       Paid-in         Development        Period      Stockholders'
                                             Shares      Amount        Capital            Stage         Adjustment       Equity
                                           ---------   ---------     ----------        -----------      ----------    ------------
<S>                                        <C>         <C>           <C>               <C>              <C>           <C>
Balance, June 3, 1996                      2,500,000   $   2,500     $   22,500        $         -              -     $    25,000

Net (loss) for the period ended
    January 31, 1997                                                                      (139,907)                      (139,907)
                                          ------------------------------------------------------------------------    -----------
Balance, January 31, 1997                  2,500,000       2,500         22,500           (139,907)             -        (114,907)

Net (loss) for the year ended
    January 31, 1998                                                                       (51,374)             -         (51,374)
                                          ------------------------------------------------------------------------    -----------
Balance, January 31, 1998                  2,500,000       2,500         22,500           (191,281)             -        (166,281)

Reorganization of Company,
    reverse acquisition of Zepplin, Inc.   2,800,000       2,800         (2,573)                                              227

Shares issued for cash                     6,900,000       6,900        683,300                                           690,200

Shares issued for patents                    200,000         200         19,800                                            20,000

Shares issued for services                   134,700         135        134,565                                           134,700

Net (loss) for the year ended
    January 31, 1999                                                                      (700,909)             -        (700,909)
                                          ------------------------------------------------------------------------    -----------
Balance, January 31, 1999                 12,534,700      12,535        857,592           (892,190)             -         (22,063)

Shares issued for cash                     2,900,000       2,900        287,099                                           289,999

Shares issued for services                   548,800         549        329,001                                           329,550

Shares issued for debt conversion          1,034,000       1,034        205,766                                           206,800

Prior period adjustment                     (200,000)       (200)       (20,000)                           20,000            (200)

Net (loss) for the year ended
    January 31, 2000                                                                      (908,475)                      (908,475)
                                          ----------   ---------     ----------        -----------      ----------    ------------

Balance, January 31, 2000                 16,817,500      16,818      1,659,458         (1,800,665)        20,000        (104,389)

Shares issued for cash                     1,155,000       1,155        597,720                                           598,875

Shares issued for services                 1,055,000       1,055        465,395                                           466,450

Reversal of prior period adjustment                                                                       (20,000)        (20,000)

Net (loss) for the year ended
    January 31, 2001                                                                    (1,708,345)                    (1,708,345)
                                          ----------   ---------     ----------        -----------      ----------    ------------
Balance, January 31, 2001                 19,027,500      19,028      2,722,573         (3,509,010)             -        (767,409)
                                          ==========   =========     ==========        ===========      ==========    ============
</TABLE>


                                                        F-4
<PAGE>

                             POWER TECHNOLOGY, INC.

                     CONSOLIDATED STATEMENT OF CASH FLOWS
                 FOR THE YEARS ENDED JANUARY 31, 2001 AND 2000
        AND FOR THE PERIOD JUNE 3, 1996 (INCEPTION) TO JANUARY 31, 2001
<TABLE>
<CAPTION>
                                                                        FOR THE YEARS ENDED                       JUNE 3, 1996
                                                                            JANUARY 31,                           (INCEPTION)
                                                              ----------------------------------------           TO JANUARY 31,
                                                                     2001                 2000                        2001
                                                              -----------------    -------------------       -------------------
<S>                                                           <C>                  <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)                                                    $     (1,708,345)     $        (908,475)       $       (3,509,010)
    Prior period adjustment                                            (20,000)                20,000                         -
    Depreciation expense                                                 3,848                  2,272                     8,030
    Stock issued for services                                          466,450                516,349                 1,117,499
    Stock issued to acquire patents                                          -                      -                   (20,000)
Adjustments to reconcile net (loss) to net cash (used) by
   operating activities:

