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

                                   FORM 10-KSB

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
         ACT OF 1934
         FOR THE FISCAL YEAR ENDED JANUARY 31, 2005

[ ]      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
                         (State or Other Jurisdiction of
                         Incorporation or Organization)

                                   88-0395816
                      (I.R.S. Employer Identification No.)


                       109 NORTH POST OAK LANE, SUITE 422
                                HOUSTON, TX 77024
                    (Address of principal executive offices)

                                  713.621.4310
                           (Issuer's telephone number)

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

                               TITLE OF EACH CLASS
                                       N/A

                    NAME OF EACH EXCHANGE ON WHICH REGISTERED
                                       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. [ ]

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

The aggregate market value of voting and non-voting equity held by
non-affiliates of the registrant as of May 25, 2005: Common stock, $.001 par
value: $5,435,170

      ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS

Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes _____ No _____

The number of shares of the registrant's common stock outstanding as of May 24,
2005: 129,924,358 shares.

Documents incorporated by reference: None

Transitional Small Business Disclosure Format: Yes ___   No _X_

<PAGE>

                               TABLE OF CONTENTS

PART I

Item 1.  Description of Business.............................................  3
Item 2.  Description of Property............................................. 15
Item 3.  Legal Proceedings................................................... 15
Item 4.  Submission of Matters to a Vote of Security Holders................. 16

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters............
Item 6.  Management's Discussion and Analysis or Plan of Operations.......... 18
Item 7.  Financial Statements................................................
Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure................................................
Item 8A. Controls and Procedures.............................................
Item 8B  Other Information...................................................

PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act...................
Item 10. Executive Compensation..............................................
Item 11. Security Ownership of Certain Beneficial Owners and Management
         and Related Stockholder Matters.....................................
Item 12. Certain Relationships and Related Transactions......................
Item 13. Exhibits and Reports on Form 8-K....................................
Item 14  Principal Accountant Fees and Services..............................


Financial Statements.........................................................F-1

Signatures...................................................................

Exhibit Index................................................................


                                       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 engaged in
research and development activities regarding batteries for the automotive and
electric car industries and pipeline connection technology.

BATTERIES

         The primary business of the Company has been to develop improved
technology for batteries to be used in electric vehicles, hybrid powered
vehicles, solar power systems, electric motorcycles, electric bicycles, electric
wheelchairs, electric power management, uninterruptible power supply systems,
automobiles, aircraft, marine and submarine craft. The Company's battery
technology has passed from the "proof of principle" stage. The Company has
manufactured preliminary prototype batteries, using methods that would not be
practical for economically manufacturing batteries on a commercial scale.

         The goal of the Company has been the development of batteries that (i)
are smaller and lighter than conventional batteries which produce the same
electrical capacity, (ii) have a higher specific energy density, (iii) have a
higher energy efficiency, (iv) have a quicker recharge rate, (v) will be more
cost effective, and (vi) will be more environmentally friendly.

          The Company intends to continue its development efforts to be funded
in part through licensees and industrial joint venture partners and from the
sale of its securities.

         The importance of electric vehicles and hybrid vehicles in the United
States and abroad has increased because of concerns regarding air pollution, the
price of gasoline, 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.

         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.


                                       3
<PAGE>

         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 paste to be in contact. The surface structure of the
plates is specially coated with an electrically conductive metal.

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

Active Material - The constituents of a cell that participate in the
electrochemical charge/discharge reactions. This does not include separators,
current collectors, and connectors.

Ampere or Amp (A) - The unit of measurement of current flow. One volt placed
across a one ohm resistance will cause a current of one Amp to flow. One amp for
one hour is called an "amp-hour" or Ah.

Ampere-hour or Ah - A unit of electrical capacity that measures how much energy
the battery will store. This is obtained by multiplying the current in amperes
by the time in hours of discharge. A battery delivering 5 amperes for 20 hours,
delivers 100 Amp Hr of capacity.

Current Collector - A part of an electrode that conducts electrons. It also
serves as a structural support for the electrode.

Current Density (mA/cm(2)) - The current per unit of electrode area. It is equal
to the charge or discharge current divided by the total geometric area of the
positive or negative electrode. Current density is measured in milliamps divided
by square centimeter .

Cycle life -The number of times a rechargeable battery can be charged and
discharged. One battery cycle includes a charge section and a discharge section.

Deep Cycle Discharge - A qualitative term indicating the withdrawal of a
significant percentage of capacity (typically, 80 percent or more)

Electrical Efficiency (%)- The amount of the discharge capacity in amp hours
(Ah) divided by the amount of recharge capacity in (Ah)

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

Electrolyte -- The conductive chemical (such as acid), usually fluid or gel, in
which the electricity flows within the battery, and which supports the chemical
reactions required.

Energy Density - The amount of energy stored per unit volume of a battery. It is
measured by the number of watt hours divided by the volume of the battery in
liters. (Whr/L)

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


                                       4
<PAGE>

HEV- Hybrid Electric Vehicle - a vehicle 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.

PAM - Positive active material, it is the constituents of a cell that
participate in the electrochemical charge/discharge reactions. (paste on the
positive plate)

Power Density (W/L) the amount of power a battery can delivery per unit volume.
It is measured by the number of watts divided by the volume in liters.

SLI battery  - Starting, lighting, and ignition battery

Specific Capacity (Ah/kg) - Capacity per unit weight of active material and/or
current collectors. It is measured by the number of amp hours divided by the
weight of the battery in kilograms.

Specific Power Density (W/kg) - The amount of power per unit weight of a
battery. It is measured by the number of watts divided by the weight of the
battery in kilograms.

Specific Surface Area (cm(2)/cm(3)) The effective surface area per unit volume.
It is a measure of the number of square centimeters of the surface area divided
by the number of cubic centimeters of the object.

Utilization Efficiency (%) - The percentage by weight of the limiting active
material present in an electrode that is electrochemically available for
discharge at useful voltages. It is equal to the actual capacity (Ah) divided by
the theoretical capacity (Ah).

Volt - (V) - The unit of measurement of electrical potential.

Watt - (W) - A measurement of total power. It is amperes multiplied by volts.
One horsepower equals about 750 watts.

Watt-hours or kilowatt-hours (kWh) is the number of watts times the number of
hours.

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.

         Conventional lead-acid batteries typically use lead molded into a grid
pattern as a current collector. The surface area of a conventional lead current
collector is approximately 4.6 cm(2) per cm(3) The Company's battery employs a
high specific surface area, 18 cm(2) per cm(3), open-cell, reticulated vitreous
carbon electrode structure coated with a lead-tin alloy to advance the reliable
lead-acid chemistries to new performance levels by significantly increasing the
utilization efficiency of PAM.

         Because the capability of a battery is directly related to the surface
area of its current collectors which are in contact with paste, their capability
is usually enhanced by sculpting their surfaces to increase and open up their
surface areas. The Company's technology further increases the surface areas of
the plates without compromising their strength or resistance to vibration,
erosion and loss of material. The Company's technology also increases the energy
density for both the weight and size of the battery. The size of the Company's
battery is significantly reduced compared to a traditional lead-acid battery of
the same amp-hour capacity.

         The Company's preliminary prototype batteries were independently tested
by B C Research, Inc of Vancouver Canada, by the Long-Yuan Shuang-Deng battery
company of China and by the Catella Generics Centre of Battery Technology
("Catella') in Sweden.

         The test report from Long-Yuan Shuang-Deng battery manufacture states
that the positive active material utilization efficiency of the Company battery
was 63% as compared to the conventional lead acid battery's 35%.


                                       5
<PAGE>

         The Catella report concluded that the Company's battery gives improved
properties to lead-acid batteries. Catella's report says:

         "The electrochemical utilization of the paste mass is considerably
improved with the reticulated structure plates in lead-acid batteries. We have
recorded an increase in the area specific capacity withdrawn by about 90 % in
the current range 3 to 100 mA/cm(2). The plate weight is lower, by 20-25% for
the positive and 45-50% for the negative, and the area larger, by about 30% for
the positive as well as the negative, for the conventional plates used for
comparison."

         The following table shows part of the data summary in Catella test
report. The test was to compare the performance of the Company's reticulated
plates and conventional lead-acid battery grids. The test was carried out with
single two volt cell arrangement which comprising two negative plates and one
positive. Single cell testing is a common practice used by battery manufactures
in the research stage for concept proofing and prototype testing.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
                          the Company Battery     Conventional Lead-Acid Battery
----------------------------------------------------------------------------------
<S>                              <C>                           <C>
Cut Off Voltage (V)              1.75                          1.75
----------------------------------------------------------------------------------
Capacity (Ah)                    21.7                          12.5
Amp hours
----------------------------------------------------------------------------------
PAM Efficiency (%)                67                            38
----------------------------------------------------------------------------------
</TABLE>

                     Catella Research Laboratory Test Report

         The Company's proprietary reticulated-structure battery has been
independently proven to provide performance characteristics (most notably, high
specific energy density) that are suitable to pure electric vehicles such as the
neighborhood electric vehicle (NEV). The Company believes its lead-acid battery
technology has the following advantages over conventional lead acid battery:

1.   The reticulated grid offers up to four times higher effective surface area
     per unit volume as compared to a typical molded lead current collector grid
     used in conventional lead-acid batteries. The higher surface area and the
     shortened distance between the Company's current collector wires and the
     active material particles, generate a higher utilization efficiency of the
     active material which is a key parameter for the improvement of the
     lead-acid battery.

2.   The weight per unit volume of the reticulated grid, depending on the
     lead-alloy coating thickness, can be as much as two to four times lower
     than for a conventional grid. Thus, significant savings in battery weight
     can be achieved. As a result of that, weight saving of the Company's
     battery plates for equivalent power delivered is 40% to 50% lighter than a
     conventional lead-acid battery. Fewer and lighter plates mean the Company
     battery is 30% to 50% smaller and lighter, compared to a regular lead-acid
     battery.

3.   An increase of the active material utilization efficiency improves the
     specific energy. In electric vehicles the specific energy is directly
     correlated with the driving range. As a rule of thumb, a 50% improvement in
     specific energy increases the driving range of an electric vehicle by about
     74%.

4.   The reticulated structure increased the utilization efficiency by up to
     65%. This increase coupled with the weight reduction, resulted in a
     specific energy increase of up to 60% versus a conventional lead-acid
     battery equipped with book-mould grid.

5.   The cycle life of the Company reticulated battery was tested with deep
     cycle discharge protocol. Cycling results at a one-hour discharge rate
     showed the battery last 700 cycles before the battery could not be
     recharged to 80% of the rated specific capacity.

6.   The amount to time required to fully recharge Company battery is
     significantly less than conventional lead acid battery. AccelRate Power
     Systems Inc., formerly Key Capital Group, (www.keycapital.net) manufactures
     battery chargers and tested the Company prototype. AccelRatre reported that


                                       6
<PAGE>

     with its battery charger, the Company's battery can be fully recharged in
     2.5 hours compared to a conventional lead-acid battery that takes 6-8
     hours. AcceRate's test report also shows there is insignificant temperature
     rise when charging as compared to a conventional lead-acid battery whose
     temperature rise under charge is significant.

         The Company is unaware of any competitor which uses technology similar
to its own for current collectors in lead acid batteries.

PILOT PLANT

         The Company intends to design and construct a pilot plant capable of
manufacturing the Company's current collectors in commercial quantities for use
in lead acid batteries. The manufacturing process will include manufacturing the
reticulated vitreous carbon foam plates, casting a top frame and tab on the
individual reticulated vitreous carbon foam plates, depositing the lead tin
alloy on the reticulated vitreous carbon foam plate by electroplating, casting
side and bottom frames on the individual reticulated vitreous carbon foam
plates, applying battery paste onto the individual reticulated vitreous carbon
foam plate, and curing them. Once this process has been completed, the
individual plate is suitable for use as a current collector. The Company
believes that the manufacturing process and machinery necessary for insertion of
the Company's current collector into a battery case and completing the
manufacturing of the Company's battery is substantially similar to existing
processes, methods, and machinery commonly used in the manufacture of a typical
lead acid battery.

         The Company has engaged in discussion, planning, and negotiations with
an engineering firm which specializes in manufacturing reticulated vitreous
carbon foam and other advanced materials. This firm has provided the Company
with a written proposal to provide the Company with the equipment, materials,
and processes to manufacture reticulated vitreous carbon foam plates suitable
for current collectors. Wirtz Manufacturing Company, Inc., a company which
designs and builds equipment used in the manufacturing of lead-acid batteries,
has built the Company a prototype mold assembly machine to cast the top frame
and tab onto the uncoated reticulated vitreous carbon electrode plates. The
Company has engaged in discussion, planning, and negotiations with an
engineering and manufacturing firm which specializes in designing and
manufacturing electroplating equipment. This firm has provided the Company with
written proposals to construct various machines and systems for lead-tin
electroplating of its reticulated vitreous carbon foam plates.

         The Company's lead acid battery is not yet commercially successful
because Company has not yet designed and built the equipment necessary to
manufacture its batteries in commercial quantities. Reticulated vitreous carbon
current collectors are more expensive and time consuming to manufacture than are
current collectors manufactured by pouring molten lead into a grid patterns. The
Company's battery will be more expensive to manufacture and its purchase price
will be more than a traditional lead acid battery.

         The Company believes that it will be able to design and build a pilot
plant capable of manufacturing its current collectors cost effectively in
commercial quantities; however, further design and engineering are necessary
before a pilot plant can be built. The issues related to the successful
commercial production of the Company's current collectors and its battery
include: whether it can manufacture reticulated vitreous carbon plates
economically in mass produced commercial quantities; whether it can apply the
top frame and tab to the plates economically in mass produced commercial
quantities; whether it can economically electroplate the lead-tin alloy onto the
reticulated vitreous carbon plates uniformly and consistently in mass produced
commercial quantities; whether it can apply the side and bottom frame to the
plates economically in mass produced commercial quantities; whether it can
adapting the existing battery plate pasting equipment to paste lead-tin coated
reticulated vitreous carbon current collectors in economically in mass produced
commercial quantities. There can be no assurance that the Company can
manufacture its current collectors or batteries cost effectively on a commercial
scale. Assuming the Company obtains the financing and capital required to
construct a pilot plant, the Company believes and anticipates that its pilot
plant can be completed and it can begin manufacturing current collectors by
December 31, 2005. There can be no assurance that this will occur.


