<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 THE FISCAL YEAR ENDED JANUARY 31, 2002

           [ ]   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 10, 2002:

                  Common stock, $.001 par value:  $5,821,861

         The number of shares of the registrant's common stock outstanding as of
January 31, 2002:

                  23,301,830 shares.

         Documents incorporated by reference:  None

         Transitional Small Business Disclosure Format:

                                       Yes         No   X
                                           -----      -----


<PAGE>


                             POWER TECHNOLOGY, INC.

                       INDEX TO FORM 10-KSB ANNUAL REPORT


<Table>
<S>      <C>                                                                                                           <C>
PART I

Item 1.  Description of Business...................................................................................     3

Item 2.  Description of Property...................................................................................     7

Item 3.  Legal Proceedings.........................................................................................     7

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters..................................................     8

Item 6.  Management's Discussion and Analysis or Plan of Operations................................................    10

Item 7.  Financial Statements......................................................................................    14

Item 8.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................    14

PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons; Compliance with
         Section 16(a) of the Exchange Act.........................................................................    15

Item 10. Executive Compensation....................................................................................    17

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related
         Stockholder Matters.......................................................................................    18

Item 12. Certain Relationships and Related Transactions............................................................    20

Item 13. Exhibits and Reports on Form 8-K..........................................................................    20

Signatures.........................................................................................................    24

Exhibit Index......................................................................................................    25
</Table>


                                       2
<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 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.


                                       3
<PAGE>


         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
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
         reformulated gasoline, direct injection diesel or compressed natural
         gas.


                                       4
<PAGE>


         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.

         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


                                       5
<PAGE>


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
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.


                                       6
<PAGE>


RESEARCH AND DEVELOPMENT

         Research and development efforts are directed at improving the
performance and expanding the capabilities of its prospective products. 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, 2002, 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 January 31, 2002. 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

         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 2002, 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, 2002.
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.


                                       7
<PAGE>


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

        None.


                                     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 NASD Electronic
Bulletin Board over-the-counter market, and is quoted under the symbol PWTC.

Common Stock

         The Company's Articles of Incorporation authorize 100,000,000 shares of
Common Stock, $.001 par value. As of January 31, 2002, the Company had
23,301,830 shares of Common Stock, $.001 par value, that were issued and
outstanding, which were held by 77 stockholders of record.

Preferred Stock

         The Company's Articles of Incorporation authorize 1,000,000 shares
of Preferred Stock, $.001 par value. As of January 31, 2002, the Company had no
shares of its Preferred Stock issued and outstanding.

STOCK OPTION, SAR AND STOCK BONUS PLANS

         During the first fiscal quarter of 2002, the Company adopted and
approved its 2002 Stock Option, SAR and Stock Bonus Consultant Plan (the "Plan")
which provided for the issuance of up to 2,000,000 shares of its Common Stock to
consultants to the Company for services. Directors, officers and employees of
the Company are not eligible to participate in the Plan. The Plan is
administered by a committee comprised of Lee A. Balak, Chief Executive Officer
and President of the Company, and Alvin A. Snaper, Vice President and Secretary
of the Company.

OPTIONS AND WARRANTS

         As of January 31, 2002, the Company had outstanding warrants to
purchase 1,157,000 shares of Common Stock at exercise prices ranging from $.50
to $.8125.

         As of January 31, 2002, the Company had outstanding stock options to
purchase 3,754,000 shares of Common Stock at exercise prices ranging from $.25
to $3.00 per share.

REGISTRAR AND TRANSFER AGENT

         The registrar and transfer agent of the Company is Pacific Stock
Transfer Company, P.O. Box 93385, Las Vegas, Nevada 89193; telephone (702)
361-3033.

Common Stock Trading

         The Company's Common Stock trades on the NASD Electronic Bulletin Board
over-the-counter market under the symbol "PWTC". The following table sets forth
the high and low closing prices of the Common Stock of the Company:


                                       8
<PAGE>


         The following table sets forth the range of high and low closing prices
per share of the Common Stock of the Company as reported by Pink Sheets, L.L.C.
for the periods indicated.

<Table>
<Caption>
Year Ended December 31, 2000(1)                      High Closing   Low Closing
                                                        Prices         Prices
                                                     ------------   -----------
<S>                                                  <C>            <C>
         1st Quarter....................             $1.84375          $.40
         2nd Quarter....................             $1.65625          $.53125
         3rd Quarter....................             $1.40625          $.625
         4th Quarter....................             $1.01             $.40625

----------

Year Ended December 31, 2001(1)

         1st Quarter....................             $ .96875          $ .50
         2nd Quarter....................             $ .73             $ .50
         3rd Quarter....................             $ .70             $ .35
         4th Quarter....................             $ .58             $ .35

----------

Year Ending December 31, 2002(1)

         1st Quarter. . . . . . . . . .              $ .44             $ .27
</Table>

----------
(1)      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 10, 2002,
was $.35 per share.

