**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, 2006**





**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: 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 is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act  ____





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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).Yes o No x





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained herein, and no disclosure will be contained, to the
      best of registrant's knowledge, in definitive proxy or information statement
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. o




The
      Issuer's revenues for the year ended January 31, 2006 were $-0-.





The
      aggregate market value of Common Stock held by non-affiliates of the registrant
      at May 1, 2006, based upon the last reported sales prices on the OTCBB, was
      $21,234,361.





As
      of May
      1, 2006, there were 141,562,412 shares of Common Stock outstanding.





Documents
      incorporated by reference: None





Transitional
      Small Business Disclosure Format: Yes o No x





**TABLE
      OF CONTENTS**





PART
                I
            
            PageItem
                1.
            Business
            1Item
                2.
            Description
                of Properties
            23Item
                3.
            Legal
                Proceedings
            24Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            24PART
                IIItem
                5.
            Market
                for Common Equity, Related Stockholder Matters and Small Business
              Issuer
                Purchases Of Equity Securities
            24Item
                6.
            Plan
                of Operation
            29Item
                7.
            Financial
                Statements
            F-1Item
                8.
            Changes
                in and Disagreements with Accountants
              on
                Accounting and Financial Disclosure
            40Item
                8A.
            Controls
                and Procedures
            41Item
                8B.
            Other
                Information
            41PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons;
              Compliance
                with Section 16(a) of The Exchange Act
            41Item
                10.
            Executive
                Compensation
            43Item
                11.
            Security
                Ownership of Certain BeneficialOwners
                and Management and
              Related
                Stockholder Matters
            47Item
                12.
            Certain
                Relationships and Related Transactions
            48Item
                13.
            Exhibits
            50Item
                14.
            Principal
                Accountant Fees and Services
            50SIGNATURES









**PART
      I**





**ITEM
      1. DESCRIPTION OF BUSINESS.**





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





We
      are a
      research and development company. During the past three years, our business
      development has included the research and development of improved technology
      for
      deep cycle batteries; the manufacture of preliminary prototype batteries; the
      filing and prosecution of patent applications on its technology of a battery
      current collector comprised of reticulated carbon substrate to which a lead-tin
      containing alloy is deposited and the design of equipment and machinery to
      manufacture our unique battery current collectors. We have not been involved
      in
      any bankruptcy, receivership or similar proceedings and have not had any
      material reclassification, merger, consolidation, or purchase or sale of a
      significant amount of assets not in the ordinary course of business.





**BATTERIES**





Our
      primary business 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. Our battery technology has passed from the "proof of
      principle" stage, by which we validated the proposition that lead acid battery
      current collectors comprised of reticulated vitreous carbon (“RVC”) foam plates
      onto which a lead tin alloy has been deposited are a significant improvement
      over existing solid lead current collectors. We have manufactured preliminary
      prototype batteries, original, full-scale, working models of our new product,
      using methods that would not be practical for economically manufacturing
      batteries on a commercial scale.





Our
      goal
      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.





We
      intend
      to continue our development efforts to be funded in part through licensees
      and
      industrial joint venture partners and from the sale of our securities.





The
      importance of electric vehicles and hybrid vehicles in the United States and
      abroad has increased because of concerns regarding air pollution, global
      climactic changes, ozone layer depletion, noise abatement, increase in 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).





Our
      future business prospects are substantially dependent upon the ability of Power
      Technology, its joint venture partners and licensees to develop, manufacture
      and
      sell products based on our battery technologies. Additional development efforts
      will be required before products based on our technologies can be manufactured
      and sold commercially. There can be no assurance that certain products based
      on
      our 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 our technologies obsolete or
      noncompetitive.


1




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





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





**BATTERY
      TECHNOLOGY**





The
      battery we are developing 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 Battery - A battery
      designed to regularly discharge 80 percent or higher of its capacity before
      recharging. A deep
      cycle battery has less instant energy than a starting, lighting and ignition
      battery but it has greater long-term energy delivery.


2




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.





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.





Lead
      Tin
      Containing Alloy - a
      homogeneous mixture or solid solution of lead and tin metals.





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.





Reticulated
      Carbon Substrate - a
      carbon
      material with reticulate structure and is used as a surface on which another
      material is coated or attached.”





Reticulated
      Vitreous Carbon (“RVC”) - is an electrically conductive, highly porous, rigid,
      open cell, pure carbon, foam structure with a high melting point, high chemical
      inertness, and low bulk thermal conductivity. RVC has an exceptionally high
      void
      volume (97%), a high surface area combined with self supporting rigidity, low
      resistance to fluid flow, an ability to hold infused materials, and superior
      resistance to very high temperatures in non-oxidizing environments.





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).


3




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). Our battery employs a high specific surface
      area, 18 cm(2) per cm(3), open-cell, RVC 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. Our technology further increases the surface areas of the plates without
      compromising their strength or resistance to vibration, erosion and loss of
      material. Our technology also increases the energy density for both the weight
      and size of the battery. The size of our battery is significantly reduced
      compared to a traditional lead-acid battery of the same amp-hour capacity.





**CATELLA
      RESEARCH LABORATORY TEST REPORT**





Our
      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 our battery was 63% as compared to
      the
      conventional lead acid battery's 35%.





The
      Catella report concluded that our 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 Power Technology'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.


4




**Power
                Technology Battery**
            ****
            **Conventional
                Lead-Acid Battery**Cut
                Off Voltage (V)
            1.75
            
            1.75Capacity
                (Ah)
            21.7
            
            12.5Amp
                hoursPAM
                Efficiency (%)
            67
            
            38





Our
      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).





We
      believe our 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 ours 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 our battery
                plates
                for equivalent power delivered is 40% to 50% lighter than a conventional
                lead-acid battery. Fewer and lighter plates mean our 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. Generally, 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 our 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 our battery is significantly
                less than conventional lead acid battery. AccelRate Power Systems
                Inc.,
                formerly Key Capital Group, manufactures battery chargers and tested
                our
                prototype. AccelRate reported that their testing showed our
                 battery can be fully recharged in 2.5 hours compared to a
                conventional lead-acid battery that takes 6-8 hours. AccelRate'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.





We
      are
      unaware of any competitor which uses technology similar to our own for current
      collectors in lead acid batteries.




5


**PILOT
      PLANT**




We
      have
      designed and are in the process of constructing a pilot plant capable of
      manufacturing our current collectors in commercial quantities for use in lead
      acid batteries. The manufacturing process to create a current collector will
      include manufacturing the RVC plates, casting a top frame and tab and side
      frames on the individual RVC plates, depositing the lead tin alloy on the RVC
      plate by electroplating, applying battery paste onto the individual RVC foam
      plate, and curing them. Once this process has been completed, the individual
      plate is suitable for use as a current collector. We believe that the
      manufacturing process and machinery necessary for insertion of our current
      collector into a battery case and completing the manufacturing of our battery
      is
      substantially similar to existing processes, methods, and machinery commonly
      used in the manufacture of a typical lead acid battery.





We
      are
      establishing a pilot plant facility in Vancouver, British Columbia, Canada.
      We
      have leased from Vizon Scitec Inc., approximately 1000 square feet of space
      located at BC Research Complex, 3650 Westbrook Mall, Vancouver,  British
      Columbia, Canada, for a minimum term of three months beginning May 1, 2006,
      at
      the rate of approximately $1,300 per month. Management has determined that
      we
      will need approximately 2,500 square feet of industrial space to house our
      pilot
      plant and that suitable space, properly equipped with necessary power, other
      utilities, and required environmental equipment is available in Vancouver at
      a
      cost of approximately $3,150 per month. We have engaged in discussions regarding
      potential property for a longer lease term and Management is confident of its
      ability to secure suitable space for our pilot plant as it becomes
      necessary.





The
      purpose of the Pilot Plant is not to manufacture current collectors in
      commercial quantities for sale to battery manufacturers. The purpose of the
      Pilot Plant is to demonstrate to battery manufacturers the manufacturing
      process, machinery and procedure necessary to manufacture our proprietary RVC
      current collectors.


Management
        has engaged in discussion, planning, and negotiations with an engineering
        firm,
        Destech Corp., which specializes in manufacturing RVC and other advanced
        materials. This firm has provided us with a written proposal to provide us
        with
        the equipment, materials, technology transfers and processes to manufacture
        RVC
        plates suitable for current collectors. Based on the engineering and design
        that
        has been performed and the written proposal provided, we estimate that the
        consulting costs, equipment, and materials to enable us to begin manufacturing
        RVC plates will be approximately $110,000. This system will manufacture RVC
        in
        billets in a batch process and the blocks of RVC will then be cut and sliced
        into the proper size for individual current collectors. The system is designed
        to permit production of 5000 RVC plates of 6 inches by 6 inches by 3 mm per
        moth. We estimate it will take approximately one month before we are ready
        to
        manufacture the RVC in a batch process.





We
      have
      signed a Consulting Services Agreement with Richard R. McCormick, a former
      employee of an engineering firm, Destech Corp., which specializes in
      manufacturing RVC and other advanced materials. Mr. McCormick has fifteen years
      of experience in supervising the manufacture of RVC foam. Mr. McCormick has
      provided us with the specifications for all equipment, supplies, materials,
      chemicals, instruments, utilities and machinery that will be required for
      production of RVC. Mr. McCormick will provide us with a detailed written report
      and manufacturing procedures manual describing the process to be utilized to
      manufacture RVC that meets our specifications for current collectors. Mr.
      McCormick will be present at our facility in Vancouver, British Columbia, Canada
      to demonstrate in person to our Chief Technology officer, Joey Jung, and other
      personnel the proper manufacturing procedures for making RVC. Mr. McCormick
      will
      supervise the hands on practice of manufacturing RVC by our personnel. The
      technology transfer provided will include full disclosure to us of all pertinent
      information including procedures used and problems to be avoided, appropriate
      vendors for raw materials and equipment, outlines for further scale up as
      appropriate and an overview of the prior art of production of RVC foam, focusing
      on those processes that have actually proved to be efficient and workable.
      We
      have ordered the equipment, machinery and supplies necessary for the production
      of RVC and anticipate that it will be delivered to us in May and June of 2006.
      We will manufacture RVC in billets in a batch process and the blocks of RVC
      will
      then be cut and sliced into the proper size for individual current collectors.
      The system is designed to permit production of 5000 RVC plates of 6 inches
      by 6
      inches by 3 mm per month. The manufacturing process developed will be manual
      rather than automated but will be fully capable of scale up with additional
      manpower and additional equipment. Mr. McCormick will provide Company with
      the
      information required to scale up the process for automation.




6




Wirtz
      Manufacturing Company, Inc., a company which specializes in designing and
      building equipment used to manufacture lead-acid batteries, has built us various
      prototype molds to cast the top lead frame and tab onto the uncoated RVC foam
      plates. Wirtz has completed the engineering and has machined a double panel
      casting mold designed to cast a lead top frame with lug and two side frames
      on
      uncoated RVC foam plates. Wirtz is scheduled to complete the process of testing
      this casting mold in June of 2006. This casting mold was designed to be used
      in
      a conventional grid casting machine, which manufactures typical lead battery
      current collectors. The casting mold is designed for 6" x 6" current collectors.
      The configuration of the double panel casting mold is designed so that it will
      fit into conventional current collector pasting machines which cost
      approximately $50,000. Following testing of the mold additional design may
      be
      necessary to adapt the mold to an existing manufacturing machine so that the
      top
      frame, lug and side frames may be cast at high speed on individual RVC foam
      plates.




We
      engaged in discussion, planning, and negotiations with Technic, Inc., an
      engineering and manufacturing firm which specializes in designing and
      manufacturing electroplating equipment. We entered into an agreement dated
      January 12, 2006, with Technic, Inc. for the purchase of machinery to apply
      lead
      tin plating to RVC plates for our battery systems. The lead tin plating
      system includes the necessary hoist with motorized trolley structural support
      steel with trolly track and electrical tag line, steel tanks with locating
      saddles and twin 60 inch air blow-off manifolds, rectifiers, and its accessories
      for the plating system. We also purchased air agitation blowers and air handling
      ducts for the system. The total price for lead tin system and air agitation
      equipment was $101,775. The manufacture of the plating system and air agitation
      equipment has been completed and they have been delivered to our facility in
      Vancouver, British Columbia. The plating system is a manual line capable of
      plating 250 current collectors per eight hour shift. Management believes the
      plating system will demonstrate that the electroplating of the current
      collectors can be performed efficiently. Technic, Inc. has provided us with
      designs and proposals to increase the system capacity by adding six additional
      plating stations, additional rectifiers, an automated hoist and a computer
      controlled, programmable, automation package that would increase the system
      capacity to plate approximately 1000 to 1200 current collectors per eight-hour
      shift. The price of automation package proposal is $278,000. By increasing
      the
      number of tanks and other equipment and machinery, the electroplating system's
      capacity could be further increased.




We
      have
      engaged in discussion, planning, and negotiations with two engineering and
      manufacturing firms which specialize in designing and manufacturing battery
      plate pasting equipment to design and construct equipment capable of applying
      battery paste on lead-tin coated RVC current collectors. Based on the
      engineering and design that has been performed, we estimate that that the
      battery pasting machine needed to apply battery paste onto our individual
      current collectors will cost approximately $95,000 and that it will take two
      to
      three months to build.





To
      fund
      this pilot plant project we have used and intend to use general corporate funds,
      which include the proceeds from the sale of Secured Convertible Debentures
      to
      Cornell Capital Partners, L.P., and proceeds from the exercise of stock options
      and warrants, as discussed in the section entitled “Liquidity and Capital
      Resources” herein.





Our
      lead
      acid battery is not yet commercially successful because we have not yet designed
      and built the equipment necessary to manufacture our batteries in commercial
      quantities. RVC current collectors are more expensive and time consuming to
      manufacture than are current collectors manufactured by pouring molten lead
      into
      a grid patterns. Our battery will be more expensive to manufacture and its
      purchase price will be more than a traditional lead acid battery.