                                       7
<PAGE>

         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.

         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. Its discussions with various manufacturers lead the Company to
believe that there would be a significant demand for its battery, if it can be
manufactures economically on a commercial scale. The Company also believes its
battery has a number of applications such as electric vehicles, hybrid powered
vehicles, solar power systems, electric motorcycles, electric bicycles, electric
power management, uninterruptible power supply systems, aircraft, marine, and
submarine craft and for starting batteries for automobiles. The Company is
designing various prototype batteries for such applications.

PROTOTYPE BATTERIES

         The Company is preparing to produce prototype versions of its battery
that will be built in a variety of configurations using methods that the company
anticipates will be practical for economically manufacturing batteries on a
commercial scale. The Company has entered into an agreement with ERG Materials
and Aerospace Corporation to provide the Company with 5000 reticulated vitreous
carbon electrode plates for use as current collectors in the manufacture of
prototype batteries and the Company has taken delivery of 1000 reticulated
vitreous carbon electrode plates and an additional 500 reticulated vitreous
carbon plates have been manufactured and are ready to be shipped to the Company.
The number of reticulated vitreous carbon electrode plates used as current
collectors in a single battery will vary depending on the type, size and amp
hour capacity of a battery. The Company has entered into an agreement with Wirtz
Manufacturing Company, Inc. to build a prototype mold assembly to cast the top
frame and tab onto the uncoated reticulated vitreous carbon electrode plates.
Wirtz Manufacturing Company, Inc. has built the prototype mold assembly machine
and successfully cast the top frame and tab on uncoated reticulated vitreous
carbon electrode plates. The top frame and tab must be cast on the reticulated
vitreous carbon electrode plates before the lead tin alloy can be deposited on
them by the electroplating process. The Company is negotiating with various
companies to deposit the lead-tin alloy on the reticulated vitreous carbon
electrode plates by the electroplating process. Wirtz Manufacturing Company,
Inc. has provided the Company with a written proposal to build a prototype frame
assembly machine to cast the side and bottom frames onto the reticulated
vitreous carbon electrode plates once the lead tin alloy has been applied. Based
on its investigation of existing battery current collector pasting machines, and
discussions with equipment manufactures and battery manufacturers, the Company
believes that it will be able to use existing pasting machines, with some
modifications, to apply battery paste to its current collectors. Further
engineering is necessary before the prototype batteries can be manufactured. The
Company previously anticipated that it would be able to manufacture some
prototype batteries during its first fiscal quarter of 2005; however it has not
done so. The Company has sufficient current collectors which have been
electroplated and framed to be able to manufacture two 25 amp hour 12 Volt
prototype batteries. The Company is in the process of determining the most
economical and practical method of manufacturing prototype batteries for
industry evaluation pending the completion of the design and construction its
pilot plant. The Company has had discussions and negotiations with and proposals
from various firms it believes are capable of electroplating the reticulated
vitreous carbon electrode plates that have been and are being manufactured by
ERG Materials and Aerospace Corporation. The Company is awaiting receipt of
additional electroplating proposals to provide the electroplating before it
decides how many prototype batteries it will produce and when it will produce
them. Once the Company has manufactured and pasted its current collectors, the
Company intends to employ an established battery maker to complete the
manufacturing of its prototype batteries.

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.


                                       8
<PAGE>

         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, and support, technical and other
resources than the Company.

PIPELINE CONNECTION TECHNOLOGY

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

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

         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 micro-cracks that can


                                       9
<PAGE>

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.

         The Company's pipeline connection technology will require additional
development, design, engineering, fabrication of machinery, testing, and
evaluation before a field unit capable of joining large diameter pipe can be
manufactured and delivered to potential customers. The Company has not made the
decision to discontinue its research and development activities regarding
patented alloy sensor technology; however, during the year ended January 31,
2005, no research and development activities regarding patented alloy sensor
technology were conducted, due to lack of funding and a decision by the Company
to concentrate primarily on developing its battery technology.

ALLOY SENSOR TECHNOLOGY

         The Company was previously researching and developing its patented
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 Company has made the decision to discontinue its research and development
activities regarding patented alloy sensor technology due to lack of funding and
a decision to concentrate primarily on its battery technology.

RESEARCH AND DEVELOPMENT

         Mr. Joey Jung became Chief Technology Officer of the Company effective
November 26, 2004. Mr. Jung is a co-inventor of the Company's battery technology
and is primarily responsible for the Company's research and product development.

         Research and development efforts have been directed to designing a
pilot plant capable of manufacturing the Company's current collectors in
commercial quantities for use in lead acid batteries, developing various methods
and processes to manufacture the current collectors for use in the Company's
batteries and 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 its 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,


                                       10
<PAGE>

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.
The Company owns the rights to U.S. Patent 6,060,198, which is titled
"Electrochemical Battery Structure and Method." Patent 6,060,198 was filed on
May 29, 1998, was issued on May 9, 2000 and provides patent protection until May
28, 2018. This patent covers the basic invention of a metal battery plate
comprised of rigid elongated tendrils that form a conductive structure with
substantial additional surface area that is exposed to a battery. Thus, battery
performance is markedly improved since a battery's capacity to deliver
electrical current is a straight-line function of the amount of plate surface
area in contact with the electrolyte. The Company also owns the rights to
national patent applications deriving from International Patent Application
Number PCT/US02/30607 filed September 25, 2002 at the World Intellectual
Property Organization under the Patent Cooperation Treaty, titled Current
Collector Structure and Methods to Improve the Performance of a Lead-Acid
Battery. This patent application offers improved battery technology by
disclosing a vitreous carbon substrate coated with a metallic alloy as a
substitute for the porous metal battery plate, thereby reducing a battery's
weight and improving its cycle life. The Company has filed patent applications
on the technology in strategic locations that include the United States, Canada,
Japan, China, and Australia and has also filed a European regional patent
application for the same technology. In addition, the Company owns the rights to
U.S. Patent Application Serial Number 11/048,104 titled Method of Manufacture of
a Battery and Current Collector, which covers an improved process of
manufacturing a battery with a vitreous carbon substrate. The Company owns the
rights to U.S. Patent 5,442,846 which is titled "Procedure and Apparatus for
Cold Joining of Metallic Pipes." Patent 5,442,846 was filed on September 23,
1993, was issued on August 22, 1995, and provides patent protection until
September 22, 2013.

FORWARD-LOOKING STATEMENTS

         This Form 10K-SB contains forward-looking statements. These
forward-looking statements are not historical facts but rather are based on
current expectations, estimates and projections about our industry, our beliefs
and our assumptions. Words such as "anticipates", "intends", "plans", "will",
"believes", "seeks", and "estimates", and variations of these words and similar
expressions, are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed, implied or forecasted in the forward-looking statements. In
addition, the forward-looking events discussed in this Form 10-KSB might not
occur. These risks and uncertainties include, among others, those described in
"Risk Factors" and elsewhere in this Form 10-KSB. You are cautioned not to place
under reliance on these forward-looking statements, which reflect our
management's view only as of the date of this Form 10-KSB. Except as required by
law, the Company undertakes no obligation to update any forward-looking
statement, whether as a result of new information, future events or otherwise.
The reader is cautioned not to place undue reliance on any such statements, each
of which speaks only as of the date made. Such statements are subject to certain
risks and uncertainties, including but not limited to our history of losses, our
limited operating history, our need for additional financing, rapid
technological change, and an uncertain market, that could cause actual results
to differ materially from historical earnings and those presently anticipated or
projected. Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
factors described below. The Company undertakes no obligation to release
publicly revisions made to any forward-looking statements to reflect events or
circumstances occurring after the date of such statements. All written and oral
forward-looking statements made after the date of this Form 10KSB, our annual
report and/or attributable to us or persons acting on our behalf are expressly
qualified in their entirety by this discussion.


                                       11
<PAGE>

EMPLOYEES

         As of January 31, 2005, the Company had two (2) full-time employees,
one of whom was engaged in product research and development. 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.

CONSULTANTS

         On January 14, 2004, the Company entered into a consulting contract
with an individual to provide scientific and marketing services for a period of
one year. The Company issued 800,000 shares of its common stock valued at
$30,000 pursuant to the terms of the consulting contract.

         On April 19, 2004 the Company entered into a consulting agreement with
SeaWay Trading, Inc. for a period of two years with a monthly payment to Seaway
of $15,000. In May of 2004 the Company issued 5,000,000 shares of the Company's
common stock as payment of twelve monthly payments due SeaWay Trading, Inc. On
August 18, 2004 the Company entered into an amendment to the consulting
agreement, pursuant to which the Company issued 5,000,000 shares of the
Company's common stock as full and final payments of all monthly fees and
benefits due SeaWay for services rendered and to be rendered pursuant to the two
year contract.

         On April 15, 2004, the Company entered into a consulting contract with
an individual to provide general business strategic consulting and management
advisory services. The Company agreed to pay the sum of $5,000 per month in cash
or equity for a period of 12 months. The Company also agreed to issue warrants
for the right to purchase up to 5,000,000 shares of the Company's common stock
exercisable at $0.01 per share. The warrants were to expire April 15, 2006. As
of September 28, 2004, the Company had issued 3,250,000 shares of its $0.001 par
value common stock pursuant to the terms of the consulting contract. On
September 28, 2004, the Company agreed to pay the consultant, in lieu of the
$45,000 unpaid and due for the remainder of the contract term, as his fee, and
as consideration for services provided, 8,150,000 shares of the Company's common
stock. Additionally the consultant specifically surrendered and waived his right
to exercise his warrants to purchase up to 5,000,000 shares of the common stock
of the Company up to 5,000,000 shares of the Company's common stock exercisable
at $0.01 per share.

         On May 4, 2004, the Company entered into a consulting contract with an
individual to provide marketing and operation development services in Russia.
The Company issued 1,100,000 shares of its common stock pursuant to the terms of
the consulting contract.

         On June 30, 2004, the Company entered into a consulting contract with
Mr. Lee Balak, former President of the Company, wherein Mr. Balak resigned his
position as President of the Company, and was retained as a consultant to
provide information, evaluation and consulting services to the Company for
consideration totaling $5,000 cash per month for a period of six months.

         On December 30, 2004, the Company entered into a consulting contract
with an individual to provide, for a one year period, general business strategic
consulting and management advisory services. The Company agreed to pay the
consultant $5,000 per month in cash or equity for a period of twelve months. The
consultant also agreed to provide the Company office space, telecommunication
equipment, secure high speed internet access, and copying equipment for
Company's use during January of 2005 at 1770 St. James Place, Suite 115,
Houston, Texas 77056 and for the remaining term of the agreement at 109 North
Post Oak Place, Suite 422, Houston, Texas 77024. The Company also agreed to
issue to the individual warrants for the right to purchase up to 1,250,000
shares of the Company's common stock exercisable at $0.04 per share. These
warrants were to expire January 3, 2006. On April 19, 2005, the individual
exercised the Warrants and purchased 1,250,000 shares of the Company's common
stock at $0.04 per share.


                                       12
<PAGE>

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.

RISK FACTORS

IF THE COMPANY'S PRODUCTS AND SERVICES DO NOT BECOME WIDELY USED IN INDUSTRY, IT
IS UNLIKELY THAT THE COMPANY WILL BE PROFITABLE.

         Compared to other technologies, the Company's technologies are new and
unproven, and the use of The Company's technology by other companies is limited.
In addition, the company has a very limited history of offering the Company's
products and services. It is uncertain whether new customers, if any, will use
these products and services. In order to be successful, the Company's products
and services must meet the requirements of the industry involved in each
product, and the company must convince potential customers to use the Company's
products and services instead of competing technologies. Market acceptance will
depend on many factors, including the Company's ability to: convince potential
customers that the Company's technologies are attractive alternatives to other
technologies; manufacture products and conduct services in sufficient quantities
with acceptable quality and at an acceptable cost; convince potential customers
to purchase the Company's products and services from the Company rather than
developing them internally; and place and service sufficient quantities of the
Company's products. Because of these and other factors, the Company's products
and services may not gain market acceptance.

GOING CONCERN QUALIFICATION BY AUDITORS

         The accountants' reports of the independent certified public
accountants of the Company for fiscal years 2005, 2004, and 2003 express a going
concern qualification by the auditors. The Company has had recurring operating
losses for the past several years which raise substantial doubts about its
ability to continue as a going concern. See Independent Auditor's Report(s),
Note 2 to the Consolidated Financial Statements of the Company, and Management's
Discussion and Analysis or Plan of Operation - Plan of Operation and
-Uncertainties". The Company had no revenue during its last fiscal year. The
Company has no commercial product. The Company has no customers who have agreed
to purchase its products. The Company has minimal cash. The Company does not own
the equipment necessary to manufacture its products. The Company's success is
dependent on its raising additional capital.

THE COMPANY MAY DEPEND ON THIRD-PARTY PRODUCTS AND SERVICES, AND SOLE OR LIMITED
SOURCES OF SUPPLY TO MANUFACTURE SOME COMPONENTS OF THE COMPANY'S PRODUCTS.

         The Company may rely on outside vendors to manufacture and process many
of the components and subassemblies used in the Company's products, including
manufacturers of reticulated vitreous carbon foam and electroplating processors.
Some of these components, processors, and subassemblies may be obtained from a
single supplier or a limited group of suppliers. The Company's reliance on
outside vendors generally, and a sole or limited group of suppliers in
particular, involves several risks, including: the inability to obtain an
adequate supply of required components at a reasonable price due to
manufacturing capacity constraints; a discontinuance of a product by a
third-party manufacturer or other supply constraints; including reduced control
over quality and pricing of components; and delays and long lead times in
receiving materials from vendors.

THE COMPANY MAY NOT ACHIEVE OR SUSTAIN PROFITABILITY IN THE FUTURE.