         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.

DIVIDEND POLICY

         The Company has not adopted any policy regarding the payment of
dividends on its Common Stock. The Company does not intend to pay any cash
dividends on its Common Stock in the foreseeable future. All cash resources are
expected to be invested in developing the Company's business.


Sale of Unregistered Securities

         During February 2001, the Company issued 25,000 shares of Common Stock
to Gist Inc., as compensation to Ulf Lindqwister, the Vice President - Business
Development of the Company, in reliance upon Section 4(2) of the Securities Act
of 1933.


                                       9
<PAGE>


         During February 2001, the Company issued 43,685 restricted shares of
Common Stock to Swartz Private Equity under the terms of a stock purchase
agreement in reliance upon Section 4(2) of the Securities Act of 1933.

         During March 2001, the Company issued 75,000 shares of restricted
Common Stock to Princeton Research Inc. for research consulting services in
reliance upon Section 4(2) of the Securities Act of 1933.

         During May and June 2001, the Company issued shares of restricted
Common Stock for consulting services to William E. McNerney (90,060 shares),
Investor Communications (70,000 shares), IC Capital and Alpha Global Securities
(15,000 shares) in reliance upon Section 4(2) of the Securities Act of 1933.

         During July 2001, the Company issued 25,000 shares of restricted Common
Stock to Gist Inc. as executive compensation to Ulf Lindqwister, a Vice
President of the Company, in reliance upon Section 4(2) under the Securities Act
of 1933.

         In September 2001, the Company issued 75,000 shares of restricted
Common Stock to Investor Communications for consulting services in reliance upon
Section4(2) under the Securities Act of 1933.

         In September 2001, the Company issued 1,221,786 shares of restricted
Common Stock to Global Alliance Partners for conversion of debt, in reliance
upon Regulation S under the Securities Act of 1933.

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

Management's Discussion and Alalysis and Plan of Operation

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

         Although management of the Company believes that the expectations and
opinions reflected in its forward-looking statements are reasonable, these
statements are not guarantees of future performance. They are subject to risks,
uncertainties and other factors that could cause actual performance to differ
materially from projected results. Factors that could cause or contribute to
differences between actual and projected results include, but are not limited
to, the current lack of funding needed for working capital, debt repayment and
capital investment, failure to attract management and staff, the inability to
grow membership subscriptions, and lack of success in launching additional
service offerings. Additional risk factors are disclosed elsewhere in this
document.

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

         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.


                                       10
<PAGE>


YEAR ENDED JANUARY 31, 2002 COMPARED TO 2001

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

<Table>
<Caption>
                                                   Year Ended                 Year Ended
                                                   January 31, 2002           January 31, 2001
                                                   ----------------           ----------------
<S>                                                <C>                        <C>
Revenues                                             $         0                $          0
General and administrative expense                   $   274,412                $    565,315
Research and development                             $   260,357                $    672,732
Consulting fees                                      $ 2,339,456                $    466,450
Net Loss                                             $(2,943,692)               $ (1,708,345)
Net Loss Per Share                                   $     (0.13)               $     (0.09)
</Table>

REVENUES.

         Total revenues for fiscal years 2002 and 2001 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 decreased from $565,315 in fiscal
year 2001 to $274,412 during the fiscal year ended January 31, 2002, a decrease
of approximately 48.5%. The principal reason for the decrease was the decrease
in research activities of the Company.

RESEARCH AND DEVELOPMENT EXPENSES.

         Research and development expenses decreased from $672,732 in fiscal
year 2001 to $260,357 during the fiscal year ended January 31, 2002, a decrease
of approximately 38.7%, as a result of a decrease in research activities
regarding the Company's battery development.

NET LOSS.

         The net loss of the Company increased from $1,708,345 during fiscal
year 2001 compared to a net loss of $2,943,692 during the fiscal year ended
January 31, 2002, an increase of approximately 72%. The increase in the net loss
of the Company is attributable primarily to an increase in consulting fees paid
by the Company during the fiscal year ended January 31, 2002, and its continued
lack of revenues.

CAPITAL RESOURCES.

         The Company's capital resources have been provided primarily by the
exchange of outstanding convertible debt of $525,000 and accrued interest of
$70,000 for 1,221,780 shares of Common Stock of the Company, stockholders
related loans, and from the exercise of warrants.