7




Management
      believes we will be able to design and build a pilot plant capable of
      manufacturing our current collectors cost effectively in commercial quantities;
      however, further design and engineering may be necessary before a pilot plant
      can be built. The issues related to the successful commercial production of
      our
      current collectors and its battery include: whether we can manufacture RVC
      economically in mass produced commercial quantities; whether we can apply the
      top frame and tab to the plates economically in mass produced commercial
      quantities; whether we can economically electroplate the lead-tin alloy onto
      the
      RVC plates uniformly and consistently in mass produced commercial quantities;
      whether we can apply the side and bottom frame to the plates economically in
      mass produced commercial quantities; whether we can adapting the existing
      battery plate pasting equipment to paste lead-tin coated RVC current collectors
      in economically in mass produced commercial quantities. There can be no
      assurance that we can manufacture our current collectors or batteries cost
      effectively on a commercial scale. Management believes and anticipates that
      its
      pilot plant can be completed and we can begin manufacturing current collectors
      by June 2006; however, there can be no assurance that this will occur.





There
      can
      be no assurance that we can establish a competitive position against current
      and
      potential competitors, especially those with greater financial, marketing,
      service, support, technical and other resources than us.





Our
      preliminary testing indicates that various configurations of the battery meet
      or
      exceed some of the performance goals established by major governmental and
      industry groups for electric vehicle batteries. Management’s discussions with
      various manufacturers lead us to believe that there would be a significant
      demand for our battery, if it can be manufactures economically on a commercial
      scale. We also believe our battery has a number of applications such as electric
      vehicles, hybrid powered vehicles, solar power systems, electric motorcycles,
      electric bicycles, electric power management, uninterruptible power supply
      systems, aircraft, marine, and submarine craft and for starting batteries for
      automobiles. We are designing various prototype batteries for such applications.





**LICENSING
      AGREEMENTS**





We
      do not
      intend to manufacture and sell our batteries. We do plan to manufacture our
      proprietary current collectors which would be a component part of a lead acid
      battery. We own the rights to U.S. Patent Application Serial Number 10/809,791
      titled Current Collector Structure and Methods to Improve the Performance of
      a
      Lead-Acid Battery, which relates to a current collector for use in lead-acid
      batteries comprising a reticulated carbon substrate having circuitous pores
      and
      a layer of lead tin alloy applied to the reticulated carbon substrate. We plan
      to license our technology to other entities. We intend to discuss and explore
      various possible business combinations or transactions with established battery
      manufacturers. These may include joint venture agreements, licensing agreements,
      technology transfer agreements or other agreements by which established
      manufacturers acquire the right to employ our technology to manufacture
      batteries. We plan to provide prototype batteries and demonstrate our pilot
      plant equipment to established battery manufacturers. We intend to negotiate
      licensing agreements with manufacturers by which we would permit established
      battery manufacturers to make batteries using our proprietary technology. The
      business model for these agreements would involve the payment to Power
      Technology of a substantial up-front licensing fee and a royalty payment for
      each RVC current collector manufactured pursuant to the licensing agreement.
      The
      distribution method for batteries employing our unique current collectors will
      be by third parties who manufacture and sell the batteries pursuant to include
      joint venture agreements, licensing agreements, technology transfer agreements
      or other agreements. We have not yet executed any licensing agreements,
      technology transfer agreements or other similar agreements. Any revenues or
      profits which we may derive from these arrangements will be substantially
      dependent upon the willingness and ability of our licensees and joint venture
      partners to devote their financial resources and manufacturing and marketing
      capabilities to commercialize products based on our technologies.


8




In
      November 2005, our management traveled to Taiwan to meet with management and
      engineers from Kung
      Long
      Batteries Industrial Co., Ltd., (‘Kung Long”), a publicly traded expert
      manufacturer of lead acid batteries. Kung Long’s stock is listed on the Taiwan
      Stock Exchange under the symbol 1537.TW. Kung Long owns and operates two
      manufacturing facilities in Taiwan and one in Viet Nam. It manufactures more
      than 200 different types of batteries, including batteries for electric
      vehicles, uninterrupted power supply systems, alternative energy systems, solar
      energy systems, mobile energy, motorcycle and automotive uses. Kung Long exports
      its products to Asia, the U.S.A., Europe, and other countries. We discussed
      with
      Kung Long management and engineers our technology, and possible technology
      transfer, licensing, royalty and joint venture agreements. We
      signed
      a memorandum of understanding with Kung Long concerning the commercialization
      of
      Power Technology’s advanced lead acid battery technology. Pursuant to this
      agreement, on February 20, 2006 we delivered to Kung Long 22 positive and 28
      negative current collectors for its testing and evaluation. During the week
      of
      April 24, 2006, our Chief
      Technology Officer, Joey Jung, who is fluent in Chinese, met in Taiwan with
      Kung
      Long engineers and managers to discuss Kung Lon’s preliminary testing of our
      current collectors and technical issues relating to the manufacturing of our
      battery. Based on that testing, Kung Long has decided to use our current
      collectors, our core patent pending technology, to manufacture a working
      prototype battery. Kung Long intends to thoroughly test and evaluate our
      battery’s performance. Discussions
      with Kung Long included the negotiation of technology transfer, license, and
      royalty agreement or a joint venture agreement that would enable Kung Long
      to
      build a new manufacturing facility to produce Power Technology batteries.





**COSTS
      AND EFFECTS OF COMPLIANCE WITH ENVIROMENTAL LAWS**





We
      purchased air agitation blowers and air handling ducts at a cost of
      approximately $7,500 for our lead tin plating system. The industrial space
      where
      we have located our pilot plant is equipped with all necessary equipment that
      will enable us to comply with the applicable federal, provincial and local
      environmental laws relating the operation of our pilot plant.





**PROTOTYPE
      BATTERIES**





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





We
      are
      preparing to produce prototype versions of our battery that will be built in
      a
      variety of configurations using methods that management anticipates will be
      practical for economically manufacturing batteries on a commercial scale. We
      have equipment which enables us to deposit lead tin alloy on RVC plates in
      our
      laboratory. Once our pilot plant is completed, we intend to manufacture current
      collectors. We have on hand a total of 110 RVC current collectors onto which
      a
      top lead frame and tab have been cast and which have had a lead-tin allow
      applied. Seventy of these have lead side frames cast on them. We also have
      on
      hand approximately 750 RVC foam plates, which measure 6 inches by 6 inches
      by
      3mm. These 750 plates are suitable being made into current collectors for our
      batteries by having frames and tabs cast on them and having a lead tin alloy
      applied to them and having battery paste applied to them. Once we have
      manufactured these plates into current collectors and applied battery paste
      to
      them, we intend to use them to manufacture 12 volt prototype batteries. The
      number of RVC plates used as current collectors in a single 12 volt battery
      will
      vary depending on the type, size and amp hour capacity of a
      battery.


9




**BATTERY
      COMPETITION**





The
      market for our batteries and other proposed products is highly competitive,
      subject to rapid change and significantly affected by new product introductions
      and other market activities of industry participants. Our proposed battery
      products are targeted at the established deep cycle battery market and at the
      emerging market of electric powered automobiles and other electric vehicles.
      Our
      competitors offer a variety of products and services to address these markets.
      We currently face direct and indirect competition from traditional batteries.





The
      battery industry is mature, well-established and highly competitive. The
      industry is characterized by a few major domestic and foreign producers
      including Exide, Delphi, A.C. Delco, Johnson Controls, Inc., GNB, Electrosource,
      Inc., Energy Conversion Devices, Inc., Hawker and Yuasa, all of which have
      substantially greater financial resources than us. Accordingly, our ability
      to
      succeed in this market depends upon our ability to demonstrate superior
      performance and cost attributes of our technology. We have historically
      concentrated our 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. Our principal competitors 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
      May
      2003, Firefly Energy Inc. was formed and spun off by Caterpillar Inc., a Fortune
      100 industrial manufacturing company. Firefly has announced its business plan
      to
      manufacture a high performance, extremely low weight, reduced cost battery
      utilizing traditional but non-corrosive lead-acid chemistry. On December 27,
      2005, the U.S. Patent and Trademark Office issued to Firefly patent number
      6,979,513, titled, "Battery Including Carbon Foam Current Collectors." The
      invention is a battery comprised of an electrical current collector constructed
      of carbon or lightweight graphite foam. The patent does not reference any lead
      tin other alloy being deposited on the entire surface of the Firefly carbon
      or
      lightweight graphite foam. If Firefly is able to manufacture its current
      collectors in commercial quantities for use in batteries and if its uncoated
      current collector has the structural integrity and strength to withstand the
      physical forces involved in pasting and the physical force a battery undergoes
      while in use, then Firefly’s technology will directly compete with our
      technology.




In
      the
      future, because there are relatively low barriers to entry in the battery
      industry, we could experience additional competition from other established
      or
      emerging companies as the market continues to develop and expand. Many potential
      competitors may have well-established relationships with our potential
      customers, have extensive knowledge of the industry, better name recognition
      and
      significantly greater financial, technical, sales, marketing and other resources
      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. We also expect that competition will
      increase as a result of industry consolidations. Our competitors may be able
      to
      respond more quickly to new or emerging technologies and changes in customer
      requirements, or to devote greater resources to the development, promotion
      and
      sale of their battery products.





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


10





Management
      believes that the principal competitive factors affecting our market include
      features such as functionality, weight, adaptability, ease of use, product
      reputation, quality, price, performance, customer service and support,
      effectiveness of sales and marketing efforts and company reputation.





We
      intend
      to compete by offering battery technology which provides higher utilization
      efficiency; a smaller and lighter battery; a battery with a specific energy
      increase and a battery that recharges significantly faster than traditional
      lead
      acid batteries with insignificant temperature rise when charging as compared
      to
      a conventional lead-acid battery whose temperature rise under charge is
      significant.




The
      disadvantage our battery technology is that it will be more time consuming
      and
      expensive to build our current collectors than the time and expense for building
      typical lead mold current collectors for use in traditional lead acid batteries.
      Although we believe that we will compete favorably with respect to such factors,
      there can be no assurance that we can establish a competitive position against
      current and potential competitors, especially those with greater financial,
      marketing, service, and support, technical and other resources than us.




**PIPELINE
      CONNECTION TECHNOLOGY**





Although
        we do not have any current plans to pursue this area of business, we own
        the
        rights to U.S. Patent 5,442,846 which is titled "Procedure and Apparatus
        for
        Cold Joining of Metallic Pipes." We have conducted research and development
        operations regarding our patented pipeline connection technology. We have
        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 us 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. The cold
      magnetic impulse method creates a uniform joint connection between pipes. The
      magnetic impulse method also has the advantage that it can be performed in
      the
      field in any weather condition.





Our
      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 in our design, 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 our work coil pinches the conductive
      sleeve around the pipes.





To
      commercialize the pipeline connection technology, we must complete the design
      of
      a modular clamp, a field fastening system, field power supply systems for
      onshore and offshore applications and a control unit. We have solicited and
      received a proposal to design, engineer and fabricate a prototype power supply
      system from IAP Research, Inc. (“IAP”), a product development engineering
      services firm that specializes in electromagnetic metal forming and innovative
      electrical and mechanical engineering solutions. The budget estimate for the
      IAP
      project is approximately $500,000.





Our
      pipeline connection technology will require additional development, design
      and
      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. We have not made the decision to discontinue our research
      and development activities regarding patented alloy sensor technology; however,
      during the year ended January 31, 2006, no research and development activities
      regarding patented alloy sensor technology were conducted, due to lack of
      funding and Management’s decision to concentrate primarily on developing our
      battery technology.


11




**ALLOY
      SENSOR TECHNOLOGY**





We
      previously researched and developed our 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. Management has made the decision
      to discontinue our research and development activities regarding patented alloy
      sensor technology due to lack of funding and a decision to concentrate primarily
      on our battery technology.





**RESEARCH
      AND DEVELOPMENT**




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





Prior
      to
      Mr. Jung’s employment, during the fiscal year beginning January 31, 2004, we
      curtailed our research and development activities due to a lack of funds. Prior
      to 2004, significant research and development activities had been performed
      by
      BC Research, Inc. for us relating to microstuctural and surface analyses and
      electrochemical testing of our device useful for detecting the presence of
      water
      in a fuel tank, an invention described in US Patents 4,107,797 and 4,595,916.
      As
      an employee of BC Research, Inc., Mr. Jung was personally involved in this
      research project.





We
      own
      the rights to U.S. Patent 6,060,198, which is titled "Electrochemical Battery
      Structure and Method." 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. Prior
      to
      2004, significant research and development activities had been performed by
      BC
      Research, Inc. for us to study the properties of reticulated lead structure
      and
      to optimize its performance. As an employee of BC Research, Inc., Mr. Jung
      was
      personally involved in this research project.





Prior
      to
      2004, significant research and development activities relating to a unique
      RVC
      foam current collector structure, which increases the electrochemically active
      surface area within the battery had been performed for us by BC Research, Inc.
      As an employee of BC Research, Inc., Mr. Jung was personally involved in this
      research, which resulted in the filing of 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 and of which Mr.
      Jung
      is a co-inventor .





Since
      Mr.
      Jung became an
      employee of Power Technology, he has been primarily responsible for research
      and
      product development. With the
      addition of Mr. Jung as an
      employee of Power Technology, research and development efforts have been
      directed to designing a pilot plant capable of manufacturing our current
      collectors in commercial quantities for use in lead acid batteries, developing
      various methods and processes to manufacture the current collectors for use
      in
      our batteries and improving the performance and expanding the capabilities
      of
      its prospective products. As an employee of Power Technology, Mr. Jung was
      personally involved in research and development, which resulted in the filing
      of U.S.
      Patent Application Serial Number 12/279,103
      titled Current Collector Structure and Methods to Improve the Performance of
      a
      Lead-Acid Battery, which relates to methods improving the performance,
      especially cycling performance, of batteries using current collector structures
      based on light-weight, porous, open pore, high specific surface area foam
      substrates at least partially coated with a metal alloy. Although we expect
      that
      certain of our products will be developed internally, we may, based on timing
      and cost considerations, acquire technology and products from third parties
      or
      retain consultants.