         The Company has incurred operating and net losses and negative cash
flow from operations since its inception. As of January 31, 2005, the Company
had an accumulated deficit of $11,523,149. For the years ended January 31, 2005
and 2004, the Company had net losses of $(2,241,852) and $(317,238)


                                       13
<PAGE>

respectively. The Company may also in the future incur operating and net losses
and negative cash flow from operations, due in part to anticipated increases in
expenses for research and product development, the acquisition of capital
assets, acquisitions of complementary businesses and technologies and expansion
of the Company's sales and marketing capabilities. The Company may not be able
to achieve or maintain profitability. Moreover, if it does achieve
profitability, the level of any profitability cannot be predicted and may vary
significantly from quarter to quarter.

THE COMPANY'S SUCCESS WILL DEPEND ON THE COMPANY'S ABILITY TO ATTRACT AND RETAIN
EXPERIENCED SCIENTISTS AND SALES PERSONNEL.

         The Company's future success will depend to a significant extent on The
Company's ability to attract, retain and motivate highly skilled scientists and
sales personnel.

         The Company's ability to enter into new engagements and provide
additional services to customers depends, in large part, on the Company's
ability to hire and retain scientists with the skills necessary to keep pace
with continuing changes in technology and sales personnel who are highly
motivated. The Company believes that there is a shortage of, and significant
competition for, scientists with the skills and experience in the sciences
necessary to perform the services it offers. The Company competes with other
contract research companies and academic institutions for new personnel. In
addition, the Company's inability to hire additional qualified personnel may
require an increase in the workload for both existing and new personnel.

         The Company may not be successful in attracting new scientists or sales
personnel or in retaining or motivating the Company's existing personnel.

THERE IS A THIN MARKET FOR THE COMPANY'S STOCK AND ITS PRICE IS VOLATILE

         The Company's common stock is traded on the Electronic Bulletin Board
over-the-counter market, and is quoted under the symbol PWTC. The Company is
aware that there is a thin market for its common stock, that there are
frequently few shares being traded and that any sales activity may significantly
impact the market price.

FUTURE SALES OF THE COMPANY'S COMMON STOCK MAY DEPRESS THE COMPANY'S STOCK
PRICE.

         The Company entered into material agreements with Cornell Capital
Partners, L.P. ("Cornell") described below in more detail in Item 6.
Management's Discussion and Analysis of Plan of Operation. The Company entered
into an Amended and Restated Securities Purchase Agreement effective May 10,
2005 and other related agreements with Cornell Capital Partners, L.P.
("Cornell") regarding the issuance of a 5% secured convertible debenture in the
principal amount of $514,567 (the "Amended Debenture"). The Amended Debenture
issued to Cornell by the Company and the accrued interest thereon are
convertible into the common stock of the Company at anytime until repayment of
the Amended Debenture at the price equal to $0.036 per share. The Company
intends to file a registration statement with the SEC registering the resale of
the approximately 14,300,000 of the shares of common stock of the Company that
may be issued to Cornell upon the conversion of the Amended Debenture into the
common stock of the Company. On May 10, 2005, the Company entered into a Standby
Equity Distribution Agreement (the "SEDA") with Cornell, which entitles the
Company to issue and sell its common stock to Cornell up to an aggregate of
$5,000,000 from time to time during a certain period beginning on the effective
date of a registration statement contemplated by the SEDA. Before the Company
may issue and sell its common stock to Cornell, the Company must have an
effective registration statement on file with the SEC registering the resale of
the shares of common stock that may be issued and sold to Cornell. Once the
registration statement is effective, upon written notice from the Company,
Cornell is committed to purchase common stock of the Company at a purchase price
equal to 97% of the then current market price. Market price is defined to mean
the lowest closing bid price for the common stock during a pricing period
beginning on the date following the notice from the Company and ending on the
fifth consecutive trading day thereafter.


                                       14
<PAGE>

         The Company engaged Newbridge Securities Corporation as its exclusive
placement agent for its sale of common stock to Cornell under the terms of a
Placement Agent Agreement. The Company is obligated to issue to Newbridge
Securities Corporation 442,477 shares of common stock. Newbridge Securities
Corporation is entitled to "piggy-back" registration rights with respect to
these sahres Placement Agent's Shares, which shall be triggered upon
registration of any shares of common stock by the Company pursuant to the
Cornell Registration Rights Agreement.

         The Company cannot predict the actual number of shares of common stock
that will be issued pursuant to the SEDA, in part, because the purchase price of
the shares will fluctuate based on prevailing market conditions and the Company
has not determined the total amount of advances it intends to draw. Nonetheless,
the Company can estimate the number of shares of its common stock that will be
issued using certain assumptions. Assuming the Company drew down the entire
$5,000,000 available under the SEDA in a single advance (which is not permitted
under the terms of the SEDA and the purchase price were equal to $0.05 per
share, then the Company would issue 100,000,000 shares of its common stock to
Cornell. These shares would then represent 42.4% of the Company's outstanding
common stock upon issuance. All of the registered shares sold to Cornell would
be freely transferable without restriction or further registration under the
Securities Act, except for any shares purchased by the Company's "affiliates",
as defined in Rule 144 of the Securities Act. The market price of the Company's
common stock could decline as a result of sales of substantial amounts of the
Company's common stock in the public market during and after the registration
statement relating to the Cornell transactions becomes effective. As of January
31, 2005, there were 65,847,854 shares of common stock then outstanding as
"restricted securities" as defined in Rule 144 which will be available for sale
in the future. These shares may be sold in the future without registration under
the Securities Act to the extent permitted by Rule 144 or other exemptions under
the Securities Act.

FUTURE SALES OF THE COMPANY'S COMMON STOCK WILL RESULT IN DILUTION OF THE
PRESENT SHAREHOLDERS' PERCENTAGE OWNERSHIP OF THE COMPANY AND COULD RESULT IN A
CHANGE OF CONTROL

         The issuance of the Company's common stock pursuant to the Standby
Equity Distribution Agreement will dilute the percentage of the ownership of the
Company by the current shareholders. A change in control of the Company could
occur as the result of a dilution of the percentage of the ownership of the
Company by the existing largest shareholders.

ITEM 2.    DESCRIPTION OF PROPERTY.

         The Company is currently provided with executive offices located at 109
North Post Oak Lane, Suite 422, Houston, Texas 77024 pursuant to a Consulting
Agreement with Timothy J. Connolly. The use of the approximately 500 square feet
of office space includes the use of telecommunication equipment, secure high
speed internet access, conference room, and copying equipment. In exchange for
approximately five hours of consulting services per month by the Company's chief
technology officer to Mag Power Systems, Inc., a fuel cell technology
development company, the Company has a month to month tenancy and the use of
approximately 300 square feet of private office space and the laboratory within
Mag Power Systems, Inc.'s office at Suite 360, 6165 Highway 17Delta, BC, V4K 5B8
Canada. The Company believes that its current facilities are adequate for its
needs through 2005, 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 filed a civil action against Mr. Alvin A. Snaper, a
former director and officer of the Company, and against Neo-Dyne Research, Inc.
("Neo-Dyne"), his research and development company, based upon allegations of
breach of fiduciary relationship and breach of contract, and seeking an
injunction, declaratory relief and the turnover of Company property. Mr. Snaper
and Neo-Dyne filed an answer and asserted counterclaims alleging fraud and
misrepresentation, breach of contract, and intentional interference with
prospective economic advantage, and seeking an injunction and declaratory
relief. The litigation involved the ownership and rights to the battery
technology and patent rights of the Company. The Company entered into a Mutual


                                       15
<PAGE>

Settlement and Release Agreement with Mr. Snaper and Neo-Dyne on January 6,
2005, pursuant to which the parties compromised and settled the claims and
counterclaims at issue in the litigation. Pursuant to the Settlement Agreement,
Mr. Snaper assigned to the Company his entire right, title and interest
throughout the world in the inventions and improvements encompassed by U.S.
Patent Number 10/809,791, International Patent Application Number PCT/US02/30607
and United States Patent 6,060,198. The Settlement Agreement includes a "share
lockup agreement" for a period of one-year during which Snaper will not be
permitted to sell or transfer ownership of any of his 664,155 shares of common
stock of the Company. Mr. Snaper released the Company, its present and former
officers and directors, including F. Bryson Farrill, Hugo P. Pomrehn, and Lee
Balak of all claims that were asserted or that could have been asserted by
Snaper and Neo-Dyne in the litigation. The Company paid Alvin Snaper $20,000 to
settle the dispute and released Snaper and Neo-Dyne claims that were asserted or
that could have been asserted in the litigation. The Company also entered into
an agreement with Lee A. Balak, a former director and officer of the Company, on
January 10, 2005, pursuant to which the Company released Mr. Balak of all claims
it may have against Mr. Balak which are related to any act that Mr. Balak did or
failed to do in his capacity as an officer or director of the Company. Pursuant
to the Agreement, Mr. Balak agreed to surrender to the Company his ownership of
4,000,000 shares of the common stock of the Company and Mr. Balak waived all
ownership right, title, or interest in those shares. Following his surrender of
those shares, Mr. Balak will own 23,657,483 shares of the common stock of the
Company and Mr. Balak agreed that the Share Lockup Agreement of paragraph 9 of
the Consulting Services Agreement dated June 30, 2004, between the Company and
Mr. Balak, shall remain in full force and effect. The Company agreed to pay the
balance due on its certain line of credit Promissory Note dated May 21, 2004,
payable to the order of Corporate Strategies, Inc., in the original principal
sum of $100,000 ("the Promissory Note") which was secured by the pledge by Mr.
Balak of 27,157,483 of his shares of common stock of the Company and to deliver
to Mr. Balak 23,157,483 of those shares of the common stock of the Company. The
Company paid the Promissory Note. The Company has physical possession of a share
certificate issued to Lee Balak, evidencing ownership of 23,285,483 shares of
fully paid and non-assessable shares of common stock of the Company. The Company
is awaiting receipt from Mr. Balak of an Irrevocable Stock Power to tender to
the Company's Stock Transfer Agent to effectuate the surrender by Mr. Balak to
the Company the 4,000,000 shares of common stock of the Company.

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 750,000,000 shares of
Common Stock, $.001 par value. As of January 31, 2005, the Company had
125,880,201 shares of common stock, $.001 par value, that were issued and
outstanding, which were held by 145 stockholders of record.

Preferred Stock

         The Company's Articles of Incorporation authorize 1,000,000 shares of
Preferred Stock, $.01 par value. As of January 31, 2005, the Company had no
shares of its Preferred Stock issued and outstanding.


                                       16
<PAGE>

Options and Warrants

         As of January 31, 2005, the Company had issued warrants to purchase
13,240,000 shares of the common stock of the Company at exercise prices ranging
from $.021 to $.10 per share.

         Warrants to purchase 10,000,000 of the 13,240,000 shares of the common
stock of the Company expired without being exercised on March 24, 2005. Warrants
to purchase 490,000 shares of the common stock of the Company were exercised
pursuant to a "cashless exercise" clause which resulted in the issuance of
269,157 shares of the common stock of the Company on February 2, 2005. Warrants
to purchase 1,250,000 shares of the common stock of the Company at $.04 per
share were exercised on April 18, 2005.

         As of January 31, 2005 the Company had an outstanding stock option to
purchase 100,000 shares of the common stock of the Company at an exercise price
of $ 0.005 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.

MARKET PRICE

         The following table sets forth the range of high and low bid prices per
share of the common stock of the Company for the periods indicated.

                                          High Closing       Low Closing
                                         Bid Prices (1)     Bid Prices (1)
                                         --------------     --------------
Year Ended December 31, 2002

         1st Quarter .................        $ .44             $ .25
         2nd Quarter .................        $.36              $.16
         3rd Quarter .................        $.27              $.085
         4th Quarter .................        $.13              $.07

Year Ended December 31, 2003

         1st Quarter .................        $.125             $.05
         2nd Quarter .................        $.071             $.045
         3rd Quarter .................        $.066             $.02
         4th Quarter .................        $.03              $.015

Year Ended December 31, 2004

         1st Quarter .................        $.06              $.04
         2nd Quarter .................        $.038             $.0158
         3rd Quarter .................        $.035             $.016
         4th Quarter .................        $.048             $.025

(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 bid price of the common stock of the Company on May 25,
2005, was $.08 per share.


                                       17
<PAGE>

         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 December 2004, the Company issued 300,000 shares of restricted
common stock to Hugo P. Pomrehn, a Director of the Company, as director's fees
in reliance upon Section 4(2) of the Securities Act of 1933.

         During December 2004, the Company issued 300,000 shares of restricted
common stock to F. Bryson Farrill, a Director of the Company, as director's fees
in reliance upon Section 4(2) of the Securities Act of 1933.

         During January 2005, the Company issued 190,576 shares of restricted
common stock to Bernard J. Walter, Director, President, Treasurer and Secretary
of the Company, as compensation in reliance upon Section 4(2) of the Securities
Act of 1933.

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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
annual report. This discussion contains statements reflecting the opinions of
management as well as forward-looking statements regarding the market and the
Company that involve risk and uncertainty. These statements relate to
expectations and concern matters that are not historical facts. Works such as
"believes", "expects", "anticipates" and similar expressions used throughout
this document indicate that forward-looking statements are being made.


                                       18
<PAGE>

         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
annual report.

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

         The Company is in the development stage of designing and producing its
batteries and other products. The Company is preparing to produce prototype
versions of its battery to be built in a variety of sizes, amp hour capacities
and configurations using methods that the company anticipates will be practical
for economically manufacturing batteries on a commercial scale. The Company is
in the process of designing a pilot plant capable of manufacturing its
reticulated vitreous carbon, lead-tin alloy current collectors. The Company has
not commenced any commercial production or sales of its batteries or pipeline
connection equipment.

         Historically, the Company has used the sale of its common stock,
capital contributions and loans 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.