WORKING CAPITAL AND LIQUIDITY.

         At January 31, 2002, the Company had negative working capital of
approximately $709,722 compared to January 31, 2001, negative working capital in
the amount of $767,409. The Company believes that it will be necessary to
increase its 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.


                                       11
<PAGE>


         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.


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, 2003.


         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.

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.

GOING CONCERN

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

         At January 31, 2002, the Company had a deficit in working capital of
$709,722, a loss from operations for the year ended January 31, 2002, of
$2,943,692 and an accumulated deficit of $6,452,702 since June 3, 1996, the date
of inception of the Company.

         Management believes that current plans to expand the Company's
operations and a combination of its financing and capital raising plans will
provide sufficient working capital to allow the Company to continue as a going
concern.

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
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


                                       12
<PAGE>


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, 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.


                                       13
<PAGE>


ITEM 7. FINANCIAL STATEMENTS.

         The consolidated financial statements of the Company for its fiscal
years ended January 31, 2002 and 2001, are provided with this Form 10-KSB and
are incorporated herein by reference.

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.


                                       14
<PAGE>


                                    PART III

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


                                       15
<PAGE>


DIRECTORS AND OFFICERS

         The present directors and officers of the Company are as follows:

<Table>
<Caption>
         Name(1)(2)                 Age     Position
         ---------------            ---     -----------
<S>                                 <C>     <C>
         Lee A. Balak               47      Director, President and Treasurer
         Alvin A. Snaper            72      Director, Vice President - Development, and Secretary
         F. Bryson Farrill          74      Director
         Hugo P. Pomrehn, Ph.D.     62      Director
         Wolf Meyerfeld             64      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. Mr. Balak also serves as President of Omega Dynamics, Inc., and
serves as a Director on the Board. 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 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. 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., Devine Entertainment, and Daner Partnership. 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.


                                       16
<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.

         Mr. Meyerfeld became a director of the Company on March 11, 2002. Mr.
Meyerfeld also currently serves as the President of Republic Aircraft
Manufacturing Inc., and has held that position since 1987. Mr. Meyerfeld
attended Sir George Williams University in Montreal, Canada from 1959 to 1963.

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, 2002, 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.

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, 2002, 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)
                                                      ANNUAL          BONUS      STOCK COMPENSATION(4)
                                                     --------        -------     ---------------------
<S>                                                  <C>             <C>         <C>
         Lee A. Balak ..........................     $ 45,000        $     0           $      0
         William E. McNerney (3)  ..............     $      0        $     0           $ 56,738
         Alvin A. Snaper (3) ...................            0        $     0           $      0
         Ulf J. Lindqwister (3) ................     $      0        $     0           $ 26,913

All executive officers as a group (including
above 4 persons) ...............................     $ 45,000        $     0           $ 83,651
</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
         to its directors, officers or employees.

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


                                       17
<PAGE>


(4)      Represents the issuance 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 COMMITTEES

         A Stock Plan Committee of the Board of Directors administers the
Company's Stock Option, SAR and Stock Bonus Consultant Plan. Messrs. Lee A.
Balak and Alvin A. Snaper 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.

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, 2002, are as follows:

<Table>
<Caption>
                                            SHARES                     PERCENT OF
MANAGEMENT                                  BENEFICIALLY               COMMON
SHAREHOLDERS(1)                             OWNED(1)                   STOCK
---------------------------                 ------------               ----------
<S>                                         <C>                        <C>
Lee A. Balak ..........................        4,702,000                  20.2%
15 Ocean View Road
Lions Bay, B.C. V0N 2E0
Canada

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

Hugo P. Pomrehn, Ph.D (2) .............           80,000                  0.34%
1017 South Mountain
Monrovia, California 91016

Alvin A. Snaper .......................          664,155                   2.9%
2800 Cameo Circle
Las Vegas, Nevada 89107

Ulf Lindqwister (3) ...................           55,000                  0.24%
9717 Royal Lamb Drive
Las Vegas, Nevada 89145

Directors and officers as a group
(5 persons, including the above) ......        5,501,155                  23.7%
</Table>


                                       18
<PAGE>


----------
(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.

(2)      These share are held by the Pomrehn Family Trust of which Mr. Hugo P.
         Pomrehn is a trustee.

(3)      Mr. Lindqwister resigned as Vice President - Business Development of
         the Company effective March 4, 2002.


         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, 2002.