12




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





**PROPRIETARY
      RIGHTS AND LICENSING**





Our
      success is dependent upon proprietary technology. We will rely primarily on
      a
      combination of patents, trade secrets, confidentiality procedures and
      contractual provisions with our employees, consultants and business partners
      and
      in our license agreements to protect our proprietary rights. In addition to
      our
      patents, we seek to protect our products, documentation and other written
      materials under trade secret and copyright laws, which afford only limited
      protection. Despite our efforts to protect our proprietary rights, unauthorized
      parties may attempt to reverse engineer or otherwise copy aspects of our
      products or to obtain and use information that we regard as proprietary. While
      we are not aware that any of our products infringe upon the proprietary rights
      of third parties, there can be no assurance that third parties will not claim
      infringement by us with respect to current or future products. We own 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. We also own
      the rights to U.S. Patent Application Serial Number 10/809,791 titled Current
      Collector Structure and Methods to Improve the Performance of a Lead-Acid
      Battery, which relates to a current collector for use in lead-acid batteries
      comprising a reticulated carbon substrate having circuitous pores and a layer
      of
      lead tin alloy applied to the reticulated carbon substrate. On March 6, 2006,
      the United
      States Patent and Trademark Office provided us written notice of the
      Allowability of this Patent. We have paid the licensing fees for the allowed
      claims under this Patent Application and we anticipate the grant of patent
      rights by June 30, 2006. When granted, this patent will provide patent
      protection until March 25, 2024. We consider the rights to this Patent
      Application to be our core technology. We
      also
      own the rights to U.S. Patent Application Serial Number 12/279,103 titled
      Current Collector Structure and Methods to Improve the Performance of a
      Lead-Acid Battery, which relates to methods improving the performance,
      especially cycling performance, of batteries using current collector structures
      based on light-weight, porous, open pore, high specific surface area foam
      substrates at least partially coated with a metal alloy.





We
      also
      own 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. Power Technology has filed patent
      applications on the technology in strategic locations that include the United
      States, Canada, Japan, China, Taiwan, and Australia and has also filed a
      European regional patent application for the same technology. In addition,
      we
      own 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. We own
      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.


13




**EMPLOYEES**





As
      of May
      1, 2006, we had two (2) full-time employees, one of whom was engaged in product
      research and development. None of our employees is represented by a labor union
      with respect to his or her employment. We have experienced no organized work
      stoppages and we believe our relationship with our employees is good. Management
      believes that our 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 we
      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 our
      business or results of operations.





**MEDIA
      CAMPAIGN**




On
      February 1, 2005, we 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 our battery technology. TVA guaranteed us a minimum
      of 24
      live or pre-recorded nationally televised interviews during the course of the
      contract. Since November of 2005 our president had 20 Radio Talk show interviews
      concerning our company and its technology. TVA produced a one half hour
      exclusive television special, a video news release, a corporate video, a
      tradeshow loop presentation, internet streaming video and newspaper features.
      Since November 2005, the half hour video has had over 1,500 airings in the
      top
      50 markets on various national and local cable TV, satellite TV, and broadcast
      affiliates throughout the U.S. and Canada.





**CONSULTING
      AGREEMENTS**





On
      January 14, 2004, we entered into a consulting contract with James Hill to
      provide scientific and marketing services for a period of one year. We issued
      800,000 shares of our common stock valued at $30,000 pursuant to the terms
      of
      the consulting contract.




On
        April
        15, 2004, we entered into a consulting contract with Timothy J. Connolly
        to
        provide general business strategic consulting and management advisory services.
        Mr. Connolly agreed to provide two eight-hour workdays per month of general
        management strategic consulting services, including but not limited to: advising
        on corporate structure; advising on marketing; developing strategic alliances;
        implementation of financial systems, structures and controls; retaining Internet
        traffic engineering services to increase brand identity; retaining of
        appropriate executive, legal and accounting services; consulting on matters
        of
        our board of directors, including but not limited to assisting the board
        of
        directors in developing policies and procedures; and assisting our board
        of
        directors in mergers, acquisitions, and other business combinations. We agreed
        to pay the sum of $5,000 per month in cash or equity for a period of 12 months,
        on a quarterly basis, at the beginning of each quarter. We also agreed to
        issue
        warrants for the right to purchase up to 5,000,000 shares of our common stock
        exercisable at $0.01 per share. The warrants were to expire April 15, 2006.
        The
        Company did not issue the warrants, as it had agreed to do. As of September
        28,
        2004, we had issued 3,250,000 shares of our common stock pursuant to the
        terms
        of the consulting contract. On September 28, 2004, we agreed to pay Mr.
        Connolly, 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 our common stock. Additionally, the consultant specifically
        surrendered and waived his right to exercise his warrants to purchase up
        to
        5,000,000 shares of our common stock at $0.01 per share and to provide the
        Company with office space, copiers, telephones, a receptionist, and staff
        support through December 31, 2004. In agreeing to issue 8,150,000 shares
        of
        common stock to Mr. Connolly, we considered the factors of the nature and
        amount
        and value of the services rendered by Mr. Connolly and that Mr. Connolly
        did not
        receive the warrants he was due on a timely basis. During the period that
        Mr.
        Connolly should have received the warrants to purchase 5,000,000 shares of
        our
        common stock at $.01 per share but did not, our shares traded for up to $.037
        per share. If Mr. Connolly had received his warrant and exercised his right
        to
        purchase those shares and then sold those shares in the open market, he would
        have made a substantial profit. If we had not resolved this matter, we would
        have been exposed to a potential claim by Mr. Connolly for substantial lost
        profits.




14




On
      April
      19, 2004, we entered into a consulting agreement with SeaWay Trading, Inc.
      for a
      period of two years with a monthly payment to Seaway of $15,000. SeaWay’s
      obligations included using reasonable and best efforts to organize marketing
      programs via strategic alliances and to assist in protecting the proprietary
      technology held by us and identify and qualify international candidates for the
      marketing of our products. The consulting services included efforts by Seaway
      to
      arrange strategic alliances on our behalf with Oriental and Motolite
      Corporation, (“OMC”), the largest battery manufacturer in the Philippines and
      Southeast Asia and its United States subsidiary, Ramcar Batteries, Inc., which
      operates a battery manufacturing plant in California. Discussions and meetings
      between our management and OMC and Ramcar representatives were arranged to
      explore a licensing and royalty agreement by which OMC and Ramcar would
      manufacture our batteries. Ramcar personnel met with our management at Ramcar’s
      manufacturing facility to provide advice concerning the design of manufacturing
      equipment and technical issues relating to industry practices in the manufacture
      of prototype batteries and regular production batteries. Seaway also provided
      consulting services to assist us in protecting our proprietary technology in
      China and Japan. In May 2004, we issued 5,000,000 shares of our common stock
      as
      payment of twelve monthly payments due SeaWay Trading, Inc. On August 18, 2004,
      we entered into an amendment to the consulting agreement, pursuant to which
      we
      issued 5,000,000 shares of our 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
      May 4,
      2004, we entered into a consulting contract with Igor Litovsky to provide
      marketing and operation development services in Russia. We issued 1,100,000
      shares of our common stock pursuant to the terms of the consulting contract.





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





On
      December 30, 2004, we entered into a new one year consulting contract with
      Mr.
      Timothy J. Connolly to provide general business strategic consulting and
      management advisory services. Mr. Connolly agreed to provide two eight-hour
      workdays per month of general management strategic consulting services,
      including but not limited to: advising on corporate structure; advising on
      marketing; developing strategic alliances; implementation of financial systems,
      structures and controls; retaining Internet traffic engineering services to
      increase brand identity; retaining of appropriate executive, legal and
      accounting services; consulting on matters of our board of directors, including
      but not limited to assisting the board of directors in developing policies
      and
      procedures; and assisting the board of directors in mergers, acquisitions,
      and
      other business combinations. We agreed to pay Mr. Connolly $5,000 per month
      in
      cash or equity for a period of twelve months. Mr. Connolly also agreed to
      provide us office space, telecommunication equipment, secure high speed internet
      access, and copying equipment 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. We also agreed to
      issue to Mr. Connolly warrants for the right to purchase up to 1,250,000 shares
      of our common stock exercisable at $0.04 per share which were exercised in
      April
      2005. We also agreed to issue to Mr. Connolly options for the right to purchase
      up to 1,750,000 shares of our common stock exercisable at $0.036 per share
      which
      were exercised in July 2005.





In
      July
      2005, we entered into a contract with Princeton Research, Inc. (“PRI”) by which
      PRI agreed to perform due diligence review of the Company, prepare analytical
      reports and perform investor relations for us for the period from July 1, 2005
      through June 30, 2006. We agreed to pay to PRI as its fee and as consideration
      for services provided, $2,500 per moth. The fees paid to PRI pursuant to this
      agreement were paid by the issuance of 500,000 shares of our restricted common
      stock.


15




On
      February 10, 2006, upon the expiration of his previous consulting agreement,
      we
      entered into a new consulting contract with Mr. Timothy J. Connolly to provide
      general business strategic consulting and management advisory services for
      the
      period January 1, 2006 through December 31, 2006. Mr. Connolly agreed to provide
      three eight-hour workdays per month of general management strategic consulting
      services, including: advising on corporate structure; advising on marketing
      and
      press releases; developing strategic alliances; advising on and assistance
      with negotiating licensing agreements; advising on and assisting with obtaining
      patents; implementation of financial systems, structures and controls; retaining
      of appropriate executive, legal and accounting services; consulting on matters
      with our board of directors, including assisting the board of directors in
      developing policies and procedures and assisting the board of directors in
      mergers, acquisitions, and other business combinations. Mr. Connolly agreed
      to
      provide office space, a conference room, telecommunication equipment; secure
      high speed internet access, computer equipment, copying equipment, a
      receptionist and clerical assistance for our use during the term of the
      agreement at 109 North Post Oak Place, Suite 422, Houston, Texas 77024. We
      agreed to pay Mr. Connolly the sum of $50,000 cash, plus $6,000 per month,
      paid
      quarterly. These monthly payments will be made in cash for a period of 12 months
      or, at our option, the fees paid shall be paid in shares of our common stock
      at
      the lower of $.06 per share or 80% of the highest closing bid price per share
      the common stock as reported by Bloomberg, LP on the day prior to the date
      the
      payment is due. We also agreed to pay Mr. Connolly an advisory fee equal to
      5%
      of the total transaction value of any acquisition, merger, or debt financing
      which is consummated during the term of this agreement. We granted Mr. Connolly
      fully vested options for the right to purchase on demand, for one year, up
      to
      5,000,000 shares of our common stock at the lower of $.06 per share or 80%
      of
      the highest closing bid price per share for our common stock as reported by
      Bloomberg, LP on the day prior to the notice by Mr. Connolly of his intent
      to
      exercise his option rights. All the shares issued and the shares underlying
      the
      options were registered by us under Form S-8 on February 17, 2006. On February
      21, 2006, we amended the consulting agreement with Mr. Connolly to provide
      for
      payment and options at $0.06 per share with no floating feature. On March 2,
      2006, the Board of Directors decided to prepay the entire fee owed to Mr.
      Connolly under the consulting agreement by issuing 1,200,000 shares of our
      common stock. Pursuant to the terms of the consulting agreement, Mr. Connolly
      will not own more than 4.99% of Power Technology at any time, unless mutually
      agreed by Mr. Connolly and the Company.




On
      February 10, 2006, we entered into a consulting contract with Yoshi Yamanashi
      (“Yamanashi”) to provide general business strategic consulting and management
      advisory services for the two year period of January 1, 2006 through December
      31, 2007. The services provide by Yamanashi will include: advising on and
      assisting with our marketing, sales, licensing and general business practices
      in
      Japan; developing strategic alliances in Japan; arranging and facilitating
      communications between us and Japanese companies which may wish to purchase,
      license, or manufacture our products; advising on and assisting with negotiating
      licensing agreements; advising on and assisting with retaining of appropriate
      legal and accounting services in Japan; advising and assisting us with
      compliance with Japanese business customs, practices, laws and regulations;
      and
      performing such other duties mutually agreed upon. We will pay Yamanashi a
      commission of 10% of the total net licensing fee we receive from those companies
      to whom we are introduced by Yamanashi. We will also pay Yamanashi a commission
      of 5% of the net royalties actually received by us from those companies, for
      our
      products manufactured by those companies, for the first three years of the
      royalty agreement. Yamanashi shall not seek or accept any commission, payment
      or
      compensation directly or indirectly from any Japanese licensees and companies
      with whom we contract and Yamanashi’s sole compensation for consulting with us
      and assisting us in arranging contracts with Japanese companies will be the
      consideration paid to Yamanashi by us. Yamanashi will pay all his own out of
      pocket expenses, including travel, entertainment, and
      communications.


16




**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 10-KSB,
      our
      annual report and/or attributable to us or persons acting on our behalf are
      expressly qualified in their entirety by this discussion.





**RISK
      FACTORS**





**WE
      HAVE EXPERIENCED RECENT SUBSTANTIAL OPERATING LOSSES AND MAY INCUR ADDITIONAL
      OPERATING LOSSES IN THE FUTURE.**





We
      have
      incurred operating and net losses and negative cash flow from operations since
      our inception. For the years ended January 31, 2006 and 2005, we had net losses
      of ($3,245,966) and ($2,241,852), respectively. As of the fiscal year ending
      January 31, 2006, we had an accumulated deficit of $14,769,116. In the future,
      we may continue to 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 our sales and
      marketing capabilities. We may not be able to achieve or maintain profitability.
      Moreover, if we do achieve profitability, the level of any profitability cannot
      be predicted and may vary significantly from quarter to quarter. In the event
      we
      are unable to increase our gross margins, reduce our costs and/or generate
      sufficient additional revenues to offset our increased costs, we may continue
      to
      sustain losses and our business plan and financial condition will be materially
      and adversely affected.





**OUR
      LIMITED OPERATING HISTORY OF PRODUCING BATTERIES MAKES AN EVALUATION OF US
      AND
      OUR FUTURE EXTREMELY DIFFICULT, AND PROFITS ARE NOT ASSURED.**





In
      view
      of our limited operating history of producing batteries, you may have difficulty
      in evaluating us and our business and prospects. You must consider our business
      and prospects in light of the risks, expenses and difficulties frequently
      encountered by companies in their early stage of development. For our business
      plan to succeed, we must successfully undertake most of the following
      activities:


17




*
            
            Comply
              with applicable laws and regulations;*
            
            Identify
              and enter into binding agreements with suitable joint venture partners
              for
              our future projects;*
            
            Raise
              a sufficient amount of funds to continue our research and development
              program;*
            
            Implement
              and successfully execute our business strategy;*
            
            Respond
              to competitive developments and market changes; and*
            
            Attract,
              retain and motivate qualified personnel.