YEAR ENDED JANUARY 31, 2005 COMPARED TO 2004

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

                                            Year Ended             Year Ended
                                          January 31, 2005      January 31, 2004
                                          ----------------      ----------------

Revenues                                    $         0            $       0
General and administrative expense          $   292,069            $  58,878
Research and development                    $     2,595            $       0
Consulting fees                             $    46,671            $ 156,500
Stock-based executive compensation
and reimbursed expense                      $   909,895            $       0
Stock-based consulting fees                 $   789,680            $       0
Stock-based legal fees                      $    20,500            $       0
Stock-based patent litigation fees          $   152,000            $       0
Interest expense-related party              $    22,006            $       0
Financing fees                              $   109,126            $       0
Impairment of long lived assets             $    55,000            $       0
Net income (loss)                           $(2,421,852)           $(350,046)

Net income (loss per share)                 $      (.03)           $    (.01)


                                       19
<PAGE>

REVENUES

         Total revenues for fiscal years 2005 and 2004 were $0 and $0,
respectively, as the operations of the Company continued to be focused on
research and development. To date, the Company has not established any
commercial products nor commenced any commercial production operations.

GENERAL AND ADMINISTRATIVE EXPENSES

         General and administrative expenses increased from $58,878 in fiscal
year 2004 to $292,069 in the fiscal year ended January 31, 2005, an increase of
approximately 496%. This increase is principally attributable to payment of
$99,500 in salaries in the fiscal year ended January 31, 2005 compared to $0 in
the fiscal year ended January 31, 2004; increased bookkeeping and auditors fees;
legal fees for filing patent applications in various countries; additional SEC
filings expenses; increases in litigation expenses relating to the Company's
patent dispute litigation; and the payment of directors fees of $18,000 in the
fiscal year ended January 31, 2005 compared to $0 during the fiscal year ended
January 31, 2004.

CONSULTING FEES

         Consulting fees incurred in the operations of the Company, decreased to
$46,671 during the fiscal year ended January 31, 2005, compared to $156,500
during the fiscal year ended January 31, 2004.

STOCK BASED EXECUTIVE COMPENSATION AND REIMBURSED EXPENSES

         Lee Balak, a former president of the Company, received shares of common
stock of the Company in lieu of a salary and repayment of expenses incurred on
behalf of the Company, valued at $576,254, during the fiscal year ended January
31, 2005, compared to $0 during the during the fiscal year ended January 31,
2004. Bernard J. Walter, an executive of the Company, received as compensation,
shares of common stock of the Company, valued at $272,641during the fiscal year
ended January 31, 2005, compared to $0 during the during the fiscal year ended
January 31, 2004. Hugo Pomrehn, a director of the Company, received shares of
common stock of the Company valued at $30,500 as director's fees during the
fiscal year ended January 31, 2005, compared to $0 during the during the fiscal
year ended January 31, 2004. F. Bryson Farrill, a director of the Company,
received shares of common stock of the Company valued at $30,500 as director's
fees during the fiscal year ended January 31, 2005, compared to $0 during the
during the fiscal year ended January 31, 2004.

STOCK BASED CONSULTING FEES

          Stock based consulting fees increased to $789,680 during the fiscal
year ended January 31, 2005,compared to $0 during the during the fiscal year
ended January 31, 2004 due to consulting fees incurred for scientific advisory
services; for services relating to establishing various possible business
combinations with established foreign and domestic battery manufacturers; for
services in connection with protecting the proprietary technology of the
Company; for services relating to marketing and operational development services
in Russia; and for services in providing general business strategic consulting,
management advisory service, internet traffic engineering services and website
enhancement services.

STOCK BASED PATENT LITIGATION FEES

         The Company issued shares common stock valued at $152,000 to the
Company's patent litigation attorneys as legal fees for professional services
rendered in fiscal year ended January 31, 2005 compared to $0 in fiscal year
ended January 31, 2004.


                                       20
<PAGE>

NET LOSS

         The net loss of the Company increased to $(2,421,852) during the fiscal
year ended January 31, 2005, as compared with a loss of $(350,046) during the
fiscal year ended January 31, 2004, an increase of approximately 692%. This
increase is principally attributable to: payment of $88,500 in salaries in the
fiscal year ended January 31, 2005 compared to $0 in the fiscal year ended
January 31, 2004; increased bookkeeping and auditors fees; legal fees for filing
patent applications in various countries; additional SEC filings expenses;
increases in litigation expenses relating to the Company's patent dispute
litigation; the payment of directors fees in cash and by the issuance of common
stock; the market value of the shares of common stock issued to pay the salary
due Lee A. Balak's for the fiscal year ended January 31, 2004 paid during the
fiscal year ended January 31, 2005; the market value of the shares of Company's
common stock issued to Bernard J. Walter pursuant to his employment contract;
the market value of the shares of Company's common stock issued to the Company's
patent litigation counsel to prosecute the civil action described in Legal
Proceedings, Item 3, above; the expense of financing fees; and the impairment of
a long lived asset.

FINANACING FEES

         Financing fees increased to $109,126 in fiscal year ended January 31,
2005 compared to $0 in fiscal year ended January 31, 2004. This increase is
attributable to the financing fees incurred in connection with material
agreements with Cornell Capital Partners, L.P. ("Cornell") described below.

IMPAIRMENT OF LONG LIVED ASSETS

         Certain costs were capitalized for patents totaling $78,500, with
$4,800 accumulated amortization since 1998. All other related patent acquisition
and development costs have been expensed. During fiscal 2005, $55,000 was deemed
impaired and written off.

INTEREST EXPENSE RELATED PARTY

         The Company incurred $22,006 interest expense on loans from a related
party in the fiscal year ended January 31, 2005 compared to $0 in the fiscal
year ended January 31, 2004.

CAPITAL RESOURCES

         The Company's capital resources were provided primarily by the sale of
its $500,000 convertible debentures to Cornell Capital Partners, L.P. The net
proceeds of these sales were $425,000 cash.

WORKING CAPITAL AND LIQUIDITY

         At January 31, 2005, the Company had negative working capital of
approximately $151,000 compared to negative working capital of approximately
$290,780 on January 31, 2004. The Company believes that it will be necessary to
increase it working capital to continue its research and development activities
which may be achieved by incurring additional indebtedness from stockholders or
others.

         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.

         The Company entered into material agreements to enable it to offer and
sell additional shares of its common stock.


                                       21
<PAGE>

         The Company entered into an Amended and Restated Securities Purchase
Agreement effective May 10, 2005 and other related agreements with Cornell
regarding the issuance of a 5% secured convertible debenture in the principal
amount of $514,567 (the "Amended Debenture"). The Amended Debenture replaced the
Debentures. The Amended Debenture issued to Cornell by the Company and the
accrued interest thereon are convertible into the common stock of the Company at
anytime until repayment of the Debenture at the price equal to $0.036 per share.
However, in no event shall Cornell convert the Debentures in such manner that
would cause Cornell and its affiliates to beneficially own more than 4.99% of
the then total issued and outstanding shares of the common stock of the Company.
The Amended Debenture requires the Company to make six (6) scheduled payments
("Scheduled Payments") of principal, plus accrued interest and a Redemption
Premium ("Redemption Premium") equal to fifteen percent (15%) of the principal
amount of each Scheduled Payment. The first Scheduled Payment is due and payable
on October 1, 2005, and shall continue on the first business day of each
succeeding calendar month thereafter for a total of six (6) Scheduled Payments.
The principal amount of each Scheduled Payment shall be determined by dividing
the outstanding principal amount of this Amended Debenture as of the date such
Scheduled Payment is due by the number of Scheduled Payments remaining. The
Company, at its option, has the right to redeem the Amended Debenture in whole
or in part with three days written notice at a 20% redemption premium. In this
event, the Company is required to issue Cornell a two-year warrant to purchase
50,000 shares of its common stock exercisable on a cash basis at an exercise
price equal $0.043 per share, with piggyback rights. The Company is obligated to
file a registration statement with the SEC registering the resale of
approximately 14,300,000 of the shares of common stock of the Company that may
be issued upon the conversion of the Amended Debenture into the common stock of
the Company.

         Standby Equity Distribution Agreement. The Company also entered into a
Standby Equity Distribution Agreement effective August 26, 2004, with Cornell
(the "Equity Agreement"). The Equity Agreement provided for Cornell to commit to
purchase up to an aggregate of $5,000,000 of the common stock of the Company,
subject to certain volume limitations and other conditions, as requested from
time to time by the Company as its equity capital needs arise during the
two-year term of the Equity Agreement. The Equity Agreement required the Company
to file a registration statement with the SEC registering the resale of the
8,849,558 shares of its common stock issued to Cornell as a commitment fee in
connection with the execution of the SPA and the Equity Agreement. The Company
filed a Form SB-2 registration statement on November 5, 2004; however, the
registration statement never became effective. On May 5, 2005 the Company
submitted to the SEC its application to withdraw the SB-2 registration statement
). The Company and Cornell renegotiated the terms of the Equity Agreement and on
May 10, 2005, the Company entered into a Standby Equity Distribution Agreement
(the "SEDA") with Cornell, which entitles the Company to issue and sell its
common stock to Cornell up to an aggregate of $5,000,000 from time to time
during a certain period beginning on the effective date of a registration
statement contemplated by and pursuant to certain conditions as set forth in the
SEDA. Each election by the Company to sell stock to Cornell is referred to as a
"commitment right". In order to invoke a commitment right, the Company must have
an effective registration statement on file with the SEC registering the resale
of the shares of common stock that may be issued as a consequence of the
exercise of the commitment right. Once an effective registration statement is on
file with the SEC, the Company may deliver an initial draw down letter to the
purchaser and the transaction shall close within seven days of that delivery.
Additionally, certain conditions set forth in the investment agreement must be
met at to the volume and price of the Company's common stock. Once the
registration statement is effective, upon written notice from the Company,
Cornell is committed to purchase common stock of the Company at a purchase price
equal to 97% of the then current market price. Market price is defined to mean
the lowest closing bid price for the common stock during a pricing period
beginning on the date following the notice from the Company and ending on the
fifth consecutive trading day thereafter.

         There are certain conditions to the Company's and Cornell's obligations
to carry out the transactions contemplated by the Agreement and those conditions
include:

(a) Cornell shall furnish the Company with certified copies of all necessary
actions on its behalf approving its execution, delivery and performance of the
Agreement;

(b) All representations and warranties of the purchaser contained in the
Agreement shall be true and correct in all material aspects at the time of the
closing and the purchaser shall perform and satisfy in all material respects all
covenants and agreements required by the Agreement to be performed and satisfied
to Cornell at or prior to the closing;

(c) As of the closing date no suit, action or other proceeding shall pending or
threatened before any governmental authority seeking to restrain the Company or
prohibit the closing or seeking damages against the Company as the result of the
consummation of the Agreement.

The conditions set forth above must be satisfied or must be waived by the
parties before the put may be effected.

The Company has undertaken and made certain representations to Cornell in
connection with the execution of the Agreement and those representations must
still be true and correct at the time that the put in effectuated in order for
Cornell to be required to purchase the stock. Those representations include:

(a) That the Company is duly organized and in good standing;

(b) The Company has the requisite corporate power and authority to enter into
and perform the agreement and it constitutes a valid and binding obligation of
the Company;


                                       22
<PAGE>

(c) Except as disclosed in the SEC Documents, as of the execution of the
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities (iii) there are no
outstanding registration statements other than on Form S-8 and (iv) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of their securities under the Securities
Act (except pursuant to the Registration Rights Agreement);

(d) All shares of the Company's common stock and which are outstanding have been
duly authorized and validly issued in compliance with all applicable state and
federal laws;

(e) Performance of the Agreement by the Company and the consummation by the
Company will not (i) result in a violation of the Articles of Incorporation, any
certificate of designations of any outstanding series of preferred stock of the
Company or By-laws or (ii) conflict with or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market on
which the common stock is quoted) applicable to the Company or any of its
subsidiaries or by which any material property or asset of the Company or any of
its subsidiaries is bound or affected and which would cause a Material Adverse
Effect;

(f) As of their respective dates, the financial statements of the Company
disclosed in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and, fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).

(g) The SEC Documents do not include any untrue statements of material fact, nor
do they omit to state any material fact required to be stated therein necessary
to make the statements made, in light of the circumstances under which they were
made, not misleading.

(h) Except for matters described in the SEC Documents and/or the Agreement, no
Event of Default, as defined in the respective agreement to which the Company is
a party, and no event which, with the giving of notice or the passage of time or
both, would become an Event of Default (as so defined), has occurred and is
continuing, which would have a Material Adverse Effect on the Company's
business, properties, prospects, financial condition or results of operations.

(i) Except as disclosed in the SEC Documents, the Company owns or possesses
adequate rights or licenses to use all material trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct its business.

(j) Neither the Company nor any of its subsidiaries is involved in any labor
dispute and the Company believe that their relations with their employees are
good.

(k) The Company is (i) in compliance with any and all applicable material
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants, (ii) has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its respective businesses and (iii) is in compliance with all terms
and conditions of any such permit, license or approval


                                       23
<PAGE>

(l) The Company has good and marketable title to its properties and assets and
those have not been unreasonably or unusually impaired, as set forth in the
Agreement;

(m) Except as set forth in the SEC documents, the Company has appropriate legal
rights to all of its intellectual property and proprietary information and those
have not been challenged or infringed upon since the execution of the Agreement;

(n) Except as set forth in the SEC documents, there is no significant litigation
pending against the Company as set forth in the Agreement;

(o) The Company maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

(p) The Company has timely filed all tax returns;

(q) The Company is not obligated to offer the securities offered on a right of
first refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers, agents
or other third parties;

(r) Except as set forth in the SEC Documents none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee; and

(s) The Company has provided Cornell all information and full disclosure
necessary as set forth in the Agreement and the Company has complied with all
SEC reports to the best of the Company's knowledge and the Company's common
stock is currently listed on the NASD OTC bulletin board and satisfies all
requirements for continuation of such listing.

         The Company engaged Newbridge Securities Corporation (Newbridge) as its
exclusive placement agent for its sale of common stock to Cornell under the
terms of a Placement Agent Agreement. The Company is obligated to issue to
Newbridge 442,477 shares of common stock of the Company Newbridge is entitled to
piggy-back registration rights with respect to those shares, which shall be
triggered upon registration of any shares of common stock by the Company
pursuant to the Registration Rights Agreement with Cornell.