<Table>
<Caption>
                                                              SHARES OF                 PERCENT
                                    TITLE OF                  OUTSTANDING               BENEFICIALLY
NAME AND ADDRESS                    CLASS                     COMMON STOCK(1)           OWNED
-------------------                 --------                  ---------------           ------------
<S>                                 <C>                       <C>                       <C>
Lee A. Balak                        Common Stock              4,702,000                 20.2%
15 Ocean View Road
Lions Bay, B.C. V0N 2E0
Canada

Global Alliance Partners            Common Stock              1,221,786(2)               9.6%
c/o Buser Management
Todistrasse 51
Postfach 1059
8039 Zurich
Switzerland

Cede & Co.                          Common Stock              15,808,226(3)             67.8%
P.O. Box 222
Bowling Green Station
New York, New York 10274
</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.


                                       19
<PAGE>


(2)      These shares were issued upon the conversion of a Series A Convertible
         Note, including interest, into shares of Common Stock of the Company.

(3)      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, 2002 and
2001, the Company paid $24,000 in lease payments for these facilities during
each year.

         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,
and issued 90,060 shares to him during fiscal 2002, under the terms of the
consulting agreement.

         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 fiscal year ended January 31, 2002, a total
of 50,000 shares of Common Stock were paid to Gist Incorporated as compensation.

         During the year ended January 31, 2002, Mr. Lee A. Balak has loaned
$491,745 to the Company. The loans are on demand with interest at 10% per annum.

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

             No reports on Form 8-K were filed by the Registrant during its
fiscal year ended January 31, 2002.

INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBITS                                             DESCRIPTION
--------                                             -----------
<S>                                                  <C>
3(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)

3(ii) Amendment to Articles of Incorporation         The Amendment to the Articles of Incorporation is
                                                     incorporated
</Table>


                                       20
<PAGE>


<Table>
<S>                                                  <C>
                                                     herein by reference to Exhibit 3(ii) to the Form 10-SB
                                                     registration statement of the Company (File No. 0-24857)

3(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
                                                     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).
</Table>


                                       21
<PAGE>


<Table>
<S>                                                  <C>
         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 is incorporated by reference to
                                                     Form 10-KSB for its fiscal year ended January 31, 2001.

         10(n)                                       Letter Agreement with Goodbody International, Inc. - Joseph H.
                                                     Hale, dated January 28, 2000 is incorporated by reference to
                                                     Form 10-KSB for its fiscal year ended January 31, 2001.

         10(o)                                       Contract Agreement with GDH Consultants Ltd. dated September
                                                     12, 2000 is incorporated by reference to Form 10- KSB for its
                                                     fiscal year ended January 31, 2001.

         10(p)                                       Memorandum of Intention to Create a Foreign Invested Joint
                                                     Venture Company with the Shuang Deng Group dated February 2,
                                                     2001 is incorporated by reference to Form 10-KSB for its fiscal
                                                     year ended January 31, 2001.

         10(q)                                       Partnership Agreement with Department of Science and Technology
                                                     Development of Peking University and PU Lead Company dated
                                                     February 15, 2001 is incorporated by reference to Form 10-KSB
                                                     for its fiscal year ended January 31, 2001.

         10(r)                                       Non-Disclosure/Non-Use Agreement with Bipolar Power
                                                     International and BC Research, Inc. dated March 3, 2001 is
                                                     incorporated by reference to Form 10-KSB for its fiscal year
                                                     ended January 31, 2001.

         10(s)                                       2000 Stock Option, SAR and Stock Bonus Plan incorporated herein
                                                     by reference to Exhibit 10 of the Form S-8 registration
                                                     statement of the Company filed on March 13, 2001(SEC File No.
                                                     333-56968).
</Table>


                                       22
<PAGE>


<Table>
<S>                                                  <C>
         10(t)                                       License Agreement with Gartner Trans d.o.o. is incorporated by
                                                     reference to the Form 10-QSB quarterly report of the Company
                                                     for its fiscal quarter ended October 31, 2001.

         10(u)                                       Engagement Agreement with Dr. Basanta K. Mahato dated November
                                                     1, 2001 is incorporated by reference to the Form 10- QSB
                                                     quarterly report of the Company for its fiscal quarter ended
                                                     October 31, 2001.

         10(v)                                       Power Technology, Inc. 2002 Stock Option, SAR and Stock Bonus
                                                     Plan of the Company is incorporated herein by reference to Form
                                                     S-8 Registration Statement (SEC File No. 333-82512).

         10(w)                                       Memorandum of Understanding regarding China Asia-Pacific Mobile
                                                     Telecommunications Satellite CompanyLimited dated January 29,
                                                     2002.

11.  Statement re: computation of per
         share earnings                              Reference is made to the Consolidated Statements of Operations
                                                     of the Consolidated Financial Statements which are incorporated
                                                     herein.