There
      can
      be no assurance that we will be successful in undertaking any or all of such
      activities. Our failure to undertake successfully most, if not all, of the
      activities described above could materially and adversely affect our business,
      prospects, financial condition and results of operations. In addition, there
      can
      be no assurance that our research and production activities will produce
      commercially viable products, if any at all. There can be no assurance that
      sales of our products will ever generate significant revenues, that we will
      ever
      generate additional positive cash flow from our operations or that we will
      be
      able to achieve or sustain profitability in any future period.





**SHAREHOLDERS
      COULD INCUR NEGATIVE IMPACT DUE TO THE AVAILABILITY OF RESALE OF A SIGNIFICANT
      PERCENTAGE OF OUR OUTSTANDING SHARES OF COMMON STOCK.**





On
      February 22, 2006, we filed a Form SB-2 registration statement with the SEC
      (the
“Registration Statement”). As of May 1, 2006, there were 141,562,412 shares of
      our common stock outstanding. Of these shares, approximately 48,250,022 shares
      of our common stock were eligible to be sold pursuant Rule 144 of the Securities
      Act of 1933, as amended (the “Securities Act”). However, 10,945,473 of these
      shares of common stock are subject to lock up agreements with varying
      termination dates. In the event that a substantial number of these shares are
      offered for sale in the market by several holders, the market price of our
      common stock could be adversely affected. Additionally, the registration of
      up
      to 173,434,872 shares pursuant to the Registration Statement will also increase
      the number of common shares which could be sold in the public market. The
      availability of public trading for such a large number of shares may have an
      adverse effect on the trading prices of our common stock. Further, we are not
      engaging an underwriter to assist in a distribution of shares on behalf of
      the
      selling stockholders under the registration statement. No prediction can be
      made
      as to the effect, if any, that sales of shares of our common stock or the
      availability of such shares for sale will have on the market prices prevailing
      from time to time. Nevertheless, the possibility that substantial amounts of
      common stock may be sold in the public market would likely have an adverse
      effect on prevailing market prices for the common stock.





**FUTURE
      SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.**





We
        have
        entered into material agreements with Cornell Capital Partners, L.P. described
        herein (Item 6.- Plan of Operation). As a result of these agreements with
        Cornell, we were required to file a registration statement with the SEC
        registering the resale of the approximately 173,434,872 shares of our common
        stock that was issued to selling stockholders or may be issued Cornell upon
        the
        conversion of warrants or the Convertible Debenture. The Convertible Debenture
        provides that the number of shares of our common stock that may be issued
        by us
        or acquired by Cornell shall not exceed 4.99% of the total number of then
        issued
        and outstanding shares of our common stock.


We
      engaged Newbridge Securities Corporation as our exclusive placement agent for
      our sale of common stock to Cornell under the terms of a Placement Agent
      Agreement. We issued 442,477 shares of our common stock to Newbridge. As a
      result of our agreement with Newbridge, we registered 442,477 shares of our
      common stock.





The
        market price of our common stock could decline as a result of sales of
        substantial amounts of our common stock in the public market during and after
        the effectiveness of the registration statement. As of May 1, 2006, there
        were
        22,277,662 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.




18




As
        of May
        1, 2006, we had 10,830,000 shares of common stock which remain to be issued
        under certain stock, SAR and stock option plans which have been registered
        on
        Form S-8 filings on September 30, 2004, July 20, 2005 and February 17, 2006.
        Of
        those shares, 2,633,333 shares have been reserved for issuance upon the exercise
        of stock options which have been granted. These 10,830,000 shares can
        be
        sold in the public market upon issuance, subject to restrictions under the
        securities laws applicable to resales by affiliates.




**EXISTING
      SHAREHOLDERS WILL EXPERIENCE SIGNIFICANT DILUTION FROM SALES OF OUR COMMON
      STOCK
      UNDER EQUITY FINANCING AND COULD RESULT IN A CHANGE OF CONTROL.**




The
        issuance of our common stock pursuant to the Convertible Debenture and Warrants
        will dilute the percentage of the ownership by the current shareholders. We
        have
        filed a registration statement to register 173,434,872 shares of our common
        stock under the Convertible Debentures with Cornell Capital Partner, LP (as
        discussed herein). Upon issuance, these 173,434,872 shares of common stock
        would
        represent approximately 55% of our then outstanding common stock. As a result,
        our net income per share could decrease in future periods, and the market
        price
        of our common stock could decline. If our stock price is lower, then our
        existing stockholders would experience greater dilution. We cannot predict
        the
        actual number of shares of common stock that may be issued pursuant to any
        other
        future equity financing transaction, in part, because the purchase price
        of the
        shares will fluctuate based on prevailing market conditions and we do not
        know
        the exact amount of funds we will need. A
        change
        in control of the Company could occur as the result of a dilution of the
        percentage of the ownership of our stock by the existing largest shareholders.




**CORNELL
      WILL PAY LESS THAN THE THEN PREVAILING MARKET PRICE AND WILL HAVE AN INCENTIVE
      TO SELL ITS SHARES.**




Cornell
      may purchase shares of our common stock pursuant to the Warrants and Convertible
      Debentures at a purchase price that is less than the then-prevailing market
      price of our common stock. Cornell will have an incentive to sell any shares
      of
      our common stock that it purchases to realize a gain on the difference between
      the purchase price and the then-prevailing market price of our common stock.
      To
      the extent Cornell sells its common stock, the common stock price may decrease
      due to the additional shares in the market. This could allow Cornell to sell
      greater amounts of common stock, the sales of which would further depress the
      stock price.




**CERTAIN
      SECURITY HOLDERS HAVE PAID LESS THAN THE THEN PREVAILING MARKET PRICE AND WILL
      HAVE AN INCENTIVE TO SELL THEIR SHARES.**




During
        the past two fiscal years, we entered contracts for services which gave us
        the
        option to pay for those services in cash or to issue shares of our common
        stock
        for those services at prices that were less than the then-prevailing market
        price of our common stock. In payment for those services, we issued 12,300,000
        shares of our common stock and at the time we agreed to the conversion rate,
        the
        discount to the then prevailing market price ranged up to a 68% discount.
        As
        part of the contract for services, we also issued options to purchase up
        to
        2,000,000 shares of our common stock at prices that were less than the
        then-prevailing market price of our common stock and the discount for these
        options to the then prevailing market price ranged up to a 30% discount.
        In the
        future, if we do not have sufficient cash to pay for services we require,
        we may
        pay for those services by issuing shares of our common stock at prices that
        may
        be less than the then-prevailing market price of our common stock and we
        may
        also issue options to purchase shares of our common stock at prices that
        may be
        less than the then-prevailing market price of our common stock.. These security
        holders will have an incentive to sell shares and/or exercise their options
        to
        purchase shares of our common stock to realize a gain on the difference between
        the purchase/exercise price and the then-prevailing market price of our common
        stock. To the extent these security holders sell their common stock, the
        price
        of our common stock per share may decrease due to the additional shares in
        the
        market. This could allow these security holders to sell greater amounts of
        common stock, the sales of which could depress our stock price. The issuance
        of
        our common stock at prices less than the then prevailing market could result
        in
        dilution to our existing shareholders.


19




**OUR
      COMMON STOCK** **PRICE MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY FLUCTUATE CONSIDERABLY.**




Our
      common stock is currently traded on the Over-the-Counter Bulletin Board. Prior
      to this offering, there has been a limited public market for our common stock
      and there can be no assurance that an active trading market for our common
      stock
      will develop. As a result, this could adversely affect our shareholders' ability
      to sell our common stock in short time periods, or possibly at all. Our common
      stock is thinly traded compared to larger, more widely known companies in our
      industry. Thinly traded common stock can be more volatile than common stock
      traded in an active public market. Our common stock has experienced, and is
      likely to experience in the future, significant price and volume fluctuations,
      which could adversely affect the market price of our common stock without regard
      to our operating performance. In addition, we believe that factors such as
      quarterly fluctuations in our financial results and changes in the overall
      economy or the condition of the financial markets could cause the price of
      our
      common stock to fluctuate substantially.




**THE
      SALE OF MATERIAL AMOUNTS OF COMMON STOCK UNDER THE REGISTRATION STATEMENT COULD
      ENCOURAGE SHORT SALES BY THIRD PARTIES.**




Significant
      downward pressure on our stock price caused by the sale of a significant number
      of shares underlying the debentures could cause our stock price to decline,
      thus
      allowing short sellers of our stock an opportunity to take advantage of any
      decrease in the value of our stock. Short selling is where a person sells shares
      of stock not yet owned by that person in the anticipation of being able to
      buy
      the stock at a later date at a lower price per share. The presence of short
      sellers in our common stock may further depress the price of our common stock.




**THE
      TRADING PRICE OF OUR COMMON STOCK ENTAILS ADDITIONAL REGULATORY REQUIREMENTS,
      WHICH MAY NEGATIVELY AFFECT SUCH TRADING PRICE.**





The
      trading price of our common stock is below $5.00 per share. As a result of
      this
      price level, trading in our common stock would be subject to the requirements
      of
      certain rules promulgated under the Securities Exchange Act of 1934, as amended
      (the “Exchange Act”). These rules require additional disclosure by
      broker-dealers in connection with any trades generally involving any non-NASDAQ
      equity security that has a market price of less than $5.00 per share, subject
      to
      certain exceptions. Such rules require the delivery, before any penny stock
      transaction, of a disclosure schedule explaining the penny stock market and
      the
      risks associated therewith, and impose various sales practice requirements
      on
      broker-dealers who sell penny stocks to persons other than established customers
      and accredited investors (generally institutions). For these types of
      transactions, the broker-dealer must determine the suitability of the penny
      stock for the purchaser and receive the purchaser's written consent to the
      transaction before sale. The additional burdens imposed upon broker-dealers
      by
      such requirements may discourage broker-dealers from effecting transactions
      in
      our common stock. As a consequence, the market liquidity of our common stock
      could be severely affected or limited by these regulatory
      requirements.





**IN
      THE FUTURE, WE WILL INCUR SIGNIFICANT INCREASED COSTS AS A RESULT OF OPERATING
      AS A PUBLIC COMPANY, AND OUR MANAGEMENT WILL BE REQUIRED TO DEVOTE SUBSTANTIAL
      TIME TO NEW COMPLIANCE INITIATIVES.**





Upon
      the
      effectiveness of the registration statement covering the resale of shares,
      we
      will incur significant legal, accounting and other expenses as a fully-reporting
      public company. In addition, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
      Act”), as well as new rules subsequently implemented by the SEC, have imposed
      various new requirements on public companies, including requiring changes in
      corporate governance practices. Our management and other personnel will need
      to
      devote a substantial amount of time to these new compliance initiatives.
      Moreover, these rules and regulations will increase our legal and financial
      compliance costs and will make some activities more time-consuming and costly.
      For example, we expect these new rules and regulations to make it more difficult
      and more expensive for us to obtain director and officer liability insurance,
      and we may be required to incur substantial costs to maintain the same or
      similar coverage.


20




In
      addition, the Sarbanes-Oxley Act requires, among other things, that we maintain
      effective internal controls for financial reporting and disclosure controls
      and
      procedures. In particular, commencing in fiscal 2007, we must perform system
      and
      process evaluation and testing of our internal controls over financial reporting
      to allow management and our independent registered public accounting firm to
      report on the effectiveness of our internal controls over financial reporting,
      as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the
      subsequent testing by our independent registered public accounting firm, may
      reveal deficiencies in our internal controls over financial reporting that
      are
      deemed to be material weaknesses. Our compliance with Section 404 will
      require that we incur substantial accounting expense and expend significant
      management efforts. We currently do not have an internal audit group, and we
      will need to hire additional accounting and financial staff with appropriate
      public company experience and technical accounting knowledge. Moreover, if
      we
      are not able to comply with the requirements of Section 404 in a timely
      manner, or if we or our independent registered public accounting firm identifies
      deficiencies in our internal controls over financial reporting that are deemed
      to be material weaknesses, the market price of our stock could decline, and
      we could
      be
      subject to sanctions or investigations by the SEC or other regulatory
      authorities, which would require additional financial and management
      resources.





**IF
      OUR PRODUCTS AND SERVICES DO NOT BECOME WIDELY USED IN INDUSTRY, IT IS UNLIKELY
      THAT WE WILL BE PROFITABLE.**





Compared
      to other technologies, our technologies are new and unproven. In addition,
      we
      have a very limited history of providing products and services. It is uncertain
      whether new customers, if any, will use these products and services. In order
      to
      be successful, our products and services must meet the requirements of the
      industry involved in each product, and we must convince potential customers
      to
      use our products and services instead of competing technologies. Market
      acceptance will depend on many factors, including our ability to: convince
      potential customers that our 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 products and services from us rather than developing them
      internally; and place and service sufficient quantities of our products. Because
      of these and other factors, we can give no assurance that our products and
      services will gain market acceptance.





**GOING
      CONCERN QUALIFICATION BY AUDITORS.**




The
        accountants' reports of our independent certified public accountants for
        fiscal
        years ending January 31, 2006, 2005, and 2004 express a going concern
        qualification by the auditors. We have had recurring operating losses for
        the
        past several years which raise substantial doubts about our ability to continue
        as a going concern. See Independent Auditor's Report(s), Note 2 to the
        Consolidated Financial Statements of Power Technology, and Plan of Operation
        -
“Plan of Operation and Uncertainties". We have had no revenue during our last
        fiscal year. We have no commercial product and have no customers who have
        agreed
        to purchase our products. We do not own all the equipment necessary to
        manufacture our products. Our success is dependent on us raising additional
        capital.