         The Company issued 8,849,558 shares of its common stock to Cornell as a
commitment fee in connection with the execution of the SPA and the Equity
Agreement. The Company intends to file a registration statement with the SEC
registering the resale of these 8,849,558 shares of its common stock. The
Company intends to file a registration statement with the SEC registering the
resale of: the approximately 14,300,000 of the shares of common stock of the
Company that may be issued upon the conversion of the Debenture into the common
stock of the Company and the 442,477 shares of common stock which it is
obligated to issue to the Placement Agent. Under the Registration Rights
Agreement with Cornell, the Company is obligated to file its registration
statement with the SEC by July 1, 2005 and the registration statement must be
effective by October 1, 2005. The Company intends to file a registration
statement with the SEC registering the resale of shares of common stock that may
be sold to Cornell pursuant to the SEDA. The Company has not determined and
cannot predict the actual number of shares of common stock that will be issued
pursuant to the SEDA, in part, because the purchase price of the shares will
fluctuate based on prevailing market conditions and the Company has not
determined the total amount of advances it intends to draw. Nonetheless, the
Company can estimate the number of shares of its common stock that will be
issued using certain assumptions. Assuming the Company drew down the entire
$5,000,000 available under the standby equity distribution in a single advance
(which is not permitted under the terms of the SEDA and the purchase price was
equal to $0.05 per share, then the Company would issue 100,000,000 shares of its
common stock to Cornell.


                                       24
<PAGE>

         The Company agreed to bear all expenses (other than broker discounts
and commissions, if any) in connection with the registration of the securities
of the Company.

PLAN OF OPERATIONS

         Because of the costs of development of its battery systems and the
continuing costs of its battery prototype production and the anticipated costs
relating to its pilot plant, the Company expects that it will incur a loss
during its fiscal year ending January 31, 2006.

         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 and conducted 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 activities
of its batteries and other products to incorporate technical changes and
improvements. The Company expects to incur substantial capital costs designing a
pilot plant capable of manufacturing the Company's current collectors in
commercial quantities for its batteries and developing various methods and
processes to manufacture the current collector. The Company expects toe incur
substantial costs in manufacturing prototype batteries.

PILOT PLANT

         The Company intends to design and construct a pilot plant capable of
manufacturing the Company's current collectors in commercial quantities for use
in lead acid batteries. The manufacturing process will include manufacturing the
reticulated vitreous carbon foam plates, casting a top frame and tab on the
individual reticulated vitreous carbon foam plates, depositing the lead tin
alloy on the reticulated vitreous carbon foam plate by electroplating, casting
side and bottom frames on the individual reticulated vitreous carbon foam
plates, applying battery paste onto the individual reticulated vitreous carbon
foam plate, and curing them. Once this process has been completed, the
individual plate is suitable for use as a current collector. The Company
believes that the manufacturing process and machinery necessary for insertion of
the Company's current collector into a battery case and completing the
manufacturing of the Company's battery is substantially similar to existing
processes, methods, and machinery commonly used in the manufacture of a typical
lead acid battery.

         The Company has engaged in discussion, planning, and negotiations with
an engineering firm which specializes in manufacturing reticulated vitreous
carbon foam and other advanced materials. This firm has provided the Company
with a written proposal to provide the Company with the equipment, materials,
and processes to manufacture reticulated vitreous carbon foam plates suitable
for current collectors. Wirtz Manufacturing Company, Inc., a company which
designs and builds equipment used in the manufacturing of lead-acid batteries,
has built the Company a prototype mold assembly machine to cast the top frame
and tab onto the uncoated reticulated vitreous carbon electrode plates. The
Company has engaged in discussion, planning, and negotiations with an
engineering and manufacturing firm which specializes in designing and
manufacturing electroplating equipment. This firm has provided the Company with
written proposals to construct various machines and systems lead-tin for
lead-tin electroplating of its reticulated vitreous carbon foam plates.

         The Company's lead acid battery is not yet commercially successful
because Company has not yet designed and built the equipment necessary to
manufacture its batteries in commercial quantities. Reticulated vitreous carbon
current collectors are more expensive and time consuming to manufacture than are
current collectors manufactured by pouring molten lead into a grid patterns. The
Company's battery will be more expensive to manufacture and its purchase price
will be more than a traditional lead acid battery.


                                       25
<PAGE>

         The Company believes that it will be able to design and build a pilot
plant capable of manufacturing its current collectors cost effectively in
commercial quantities; however, further design and engineering are necessary
before a pilot plant can be built. The issues related to the successful
commercial production of the Company's current collectors and its battery
include: whether it can manufacture reticulated vitreous carbon plates
economically in mass produced commercial quantities; whether it can apply the
top frame and tab to the plates economically in mass produced commercial
quantities; whether it can economically electroplate the lead-tin alloy onto the
reticulated vitreous carbon plates uniformly and consistently in mass produced
commercial quantities; whether it can apply the side and bottom frame to the
plates economically in mass produced commercial quantities; whether it can
adapting the existing battery plate pasting equipment to paste lead-tin coated
reticulated vitreous carbon current collectors in economically in mass produced
commercial quantities. There can be no assurance that the Company can
manufacture its current collectors or batteries cost effectively on a commercial
scale. Assuming the Company obtains the financing and capital required to
construct a pilot plant, the Company believes and anticipates that its pilot
plant can be completed and it can begin manufacturing current collectors by
December 31, 2005. There can be no assurance that this will occur.

         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.

         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. Its discussions with various manufacturers lead the Company to
believe that there would be a significant demand for its battery, if it can be
manufactures economically on a commercial scale. The Company also believes its
battery has a number of applications such as electric vehicles, hybrid powered
vehicles, solar power systems, electric motorcycles, electric bicycles, electric
power management, uninterruptible power supply systems, aircraft, marine, and
submarine craft and for starting batteries for automobiles. The Company is
designing various prototype batteries for such applications.

PROTOTYPE BATTERIES

         The Company is preparing to produce prototype versions of its battery
that will be built in a variety of configurations using methods that the company
anticipates will be practical for economically manufacturing batteries on a
commercial scale. The Company has entered into an agreement with ERG Materials
and Aerospace Corporation to provide the Company with 5000 reticulated vitreous
carbon electrode plates for use as current collectors in the manufacture of
prototype batteries and the Company has taken delivery of 1000 reticulated
vitreous carbon electrode plates and an additional 500 reticulated vitreous
carbon plates have been manufactured and are ready to be shipped to the Company.
The number of reticulated vitreous carbon electrode plates used as current
collectors in a single battery will vary depending on the type, size and amp
hour capacity of a battery. The Company has entered into an agreement with Wirtz
Manufacturing Company, Inc. to build a prototype mold assembly to cast the top
frame and tab onto the uncoated reticulated vitreous carbon electrode plates.
Wirtz Manufacturing Company, Inc. has built the prototype mold assembly machine
and successfully cast the top frame and tab on uncoated reticulated vitreous
carbon electrode plates. The top frame and tab must be cast on the reticulated
vitreous carbon electrode plates before the lead tin alloy can be deposited on
them by the electroplating process. The Company is negotiating with various
companies to deposit the lead-tin alloy on the reticulated vitreous carbon
electrode plates by the electroplating process. Wirtz Manufacturing Company,
Inc. has provided the Company with a written proposal to build a prototype frame
assembly machine to cast the side and bottom frames onto the reticulated
vitreous carbon electrode plates once the lead tin alloy has been applied. Based
on its investigation of existing battery current collector pasting machines, and
discussions with equipment manufactures and battery manufacturers, the Company
believes that it will be able to use existing pasting machines, with some
modifications, to apply battery paste to its current collectors. Further
engineering is necessary before the prototype batteries can be manufactured. The
Company previously anticipated that it would be able to manufacture some
prototype batteries during its first fiscal quarter of 2005; however it has not
done so. The Company has sufficient current collectors which have been
electroplated and framed to be able to manufacture two 25 amp hour 12 Volt
prototype batteries. The Company is in the process of determining the most
economical and practical method of manufacturing prototype batteries for
industry evaluation pending the completion of the design and construction its
pilot plant. The Company has had discussions and negotiations with and proposals
from various firms it believes are capable of electroplating the reticulated
vitreous carbon electrode plates that have been and are being manufactured by
ERG Materials and Aerospace Corporation. The Company is awaiting receipt of
additional electroplating proposals to provide the electroplating before it
decides how many prototype batteries it will produce and when it will produce
them. Once the Company has manufactured and pasted its current collectors, the
Company intends to employ an established battery maker to complete the
manufacturing of its prototype batteries.


                                       26
<PAGE>

         On February 1, 2005 the Company entered into an agreement with
Clearvision, Inc. ("TVA") a full service media production and placement company
to develop and launch a national media campaign to focus on building name brand
awareness in the business community for the Company's battery technology. TVA
has guaranteed the Company a minimum of 24 live or pre-recorded nationally
televised interviews during the course of the contract. TVA will focus on
building name brand awareness in the business community for the Company's
battery technology. TVA is obligated to produce a one half hour Exclusive TV
Special, a Video News Release, a Corporate Video, a Tradeshow Loop Presentation,
Internet Streaming Video and Newspaper features. The Company agreed to pay TVA a
total of $310,000.00 in three installments of cash or free trading shares of the
Company's common stock. On February 2, 2005, the Company issued 850,000 shares
free trading shares of the Company's common stock in satisfaction of the first
payment. TVA has written the script for the one half hour TV Special. After the
production and filming of the special on location, post production editing,
graphics, narration, music, studio mixing and duplication of broadcast masters
will be performed, followed by distribution of the program for broadcasting.

         The Company intends to discuss and explore various possible business
combinations with established battery manufacturers. These may include joint
venture agreements, licensing agreements, technology transfer agreements or
other agreements by which established manufacturers acquire the right to employ
the Company's technology to manufacture batteries. 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.

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, 2005, the Company had a deficit in working capital of
approximately $151,000, a loss from operations for the year ended January 31,
2005, of $(2,241,852) and an accumulated deficit of $(11.467.201) 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.


                                       28
<PAGE>

COSTS OF CONDUCTING BUSINESS.

         The Company will be required to incur substantial costs for research
and development, for establishing production and marketing operations, and
related costs. A substantial portion of those costs must be paid whether or not
any of its batteries or other products proves to be commercially successful on a
broad scale. 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 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.


                                       29
<PAGE>

RAW MATERIALS

         The Company believes that the basic raw materials and components for
its batteries and other products will be readily available. The Company does not
expect to experience any significant delays in obtaining timely delivery of the
materials and components necessary to manufacture its products.

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.

ITEM 7.    FINANCIAL STATEMENTS.

         The consolidated financial statements of the Company for its fiscal
year ended January 31, 2005, are provided with this Form 10-KSB annual report
and are incorporated herein by reference.

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

            Beckstead and Watts, LLP, the previous independent registered
accounting firm of the Company for the fiscal years ended January 31, 2003 and
2004, resigned from further audit services to the Company because the firm has
been the auditor of the Company for more than five years, as required by the
Sarbanes-Oxley Act of 2002, as amended. There have been no disagreements
regarding accounting and financial disclosure matters with the independent
certified public accountants of the Company.

ITEM 8A. CONTROLS AND PROCEDURES

         Evaluation of Disclosure Controls and Procedures. The Company's Chief
Executive Officer and principal financial officer, after evaluation the
effectiveness of disclosure controls and procedures of the Company [as defined
in the Securities Exchange Act of 1934 Rule 13a-14(c) and 15d-14(c)] as of the
date within 90 days of the filing date of this report on Form 10-KSB for its
fiscal year ended January 31, 2005, have concluded that as of the evaluation
date, the Company's disclosure controls and procedures were adequate and
effective to ensure that material information relating to the Company and the
Company's consolidated subsidiary would be made known to him by others within
those entities, particularly during the period in which this annual report on
Form 10-KSB was being prepared.

         Changes in Internal Controls. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
its disclosure controls and procedures subsequent to the evaluation date, nor
any significant deficiencies or material weaknesses in such disclosure controls
and procedures requiring corrective actions. As a result, no corrective actions
were taken.


                                       30
<PAGE>

                                    PART III

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

DIRECTORS AND OFFICERS

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

 Name(1)(2)               Age     Position
 ---------------         ------   -------------------------------------------
 Bernard J. Walter        57      Director, President, Treasurer and Secretary
 F. Bryson Farrill        77      Director
 Hugo P. Pomrehn, Ph.D.   66      Director
 Joey Jung                33      Chief Technology Officer

(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. Walter became a director of the Company effective July 1, 2004 to
fill the vacancy on the Board of Directors created by the resignation of Lee A.
Balak. Effective July 6, 2004, Mr. Walter executed an employment agreement with
the Company, and the Board of Directors appointed Mr. Walter to be the Chief
Executive Officer, President, Treasurer and Secretary of the Company. From 2000
to July of 2004, Mr. Walter was the General Counsel and a business and technical
consultant to LFF Systems, Inc. From 2000 to December of 2004, Mr. Walter was a
director, Vice President and General Counsel to eSimulation, Inc. From 1973
until his employment by the Company, Mr. Walter had been a practicing attorney
in the State of Texas. Mr. Walter graduated from the University of St. Thomas
with a B.A. degree in 1970, and graduated from the University of Houston Law
Center with a J.D. degree in 1973.

         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


                                       31
<PAGE>

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.

         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. Jung became Chief Technology Officer of the Company on November 21,
2004. From June of 2000 to November 2004, he was employed as a Senior Research
Scientist specializing in battery and fuel cell technology by Vizon SciTec Inc.
(formerly BC Research Inc.) in Vancouver, Canada. From 1997 through 2000 he was
employed as a Graduate Research Assistant in the Chemical Engineering Department
at the University of British Columbia in Vancouver, Canada. From 1995 to 1996,
he was the lead teaching assistant of the Department of Chemical Engineering,
Chinese Culture University, Taipei, Taiwan. Mr. Jung graduated from Chinese
Culture University with a B.Sc. degree in chemical engineering specialized in
1994, and in 2000 graduated from the University of British Columbia with a
M.A.Sc. degree in Chemical Engineering specializing in electrochemical
engineering. Mr. Jung is fluent in English, and in both the Mandarin and
Cantonese Chinese dialects. On October 30, 2004, the Company entered into an
employment agreement with Mr. Jung to retain Mr. Jung as an executive through
November 21, 2006. Mr. Jung is a co-inventor of the Company's battery technology
and is primarily responsible for the Company's research and product development.