12.  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 (SEC File No. 333-66845)

23.1  Consent                                        Consent of G. Brad Beckstead, C.P.A., independent certified
                                                     public accountant.
</Table>


                                       23
<PAGE>

G. BRAD BECKSTEAD
--------------------------------------------------------------------------------
CERTIFIED PUBLIC ACCOUNTANT
                                                             330 E. Warm Springs
                                                             Las Vegas, NV 89119
                                                                    702.257.1984
                                                                702.362.0540 fax


                          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, 2002 and 2001 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 in
the United States of America. 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, 2002 and 2001, and the
results of its operations, stockholders' equity and cash flows for the years
then ended in conformity with generally accepted accounting principles in the
United States of America.

The financial statements of Power Technology, Inc. for the period June 3, 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.




Las Vegas, Nevada
May 7, 2002



                                      F-1
<PAGE>

                             POWER TECHNOLOGY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS


<Table>
<Caption>
                                                                 JANUARY 31,      JANUARY 31,
                                                                    2002             2001
                                                                -------------    -------------
<S>                                                             <C>              <C>
ASSETS

Current assets:
    Cash and equivalents                                        $      27,543    $      25,301
    Employee advances                                                   1,000               --
    Due from related party                                            127,000               --
    Accounts receivable                                                    --            4,811
                                                                -------------    -------------
      Total current assets                                            155,543           30,112

Fixed assets, net                                                      12,283           12,323

Other assets:
    Prepaid expenses                                                   56,225           20,000
    Patents                                                            78,500           78,500

                                                                -------------    -------------
                                                                $     302,551    $     140,935
                                                                =============    =============

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

Current liabilities:
    Accounts payable                                            $      56,660    $      11,382
    Advances from MikroDri                                             25,000           45,279
    Accrued expenses                                                       --           10,200
    Loans payable - related party                                     850,343          240,723
                                                                -------------    -------------
      Total current liabilities                                       932,003          307,584
                                                                -------------    -------------

Convertible notes                                                      80,270          600,760
                                                                -------------    -------------

                                                                    1,012,273          908,344
                                                                -------------    -------------

Stockholders' (deficit):
    Common stock, $0.001 par value, 100,000,000 shares
      authorized,  23,328,610 and 19,027,500 shares issued
      and outstanding as of 1/31/02 and 1/31/01, respectively          23,329           19,028
    Additional paid-in capital                                      5,719,651        2,722,573
    (Deficit) accumulated during development stage                 (6,452,702)      (3,509,010)
                                                                -------------    -------------
                                                                     (709,722)        (767,409)
                                                                -------------    -------------

                                                                $     302,551    $     140,935
                                                                =============    =============
</Table>


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

                                      F-2
<PAGE>

                             POWER TECHNOLOGY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  FOR THE YEARS ENDED JANUARY 31, 2002 AND 2001
         AND FOR THE PERIOD JUNE 3, 1996 (INCEPTION) TO JANUARY 31, 2002


<Table>
<Caption>
                                                               FOR THE YEARS ENDED       JUNE 3, 1996
                                                                   JANUARY 31,         (INCEPTION) TO
                                                         ----------------------------    JANUARY 31,
                                                             2002            2001            2002
                                                         ------------    ------------    ------------
<S>                                                      <C>             <C>             <C>
Revenue                                                  $         --    $         --    $      1,663
                                                         ------------    ------------    ------------

Expenses:
   General administrative expenses                            274,412         565,315       2,347,388
   Research & development                                     260,357         672,732       1,205,189
   Consulting fees                                          2,339,456         466,450       2,805,906
   Depreciation and amortization                                5,607           3,848          13,637
                                                         ------------    ------------    ------------
                                                            2,879,832       1,708,345       6,372,120

Other income (expense):
   Interest expense                                           (64,633)             --         (81,102)
   Interest income                                                773              --             773
   Loss on foreign currency                                        --              --          (1,916)
                                                         ------------    ------------    ------------

Net (loss)                                               $ (2,943,692)   $ (1,708,345)   $ (6,452,702)
                                                         ============    ============    ============

Weighted average number of
   common shares outstanding - basic and fully diluted     23,328,610      19,027,500
                                                         ============    ============

Net (loss) per share - basic and fully diluted           $      (0.13)   $      (0.09)
                                                         ============    ============
</Table>



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

                                      F-3
<PAGE>

                             POWER TECHNOLOGY, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           FOR THE PERIOD JUNE 3, 1996 (INCEPTION) TO JANUARY 31, 2002