21




**WE
      MAY DEPEND ON THIRD-PARTY PRODUCTS AND SERVICES, AND SOME OR LIMITED SOURCES
      OF
      SUPPLY TO MANUFACTURE OUR CURRENT COLLECTORS.**





While
      we
      do not intend to manufacture and sell batteries in commercial quantities, we
      do
      plan to manufacture our proprietary current collectors which would be a
      component part of a lead acid battery. The manufacturing process to create
      our
      current collector will include manufacturing the reticulated vitreous carbon
      (“RVC”) plates. If we are unable to manufacture RVC foam, we would have to
      obtain the product from a single supplier or a limited group of suppliers and
      would have to rely on outside vendors to manufacture RVC foam, a major component
      used in our product. The potential suppliers of RVC foam in the United States
      are ERG Materials and Aerospace Corporation, of Oakland California, Ultramet
      of
      Pacoima, California, and Destech Corporation of Tucson, Arizona. Our reliance
      on
      a sole or limited group of suppliers of RVC foam involves several risks,
      including: the inability to obtain an adequate supply of this required component
      at a reasonable price due to manufacturing capacity constraints; a
      discontinuance of a product by a third-party manufacturer or other supply
      constraints; reduced control over quality and pricing of this component and
      delays and long lead times in receiving materials from vendors. We have no
      supply contract or agreement in place with any manufacturer of RVC foam. We
      have
      a written proposal from Destech Corporation involving a technology transfer
      agreement by which Destech would provide to us a procedure for the production
      of
      RVC foam in a batch process.





**THE
      BATTERY INDUSTRY IS HIGHLY COMPETITIVE AND SUBJECT TO TECHNOLOGIGAL CHANGE
      AND
      WE MAY NOT HAVE THE RESOURCES NECESSARY TO COMPETE
      SUCCESSFULLY.**





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





The
      battery industry is mature, well-established and highly competitive. The
      industry is characterized by a few major domestic and foreign producers
      including Exide, Delphi, A.C. Delco, Johnson Controls, Inc., East Penn
      Manufacturing Co., Inc GNB, Electrosource, Inc., Energy Conversion Devices,
      Inc., Hawker and Yuasa, all of which have substantially greater financial
      resources than us. Accordingly, our ability to succeed in this market depends
      upon its ability to demonstrate superior performance and cost attributes of
      our
      technology. Initially, we intend to concentrate our 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.
      Our principal competitors 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.
      However, 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, we could experience additional competition from other established
      or
      emerging companies as the market continues to develop and expand. Many potential
      competitors may have well-established relationships with our potential
      customers, have extensive knowledge of the industry, better name recognition
      and
      significantly greater financial, technical, sales, marketing and other resources
      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. We also expect that competition will
      increase as a result of industry consolidations. Our competitors may be able
      to
      respond more quickly to new or emerging technologies and changes in customer
      requirements, or to devote greater resources to the development, promotion
      and
      sale of their battery products. Moreover, the battery business is characterized
      by rapid and continuous technological innovation. We anticipate that we will
      face increased competition in the future as new companies enter the market
      and
      advanced technologies become available. Our products, services and expertise
      may
      be rendered obsolete or uneconomical by technological advances or entirely
      different approaches developed by us or one or more of our competitors. For
      example, advances may render some of our existing approaches to our technologies
      obsolete. Additionally, the existing approaches of our competitors may be more
      effective than those we develop. As a result, we may not be able to compete
      successfully with existing or future competitors.


22




**OUR
      SUCCESS DEPENDS ON PROPRIETARY TECHNOLGY.**





Our
      success is dependent upon proprietary technology. We intend to rely primarily
      on
      a combination of patents, trade secrets, confidentiality procedures and
      contractual provisions with our employees, consultants and business partners
      and
      in our license agreements to protect our proprietary rights. In addition to
      our
      patents, we seek to protect our products, documentation and other written
      materials under trade secret and copyright laws, which afford only limited
      protection. Despite our efforts to protect our proprietary rights, unauthorized
      parties may attempt to reverse engineer or otherwise copy aspects of our
      products or to obtain and use information that we regard as proprietary. We
      may
      not be able to protect our proprietary technology from infringement by third
      parties.





**OUR
      SUCCESS WILL DEPEND ON OUR ABILITY TO ATTRACT AND RETAIN EXPERIENCED SCIENTISTS
      AND SALES PERSONNEL.**





Our
      future success will depend to a significant extent on our ability to attract,
      retain and motivate highly skilled scientists and sales personnel. Our ability
      to enter into new engagements and provide additional services to customers
      depends, in large part, on our 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. Management 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 we offer. The scientists
      must
      have advanced degrees in Chemical Engineering with specialization in
      electrochemical engineering and knowledge of battery manufacturing. We compete
      with other contract research companies and academic institutions for new
      personnel. In addition, our inability to hire additional qualified personnel
      may
      require an increase in the workload for both existing and new personnel.
      Management believes that our present Vice President of Technology is qualified
      to keep pace with continuing changes in battery technology and to manage the
      engineering aspects of our business plan. However, we may not be successful
      in
      attracting new scientists or sales personnel or in retaining or motivating
      our
      existing personnel.





**ITEM
      2. DESCRIPTION OF PROPERTIES**





We
        are
        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
        and
        also includes use of a conference room, telecommunication equipment; secure
        high
        speed internet access, computer equipment, copying equipment, a receptionist
        and
        clerical assistance. In exchange for approximately five hours of consulting
        services per week by our chief technology officer to Mag Power Systems, Inc.,
        a
        fuel cell technology development company, we have 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
        17, Delta, BC, Canada. As discussed herein, we are establishing a pilot plant
        facility in Vancouver, British Columbia, Canada. We have leased from Vizon
        Scitec Inc., approximately 1000 square feet of space located at BC Research
        Complex, 3650 Westbrook Mall, Vancouver , British
        Columbia, Canada, for a minimum term of three months beginning May 1, 2006,
        at
        the rate of approximately $1,300 per month. Management has determined that
        we
        will ultimately need approximately 2,500 square feet of industrial space
        to
        house our pilot plant. Management has determined that suitable space, properly
        equipped with necessary power, other utilities, and required environmental
        equipment is available in Vancouver at a cost of approximately $3,150 per
        month.




23




We
      have
      engaged in discussions regarding potential property for a longer lease term
      and
      Management is confident of its ability to secure additional suitable space
      for
      our pilot plant as it becomes necessary. Management has determined that we
      will
      ultimately need approximately 2500 square feet of industrial space to house
      our
      pilot plant that suitable space, properly equipped with necessary power, other
      utilities, and required environmental equipment is available in Vancouver at
      a
      cost of approximately $3,150 per month. We have engaged in discussions regarding
      potential property for a longer lease term and Management is confident of its
      ability to secure suitable space for our pilot plant as it becomes necessary.
      We
      believe that our current facilities are adequate for our needs through 2006,
      and
      that should it be needed, suitable additional or alternative space on
      commercially reasonable terms, as it becomes necessary. We believe that our
      current facilities are adequate for our needs through 2006, and that should
      it
      be needed, suitable additional or alternative space on commercially reasonable
      terms, as it becomes necessary.





**ITEM
      3. LEGAL PROCEEDINGS**





On
      September 7, 2005, Merrill Communications, LLC ("Merrill") filed a civil action,
      # 846,770, Merrill Communications, LLC v. Power Technology, Inc. aka and dba
      PWTC Battery Co and Power Technology, in the County Civil Court at Law No.
      2 in
      Harris County, Texas. Merrill alleges we are liable to Merrill in the principal
      sum of $30,349.25 on a sworn account for EDGAR filings transmitted to the SEC.
      Merrill also sought interest and attorneys fees in at least the sum of $10,115.
      On May 12, 2006, we agreed with Merrill to compromise and settle the claims
      at
      issue in this litigation. We agreed to pay Merrill $18,500 for a full and final
      release of all claims that were made by Merrill and Merrill agreed to dismiss
      the civil action with prejudice to the right to refile the claim.




**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.**





**Market
      Information**





Our common
      stock is traded on the OTC Bulletin Board under the symbol “PWTC.OB”. These
      over the counter market quotations may reflect inter-dealer prices, without
      retail mark-up, mark-down or commission and may not necessarily reflect actual
      transaction prices.





The
      following chart sets forth the high and low closing bid prices for each quarter
      for the last three fiscal years. Such prices represent quotations between
      dealers, without dealer markup, markdown or commissions, and may not represent
      actual transactions.


24




**Quarter**
              **High**
              **Low**Quarter
                  ending 4/30/03
              .085
              .05Quarter
                  ending 7/31/03
              .071
              .035Quarter
                  ending 10/31/03
              .04
              .02Quarter
                  ending 1/31/04
              .055
              .015Quarter
                  ending 4/30/04
              .06
              .03Quarter
                  ending 7/31/04
              .037
              .0158Quarter
                  ending 10/31/04
              .035
              .018Quarter
                  ending 1/31/05
              .051
              .025Quarter
                  ending 4/30/05
              .166
              .048Quarter
                  ending 7/31/05
              .08
              .046Quarter
                  ending 10/31/05
              .10
              .051Quarter
                  ending 1/31/06
              .105
              .068Quarter
                  ending 4/30/06
              .175
              .082


As
      of May
      1, 2006, the closing price for shares of our common stock in the
      over-the-counter market, as reported by the OTCBB was $0.15.





No
      prediction can be made as to the effect, if any, that future sales of shares
      of
      our common stock or the availability of our common stock for future sale will
      have on the market price of our common stock prevailing from time-to-time.
      The
      additional registration of our common stock and the sale of substantial amounts
      of our common stock in the public market could adversely affect the prevailing
      market price of our common stock.





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.





**Record
      Holders**





As
      of May
      1, 2006, we had approximately 153 registered holders of our common stock,
      including shares held in street name. As of May 1, 2006, there were 141,562,412
      shares of common stock issued and outstanding.




**Dividends**




There
      are
      no restrictions in our articles of incorporation or bylaws that prevent us
      from
      declaring dividends. The Nevada Revised Statutes, however, do prohibit us from
      declaring dividends where, after giving effect to the distribution of the
      dividend:




1.
            We
                would not be able to pay our debts as they become due in the usual
                course
                of business; or





2.
            Our
                total assets would be less than the sum of our total liabilities
                plus the
                amount that would be needed to satisfy the rights of stockholders
                who have
                preferential rights superior to those receiving the
                distribution.


25








We
      have
      not declared any dividends and we do not plan to declare any dividends in the
      foreseeable future. Our current policy is to retain any earnings in order to
      finance the expansion of our operations. Our Board of Directors will determine
      future declaration and payment of dividends, if any, in light of the
      then-current conditions they deem relevant and in accordance with the Nevada
      Revised Statutes.





**Preferred
      Stock**





The
      Company's Articles of Incorporation authorize 1,000,000 shares of Preferred
      Stock, $.01 par value. As of January 31, 2006, the Company had no shares of
      its
      Preferred Stock issued and outstanding.





**Options
      and Warrants**




As
        of
        January 31, 2006, the Company had outstanding warrants to purchase 1,500,000
        shares of the common stock of the Company at exercise prices of $.06 per
        share.
        On April 20, 2006 the holders of these warrants exercised their rights and
        purchased 1,500,000 shares of restricted common stock of the company at a
        purchase price of $.06 cash per share.




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 $.21 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, 2006 the Company had outstanding stock options to purchase 1,000,000
      shares of the common stock of the Company at an exercise price of $ 0.005 per
      share.





**Convertible
      Debentures**





As
      discussed herein, we entered into a Securities Purchase Agreement (the
      "Agreement") with Cornell Capital Partners, L.P. (“Cornell”) effective December
      22, 2005, for the sale of redeemable secured convertible debentures in the
      principal amount of $1,630,580 (the "Debentures") and stock purchase warrants
      (the "Warrants") to buy 20,904,875 shares of our Common Stock. Pursuant to
      the
      terms of the Agreement, we became obligated to file a registration statement
      with the Securities and Exchange Commission to register for the resale of the
      shares of our common stock underlying the Debentures and shares of our common
      stock underlying the Warrants.





Under
      the
      terms of our financing with Cornell, we have received net proceeds of
      $1,405,000. This financing was comprised of three separate segments of funding
      as follows:





1.
            In
                August and November 2004, we borrowed an aggregate of $500,000 from
                Cornell through two issuances of 5% Convertible Debentures which
                was
                secured by substantially all of our assets. On May 10, 2005, we refinanced
                the Convertible Debentures with a new Convertible Debenture in the
                principal amount of $514,657, which comprised the original $500,000
                principal plus accrued interest as of that date. On December 22,
                2005, the
                Convertible Debenture was replaced by a new Convertible Debenture
                which
                was issued in the principal amount of $530,580, comprising the original
                $500,000 principal plus accrued interest as of that date. This Convertible
                Debenture: (i) has a due date of December 22, 2007, (ii) bears interest
                at
                a rate of 10% per annum; (iii) was subject to a registration rights
                agreement; and (iv) is subject to certain conversion features. If
                this
                Debenture is repaid under an Optional Redemption Feature, we must
                issue a
                warrant (the “Warrant Feature”) to Cornell to purchase 1,000,000 shares of
                our common stock for each $100,000 redeemed, exercisable at 120%
                of the
                closing bid price of our common stock. This debenture is referred
                to
                herein as the “**First
                Debenture**.”




26





2.
            In
                December 2005, we issued a new Convertible Debenture in the principal
                amount of $500,000. This Convertible Debenture: (i) has a due date
                of
                December 22, 2007, (ii) bears interest at a rate of 10% per annum;
                (iii)
                was subject to a registration rights agreement; (iv) is subject to
                certain
                conversion features including the Optional Redemption Feature and
                Warrant
                Feature as under the terms of the First Debenture. This debenture
                is
                referred to herein as the “**Second
                Debenture**.”





3.
            Pursuant
                to the terms and conditions of the Securities Purchase Agreement,
                Cornell
                was obligated to promptly provide the Company with $550,000, less
                certain
                fees and expenses, and with an additional $550,000 within two business
                days before the filing date of a registration statement registering
                shares
                of our common stock underlying the Convertible Debentures and Warrants.
                On
                February 21, 2006, we issued Secured Convertible Debentures with
                Cornell
                in the principal amount of $550,000. This Convertible Debenture:
                (i) has a
                due date of February 21, 2008, (ii) bears interest at a rate of 10%
                per
                annum; (iii) was subject to a registration rights agreement; and
                (iv) is
                subject to certain conversion features including the Optional Redemption
                Feature and Warrant Feature as under the terms of the First Debenture.
                This debenture is referred to herein as the “**Third
                Debenture**”.