    (Increase) decrease in due from related party                       (4,811)                 2,500                    (4,811)
    (Increase) decrease in prepaid expenses                                  -                      -                   (20,000)
    (Increase) decrease in organizational costs                          5,000                  5,000                         -
    Increase (decrease) in accounts payable                              6,198                 (5,308)                   11,382
    Increase (decrease) in accounts payable - related party                  -                (99,170)                        -
    Increase (decrease) in accrued expenses                             (6,269)                     -                    10,200
                                                              -----------------    -------------------    ----------------------
Net cash (used) by operating activities                             (1,257,929)              (466,832)               (2,406,710)
                                                              -----------------    -------------------    ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES

    Proceeds from loans - related party                                130,723                110,000                   240,723
    Transfer (to) from MikroDri                                        (40,788)                86,067                    45,279
    Purchase of equipment                                               (3,340)                (3,719)                  (20,353)
    Patent acquisition                                                 (13,500)                     -                   (58,500)
                                                              -----------------    -------------------    ----------------------
Net cash (used) by investing activities                                 73,095                192,348                   207,149
                                                              -----------------    -------------------    ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES

    Proceeds from convertible debentures                               535,245                      -                   600,760
    Issuance of common stock                                           598,875                290,000                 1,624,102
                                                              -----------------    -------------------    ----------------------
Net cash provided by financing activities                            1,134,120                290,000                 2,224,862
                                                              -----------------    -------------------    ----------------------
Net increase in cash                                                   (50,714)                15,516                    25,301

Cash and equivalents - beginning                                        76,015                 60,499                         -
                                                              -----------------    -------------------    ----------------------
Cash and equivalents - ending                                 $         25,301      $          76,015        $           25,301
                                                              =================    ===================    ======================

Supplemental disclosures:
    Interest paid                                             $              -      $               -        $                -
                                                              =================    ===================    ======================
    Income taxes paid                                         $              -      $               -        $                -
                                                              =================    ===================    ======================
    Non-cash investing and financing activities:

      Number of shares issued for services                           1,055,000                548,800                 1,738,500
                                                              =================    ===================    ======================
      Number of shares issued for debt conversion                            -              1,034,000                 1,034,000
                                                              =================    ===================    ======================
      Number of shares issued to acquire patents                             -                      -                   200,000
                                                              =================    ===================    ======================
</TABLE>


  The accompanying notes are an integral part of these financial statements.


                                                    F-5
<PAGE>

                             POWER TECHNOLOGY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

         The Company was incorporated under the name of Zeppelin Production
Corporation on June 3, 1996 under the laws of the State of Nevada. The Company
was organized to provide aerial photography and advertising promotion through
the use of helium filled remote control blimps, however, operations were never
secured.

         Pursuant to a plan of reorganization and acquisition agreement dated
February 15, 1998, the Company acquired PowerTek Technology, Inc. (PowerTek) and
changed its name to Power Technology, Inc. Because the management and operations
of PowerTek became the management and operations of Zeppelin, this business
combination has been recorded as a reverse acquisition.

         PowerTek was incorporated under the laws of the State of Nevada on
January 19, 1996. The Company was organized primarily for the purpose of
developing an advanced battery technology for use in the growing electric car
industry. As of the date of these statements, the Company has been able to
advance the battery technology to a proof of principle stage and is currently
seeking additional capital to finance the development of the technology to a
preliminary prototype stage.

         The Company is a development stage company as defined in Financial
Accounting Standards Board Statement No. 7. It is concentrating substantially
all of its efforts in raising capital in order to generate significant
operations.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ significantly from those estimates.

Cash and Cash Equivalents

For the purpose of the statements of cash flows, all highly liquid investments
with the maturity of three months or less are considered to be cash equivalents.

Equipment

Property and equipment are recorded at cost. Minor additions and renewals are
expensed in the year incurred. Major additions and renewals are capitalized and
depreciated over their estimated useful lives. Depreciation is calculated using
the straight-line method over the estimated useful lives as follows:

<TABLE>
                      <S>                                <C>
                      Office equipment                   5 years
                      Furniture and fixtures             7 years
                      Leasehold improvements             7 years
</TABLE>

Revenue recognition

The Company recognizes revenue on an accrual basis.

Advertising Costs

The Company expenses all costs of advertising as incurred. There were no
advertising costs included in selling, general and administrative expenses for
the years ended January 31, 2001 and 2000.