Employment Agreements

         The Company entered into an Employment Agreement with Mr. Bernard J.
Walter effective July 1, 2004 which terminates on December 31, 2009, and may be
extended by the Company annually thereafter. The Employment Agreement provides
for a base salary for 2004 of $90,000, $120,000 for 2005, and $180,000 per annum
for 2006 through 2009, with annual increases of five per cent or greater if set
by the compensation committee of the Company. The Employment Agreement also
provides for incentive bonuses based upon performance criteria to be determined
at the beginning of each year for each applicable annual period by the
compensation committee. Mr. Walter became entitled to receive 7.5% of the
outstanding shares of the Company. His shares of common stock are to be
non-dilutive and are not subject to any reverse stock split of the common stock
of the Company. As of January 31, 2005, Mr. Walter owned 9,441,015 shares of the
restricted common stock of the Company which were restricted from sale for a
period of three years from July 1, 2004. The Employment Agreement also has
customary provisions regarding an automobile allowance, participation in
benefits plans, life insurance and other terms.

            On October 30, 2004, the Company entered into an employment
agreement with Joey Jung to retain him as an executive through November 21,
2006. The Company agreed to pay Mr. Jung $68,525 as a base salary and to
increase his pay by no less than 10% of Base Salary each year of employment. Mr.
Jung was granted a stock option to acquire 100,000 shares of the Company's
common stock at a price of one half of one cent, $0.005. Mr. Jung is entitled to
a stock option to acquire an additional 900,000 shares of the Company's common
stock at a price of one half of one cent, $0.005, per share. Stock options for
450,000 of these additional shares shall vest upon the earlier of two years from
his employment commencement date -or the manufacturing and delivery of 100
prototype 12 Volt batteries. Stock options for the other 450,000 additional


                                       32
<PAGE>

shares shall vest upon the earlier of two years from earlier of his employment
commencement date or the completion of design and fabrication of the equipment
necessary to manufacture the 12 Volt battery in commercial quantities.

Director's fees.

         In consideration of the services rendered to the Company by F. Bryson
Farrill, as a director of the Company, for the period prior to July 1, 2004, the
Company issued to Mr. Farrill 500,000 shares of its restricted shares of the
Company's common stock. In consideration of the services rendered and to be
rendered to the Company by Mr. Farrill, as a director of the Company, for the
period from July 1, 2004 through June 30, 2005, the Company agreed to pay Mr.
Farrill $3,000 per each month, $1,500 of which is payable in cash and $1,500 of
which is payable in restricted shares of the Company's common stock at the
closing bid price on the date preceding the stock's issuance. During the fiscal
year ending January 31, 2005, the Company paid Mr. Farrill a total of $9,000
cash and issued to Mr. Farril a total of 800,000 shares of the Company's
restricted common stock, as director's fees. In consideration of the services
rendered to the Company by Hugo P. Pomrehn, as a director of the Company, for
the period prior to July 1, 2004, the Company issued to Mr. Pomrehn 500,000
shares of its restricted shares of the Company's common stock. In consideration
of the services rendered and to be rendered to the Company by Mr. Pomrehn, as a
director of the Company, for the period from July 1, 2004 through June 30, 2005,
the Company agreed to pay Pomrehn $3,000 per each month, $1,500 of which is
payable in cash and $1,500 of which is payable in restricted shares of the
Company's common stock at the closing bid price on the date preceding the
stock's issuance. During the fiscal year ended January 31, 2005, the Company
paid Mr. Pomrehn a total of $9,000 cash and issued to Mr. Pomrehn a total of
800,000 shares of the Company's restricted common stock, as director's fees.

Change in Management

         Effective June 30, 2004, Mr. Lee A. Balak resigned as a director and as
the President, Treasurer and Secretary of the Company. The Company entered into
a consulting agreement with Mr. Balak. The consulting agreement was for a term
of six months. The consulting fee was $5,000 per month and provided for
reimbursement of expenses. The agreement provides that no shares of Mr. Balak's
common stock of the Company could be sold during the term of the agreement and
commencing December 30, 2005, during each six month period, Mr. Balak shall be
limited to selling no more than 500,000 shares of the common stock of the
Company without the permission of the Board of Directors of the Company.

         Effective July 1, 2004, Mr. Bernard J. Walter was appointed as a
director of the Company to fill the vacancy on the Board of Directors created by
the resignation of Lee A. Balak. Effective July 6, 2004, Mr. Walter executed an
employment agreement with the Company, and the Board of Directors appointed Mr.
Walter to be the Chief Executive Officer, President, Treasurer and Secretary of
the Company.

         As a result of this change in the management of the Company, the Board
of Directors authorized a change in the location of the principal executive
office of the Company from Lions Bay, B.C., Canada to 1770 St. James Place,
Suite 115, Houston, Texas 77056 and then to 109 N Post Oak Lane, Suite 422,
Houston, Texas 77024.

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, 2005, all such filing
requirements applicable to its officers and directors and any ten percent holder
were complied with, except that Mr. Lee A. Balak, Mr. F. Bryson Farrill, Mr.
Hugo P. Pomrehn, Mr. Bernard J. Walter and Mr. Joey Jung were each late in the
filing of a Form 3 or Form 4 report during the fiscal year ended January 31,
2005.


                                       33
<PAGE>

ITEM 10.    EXECUTIVE COMPENSATION

         The following table discloses compensation during the three years ended
January 31, 2005, for the Chief Executive Officer, President, Treasurer and
Secretary of the Company.

<TABLE>
<CAPTION>
------------------------- ------- ---------------------------------------- ---------------------------------------- -------------
                                            Annual compensation                      Long-Term Compensation
                                                                           ----------------------------------------
                                                                                      Awards             Payouts
------------------------- ------- ---------------------------------------- ----------------------------- ---------- -------------
                                                             Other                       Securities
Name and                                                     Annual        Restricted    Underlying                 All Other
Principal                 Fiscal                             Compensation  Stock Awards  Options/        LTIP       Compensation
Position                  Year    Salary       Bonus                                     SARs            Payout
------------------------- ------- ------------ ------------- ------------- ------------- --------------- ---------- -------------
<S>                       <C>     <C>          <C>           <C>           <C>           <C>             <C>        <C>
Bernard J. Walter,        2005    $ 62,000     $     0       $     0       $  263,507    $     0         $     0    $     0
Chief Executive
Officer, President and
Director
------------------------- ------- ------------ ------------- ------------- ------------- --------------- ---------- -------------
Lee A. Balak, former      2003    $      0     $     0       $     0       $     0       $     0         $     0    $     0
Chief Executive           2004    $      0     $     0       $     0       $ 150,000     $     0         $     0    $     0
Officer, President and    2005    $ 37,500     $     0       $     0       $     0       $     0         $     0    $     0
Director
------------------------- ------- ------------ ------------- ------------- ------------- --------------- ---------- -------------
Wolf Meyerfeld, former    2003    $      0     $     0       $     0       $  58,000     $     0         $     0    $     0
Chief Executive
Officer, President and
Director
------------------------- ------- ------------ ------------- ------------- ------------- --------------- ---------- -------------
</TABLE>

(1)      During the fiscal year ended January 31, 2005, Mr. Balak received
         8,571,428 shares of restricted common stock, in exchange for $150,000
         of executive compensation which was salary due him for the fiscal year
         ended January 31, 2004.

(2)      Mr. Walter received 9,441,015 shares of restricted common stock as
         compensation for the fiscal year ended January 31, 2005.

STOCK COMPNESATION PLAN

         The Company adopted the 2004-B Stock Option, SAR, and Stock Bonus Plan
(the "Plan") to be effective August 1, 2004, which authorized the Company to
grant qualified and non-qualified stock options with or without stock
appreciation rights and to grant stock bonuses to employees, non-employee
directors, and consultants (the "Participants")of the Company. There were
20,000,000 shares of common stock of the Company available for grant to
Participants designated by the Committee under the Plan. Presently 5,400,000
shares of common stock remain to be issued are reserved for issuance upon
exercise of options or stock bonuses granted or reserved for grant under the
Plan. Once these shares are issued pursuant to the Plan, they can be sold in the
public market upon issuance, subject to restrictions under the securities laws
applicable to resales by affiliates.


                                       34
<PAGE>

STOCK PLAN COMMITTEES

         A Stock Plan Committee of the Board of Directors administers the
Company's Stock Option, SAR and Stock Bonus Consultant Plan. Mr. Bernard J.
Walter and Mr. Hugo P. Pomrehn are presently the 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.

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, 2005, are as follows:

                                                  SHARES            PERCENT OF
MANAGEMENT                                     BENEFICIALLY           COMMON
SHAREHOLDERS(1)                                  OWNED(1)             STOCK
---------------------------                    ------------      -----------
Bernard J. Walter  (4)                          37,098,498             29.5%
109 North Post Oak Lane
Suite 422
Houston, Texas 77024

F. Bryson Farrill (2)                            1,300,000             1.03%
77 Verplank Avenue
Stanford, Connecticut 06902

Hugo P. Pomrehn, Ph.D (2)(3)                     1,560,000              1.2%
1017 South Mountain
Monrovia, California 91016

Joey Jung                                          100,000             .008%
6685 Berkeley Street
Vancouver, B.C.
V5S 2J5 CANADA

Directors and officers as a group
(4 persons, including the above)                40,058,498            31.74%

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


                                       35
<PAGE>

(2)   Includes a warrant to purchase 500,000 shares of common stock of the
      Company at an exercise price of $.06 per share during a period ending
      April 22, 2006.

(3)   Includes 80,000 shares of common stock that are held by the Pomrehn Family
      Trust of which Mr. Hugo P. Pomrehn is a trustee.

(4)   Includes 27,657,483 shares of the common stock of the Company owned by Lee
      A. Balak for which Mr. Bernard J. Walter holds an irrevocable proxy.

         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, 2005.

                                                     Shares of        Percent
                                    Title of        Outstanding    Beneficially
Name and Address                     Class        Common Stock (1)     Owned
-------------------               ------------    ---------------- ------------
Lee A. Balak                      Common Stock     27,657,483 (2)      22%
15 Ocean View Road
Lions Bay, B.C. V0N 2E0
Canada

Cornell Capital Partners, L.P.    Common Stock     23,026,244 (3)      15.5%
101 Hudson Street
Suite 3700
Jersey City, NJ 07302

Bernard J. Walter                 Common Stock     37,098,498 (4)      29.5%
109 North Post Oak Lane
Suite 422
Houston, Texas 77024

-----------
(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)   Includes 4,000,000 shares of common stock of the Company which Mr. Balak
      agreed to surrender to the Company pursuant to a Settlement Agreement
      described in "Legal Proceedings", above.

(3)   Includes a 5% Secured Convertible Debenture held by Cornell Capital
      Partners, L.P. in the principal amount of $500,000 which, at the option of
      Cornell, was convertible into 14,107,686 shares of common stock of the
      Company at a conversion price equal to $0.036 per share.

(4)   Includes 27,657,483 shares of the common stock of the Company owned by Lee
      A. Balak for which Mr. Bernard J. Walter holds an irrevocable proxy.


                                       36
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         During the year ended January 31, 2005, Bernard J. Walter, a Director,
the Chief Executive Officer, President, Treasurer and Secretary of the Company,
pursuant to an Employment Agreement, received stock grants and was issued
9,441,015 shares of the restricted common stock of the Company. These shares are
restricted from sale for a period of three years from July 1, 2004 and are to be
non-dilutive and are not subject to any reverse stock split of the common stock
of the Company.

         During the year ended January 31, 2005, Hugo P. Pomrehn, a Director of
the Company, was issued 800,000 shares of the restricted common stock of the
Company and was paid $9,000 cash, as director's fees.

         During the year ended January 31, 2005, F. Bryson Farrill, a Director
of the Company, was issued 800,000 shares of the restricted common stock of the
Company and was paid $9,000 cash, as director's fees.

         During the year ended January 31, 2005, Joey Jung, Chief Technology
Officer of the Company, was granted a stock option to acquire 100,000 shares of
the Company's common stock at a price of one half of one cent, $0.005, per
share.

         On May 25, 2004, while he was a Director, the Chief Executive Officer,
President, Treasurer and Secretary, the Company issued to Lee Balak, 4,037,485
restricted shares of the Company's common stock in payment of a loan to the
Company by Mr. Balak of $65,423 principal and $5,233 interest due on the loan.

         On May 25, 2004, while he was a Director, the Chief Executive Officer,
President, Treasurer and Secretary, the Company issued to Lee Balak, 10,676,570
restricted shares of the Company's common stock, in payment of previous loans to
the Company by Mr. Balak made during 2002, in the principal amount of $173,000,
plus $13,840 in accrued interest.

         On May 25, 2004, while he was a Director, the Chief Executive Officer,
President, Treasurer and Secretary, the Company issued to Lee Balak, the Company
issued to Lee Balak, 8,571,428 restricted shares of the Company's common stock
in payment of his annual salary in the amount of $150.000, for the fiscal year
ended January 31, 2004.

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

A. FORM 8-K

         On January 14, 2005 a Form 8-K current report was filed by the Company
regarding the settlement of a lawsuit with Alvin A. Snaper, a former officer and
director of the Company.

         On May 6, 2005 a Form 8-K current report was filed by the Company
regarding withdrawal of its Form SB-2 registration statement.

         On May 10, 2005 a Form 8-K current report was filed by the Company
regarding material agreements with Cornell Capital Partners, L.P. and change of
its independent auditors.