The
      First
      Debenture, Second Debenture and Third Debenture are referred to collectively
      as
      the “Convertible Debentures.”





Conversion
      Feature





The
      Convertible Debentures are convertible (“Conversion Feature”) into our common
      stock at any time until repayment of the Convertible Debentures at the price
      per
      share equal to the lesser of:





a.
            an
                amount equal to 120% of the closing bid price of the common stock
                (the
                “Optional Redemption Feature”); or




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





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





**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.


27




**EQUITY
      COMPENSATION PLAN INFORMATION** **(1)**





**Plan
                category**
            **Number
                of securities to be issued upon exercise of outstanding options,
                warrants and rights**
              
              **(a)**
            **Weighted-average
                exercise price of outstanding options,warrants and
                rights**
              
              **(b)**
            **Number
                of securities remaining available forfuture issuance under
                equity compensation plans (excluding securities reflected in
                column (a))**
              
              **(c)**Equity
                compensation plans approved by security holders
            1,000,000
            $0.005
            1,208,333Equity
                compensation plans not approved by security holders
            1,000,000
            $0.06
            188,334Total
            2,000,000
            N/A
            1,396,667





(1)  As
      of
      January 31, 2006.





We
      adopted the 2004-B Stock Option, SAR, and Stock Bonus Plan (the "2004 Plan")
      effective August 1, 2004, which authorized us 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 of
      Power Technology. There were 20,000,000 shares of our common stock available
      for
      grant to participants designated by the Stock Plan Committee under the 2004
      Plan. As of January 31, 2006, 1,208,333 shares of common stock remain to be
      issued which are reserved for issuance upon exercise of options or stock bonuses
      granted or reserved for grant under the 2004 Plan. If these shares are issued
      pursuant to the 2004 Plan, they can be sold in the public market upon issuance,
      subject to restrictions under the securities laws applicable to resales by
      affiliates.





In
      July
      2005, we adopted the 2005 Stock Option, SAR and Stock Bonus Consultant Plan
      (the
“2005 Plan”) which authorized us to grant non-qualified stock options with or
      without stock appreciation rights and to grant stock bonuses to consultants
      of
      Power Technology. There were 5,000,000 shares of our common stock available
      for
      grant to participants designated by the Stock Plan Committee under the 2005
      Plan. As of January 31, 2006, there were 188,334 shares of our common stock
      remaining to be issued which are reserved for issuance upon the exercise of
      options or stock bonuses reserved for grant under the 2005 Plan. If these shares
      are issued pursuant to the 2005 Plan, they can be sold in the public market
      upon
      issuance, subject to restrictions under the securities laws applicable to
      resales by affiliates.





Subsequent
        to the fiscal year ending January 31, 2006, we adopted the 2006 Stock Option,
        SAR and Stock Bonus Consultant Plan on February 8, 2006, which authorized
        the Company to grant non-qualified stock options with or without stock
        appreciation rights, SAR's and stock bonuses to consultants of the Company.
        Under the plan, there were 13,000,000 shares of our common stock
        available for grant to participants designated by the Stock Plan Committee.
        On
        February 17, 2006 the Company filed with the SEC a Form S-8 registration
        statement which registered these shares. On February 21, 2006, the Company
        granted Timothy J. Connolly fully vested options for the right to purchase
        on
        demand, until February 10, 2007, up to 5,000,000 shares of our common stock
        at
        $.06 per share. Pursuant to this warrant, on April 11, 2006, Mr. Connolly
        purchased 1,700,000 shares of our common stock at $.06 per share and on April
        26, 2006, Mr. Connolly purchased 1,666,667 shares of our common stock at
        $.06
        per share.




28





On
      March 2, 2006, we issued 1,200,000 shares of our common stock to Timothy J.
      Connolly in pre-payment of his fee for consulting services.


In
        March
        2003, we issued 500,000 warrants to purchase shares of our restricted common
        stock to F. Bryson Farrill and 500,000 warrants to purchase shares of our
        restricted common stock to Hugo P. Pomrehn and 500,000 warrants to purchase
        shares of our restricted stock to Lee P. Balak as Director Compensation.
        These
        warrants were exercisable at $0.06 per share and were scheduled to expire
        on
        April 22, 2006. On April 20, 2006, the holders of the warrants exercised
        the
        warrants in full.





**RECENT
      SALE OF UNREGISTERED SECURITIES**





Set
      forth
      below is information regarding the issuance and sales of our securities without
      registration during the last quarter of our fiscal year ending January 31,
      2006.
      Except as otherwise noted, all sales below were made in reliance on Section
      4(2)
      of the Securities Act of 1933, as amended and no such sales involved the use
      of
      an underwriter and no commissions were paid in connection with the sale of
      any
      securities. No
      advertising or general solicitation was employed in offering the securities.
      In
      each instance, the offerings and sales were made to a limited number of persons,
      who were either (i) accredited investors, (ii) business associates of the
      Company (iii) employees of the Company, or (iv) executive officers or directors
      of the Company. In addition, the transfer of such securities were restricted
      by
      the Company in accordance with the requirements of the Act. Furthermore, all
      of
      the above-referenced persons were provided with access to our filings with
      the
      Securities and Exchange Commission.





1.  On
      December 30, 2005, we issued 106,811 shares of our restricted common stock
      to
      Mr. F. Bryson Farrill and 106,811 shares of our restricted common stock to
      Mr.
      Hugo P. Pomrehn as director compensation in reliance upon Section 4(2) of the
      Securities Act of 1933.





2.  On
      January 10, 2006, we issued 721,165 shares of our restricted common stock to
      Mr.
      Bernard J. Walter, our president and director, as compensation under the terms
      of his Employment Agreement with us in reliance upon Section 4(2) of the
      Securities Act of 1933





**ITEM
      6. 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.





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.




29





Power
      Technology, Inc., a Nevada corporation, was incorporated on June 3, 1996. We
      are
      in the development stage of designing and producing its batteries and other
      products. We are preparing to produce prototype versions of our battery to
      be
      built in a variety of sizes, amp hour capacities and configurations using
      methods that we anticipate will be practical for economically manufacturing
      batteries on a commercial scale. We have designed and are in the process of
      constructing a pilot plant capable of manufacturing our current collectors
      in
      commercial quantities for use in lead acid batteries. We have not commenced
      any
      commercial production or sales of our batteries or pipeline connection
      equipment.




Historically,
      we have used the sale of our common stock, capital contributions and loans
      from
      various stockholders to fund our operations. To date, we have not had adequate
      funds to commercially produce, market, and sell our batteries or pipeline
      connection equipment. There can be no assurances that we will be able to obtain
      a profitable level of operations.


PLAN
        OF
        OPERATIONS
 
 Because
        of the costs of development of our battery systems, the continuing costs
        of our
        battery prototype production and the anticipated costs relating to our pilot
        plant, we will incur a loss during our fiscal year ending January 31, 2007.
 
 We
        believe that our cash needs will be satisfied from existing funds for the
        next six months. Additional debt or equity financing or licensing agreement
        proceeds will be required to accomplish our plan of operations during the
        next
        12 months. As a result, we intend to sell additional shares of our common
        stock
        to further capitalize our operations. We may also borrow from banks and others
        to the extent necessary to provide liquidity for our operations, although
        no
        arrangements for any additional borrowings have been made. There is no assurance
        that funds will be available from any of these sources, or, if available,
        upon
        terms and conditions acceptable to us.
 
 We
        intend
        to continue our research and development activities in order to develop our
        batteries for commercial production. We expect to incur substantial capital
        costs designing and building a pilot plant capable of manufacturing our current
        collectors in commercial quantities for our batteries. We intend to manufacture
        prototype versions of our batteries and we expect to incur substantial costs
        in
        manufacturing prototype batteries.
 
 PILOT
        PLANT
 
 We
        have
        designed and are in the process of constructing a pilot plant capable of
        manufacturing our current collectors in commercial quantities for use in
        lead
        acid batteries. The manufacturing process to create a current collector will
        include manufacturing the RVC plates, casting a top frame and tab and side
        frames on the individual RVC plates, depositing the lead tin alloy on the
        RVC
        plate by electroplating, applying battery paste onto the individual RVC foam
        plate, and curing them. Once this process has been completed, the individual
        plate is suitable for use as a current collector. We believe that the
        manufacturing process and machinery necessary for insertion of our current
        collector into a battery case and completing the manufacturing of our battery
        is
        substantially similar to existing processes, methods, and machinery commonly
        used in the manufacture of a typical lead acid battery.
  We
        are
        establishing a pilot plant facility in Vancouver, British Columbia, Canada.
        We
        have leased from Vizon Scitec Inc., approximately 1000 square feet of space
        located at BC Research Complex, 3650 Westbrook Mall, Vancouver,  British
        Columbia, Canada, for a minimum term of three months beginning May 1, 2006,
        at
        the rate of approximately $1,300 per month. Management has determined that
        we
        will need approximately 2,500 square feet of industrial space to house our
        pilot
        plant and that suitable space, properly equipped with necessary power, other
        utilities, and required environmental equipment is available in Vancouver
        at a
        cost of approximately $3,150 per month. We have engaged in discussions regarding
        potential property for a longer lease term and Management is confident of
        its
        ability to secure suitable space for our pilot plant as it becomes
        necessary.
 
 30
 The
        purpose of the Pilot Plant is not to manufacture current collectors in
        commercial quantities for sale to battery manufacturers. The purpose of the
        Pilot Plant is to demonstrate to battery manufacturers the manufacturing
        process, machinery and procedure necessary to manufacture our proprietary
        RVC
        current collectors.
 
 Management
        has engaged in discussion, planning, and negotiations with an engineering
        firm,
        Destech Corp., which specializes in manufacturing RVC and other advanced
        materials. This firm has provided us with a written proposal to provide us
        with
        the equipment, materials, technology transfers and processes to manufacture
        RVC
        plates suitable for current collectors. Based on the engineering and design
        that
        has been performed and the written proposal provided, we estimate that the
        consulting costs, equipment, and materials to enable us to begin manufacturing
        RVC plates will be approximately $110,000. This system will manufacture RVC
        in
        billets in a batch process and the blocks of RVC will then be cut and sliced
        into the proper size for individual current collectors. The system is designed
        to permit production of 5000 RVC plates of 6 inches by 6 inches by 3 mm per
        moth. We estimate it will take approximately one month before we are ready
        to
        manufacture the RVC in a batch process.
 
 We
        have
        signed a Consulting Services Agreement with Richard R. McCormick, a former
        employee of an engineering firm, Destech Corp., which specializes in
        manufacturing RVC and other advanced materials. Mr. McCormick has fifteen
        years
        of experience in supervising the manufacture of RVC foam. Mr. McCormick has
        provided us with the specifications for all equipment, supplies, materials,
        chemicals, instruments, utilities and machinery that will be required for
        production of RVC. Mr. McCormick will provide us with a detailed written
        report
        and manufacturing procedures manual describing the process to be utilized
        to
        manufacture RVC that meets our specifications for current collectors. Mr.
        McCormick will be present at our facility in Vancouver, British Columbia,
        Canada
        to demonstrate in person to our Chief Technology officer, Joey Jung, and
        other
        personnel the proper manufacturing procedures for making RVC. Mr. McCormick
        will
        supervise the hands on practice of manufacturing RVC by our personnel. The
        technology transfer provided will include full disclosure to us of all pertinent
        information including procedures used and problems to be avoided, appropriate
        vendors for raw materials and equipment, outlines for further scale up as
        appropriate and an overview of the prior art of production of RVC foam, focusing
        on those processes that have actually proved to be efficient and workable.
        We
        have ordered the equipment, machinery and supplies necessary for the production
        of RVC and anticipate that it will be delivered to us in May and June of
        2006.
        We will manufacture RVC in billets in a batch process and the blocks of RVC
        will
        then be cut and sliced into the proper size for individual current collectors.
        The system is designed to permit production of 5000 RVC plates of 6 inches
        by 6
        inches by 3 mm per month. The manufacturing process developed will be manual
        rather than automated but will be fully capable of scale up with additional
        manpower and additional equipment. Mr. McCormick will provide Company with
        the
        information required to scale up the process for automation.
  Wirtz
        Manufacturing Company, Inc., a company which specializes in designing and
        building equipment used to manufacture lead-acid batteries, has built us
        various
        prototype molds to cast the top lead frame and tab onto the uncoated RVC
        foam
        plates. Wirtz has completed the engineering and has machined a double panel
        casting mold designed to cast a lead top frame with lug and two side frames
        on
        uncoated RVC foam plates. Wirtz is scheduled to complete the process of testing
        this casting mold in June of 2006. This casting mold was designed to be used
        in
        a conventional grid casting machine, which manufactures typical lead battery
        current collectors. The casting mold is designed for 6" x 6" current collectors.
        The configuration of the double panel casting mold is designed so that it
        will
        fit into conventional current collector pasting machines which cost
        approximately $50,000. Following testing of the mold additional design may
        be
        necessary to adapt the mold to an existing manufacturing machine so that
        the top
        frame, lug and side frames may be cast at high speed on individual RVC foam
        plates.
 
 31
 We
        engaged in discussion, planning, and negotiations with Technic, Inc., an
        engineering and manufacturing firm which specializes in designing and
        manufacturing electroplating equipment. We entered into an agreement dated
        January 12, 2006, with Technic, Inc. for the purchase of machinery to apply
        lead
        tin plating to RVC plates for its battery systems. The lead tin plating system
        includes the necessary hoist with motorized trolley structural support steel
        with trolly track and electrical tag line, steel tanks with locating saddles
        and
        twin 60 inch air blow-off manifolds, rectifiers, and its accessories for
        the
        plating system. We also purchased air agitation blowers and air handling
        ducts
        for the system. The total price for lead tin system and air agitation equipment
        was $101,775. The manufacture of the plating system and air agitation equipment
        has been completed and they have been delivered to our facility in Vancouver,
        British Columbia. The plating system is a manual line capable of plating
        250
        current collectors per eight hour shift. Management believes the plating
        system
        will demonstrate that the electroplating of the current collectors can be
        performed efficiently. Technic, Inc. has provided us with designs and proposals
        to increase the system capacity by adding six additional plating stations,
        additional rectifiers, an automated hoist and a computer controlled,
        programmable, automation package that would increase the system capacity
        to
        plate approximately 1000 to 1200 current collectors per eight-hour shift.
        The
        price of automation package proposal is $278,000. By increasing the number
        of
        tanks and other equipment and machinery, the electroplating system's capacity
        could be further increased.
 