                                      F-6
<PAGE>

Product Development Costs

The products will comprise multiple features and offerings that are currently
under development, and it is anticipated that the offerings will require future
development and refinement. In connection with the development of its products,
the Company will incur external costs for research, development, and consulting
services, and internal costs for payroll and related expenses of its technology
employees directly involved in the development. All costs will be reviewed for
determination of whether capitalization or expense as product development cost
is appropriate.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 2000. The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash and
notes receivable and accounts payable and notes payable. Fair values were
assumed to approximate carrying values for these items because they are short
term in nature and their carrying amounts approximate fair values or they are
payable on demand.

Impairment of Long Lived Assets

Long lived assets held and used by the Company are reviewed for possible
impairment whenever events or circumstances indicate the carrying amount of an
asset may not be recoverable or is impaired.

Earnings per Share

The Company follows Statement of Financial Accounting Standards No. 128.
"Earnings Per Share" ("SFAS No. 128"). Basic earnings per common share ("EPS")
calculations are determined by dividing net income (loss) by the weighted
average number of shares of common stock outstanding during the year. Diluted
earning per common share calculations are determined by dividing net income
(loss) by the weighted average number of common shares and dilutive common share
equivalents outstanding. During periods when common stock equivalents, if any,
are anti-dilutive they are not considered in the computation.

Segment Reporting

The Company follows Statement of Financial Accounting Standards No. 130,
"Disclosures About Segments of an Enterprise and Related Information". The
Company operates as a single segment and will evaluate additional segment
disclosure requirements as it expands its operations.

Income Taxes

The Company follows Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes" ("SFAS No. 109") for recording the provision for
income taxes. Deferred tax assets and liabilities are computed based upon the
difference between the financial statement and income tax basis of assets and
liabilities using the enacted marginal tax rate applicable when the related
asset or liability is expected to be realized or settled. Deferred income tax
expenses or benefits are based on the changes in the asset or liability each
period. If available evidence suggests that it is more likely than not that some
portion or all of the deferred tax assets will not be realized, a valuation
allowance is required to reduce the deferred tax assets to the amount that is
more likely than not to be realized. Future changes in such valuation allowance
are included in the provision for deferred income taxes in the period of change.

Deferred income taxes may arise from temporary differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classification of assets and liabilities to


                                      F-7
<PAGE>

which they relate. Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or non-current
depending on the periods in which the temporary differences are expected to
reverse.

Recent Pronouncements

The FASB recently issued Statement No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement
No. 133". The Statement defers for one year the effective date of FASB Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
rule now will apply to all fiscal quarters of all fiscal years beginning after
June 15, 2000. The Statement will require the company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income, if the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company does not expect SFAS No. 133 to have a
material impact on earnings or financial position.

In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
No. 101), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB No. 101 did not impact the
Company's revenue recognition policies.

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern which contemplates the recoverability
of assets and the satisfaction of liabilities in the normal course of business.
As noted above, the Company is in the development stage and, accordingly, has
not yet generated revenues from operations. Since its inception, the Company has
been engaged substantially in financing activities and developing its product
line, incurring substantial costs and expenses. As a result, the Company
incurred net losses of $1,708,345 during the year ended January 31, 2001, and
$908,475 during the year ended January 31, 2000. In addition, the Company's
development activities since inception have been financially sustained by debt
and capital contributions from its affiliates and others.

The ability of the Company to continue as a going concern is dependent upon its
ability to raise additional capital from the sale of common stock and,
ultimately, the achievement of significant operating revenues. The accompanying
financial statements do not include any adjustments that might be required
should the Company be unable to recover the value of its assets or satisfy its
liabilities.

NOTE 3 - FIXED ASSETS

Fixed assets for the years ended January 31, 2001 and 2000 consisted of the
following:

<TABLE>
<CAPTION>
                                                     1/31/01       1/31/00
                                                 ------------  ------------
        <S>                                      <C>           <C>
        Office equipment                         $    14,113   $    10,773
        Manufacturing equipment                        4,076         4,076
        Leasehold improvements                         2,164         2,164
        Less:  Accumulated depreciation               (8,030)       (4,182)
                                                 ------------  ------------
        Fixed assets, net                        $    12,323   $    12,831
                                                 ============  ============
</TABLE>

Depreciation expense for the years ended January 31, 2001 and 2000 is $3,848 and
$2,272, respectively.