<Table>
<Caption>
                                                                                         (DEFICIT)
                                                                                        ACCUMULATED
                                                 COMMON STOCK          ADDITIONAL          DURING          PRIOR         TOTAL
                                         ---------------------------     PAID-IN        DEVELOPMENT       PERIOD      STOCKHOLDERS'
                                           SHARES         AMOUNT         CAPITAL           STAGE        ADJUSTMENT     (DEFICIT)
                                         -----------    -----------    ------------     -------------   -----------   ------------
<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 consulting 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 consulting 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 consulting 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)

Shares issued for consulting services      2,874,330          2,874       2,336,582                                      2,339,456

Shares issued for debt conversion          1,050,000          1,050         523,950                                        525,000

Shares issued for interest expense           171,780            172          59,951                                         60,123

Shares issued for cash                       205,000            205          76,595                                         76,800

Net (loss) for the year ended
    January 31, 2002                                                                       (2,943,692)                  (2,943,692)
                                         -----------    -----------    ------------     -------------   -----------   ------------

Balance, January 31, 2002                 23,328,610    $    23,329    $  5,719,651     $  (6,452,702)  $        --   $   (709,722)
                                         ===========    ===========    ============     =============   ===========   ============
</Table>



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

                                      F-4
<PAGE>

                             POWER TECHNOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  FOR THE YEARS ENDED JANUARY 31, 2002 AND 2001
         AND FOR THE PERIOD JUNE 3, 1996 (INCEPTION) TO JANUARY 31, 2002

<Table>
<Caption>
                                                          FOR THE YEARS ENDED         JUNE 3, 1996
                                                              JANUARY 31,              (INCEPTION)
                                                    ------------------------------    TO JANUARY 31,
                                                        2002             2001              2002
                                                    -------------    -------------    -------------
<S>                                                 <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)                                          $  (2,943,692)   $  (1,708,345)   $  (6,452,702)
   Prior period adjustment                                     --          (20,000)              --
   Depreciation expense                                     5,607            3,848           13,637
   Stock issued for consulting services                 2,339,456          466,450        3,456,955
   Stock issued for interest expense                       60,123               --           60,123
   Stock issued to acquire patents                             --               --          (20,000)
Adjustments to reconcile net (loss) to net cash
   (used) by operating activities:
   (Increase) in employee advances                         (1,000)              --           (1,000)
   (Increase) decrease in due from related party         (127,000)              --         (127,000)
   (Increase) decrease in accounts receivable               4,811           (4,811)              --
   (Increase) in prepaid expenses                         (36,225)              --          (56,225)
   Increase in accounts payable                            45,278            6,198           56,660
   (Decrease) in accrued expenses                         (10,200)          (6,269)              --
                                                    -------------    -------------    -------------
Net cash (used) by operating activities                  (662,842)      (1,262,929)      (3,069,552)
                                                    -------------    -------------    -------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from loans - related party                    613,580          130,723          850,343
   Transfer (to) from MikroDri                            (20,279)         (40,788)          25,000
   Purchase of equipment                                   (4,527)          (3,340)         (21,667)
   Patent acquisition                                          --          (13,500)         (58,500)
                                                    -------------    -------------    -------------
Net cash provided by investing activities                 588,774           73,095          795,176
                                                    -------------    -------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from convertible debentures                        --          535,245           80,270
   Issuance of common stock                                76,800          598,875        2,221,649
                                                    -------------    -------------    -------------
Net cash provided by financing activities                  76,800        1,134,120        2,301,919
                                                    -------------    -------------    -------------
Net increase in cash                                        2,732          (55,714)          27,543

Cash and equivalents - beginning                           20,301           76,015               --
                                                    -------------    -------------    -------------
Cash and equivalents - ending                       $      23,033    $      20,301    $      27,543
                                                    =============    =============    =============

Supplemental disclosures:
   Interest paid                                    $          --    $          --    $          --
                                                    =============    =============    =============
   Income taxes paid                                $          --    $          --    $          --
                                                    =============    =============    =============
   Non-cash investing and financing activities:
     Number of shares issued for services               2,874,330        1,055,000        4,612,830
                                                    =============    =============    =============
     Number of shares issued for debt conversion        1,050,000               --        2,084,000
                                                    =============    =============    =============
     Number of shares issued for interest expense         171,780               --          171,780
                                                    =============    =============    =============
     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, 2002 and 2001.




                                      F-6
<PAGE>
                             POWER TECHNOLOGY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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.

Stock-Based Compensation

The Company accounts for stock-based awards to employees in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations and has adopted the disclosure-only
alternative of FAS No. 123, "Accounting for Stock-Based Compensation." Options
granted to consultants, independent representatives and other non-employees are
accounted for using the fair value method as prescribed by FAS No. 123.