 We
        have
        engaged in discussion, planning, and negotiations with two engineering and
        manufacturing firms which specialize in designing and manufacturing battery
        plate pasting equipment to design and construct equipment capable of applying
        battery paste on lead-tin coated RVC current collectors. Based on the
        engineering and design that has been performed, we estimate that that the
        battery pasting machine needed to apply battery paste onto our individual
        current collectors will cost approximately $95,000 and that it will take
        two to
        three months to build.
 
 To
        fund
        this pilot plant project we have used and intend to use general corporate
        funds,
        which include the proceeds from the sale of Secured Convertible Debentures
        to
        Cornell Capital Partners, L.P., and proceeds from the exercise of stock options
        and warrants, as discussed in the section entitled “Liquidity and Capital
        Resources” herein.
 
 Our
        lead
        acid battery is not yet commercially successful because we have not yet designed
        and built the equipment necessary to manufacture our batteries in commercial
        quantities. RVC current collectors are more expensive and time consuming
        to
        manufacture than are current collectors manufactured by pouring molten lead
        into
        a grid patterns. Our battery will be more expensive to manufacture and its
        purchase price will be more than a traditional lead acid battery.
 
 Management
        believes we will be able to design and build a pilot plant capable of
        manufacturing our current collectors cost effectively in commercial quantities;
        however, further design and engineering may be necessary before a pilot plant
        can be built. The issues related to the successful commercial production
        of our
        current collectors and its battery include: whether we can manufacture RVC
        economically in mass produced commercial quantities; whether we can apply
        the
        top frame and tab to the plates economically in mass produced commercial
        quantities; whether we can economically electroplate the lead-tin alloy onto
        the
        RVC plates uniformly and consistently in mass produced commercial quantities;
        whether we can apply the side and bottom frame to the plates economically
        in
        mass produced commercial quantities; whether we can adapting the existing
        battery plate pasting equipment to paste lead-tin coated RVC current collectors
        in economically in mass produced commercial quantities. There can be no
        assurance that we can manufacture our current collectors or batteries cost
        effectively on a commercial scale. Management believes and anticipates that
        its
        pilot plant can be completed and we can begin manufacturing current collectors
        by June 2006; however, there can be no assurance that this will occur.
 
 There
        can
        be no assurance that we can establish a competitive position against current
        and
        potential competitors, especially those with greater financial, marketing,
        service, support, technical and other resources than us.
 
 32
 Our
        preliminary testing indicates that various configurations of the battery
        meet or
        exceed some of the performance goals established by major governmental and
        industry groups for electric vehicle batteries. Management’s discussions with
        various manufacturers lead us to believe that there would be a significant
        demand for our battery, if it can be manufactures economically on a commercial
        scale. We also believe our battery has a number of applications such as electric
        vehicles, hybrid powered vehicles, solar power systems, electric motorcycles,
        electric bicycles, electric power management, uninterruptible power supply
        systems, aircraft, marine, and submarine craft and for starting batteries
        for
        automobiles. We are designing various prototype batteries for such applications.
 
 PROTOTYPE
        BATTERIES
 
 We
        are
        preparing to produce prototype versions of our battery that will be built
        in a
        variety of configurations using methods that management anticipates will
        be
        practical for economically manufacturing batteries on a commercial scale.
        We
        have equipment which enables us to deposit lead tin alloy on RVC plates in
        our
        laboratory. Once our pilot plant is completed, we intend to manufacture current
        collectors. We have on hand a total of 110 RVC current collectors onto which
        a
        top lead frame and tab have been cast and which have had a lead-tin allow
        applied. Seventy of these have lead side frames cast on them. We also have
        on
        hand approximately 750 RVC foam plates, which measure 6 inches by 6 inches
        by
        3mm. These 750 plates are suitable being made into current collectors for
        our
        batteries by having frames and tabs cast on them and having a lead tin alloy
        applied to them and having battery paste applied to them. Once we have
        manufactured these plates into current collectors and applied battery paste
        to
        them, we intend to use them to manufacture 12 volt prototype batteries. The
        number of RVC plates used as current collectors in a single 12 volt battery
        will
        vary depending on the type, size and amp hour capacity of a
        battery.
 
 EXPECTED
        PURCHASE OF SIGNIFICANT EQUIPMENT
 
 We
        expect
        to make significant equipment purchases in order to construct a pilot plant
        capable of manufacturing our current collectors in commercial quantities
        for use
        in lead acid batteries. Based on the preliminary engineering and design,
        discussions and negotiations with equipment manufacturers and suppliers,
        Management currently estimates that the total cost of the equipment necessary
        to
        a construct a pilot plant capable of manufacturing our current collectors
        in
        commercial quantities for use in lead acid batteries will be approximately
        $370,000. The equipment will include that needed to manufacture RVC plates,
        equipment to cast a top frame and tab and side frames on the individual RVC
        plates, equipment to deposit the lead tin alloy on the RVC plate by
        electroplating, and equipment to apply battery paste onto the individual
        RVC
        plates. Because the design and engineering of the manufacturing equipment
        has
        not been finalized, we cannot be certain that we can accurately predict the
        cost
        of each item of the equipment. Based on the preliminary engineering and design
        that has been performed and discussions and negotiations with equipment
        manufacturers and suppliers, Management estimates that the engineering and
        equipment needed to manufacture RVC plates in a batch process will cost
        approximately $110,000; that the equipment needed to cast a top frame and
        side
        frames individual RVC plates will cost approximately $63,000; that the equipment
        needed to deposit the lead tin alloy on the RVC plate by electroplating will
        cost approximately $102,000; and that the equipment needed to apply battery
        paste onto the individual RVC plates will cost approximately $95,000.
 
 SUBSEQUENT
        EVENT—POTENTIAL ACQUISITION
 
 On
        April
        11, 2006, our wholly owned subsidiary, Sentry Power Technology, Inc. (“SPT”) and
        we entered into an Asset Purchase Agreement (the “Agreement”) with Sentry Power,
        LLC (“Sentry”). Pursuant to the terms of the Agreement, SPT will, subject to
        closing, acquire the assets of Sentry for a total purchase price of $1,195,000
        which is to be paid at closing by issuing $960,000 worth of our restricted
        common stock (the “Power Shares”) (which are to be valued as of the closing
        price per share on the date immediately prior to the closing date as reported
        by
        Bloomberg, LP). Additionally, SPT will assume $235,000 in debt presently
        owed by
        Sentry to CSI Business Finance, Inc. (“CSI”).
 
 33
 With
        regard to the debt, SPT will assume the debt to CSI and will execute a new
        security agreement and we will guarantee the note. At closing, we will execute
        a
        stock pledge agreement granting CSI a first lien on all capital stock or
        other
        interest of SPT which we hold. Our agreement to guarantee the debt is
        conditioned upon and subject to the terms and conditions of a Guaranty Stock
        Pledge Agreement (the “Stock Pledge Agreement”) to be entered into at closing
        between Sentry and us which will provide for Sentry to pledge as collateral
        for
        the Stock Pledge Agreement an amount equal to $250,000 of the Power Shares.
 
 Additionally,
        SPT will enter into employment agreements with Robert Magyar to serve as
        SPT’s
        President and Michael Julian to serve as SPT’s Vice President/Director of
        Operations.
 
 The
        terms
        of the Agreement provide for a closing on or before May 16, 2006, upon
        completion of due diligence, an audit of Sentry’s previous operations and other
        conditions standard and customary in a transaction of this nature.
 
 SPT
        will
        manufacture and sell automatic battery backup power supply systems which
        will
        provide emergency power to residential and small business property owners.
        The
        Sentry Power System will consist of a lockable, ventilated enclosure, a solid
        state inverter unit, a transfer switch, a battery charger, a controller and
        sealed lead acid batteries. The Sentry Power System will be wired to specific
        electrical circuits in the customer’s electrical system. When the main power
        fails, the Sentry Power System will automatically and instantly convert the
        direct current (“DC”) stored in the batteries to standard alternating current
        (“AC”) and will provide AC current to the selected circuits.
 
 CHANGE
        IN
        NUMBER OF EMPLOYEES
 
 We
        do not
        expect significant changes in the number of our employees prior to the time
        we
        complete the design and construction of our pilot plant.





CAPITAL
      EXPENDITURES, CAPITAL RESOURCES AND LIQUIDITY





CAPITAL
        EXPENDITURES. During the fiscal year ended January 31, 2006, we incurred
        material capital expenditures of approximately $94,000 for the purchase of
        pilot
        plant machinery to apply lead tin plating to reticulated vitreous carbon
        plates.
        During the fiscal year ended January 31, 2005, we did not incur any material
        capital expenditures for office equipment, office furniture or other fixed
        assets.




CAPITAL
      RESOURCES





During
      the fiscal year ended January 31, 2005, our 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. During the
      fiscal year ended January 31, 2006, capital resources were provided by the
      sale
      of a $500,000 convertible debenture to Cornell Capital Partners, L.P. The net
      proceeds of this sale were $485,000 cash. Capital resources during the fiscal
      year ended January 31, 2006, were also provided by the sale of the Company’s
      common stock and the net proceeds of theses sales were $113,000.





Our
      capital resources have historically been provided by the sale of our common
      stock, the exercise of warrants and options, conversion of convertible debt
      into
      common stock, and by short term loans.





We
      intend
      to raise additional capital and reduce debt through the sale or exchange of
      our
      common stock or other securities to provide additional working capital to fund
      future operations.





We
      will
      require substantial additional financing to complete the capitalization of
      our
      business plan. The additional financing will be used primarily for payment
      of
      liabilities and for expansion of further research and development and marketing.
      We can give no assurance that we will successfully negotiate or obtain
      additional financing, or that we will obtain financing on terms favorable or
      acceptable to us. Our ability to obtain additional capital depends on market
      conditions, the global economy and other factors outside our control. If we
      do
      not obtain adequate financing, or such financing is not available on acceptable
      terms, our ability to satisfy our liabilities, finance our expansion, develop
      or
      enhance our products and services, and respond to competitive pressures would
      be
      significantly limited. Our failure to secure necessary financing could have
      a
      material adverse effect on our business, prospects, financial condition, and
      results of operations.





34




LIQUIDITY




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





FISCAL
      YEAR ENDED JANUARY
      31,





**2006**
            
            **2005**Net
                cash used by operating activities
            
            $
            (482,110
            )
            $
            (509,967
            )Net
                cash provided by financing activities
            
            $
            692,202
            
            $
            557,811Net
                cash used by investing activities
            
            $
            (74,470
            )
            $
            (3,096
            )





As
      of
      April 30, 2006, we had approximately $638,000 cash on hand.





At
      January 31, 2006, we had positive working capital of approximately $21,500
      compared to negative working capital of approximately $151,000 on January 31,
      2005. Management believes that if we complete the Asset
      Purchase Agreement with Sentry Power, LLC, described in SUBSEQUENT
      EVENT—POTENTIAL ACQUISITION, below, it will be necessary to increase it working
      capital to continue our research and development activities, which may be
      achieved by incurring additional indebtedness from stockholders or others.





Our
      ability to satisfy our obligations will depend in part upon our ability to
      successfully complete the offer and sale of additional shares of its common
      stock and in part upon our ability to reach a profitable level of operations.
      We
      plan to license our technology to other entities. We intend to discuss and
      explore various possible business combinations or transactions with established
      battery manufacturers. These may include joint venture agreements, licensing
      agreements, technology transfer agreements or other agreements by which
      established manufacturers acquire the right to employ our technology to
      manufacture batteries.




Subsequent
        to the fiscal year ending January 31, 2006, in February 2006, we received
        $495,000 from the proceeds from the issuance of a convertible debenture with
        Cornell Capital Partners, L.P. (as discussed below). Additionally, in April
        2006, we received $292,000 as the proceeds from the sale of our common stock
        by
        the exercise of stock options and warrants.




SUMMARY
      OF TRANSACTIONS WITH CORNELL CAPITAL PARTNERS, L.P.





We
      entered into a Securities Purchase Agreement (the "Agreement") with Cornell
      Capital Partners, L.P. (“Cornell”) effective December 22, 2005, for the sale of
      redeemable secured convertible debentures in the principal amount of $1,630,580
      (the "Debentures") and stock purchase warrants (the "Warrants") to buy
      20,904,875 shares of our Common Stock. Pursuant to the terms of the Agreement,
      we became obligated to file a registration statement with the Securities and
      Exchange Commission to register for the resale of the shares of our common
      stock
      underlying the Debentures and shares of our common stock underlying the
      Warrants.





Under
      the
      terms of our financing with Cornell, we have received net proceeds of
      $1,405,000. This financing was comprised of three separate segments of funding
      as follows:





1.
            In
                August and November 2004, we borrowed an aggregate of $500,000 from
                Cornell through two issuances of 5% Convertible Debentures which
                was
                secured by substantially all of our assets. On May 10, 2005, we refinanced
                the Convertible Debentures with a new Convertible Debenture in the
                principal amount of $514,657, which comprised the original $500,000
                principal plus accrued interest as of that date. On December 22,
                2005, the
                Convertible Debenture was replaced by a new Convertible Debenture
                which
                was issued in the principal amount of $530,580, comprising the original
                $500,000 principal plus accrued interest as of that date. This Convertible
                Debenture: (i) has a due date of December 22, 2007, (ii) bears interest
                at
                a rate of 10% per annum; (iii) was subject to a registration rights
                agreement; and (iv) is subject to certain conversion features. If
                this
                Debenture is repaid under an Optional Redemption Feature, we must
                issue a
                warrant (the “Warrant Feature”) to Cornell to purchase 1,000,000 shares of
                our common stock for each $100,000 redeemed, exercisable at 120%
                of the
                closing bid price of our common stock. This debenture is referred
                to
                herein as the “**First
                Debenture**.”