                                      F-8
<PAGE>

NOTE 4 - PATENTS

         On June 9, 1998, the Company acquired patent number 4,107,997 issued by
the U.S. Patent office in 1978. The Company paid $45,000 and 100,000 shares of
Common Stock valued at $10,000 for the patent. The patent is for an alloy sensor
which generates a current when in contact with water or other aqueous
composition.

         Also during 1998, the Company acquired patent number 5,442,846 for
100,000 shares of Common Stock valued at $10,000. This patent is a procedure and
apparatus for cold joining of metallic pipes.

NOTE 5 - RELATED PARTY TRANSACTIONS

         The Company had $45,479 and $86,067 of research and development fees
advanced by MicroDri, L.P., a related entity with common shareholders and
management, as of January 31, 2001 and 2000, respectively. The Company will
continue to perform research and development procedures which will be invoiced
against the fee advancements.

         The president of the Company loaned approximately $258,500 to the
Company as of December 22, 1999, for research and development fees. The research
and development fees were paid by the Company to Neo-Dyne Research, Inc.
("Neo-Dyne"), a research and development company owned by another director and
officer of the Company. Neo-Dyne has conducted substantially all of the research
and development activities regarding the principal products of the Company,
including its batteries, pipeline connection technology, and its allow sensor
technology. On December 22, 1999, the Company authorized the issuance of
1,034,000 shares of restricted Common Stock at $0.25 per share to the Company's
president in exchange for the cancellation of the $258,500 debt, including
accrued interest.

         The President of the Company loaned $110,000 to the Company. The note
is due on demand, and the balance is non-interest bearing through January 31,
2001.

         The Company rents a facility in Las Vegas, Nevada from Bonanza West
Properties, a partnership 50% owned by Alvin A. Snaper, a director and Vice
President of the Company. Rents for the years ended January 31, 2001 and 2000
totaled approximately $24,000 per year.


         The Company has issued to its officers and directors 720,000 shares
of its $.001 par value Common Stock at $.50 per share for services valued at
$360,000. The Company also paid cash in the amount of $21,250 to a consulting
firm owned by an officer of the Company for services rendered.

NOTE 6 - SERIES A CONVERTIBLE NOTES

The Company has issued $600,000 of its Series A Convertible Notes (the "Notes").
The Notes are convertible into the Company's $0.001 par value common stock at
$0.50 per share for a total of 1,200,000 shares upon full conversion, with
interest at the rate of 10% per annum, payable in common stock of the Company at
$0.50 per share.

NOTE 7 - INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which
requires use of the liability method. SFAS No. 109 provides that deferred tax
assets and liabilities are recorded based on the differences between the tax
bases of assets and liabilities and their carrying amounts for financial
reporting purposes, referred to as temporary differences. Deferred tax assets
and liabilities at the end of each period are determined using the currently
enacted tax rates applied to taxable income in the periods in which the deferred
tax assets and liabilities are expected to be settled or realized.


                                      F-9
<PAGE>

The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes.
The sources and tax effects of the differences are as follows:

<TABLE>
                  <S>                             <C>
                  U.S federal statutory rate      (34.0%)
                  Valuation reserve                34.0%
                                                   -----
                  Total                               -%
                                                   =====
</TABLE>

As of January 31, 2001, the Company has combined net operating loss
carryforwards of approximately $3,500,000 for tax purposes, which will be
available to offset future taxable income. If not used, these carryforwards will
expire during the years 2016-2020. The deferred tax asset relating to the
operating loss carryforwards of approximately $1,200,000 has been fully reserved
at January 31, 2001.

NOTE 8 - STOCKHOLDERS' EQUITY

         Prior to the reverse acquisition of Power Technology, Inc. (formerly
Zepplin Production Corp.) and PowerTek Technology, Inc. (PowerTek) the Company
authorized 2,500,000 shares at a par value of $0.01 and had 2,500,000 issued and
outstanding. In the reverse acquisition, the 2,500,000 shares of PowerTek were
exchanged for 5,000,000 shares of Power Technology, Inc. (formerly Zepplin
Production Corp.).