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




                                      F-7
<PAGE>
                             POWER TECHNOLOGY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 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

In June 2001, SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill
and Other Intangible Assets," were issued. SFAS No. 141 requires that all
business combinations initiated after June 30, 2001 be accounted for using the
purchase method of accounting, and that identifiable intangible assets acquired
in a business combination be recognized as an asset apart from goodwill, if they
meet certain criteria. The impact of the adoption of SFAS No. 141 on our
reported operating results, financial position and existing financial statement
disclosure is not expected to be material.

SFAS No. 142 applies to all goodwill and identified intangible assets acquired
in a business combination. Under the new standard, all goodwill and
indefinite-lived intangible assets, including that acquired before initial
application of the standard, will not be amortized but will be tested for
impairment at least annually. The new standard is effective for fiscal years
beginning after December 15, 2001. Adoption of SFAS No. 142 effective January 1,
2002, will result in the elimination of approximately $82,000 of annual
amortization. The Company does not expect to recognize any impaired goodwill as
of January 1, 2002.

In July 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations," was
issued which requires the recognition of a liability for an asset retirement
obligation in the period in which it is incurred. When the liability is
initially recorded, the carrying amount of the related long-lived asset is
correspondingly increased. Over time, the liability is accreted to its present
value and the related capitalized charge is depreciated over the useful life of
the asset. SFAS No. 143 is effective for fiscal years beginning after June 15,
2002. The impact of the adoption of SFAS No. 143 on the Company's reported
operating results, financial position and existing financial statement
disclosure is not expected to be material.

In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," was issued. This statement addresses the financial
accounting and reporting for the impairment or disposal of long-lived assets and
broadens the definition of what constitutes a discontinued operation and how
results of a discontinued operation are to be measured and presented. The
provisions of SFAS No. 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001. The impact of the adoption of
SFAS No. 144 on our reported operating results, financial position and existing
financial statement disclosure is not expected to be material.

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 $2,949,059 during the year ended January 31, 2002, and
$1,708,345 during the year




                                      F-8
<PAGE>
                             POWER TECHNOLOGY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


ended January 31, 2001. 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, 2002 and 2001 consisted of the
following:

<Table>
<Caption>
                                                    1/31/02          1/31/01
                                                 -------------    -------------
<S>                                              <C>              <C>
Office equipment                                 $      18,640    $      14,113
Manufacturing equipment                                  4,076            4,076
Leasehold improvements                                   2,164            2,164
Less:  Accumulated depreciation                        (12,597)          (8,030)
                                                 -------------    -------------

Fixed assets, net                                $      12,283    $      12,323
                                                 =============    =============
</Table>

Depreciation expense for the years ended January 31, 2002 and 2001 is $5,607 and
$3,848, respectively.

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 $25,000 and $45,479 of research and development fees advanced by
MicroDri, L.P., a related entity with common shareholders and management, as of
January 31, 2002 and 2001, 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.

Various related entities loaned the Company approximately $358,598 during the
year ended January 31, 2002. The notes are due on demand, and the balance is
non-interest bearing.



                                      F-9
<PAGE>
                             POWER TECHNOLOGY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Company's president, Lee Balak, loaned the Company funds throughout the year
with an outstanding balance at January 31, 2002 of $491,745. The note is due on
demand, and the balance is non-interest bearing. The Company repaid $12,000 of
the loans to Mr. Balak.

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, 2002 and 2001 totaled
approximately $24,000 per year.

The Company paid a management fee in the amount of $45,000 to No. 90 Corporate
Ventures, a company owned by Lee Balak, the Company's president.

NOTE 6 - SERIES A CONVERTIBLE NOTES

The Company has issued $600,000 of its Series A Convertible Notes (the "Notes").
During the year ended January 31, 2002, $525,000 of the notes were converted
into the Company's $0.001 par value common stock at $0.50 per share for a total
of 1,050,000 shares, with an additional 171,780 shares (valued at the fair
market value on the date of issuance) for interest expense totaling $60,123.

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.

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, 2002, the Company has combined net operating loss
carryforwards of approximately $6,400,000 for tax purposes, which will be
available to offset future taxable income. If not used, these carryforwards will
expire during the years 2016-2021. The deferred tax asset relating to the
operating loss carryforwards of approximately $2,200,000 has been fully reserved
at January 31, 2002.

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.



                                      F-10
<PAGE>
                             POWER TECHNOLOGY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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, (the fair market value
of the shares on the date of issuance).

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, (the fair market value
of the shares on the date of issuance).