                                       37
<PAGE>

ITEM 14        PRINCIPAL ACCOUNTANTS FEES AND SERVICES

Name                            Audit Fees     Audit Related Fees     Tax Fees
----                            ----------     ------------------    ----------
Beckstead and Watts, LLP
For fiscal year ended

January 31, 2004                $ 13,000           $       -0-        $    -0-
January 31, 2005                $ 17,500           $       -0-        $    -0-



         B. EXHIBITS

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

3(iii)  Amendment to Articles       The Amendment to the Articles of
        of Incorporation            Incorporation dated July 27, 2004

3(iv)   By-Laws                     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

            10.1                    Consulting Agreement dated April 15, 2004
                                    with Tim J. Connolly is incorporated herein
                                    by reference to Exhibit 10.1 to the
                                    Company's Form 10-QSB filed on June 14, 2004

            10.2                    Employment Contract between the Company and
                                    Joey Jung dated October 30, 2004, is
                                    incorporated herein by reference to Exhibit
                                    10.1 to the Company's Form 10-QSB filed on
                                    December 21, 2004

            10.3                    Standby Equity Distribution Agreement with
                                    Cornell Capital Partners, L.P. dated May 10,
                                    2005, is incorporated herein by reference to
                                    Exhibit 10.1 to the Company's Form 8-K
                                    current report filed on May 10, 2005

            10.4                    Registration Rights Agreement with Cornell
                                    Capital Partners, L.P. dated May 10, 2005,
                                    is incorporated herein by reference to
                                    Exhibit 10.2 to the Company's Form 8-K
                                    current report filed on May 10, 2005


                                       38
<PAGE>

            10.5                    Escrow Agreement with Cornell Capital
                                    Partners, L.P. dated May 10, 2005, is
                                    incorporated herein by reference to Exhibit
                                    10.3 to the Company's Form 8-K current
                                    report filed on May 10, 2005

            10.6                    Placement Agent Agreement with Cornell
                                    Capital Partners, L.P. dated May 10, 2005,
                                    is incorporated herein by reference to
                                    Exhibit 10.4 to the Company's Form 8-K
                                    current report filed on May 10, 2005

            10.7                    Amended and Restated 5% Secured Convertible
                                    Debenture dated May 10, 2005 and due on
                                    November 19, 2006, is incorporated herein by
                                    reference to Exhibit 10.5 to the Company's
                                    Form 8-K current report filed on May 10,
                                    2005

            10.8                    Termination Agreement with Cornell Capital
                                    Partners, LP is incorporated herein by
                                    reference to Exhibit 10.6 to the Company's
                                    Form 8-K current report filed on May 10,
                                    2005

            10.9                    Amendment to Investment Rights Agreement
                                    with Cornell Capital Partners, LP is
                                    incorporated herein by reference to Exhibit
                                    10.7 to the Company's Form 8-K current
                                    report filed on May 10, 2005

            10.10                   Mutual Settlement and Release Agreement with
                                    Alvin A. Snaper is incorporated hereby by
                                    reference to Exhibit 10.1 to the Company's
                                    Form 8-K current report filed on January 14,
                                    2005

            10.11                   Settlement Agreement with Alvin A. Snaper is
                                    incorporated hereby by reference to Exhibit
                                    10.2 to the Company's Form 8-K current
                                    report filed on January 14, 2005

            10.12                   Employment Agreement between with Bernard J.
                                    Walter dated July 1, 2004 is incorporated
                                    hereby by reference to Exhibit 10.1 to the
                                    Company's Form 8-K current report filed on
                                    July 13, 2004.

            10.13                   Consulting Services Agreement with Lee Balak
                                    dated June 30, 2004 is incorporated hereby
                                    by reference to Exhibit 10.2 to the
                                    Company's Form 8-K current report filed on
                                    July 13, 2005

23.1    Accountants Consent         Consent of Beckstead and Watts, LLP

23.2    Accountants Consent         Consent of Malone & Bailey, PC


                                       39
<PAGE>

                           INDEX TO EXHIBITS ATTACHED

EXHIBITS                      DESCRIPTION
--------                      -----------

3(iii)                        Amendment to Articles of Incorporation dated
                              July 27, 2004
23.1    Accountants Consent   Consent of Beckstead and Watts, LLP
23.2                          Accountants Consent Consent of Malone & Bailey, PC


                                       40
<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 26, 2005
                                     By: /s/ Bernard J. Walter
                                     ------------------------------------------
                                     Bernard J. Walter
                                     Director, President, Treasurer, Chief
                                     Financial Officer and Principal Accounting
                                     Officer


                                       41
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
  Power Technology, Inc.
  (A Development Stage Company)
  Houston, Texas

We have audited the accompanying consolidated balance sheet of Power Technology,
Inc. (a development stage company) as of January 31, 2005, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the year then ended and the period from June 3, 1996 (inception) to January 31,
2005. These financial statements are the responsibility of Biomoda, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The consolidated financial statements for the
period from June 3, 1996 (inception) through January 31, 2004 were audited by
other auditors whose reports expressed unqualified opinions on those statements.
The consolidated financial statements for the period from June 3, 1996
(inception) through January 31, 2004 include total revenues and net loss of
$26,663 and $9,101,298, respectively. Our opinion on the consolidated statements
of operations, stockholders' deficit and cash flows for the period from June 3,
1996 (inception) through January 31, 2005, insofar as it relates to amounts for
prior periods through January 31, 2004, is based solely on the reports of other
auditors.

We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we 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. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Biomoda, Inc. as of
January 31, 2005, and the results of its operations and its cash flows for the
year ended January 31, 2005 in conformity with accounting principles generally
accepted in the United States of America.

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
consolidated financial statements, the Company is a development stage company
which experienced significant losses since inception with no significant
revenues. Those conditions, among others, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans regarding
these matters are also described in Note 2. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


Malone & Bailey, PC
Houston, Texas
www.malone-bailey.com

May 23, 2005


                                      F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board  of  Directors
Power Technology, Inc.
(a development stage company)
Las  Vegas,  Nevada

We have audited the Statements of Operations, Stockholders' Equity, and Cash
Flows for the year ended January 31, 2004 of Power Technology, Inc. (A Nevada
Corporation) (A Development Stage Company). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit 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
statement presentation. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of Power Technology, Inc.'s operations and
cash flows for the year ended January 31, 2004, in conformity with generally
accepted accounting principles in the United States of America.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has had limited operations and has not commenced planned
principal operations. This raises 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 financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


Beckstead  and  Watts,  LLP
Las Vegas, Nevada

May 20,  2004


                                      F-2
<PAGE>

                             Power Technology, Inc.
                         (a Development Stage Company)
                           Consolidated Balance Sheet

                                                                    January 31,
                                                                        2005
                                                                   ------------
Assets
  Current assets:
    Cash and equivalents                                           $     44,961
                                                                   ------------

      Total current assets                                               44,961

Fixed assets, net                                                         2,900

Other Assets:
  Patents                                                                18,700
                                                                   ------------

                                                                   $     66,561

Liabilities and Stockholders' (Deficit)

Current Liabilities
  Accounts payable                                                 $    147,073
  Short-term debt
  Loans payable                                                          49,000
                                                                   ------------

      Total current liabilities                                         196,073

Long-term debt
  Convertible debentures                                                 72,917
                                                                   ------------

      Total long-term debt                                               72,917

Stockholders' (deficit):
  Preferred stock, $0.01 par value, 1,000,000 shares
    authorized, none issued or outstanding
  Common stock, $0.001 par value, 750,000,000 shares
    authorized, 126,180,201 shares issued and outstanding               126,180
Additional paid-in capital                                           11,194,541
(Deficit) accumulated during development stage                      (11,523,150)
                                                                   ------------

                                                                       (202,429)
                                                                   ------------

                                                                   $     66,561
                                                                   ============

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


                                      F-3
<PAGE>

                             Power Technology, Inc.
                         (a Development Stage Company)
                     Consolidated Statements of Operations
           for the period June 3,1996 (inception) to January 31, 2005

<TABLE>
<CAPTION>
                                                        For the Years Ended          June 3, 1996
                                                             January 31,            (Inception) to
                                                    ----------------------------       January 31,
                                                        2005            2004             2005
                                                    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>
Consulting Revenue                                  $         --    $         --    $     26,663
                                                    ------------    ------------    ------------

Expenses:
General administrative expenses                          503,069          58,878       3,195,372
Reserch & development-related party                           --              --       1,350,083
Reserch & development                                      2,595              --           2,595
Litigation                                                    --              --              --
Consulting fee                                            46,671         156,500         203,171
Stock-based executive compensation and
reimbursed expenses                                      698,895              --         698,895
Stock-based consulting fee                               787,430              --         787,430
Stock-based consulting fees-related party                     --          97,700       4,665,022
Stock-based legal fees-related party                      22,500              --          22,500
Stock-based patent litigation fees                       152,000              --         152,000
Loss from impairment of related party advances                --              --         127,000
Depreciation and amortization                              8,960           4,160          29,877
                                                    ------------    ------------    ------------
                                                       2,222,120         317,238      11,233,945

Other income (expenses)
Interest expense-related party                           (22,006)             --         (22,006)
Interest expense                                         (13,600)        (32,810)       (128,599)
Financing fees                                          (109,126)                       (109,126)
Impairment of long lived assets                          (55,000)                        (55,000)
Interest income                                               --               2             779
Loss on foreign currency                                      --              --          (1,916)
                                                    ------------    ------------    ------------

Net (loss)                                          $ (2,421,852)   $   (350,046)   $(11,523,150)
                                                    ============    ============    ============

Weighted average number of
common shares outstanding-basic and fully diluted     92,024,718      39,384,738
                                                    ============    ============

Net (loss) per share-basic and fully diluted        $      (0.03)   $      (0.01)
                                                    ============    ============
</TABLE>

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


                                      F-4
<PAGE>

                             Power Technology, Inc.
                         (a Development Stage Company)
           Consolidated Statements of Changes in Stockholders' Deficit
           for the period June 3, 1996 (inception) to January 31, 2005

<TABLE>
<CAPTION>
                                                                                (Deficit)
                                                                               Accumulated
                                             Common Stock       Additional       During        Prior       Total
                                         --------------------     Paid-In      Development    Period    Stockholders'
                                           Shares     Amount      Capital         Stage     Adjustments  (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)

Reorginazation of Company,
  reverse acquistion 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)        (20,000)                   20,000         (200)
Net (loss) for the year ended
  January 31, 2000                                -        -               -       (908,475)          -     (908,475)
                                         ----------- --------     -----------   ------------    -------   -----------

Balance January 31, 2000                  17,017,500   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                  19,227,500   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
Share issued for interest                    171,780      172          59,951                                 60,123
Shares issued for cash                        20,500      205          76,595                                 76,800
Net (loss) for the year ended
  January 31, 2002                                -        -               -     (2,943,692)          -   (2,943,692)
                                         ----------- --------     -----------   ------------    -------   -----------

Balance January 31, 2002                  23,344,110   23,329       5,719,651    (6,452,702)          -     (709,722)

Shares issued for consulting services      7,680,420    7,680       1,753,736                              1,761,416
Shares issued for debt conversion            293,958      294         195,206                                195,500
Shares issued for cash                       207,500      208         182,083                                182,291
Net (loss) for the year ended
  January 31, 2003                                -        -               -     (2,298,550)          -   (2,298,550)
                                         ----------- --------     -----------   ------------    -------   -----------

Balance January 31, 2003                  31,525,988   31,511       7,850,676    (8,751,252)          -     (869,065)

Shares issued for consulting services      4,500,000    4,500         220,660                                225,160
Shares issued for consulting services
  - related party                            372,000      372          28,668                                 29,040
Shares issued for debt conversion         10,000,000   10,000         690,000                                700,000
Share issued for interest                          -        -          27,800                                 27,800
Shares issued for cash                     1,207,500    1,208          28,793                                 30,001
Shares cancelled                            (165,500)    (166)              -                                   (166)
Net (loss) for the year ended
  January 31, 2004                                -        -               -       (350,046)          -     (350,046)
                                         ----------- --------     -----------   ------------    -------   -----------

Balance January 31, 2004                  47,424,488   47,424       8,846,597    (9,101,298)          -     (207,277)

Shares issued for consulting services     26,693,897   26,694         825,718                                852,412
Shares issued for debt conversion         13,435,600   13,436         322,454                                335,890
Shares issued for financing fees           8,849,558    8,850         416,150                                425,000
Share issued for interest                          -  .                     -                                      -
Shares issued for legal fees               5,750,000    5,750         166,500                                172,250
Shares issued for executive compensation  24,026,658   24,026         617,122                                641,148
Net (loss) for the year ended
  January 31, 2005                                -        -               -     (2,421,852)          -   (2,421,852)
                                         ----------- --------     -----------   ------------    -------   -----------

Balance January 31, 2005                 126,180,201  126,180      11,194,541    (11,523,150)         -     (202,429)
                                         =========== ========     ===========   ============    =======   ===========
</TABLE>

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


                                      F-5
<PAGE>

                             Power Technology, Inc.
                         (a Development Stage Company)
                      Consolidated Statements of Cash Flows
           for the period June 3, 1996 (inception) to January 31, 2005

<TABLE>
<CAPTION>
                                                                         For the Years Ended        June 3, 1996
                                                                              January 31,          (Inception) to
                                                                    ----------------------------     January 31,
                                                                        2005            2004             2005
                                                                    ------------    ------------    ------------
<S>                                                                 <C>             <C>             <C>
Cash flows from operating activities                                $ (2,421,852)   $   (350,046)   $(11,523,150)
Net (loss)
Adjustments to reconcile net (loss) to net cash
  (used) by operating activities
  Depreciation expense                                                    10,000           4,161          30,917
  Impairment of long lived assets                                         55,000              --          55,000
  Loss from impairment of related party advances                              --              --         127,000
  Amortization of debt discount                                           72,917
  Non cash expense                                                            --              --              --
  Stock issued for executive compensation and reimbursement
    expenses                                                             641,149              --         641,149
  Stock issued for director fees                                              --              --              --
  Stock issued for consulting services                                   821,597         225,160       5,430,589
  Stock issued for consulting fees-related party                              --          29,039         212,530
  Stock issued for legal fees-related party                               22,500              --          22,500
  Stock issued for patent litigation legal fees                          152,000              --         152,000
  Stock issued for interest expense                                           --              --          60,123
  Stock issued for financing fees                                             --              --              --
  Stock issued to acquire patents                                             --              --         (20,000)
  Warrants issued for consulting fees                                     28,564          27,800          56,364
  Decrease in employee advance                                             1,000
  Increase (decrease) in accounts payable                                107,158         (10,650)        165,431
                                                                    ------------    ------------    ------------