The Company now has authorized 100,000,000 shares of its $0.001 par value common
stock and 1,000,000 shares of its $0.001 par value preferred stock.

         During June 1998, the Company issued 200,000 shares of Common Stock for
patents valued at $20,000.

         During November 1998, the Company issued 134,700 shares of Common Stock
in exchange for services valued at $134,700.

         On December 22, 1999, the Company issued 1,034,000 shares of restricted
Common Stock at $.20 per share to Mr. Lee A. Balak, the President and a director
of the Company, in exchange for cancellation of a $206,800 note, including
accrued interest.

         During the year ended January 31, 1999, the Company issued 6,900,000
shares of Common Stock for cash of $690,000.

         During the year ended January 31, 2000, the Company issued 2,900,000
shares of Common Stock for cash of $290,000.

         During the year ended January 31, 2000, the Company issued 548,800
shares of Common Stock in exchange for services valued at $329,550.

During the year ended January 31, 2001, the Company issued 1,155,000 shares of
Common Stock for cash in the amount of $598,875.

         During the year ended January 31, 2001, the Company issued 1,055,000
shares of Common Stock in exchange for services valued at $466,450.

NOTE 9 - WARRANTS AND OPTIONS

There is one warrant outstanding to purchase 490,000 shares of the Company's
$0.001 par value common stock at an exercise price of $0.66 per common share.
The warrant expires on or before April 17, 2005.

There are stock options issued and outstanding to purchase 4,889,000 shares of
the Company's $0.001 par value common stock at exercise prices ranging from
$0.40 to $4.00 per share.


                                     F-10
<PAGE>

NOTE 10 - PRIOR PERIOD ADJUSTMENT

         An adjustment in the amount of $20,000 has been recorded on the books
as of January 31, 2000 and reversed as of January 31, 2001. The adjustment is
due to an over-reported shareholders' equity amount as of January 31, 1999. The
entry has been recorded to reduce additional paid-in capital and to offset the
overstated expense in the prior year.

NOTE 11 - COMMITMENTS

         In connection with the acquisition of patent number 5,442,846, the
Company is committed to a 3% royalty on gross sales.

The Company entered into an Investment Agreement dated April 17, 2000 (the
"AGREEMENT") with Swartz Private Equity, LLC of Roswell, Georgia ("SPE"). The
Agreement provides for SPE to commit to purchase up to an aggregate of
$35,000,000 of the Company's $0.001 par value common stock, not to exceed 9.9%
of the then total issued and outstanding shares of common stock of the Company,
as requested from time to time by the Company as its equity capital needs arise
during the term of the Agreement. Upon written notice from the Company, SPE is
committed to purchase $0.001 par value common stock of the Company at a purchase
price equal to the lesser of the (i) then current market price minus $.25, or
(ii) 91% of the then current market price. Market price is defined to mean the
lowest bid price for common stock on the last business day during a pricing
period (the date following the notice from the Company and ending on the 20th
day thereafter). Unless the Company specifically requests SPE to purchase its
common stock by written notification to SPE, SPE has no right to acquire any
securities of the Company and the Company has no obligation to offer and sell
its securities to SPE. Under the terms of the Agreement, the Company issued to
SPE a warrant to purchase 490,000 shares of the Company's $0.001 par value
common stock an exercise price of $0.8125 per share, payable in cash or in a
cashless exercise based upon a formula adjusted by such exercise price and the
average closing price for five trading days prior to the exercise date, (with
price reset provisions) during a term of five years. The Company will be issuing
additional warrants to SPE to purchase a number of shares equal to 10% of each
purchase of shares made by SPE during the term of the Agreement. The shares of
common stock and warrants of the Company to be issued to SPE are covered by a
Registration Rights Agreement requiring the Company to file a registration
statement with the U.S. Securities and Exchange Commission to register such
securities under the Securities Act of 1933.


                                     F-11