During the year ended January 31, 2002, the Company issued 2,874,330 shares of
Common Stock in exchange for services valued at $2,339,456, (the fair market
value of the shares on the date of issuance).

During the year ended January 31, 2002, the Convertible Note Holders converted
their $525,000 note into 1,050,000 shares of the Company's Common Stock plus an
additional 171,780 shares for interest expense of $60,123, (the fair market
value of the shares on the date of issuance).

During the year ended January 31, 2002, the Company issued 205,000 shares of
Common Stock for cash totaling $76,800.

NOTE 9 - WARRANTS AND OPTIONS

There are three warrants outstanding to purchase a total of 151,850 shares of
the Company's $0.001 par value common stock at exercise prices ranging from
$0.50-$0.66 per common share. The warrants expire on or before April 17, 2005.

There are stock options issued and outstanding to purchase 2,529,990 shares of
the Company's $0.001 par value common stock at exercise prices ranging from
$0.44 to $4.00 per share.

On January 31, 2002, the Company's board of directors resolved to adopt the
Company's 2002 Stock Option , SAR, and Stock Bonus Consultant Plan covering
2,000,000 shares of the Company's $0.001 par value common stock. During February
2002, The Company filed a Form S-8 Registration Statement with the Securities
and Exchange Commission registering the 2,000,000 shares as "free-trading"
stock.

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.



                                      F-11
<PAGE>
                             POWER TECHNOLOGY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 agreement to issue 950,000 shares of its $0.001 par
value common stock to Mr. Jaime Vega for satisfaction of $344,515 in expenses
and service fees incurred as a consultant for the Company. As of October 31,
2001, Mr. Vega has received 400,000 shares of the Company's $0.001 par value
common stock. The additional 550,000 shares are to be issued after the Company's
Annual Shareholders' Meeting.

On October 25, 2001, the Company entered into a "Non-Exclusive,
Non-Circumvention" Product Development and Financing Agreement ("Agreement")
with LABA Investments, Ltd., an Ontario, Canada company ("LABA"). Pursuant to
the Agreement, the Company shall issue 25,000 shares of its free trading $0.001
par value common stock and 25,000 shares of Rule 144 Restricted $0.001 par value
common stock, plus out of pocket expenses. The Company may also issue an
additional 30,000 shares of free trading $0.001 par value common stock upon the
successful manufacturing development and utilization of the Company's battery
technology. The Company has also agreed to pay LABA a placement fee payable in
cash (calculated at 8% of the gross equity offering funds and/or government
assistance funds received by the Company from LABA's efforts) plus "Cashless"
Warrants equal to 5% of the total stock issued pursuant to LABA's efforts. The
Company has also agreed to pay LABA 8% of the gross revenues generated from
sales contracts, licensing or royalty contracts, and/or joint ventures obtained
from LABA's efforts.

On November 1, 2001, the Company entered into a Consulting Agreement
("Agreement") with Battery Consultation Services ("Consultant"), represented by
Dr. Basanta K. Mahato, for technical assistance in the ongoing development of
the Company's battery prototypes. The Agreement begins November 1, 2001, and
continues for a minimum of three months, with an option to continue the
Agreement upon favorable results. As consideration for the Agreement, the
Company shall pay Consultant a monthly retainer of $4,000, payable in the
Company's $0.001 par value common stock at the fair market value determined at
the end of each month during the term of the Agreement. The Company also agreed
to issue 80,000 shares of its $0.001 par value common stock to Consultant for
the purchase of an advanced battery paste formula which can be integrated with
the Company's patented technology. Upon the successful commercialization of the
jointly developed battery, the Company has agreed to issue $110,000 worth of
restricted $0.001 par value common stock valued at the closing fair market
value.

NOTE 12 - SUBSEQUENT EVENTS

During February 2002, the Company issued 1,220,000 shares of its $0.001 par
value common stock to 3 individuals pursuant to its 2002 Stock Option, SAR, and
Stock Bonus Consultant Plan for consulting services.


                                      F-12
<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 14, 2002

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


                                                /s/ Wolf Meyerfeld
                                 -------------------------------------------------
                                                  Wolf Meyerfeld
</Table>


                                       24

<PAGE>

                               INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBITS                                             DESCRIPTION
--------                                             -----------
<S>                                                  <C>
Exhibit 10(w)                                        Memorandum of Understanding regarding China Asia-Pacific Mobile
                                                     Telecommunications Satellite CompanyLimited dated January 29,
                                                     2002.

23.1  Consent                                        Consent of G. Brad Beckstead, C.P.A., independent certified
                                                     public accountant.

</Table>