Net cash (used by operating activity                                    (509,967)        (74,536)     (4,589,547)
                                                                    ------------    ------------    ------------

Cash flows from investing activities
  Purchase of equipment                                                   (3,096)             --         (24,763)
  Patent acquisition                                                          --              --         (58,500)
                                                                    ------------    ------------    ------------

Net cash (used) by investing activities                                   (3,096)             --         (83,263)
                                                                    ------------    ------------    ------------

Cash flows from financing activities
  Proceeds from short-term notes payable                                      --              --          80,086
  Proceeds from loans                                                     49,000          80,086          49,000
  Proceeds (payments) on loans-related party                              83,811         (35,490)        237,280
  Proceeds from convertible debentures                                   425,000              --       1,300,010
  Non-cash long-term debt                                                     --              --              --
  Payment of non-cash long-term debt                                          --              --              --
  Issuance of common stock                                                    --          30,000       2,977,478
                                                                    ------------    ------------    ------------

Net cash provided by financing activities                                557,811          74,596       4,643,854
                                                                    ------------    ------------    ------------

Net increase (decrease) in cash                                           44,748              60         (28,956)

Cash and equivalents-beginning                                               213             153              --
                                                                    ------------    ------------    ------------

Cash and equivalents-ending                                         $     44,961    $        213    $    (28,956)
                                                                    ============    ============    ============

Supplemental disclosures
  Interest paid                                                     $      6,424    $         --    $      6,424
                                                                    ============    ============    ============

Income taxes paid                                                   $         --    $         --    $         --
                                                                    ============    ============    ============

Non-cash investing and financing activities

  Value of shares issued for note payable and interest expense      $    335,890              --    $    335,890
                                                                    ============    ============    ============

  Value of shares issued for debt conversion                                 --     $    700,000    $  1,627,300
                                                                    ============    ============    ============

  Value of shares issued to acquire patents                                  --              --           20,000
                                                                    ============    ============    ============
</TABLE>

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


                                      F-6
<PAGE>

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


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Power Technology, Inc. (the "Company") was originally incorporated as PowerTek
in 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 January 31, 2005, 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 while it
is conducting research and development activities.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, PowerTek Technology Corporation, Inc. Significant
inter-company accounts and transactions have been eliminated.

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.

Fixed Assets

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 of five to seven years.


                                      F-7
<PAGE>

Revenue Recognition

The Company recognizes revenue on an accrual basis when persuasive evidence of
an arrangement exists, services have been rendered, the sales price is fixed or
determinable, and collectibility is reasonably assured.

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.

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 are impaired. The Company assesses
recoverability of the carrying value of the asset by estimating the future net
cash flows expected to result from the asset, including eventual disposition. If
the future net cash flows are less than the carrying value of the asset, an
impairment loss is recorded equal to the difference between the asset's carrying
value and fair value.

Earnings per Share

The Company follows Statement of Financial Accounting Standards ("SFAS") No.
128. "Earnings Per Share". 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.

Foreign Currency Translations

The functional currency for the Company's foreign subsidiaries is the local
currency. Assets and liabilities of the Company's foreign operations are
translated into U.S. dollars at the exchange rates in effect at the balance
sheet date; revenues and expenses are translated using the average exchange
rates in effect during the period. The cumulative translation adjustments are
included in accumulated other comprehensive income or loss, which is a separate
component of stockholders' equity. Foreign currency transaction gains or losses
are included in the results of operations.


                                      F-8
<PAGE>

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 SFAS 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 SFAS No. 123. The
following table illustrates the effect on net loss and net loss per share if the
Company had applied the fair value provisions of SFAS No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation.

                                                       2005             2004
                                                   -----------     -----------
         Net loss as reported                      $(2,421,852)      $(350,046)
         Add: stock based compensation
                  determined under intrinsic
                  value-based method                    25,000              --

         Less:    stock based compensation
                  determined under fair value-
                  based method                         (27,765)             --
                                                   -----------     -----------
         Pro forma net loss                        $(2,424,617)      $(350,046)
                                                   ===========     ===========
         Basic and diluted net loss per common share:
              As reported                              $(0.03)        $(0.01)
              Pro forma                                 (0.03)         (0.01)

The weighted average fair value of the stock options granted during fiscal 2005
was $0.03. Variables used in the Black-Scholes option-pricing model include (1)
3.0% risk-free interest rate, (2) expected option life is the actual remaining
life of the options as of each year end, (3) expected volatility was 139%, and
(4) zero expected dividends.

Income Taxes

The Company recognizes deferred tax assets and liabilities based on differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that are expected to be in effect when the
differences are expected to be recovered. The Company provides a valuation
allowance for deferred tax assets for which it does not consider realization of
such assets to be more likely than not.

Recent Pronouncements

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R,
"Share-Based Payment" to revise SFAS No. 123. SFAS No. 123R establishes
standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or services. This Statement focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123R requires that the fair value of


                                      F-9
<PAGE>

such equity instruments be recognized as expense in the historical financial
statements as services are performed. Prior to SFAS No. 123R, only certain pro
forma disclosures of fair value were required. SFAS No. 123R shall be effective
for small business issuers as of the beginning of the first interim or annual
reporting period that begins after December 15, 2005. The adoption of this new
accounting pronouncement is not expected to have a material impact on the
financial statements of the Company during the calendar year 2006.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current
year presentation.


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 $2,423,481 during the year ended January 31, 2005, and
$350,046 during the year ended January 31, 2004. 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.


                                      F-10
<PAGE>

NOTE 3 - FIXED ASSETS

Fixed assets as of January 31, 2005 consisted of the following:

                                                     2005
                                                     ----
Office equipment                                 $   21,737
Manufacturing equipment                               4,076
Leasehold improvements                                2,164
Less: Accumulated depreciation                      (25,077)
                                                ------------
Fixed assets, net                                $    2,900
                                                ============

Depreciation expense for the years ended January 31, 2005 and 2004 was $4,160
and $4,160, respectively.


NOTE 4 - PATENTS

Certain costs were capitalized for patents totaling $78,500, with $4,800
accumulated amortization since 1998. All other related patent acquisition and
development costs have been expensed. During fiscal 2005, $55,000 was deemed
impaired and written off.


NOTE 5 - NOTES PAYABLE AND CONVERTIBLE DEBT

In July 2004, the Company borrowed $49,000 from a third party. This loan is
non-interest bearing and is due on demand.

The Company borrowed $500,000 from Cornell Capital Partners, L.P. by issuing 5%
convertible debentures, secured by substantially all of the Company's assets.


                                      F-11
<PAGE>

The debentures are convertible into the common stock of the Company at any time
until repayment of the debentures at the price per share equal to the lesser of:

      a. an amount equal to 120% of the closing bid price of the common stock;
      or

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

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

If repaid, the Company must issue warrants for 50,000 common shares to Cornell,
exercisable at 120% of the closing bid price of the common stock.

A summary of the convertible notes at January 31, 2005 is as follows:

Gross proceeds from notes                                             $ 500,000
Less: Relative fair value of warrants                                  (173,411)
Less: Beneficial conversion feature                                    (251,589)
Add: Amortization of discounts                                           72,917
                                                                      ---------
Carrying value of note at January 31, 2005                            $  72,917
                                                                      =========


NOTE 6 - RELATED PARTY TRANSACTIONS

The Company recognized $25,000 in consulting fee income paid by MicroDri, L.P.,
a related entity, during the year ended January 31, 2003.

Neo-Dyne Research, Inc. is owned by individuals who were previously Company
officers and directors. The Company paid $144,894 in research fees to Neo-Dyne
Research, Inc. during the year ended January 31, 2003.

Lee Balak, the Company's former president, loaned $273,913 to the Company during
the years ended January 31, 2005, 2004 and 2003. The Company repaid $35,490 in
cash and the balance by issuing 10,299,840 shares of common stock in May 2004.


                                      F-12
<PAGE>

The Company issued 8,571,428 shares of common stock valued at $150,000 to Balak
as salary for the fiscal year ended January 31, 2004.

The Company issued 9,250,439 shares of common stock valued at $265,018 to
Bernard Walter and 1,600,000 shares of common stock valued at $58,000 to
directors as compensation for the fiscal year ended January 31, 2005.


NOTE 7 - INCOME TAXES

The Company uses the liability method, where deferred tax assets and liabilities
are determined based on the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for financial
and income tax reporting purposes. During fiscal 2005 and 2004, the Company
incurred net losses and, therefore, has no tax liability. The net deferred tax
asset generated by the loss carry-forward has been fully reserved. The
cumulative net operating loss carry-forward is approximately $9,858,000 at
January 31, 2005, and will expire in the years 2016 through 2024.

At January 31, 2005, deferred tax assets consisted of the following:

         Deferred tax assets
           Net operating losses                       $  3,352,000
           Less:  valuation allowance                   (3,352,000)
                                                      ------------
         Net deferred tax asset                       $          0
                                                      ============


                                      F-13
<PAGE>

NOTE 8 - STOCKHOLDERS' EQUITY

During the year ended January 31, 2004, the Company issued common shares as
follows:

         - 372,000 shares to related parties for consulting services valued at
$29,040,

         - 4,500,000 shares to unrelated parties for consulting services valued
valued at $225,160,

         - 10,000,000 shares to convertible note holders in exchange for
$700,000 of convertible debt, and

         - 1,207,500 shares to unrelated individuals for $30,000.

During the year ended January 31, 2005, the Company issued common shares as
follows:

         - 56,470,555 shares to unrelated parties for consulting services valued
at $1,637,246,

         - 13,435,600 shares for settlement of debt totaling $335,890, and

         - 8,849,558 shares to Cornell Capital Partners, L.P. as a commitment
fee for a Standby Equity Distribution Agreement valued at $173,411.


NOTE 9 - OPTIONS AND WARRANTS

Stock options

On August 1, 2004, the Company's Board of Directors adopted the "Power
Technology, Inc. 2004-B Stock Option, SAR and Stock Bonus Plan" (the "Plan").
The terms of the Plan allow for the issuance of up to 20,000,000 options to
purchase 20,000,000 shares of the Company's common stock or a comparable number
of SAR's or stock bonuses.


                                      F-14
<PAGE>

Activity of options during the years ended January 31, 2005 and 2004 is as
follows:

<TABLE>
<CAPTION>
                                              2005                                    2004
                                   ----------------------------           --------------------------
                                                     Weighted                             Weighted
                                                      Average                              Average
                                     Options        Share Price              Options     Share Price
                                   ------------    ------------           ------------  ------------
<S>                                <C>             <C>                    <C>           <C>
Outstanding at
  beginning of year                          --    $       0.00                     --  $         --

Granted                               1,000,000           0.005                     --            --
Exercised                                    --              --                     --            --
Forfeited                                    --              --                     --            --
                                   ------------    ------------           ------------  ------------
Outstanding at
  end of year                         1,000,000    $      0.005                     --  $         --
                                   ============    ============           ============  ============
</TABLE>

Exercise prices, number of exercisable options and weighted-average contractual
lives of stock options outstanding as of January 31, 2005 are $0.005, 100,000
options and 2.8 years, respectively.

Warrants

In conjunction with the conversion of debt to equity discussed in Note 5 above,
the holders also received warrants to purchase up to 10,000,000 shares of the
Company's common stock at an exercise price of $0.10 per share expiring March
24, 2005. The fair market value of the Company's common stock on the date of
grant was $0.06. Interest expense totaling $27,800 has been recorded during
fiscal 2005.

Warrants issued by the Company are valued on the date of grant using the
Black-Scholes pricing model using assumptions.

Activity of warrants during 2005 and 2004 is as follows:

<TABLE>
<CAPTION>
                                                2005                                  2004
                                   ----------------------------           --------------------------
                                                     Weighted                            Weighted
                                                      Average                             Average
                                     Warrants       Share Price             Warrants    Share Price
                                   ------------    ------------           ------------  ------------
<S>                                <C>             <C>                    <C>           <C>
Outstanding at
  beginning of year                  11,990,000          $ 0.12                490,000        $ 0.81

Granted                               6,250,000            0.02             11,500,000          0.09
Exercised                                    --              --                     --            --
Forfeited                            (5,000,000)           0.01                     --            --
                                   ------------    ------------           ------------  ------------
Outstanding at
  end of year                        13,240,000          $ 0.12             11,990,000        $ 0.12
                                   ============    ============           ============  ============
</TABLE>


                                      F-15
<PAGE>

Warrants outstanding and exercisable as of January 31, 2005:

                         ----------Outstanding---------           Exercisable
                            Number            Remaining              Number
  Exercise Price          of Shares             life               of Shares
  --------------         ----------           ---------           -----------
         $ 0.04           1,250,000           0.9 years             1,250,000
           0.06           1,500,000           1.3 years             1,500,000
           0.10          10,000,000           0.2 years            10,000,000
           0.81             490,000           0.1 years               490,000
                         ----------                               -----------
                         13,240,000                                13,240,000
                         ==========                               ===========


NOTE 10 - STANDBY EQUITY DISTRIBUTION AGREEMENT

The Company also entered into a Standby Equity Distribution Agreement effective
August 27, 2004, with Cornell Capital Partners, LLP.

The Company has issued 8,849,558 share of its common stock to Cornell as a
commitment fee in connection with this Agreement.

This agreement was canceled in May 2005.


NOTE 11 - SUBSEQUENT EVENTS

On February 1, 2005 the Company hired Clearvision, Inc. ("TVA") a full service
media production and placement company to develop and launch a national media
campaign. The Company agreed to pay TVA $310,000 in three installments of cash
or shares of common stock. On February 2, 2005, the Company issued 850,000
common shares as the first payment.


                                      F-16