35





2.
            In
                December 2005, we issued a new Convertible Debenture in the principal
                amount of $500,000. This Convertible Debenture: (i) has a due date
                of
                December 22, 2007, (ii) bears interest at a rate of 10% per annum;
                (iii)
                was subject to a registration rights agreement; (iv) is subject to
                certain
                conversion features including the Optional Redemption Feature and
                Warrant
                Feature as under the terms of the First Debenture. This debenture
                is
                referred to herein as the “**Second
                Debenture**.”





3.
            Pursuant
                to the terms and conditions of the Securities Purchase Agreement,
                Cornell
                was obligated to promptly provide the Company with $550,000, less
                certain
                fees and expenses, and with an additional $550,000 within two business
                days before the filing date of a registration statement registering
                shares
                of our common stock underlying the Convertible Debentures and Warrants.
                On
                February 21, 2006, we issued Secured Convertible Debentures with
                Cornell
                in the principal amount of $550,000. This Convertible Debenture:
                (i) has a
                due date of February 21, 2008, (ii) bears interest at a rate of 10%
                per
                annum; (iii) was subject to a registration rights agreement; and
                (iv) is
                subject to certain conversion features including the Optional Redemption
                Feature and Warrant Feature as under the terms of the First Debenture.
                This debenture is referred to herein as the “**Third
                Debenture**”.





The
      First
      Debenture, Second Debenture and Third Debenture are referred to collectively
      as
      the “Convertible Debentures.”





Conversion
      Feature





The
      Convertible Debentures are convertible (“Conversion Feature”) into our common
      stock at any time until repayment of the Convertible Debentures at the price
      per
      share equal to the lesser of:




a.
            an
                amount equal to 120% of the closing bid price of the common stock
                (the
                “Optional Redemption Feature”); or




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





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


36


**Significant
      Accounting Estimates and Policies**




Accounting
        for Stock-Based Compensation. We have elected to apply the disclosure-only
        provisions of SFAS No. 123, Accounting for Stock-Based Compensation. In
        accordance with the provisions of SFAS 123, we apply Accounting Principles
        Board
        Opinion No. 25, Accounting for Stock Issued to Employees, and will use related
        interpretations in accounting for stock option plans. We account for stock
        issued to non-employees in accordance with the provisions of SFAS 123 and
        the
        Emerging Issues Task Force consensus in Issue No. 96-18, Accounting for Equity
        Instruments That are Issued to Other Than Employees for Acquiring or in
        Conjunction with Selling, Goods or Services. Generally, under APB 25, if
        the
        option exercise price for a fixed award to an employee is equal to the fair
        value of the common stock at the date of the grant of the stock option, no
        compensation expense is recorded. Under SFAS 123 and EITF 96-18, the amount
        of
        compensation expense that is recorded is based on an option pricing model
        which
        incorporates such factors as the expected volatility of future movements
        in the
        price of the underlying stock, risk-free interest rates, the term of the
        options
        and any dividends expected to be paid. As a result, under SFAS 123 and EITF
        96-18, we would generally expect to record a greater amount of compensation
        expense than under APB 25.




Secured
      Convertible Debentures and Warrants- Derivative Financial
      Instruments





The
      Convertible Debentures and the Warrants have been accounted for in accordance
      with SFAS No. 133, “Accounting for Derivative Instruments and Hedging
      Activities,” and Emerging Issues Task Force Issue No. 00-19, “Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in, a
      Company’s Own Stock” (“EITF No. 00-19”). EITF No. 98-5, "Accounting for
      Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios", EITF No. 00-27, “Application of Issue 98-5 to
      Certain Convertible Instruments”, EITF No. 05-02 “Meaning of ‘Conventional
      Convertible Debt Instrument’ in Issue No. 00-19”, EIFT No. 05-04 “The Effect of
      a Liquidated Damages Clause on a Freestanding Financial Instrument Subject
      to
      Issue No. 00-19,” and EITF No. 96-19 “Debtor’s Accounting for a Modification or
      Exchange of Debt Instruments” were also considered.




We
      have
      identified the following instruments and derivatives:





Convertible
      Debentures


Conversion
      Feature


Company’s
      Optional Redemption right


Warrant
      Feature





We
      have
      identified the Conversion Feature and Power Technology’s Optional Redemption
      within the Convertible Debentures to represent embedded derivatives. These
      embedded derivatives have been bifurcated from their respective host debt
      contracts and accounted for as derivative liabilities because they are subject
      to a Registration Rights Agreement (“RRA”). The Conversion Feature and Power
      Technology’s Optional Redemption within the Convertible Debentures have been
      bundled together as a single hybrid compound instrument in accordance with
      SFAS
      No. 133 Derivatives Implementation Group Implementation Issue No. B-15,
“Embedded Derivatives: Separate Accounting for Multiple Derivative Features
      Embedded in a Single Hybrid Instrument.” We have identified the Warrant Feature
      to be detachable derivatives. The Single Compound Embedded Derivatives within
      Convertible Debentures and the Derivative Liability for Warrants have been
      recorded at their respective fair values at the date of issuance (December
      22,
      2005); and are marked-to-market each quarter with changes in fair value recorded
      to Power Technology’s consolidated statements of operations as “Net change in
      fair value of derivative liabilities.” We have utilized a third party valuation
      firm to fair value these derivative liabilities under the following methods:
      a
      layered discounted probability-weighted cash flow approach for the Single
      Compound Embedded Derivatives within Convertible Debentures; and the
      Black-Scholes model for the Derivative Liability for Warrants based on a
      probability-weighted exercise price.





The
      fair
      value of the derivative liabilities are subject to the changes in the trading
      value of our common stock. As a result, our financial statements may fluctuate
      from quarter-to-quarter based on factors, such as the price of our stock at
      the
      balance sheet date, the amount of shares converted by debenture holders and/or
      exercised by warrant holders. Consequently, our financial position and results
      of operations may vary from quarter-to-quarter based on conditions other than
      operating revenues and expenses.




UNCERTAINTIES
 
 DEVELOPMENT
        STAGE COMPANY
 
 We
        are in
        the development stage. There is no assurance that our activities will be
        profitable. The likelihood of our success must also be balanced with
        considerations 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.




37


GOING
      CONCERN





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




At
          January 31, 2006, we had positive working capital of approximately $21,500,
          a
          loss from operations for the year ended January 31, 2006, of $(3,245,966)
          and an
          accumulated deficit of $(14,769,116) since June 3, 1996, the date of our
          inception.


Management
      believes that current plans to expand our operations and a combination of our
      financing and plans to raise capital through the sale of our common stock will
      provide sufficient working capital to allow us to continue as a going concern.





Subsequent
        to our fiscal year end, in February 2006, we received $495,000 from the proceeds
        of the issuance of a convertible debenture to Cornell Capital Partners, L.P.
        (as
        discussed above). Additionally, in April 2006, we received $292,000 cash
        from
        the sale of our common stock and for exercise of stock options and warrants.
        As
        of May 1, 2006, we had approximately $638,000 cash on hand.


COSTS
      OF
      CONDUCTING BUSINESS. We will be required to incur substantial costs for research
      and development and equipment, establishing production and marketing operations,
      and related costs. A substantial portion of those costs must be paid whether
      or
      not any of its batteries or other products proves to be commercially successful
      on a broad scale. Our ability to generate a profit depends, among other factors,
      on the amount of equipment acquisition costs incurred, the amount of revenues
      from the sale of batteries and other products, and control over our operating
      costs.





TECHNOLOGICAL
      CHANGE. We expect that many new technologies and products will be introduced
      in
      the battery industry over the next several years. Established battery
      manufacturers, such as Exide, Delphi, A.C. Delco, Johnson Controls, Inc., East
      Penn Manufacturing Co., Inc GNB, Electrosource, Inc., Energy Conversion Devices,
      Inc., Hawker and Yuasa, all of which have substantially greater financial
      resources than us. These other companies have larger staffs, more resources,
      more laboratories, more equipment, and more manufacturing and testing facilities
      than us. These other companies can also dedicate substantially more personnel
      and resources to research and developing new products than us. They may be
      able
      to develop more technologically advanced products that are less expensive and
      have a greater useful life and better operating performance than our products.
      Our success will depend, among other things, on our ability to develop and
      maintain a competitive position technologically. There can be no assurance
      that
      we will have access to subsequently developed technology by other persons.
      Technological advances by a competitor may result in our present or future
      products becoming non-competitive or obsolete. We cannot be assured that
      competitors will not develop functionally similar or superior batteries, which
      event could have an adverse effect on our business.





CONTRACTS.
      We have no current contracts for the manufacture or sale of our batteries or
      other products. There can be no assurance that we will be able to obtain
      sufficient and suitable contracts for our business plan.





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


38





There
      can
      be no assurance that our products will achieve broad market acceptance or that
      we will be successful in marketing our products or enhancements thereto. In
      the
      event that our current or future competitors release new products that have
      more
      advanced features, offer better performance or are more price competitive than
      our products, demand for our products would decline. A decline in demand for,
      or
      market acceptance of, our batteries or other products as a result of
      competition, technological change, or other factors would have material adverse
      effects on our business, financial condition and results of operations.





RAW
      MATERIALS. The basic raw materials and components for the batteries and other
      products being developed by us are readily available. We do not expect to
      experience any significant delays in obtaining timely delivery of our materials
      and components.





SEASONALITY.
      We do not expect to experience material seasonal variations in revenues or
      operating costs, except that sales activity for its batteries may increase
      in
      the summer and winter seasons which is expected to cause an increase in our
      operations.





**ITEM
      7. FINANCIAL STATEMENTS.**




The
      consolidated financial statements of the Company for its fiscal year ended
      January 31, 2006, are provided with this Form 10-KSB annual report and are
      incorporated herein by reference.




39




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, 2006, and the related
            consolidated statements of operations, stockholders’ deficit and cash flows for
            each of the two years then ended and the period from June 3, 1996
            (inception) to January 31, 2006. These financial statements are the
            responsibility of Power Technology, Inc.'s management. Our responsibility
            is to
            express an opinion on these financial statements based on our audits.
            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, 2006, 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 audits 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
            audits provide 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 Power Technology,
            Inc. as of
            January 31, 2006, and the results of its operations and its cash flows for
            the years ended January 31, 2006 and 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
            3,
            2006
  F-1
  Power
          Technology, Inc.
 (a
          Development Stage Company)
 Consolidated
          Balance Sheet
 
 **January
                    31,**
                  **2006**ASSETSCurrent
                    assetsCash
                    and equivalents
                
                $
                180,583Prepaid
                    expenses
                
                
                1,278Deposit
                    for equipment
                
                
                9,470Total
                    current assets
                
                
                191,331Fixed
                    assets, net of accumulated depreciation of $27,156
                
                
                821Deferred
                    financing costs, net of accumulated amortization of $3,562
                
                
                61,438Total
                    assets
                
                $
                253,590LIABILITIES
                    AND STOCKHOLDERS' (DEFICIT)Current
                    liabilitiesAccounts
                    payable
                
                $
                120,770Short-term
                    debt
                
                
                49,000Total
                    current liabilities
                
                
                169,770Non-current
                    liabilitiesConvertible
                    debentures, net of discount
                
                
                194,279Derivative
                    liability
                
                
                2,441,900Total
                    non-current liabilities
                
                
                2,636,179Total
                    liabilities
                
                
                2,805,949Stockholders'
                    (deficit):Preferred
                    stock, $0.01 par value, 1,000,000 sharesauthorized,
                    none issued or outstanding
                
                
                —Common
                    stock, $0.001 par value, 750,000,000 sharesauthorized,
                    135,495,745 shares issued and outstanding
                
                
                135,495Additional
                    paid-in capital
                
                
                12,082,640Other
                    comprehensive loss
                
                
                (1,378
                )(Deficit)
                    accumulated during development stage
                
                
                (14,769,116
                )Total
                    stockholders' (deficit)
                
                
                (2,552,359
                )Total
                    liabilities and stockholders' (deficit)
                
                $
                253,590
 
 The
          accompany notes are an integral part of these financial statements.
  F-2
 
 POWER
          TECHNOLOGY, INC.
 (a
          Development Stage Company)
 Consolidated
          Statements of Operations and Comprehensive Loss
 for
          the
          years ended January 31, 2006 and 2005 and
 the
          period from June 3, 1996 (inception) to January 31, 2006
 
 **For
                      the years ended January 31,**
                ****
                **June
                        3, 1996 (inception) to January 31,**
                ********
                ****
                **2006**
                ****
                **2005**
                ****
                **2006**Consulting
                    revenue
                
                $
                —
                
                $
                —
                
                $
                26,663Operating
                    expenses:General
                    administrative expenses
                
                
                402,958
                
                
                503,069
                
                
                3,387,330Research
                    & development-related party
                
                
                —
                
                
                —
                
                
                1,350,083Research
                    & development
                
                
                31,857
                
                
                2,595
                
                
                34,452Consulting
                    fee
                
                
                68,003
                
                
                46,671
                
                
                271,174Stock-based
                    executive compensation andreimbursed
                    expenses
                
                
                98,020
                
                
                698,895
                
                
                1,007,915Stock-based
                    consulting fee
                
                
                592,347
                
                
                787,430
                
                
                1,382,027Stock-based
                    consulting fees-related party
                
                
                —
                
                
                —
                
                
                4,665,022Stock-based
                    legal fees
                
                
                —
                
                
                22,500
                
                
                20,250Stock-based
                    patent litigation fees
                
                
                —
                
                
                152,000
                
                
                152,000Loss
                    from impairment of related party advances
                
                
                —
                
                
                —
                
                
                127,000Depreciation
                    and amortization
                
                
                6,879
                
                
                8,960
                
                
                36,756Total
                    operating expenses
                
                
                1,200,064
                
                
                2,222,120
                
                
                12,434,009Interest
                    income
                
                
                15
                
                
                —
                
                
                794Other
                    expenses:Interest
                    expense
                
                
                510,718
                
                
                122,726
                
                
                748,443Interest
                    expense-related party
                
                
                —
                
                
                22,006
                
                
                22,006Gain/(loss)
                    on derivatives
                
                
                1,521,299
                
                
                —
                
                
                1,521,299Impairment
                    of long lived assets
                
                
                13,900
                
                
                55,000
                
                
                68,900Loss
                    on foreign currency
                
                
                —
                
                
                —
                
                
                1,916Total
                    other expenses
                
                
                2,045,917
                
                
                199,732
                
                
                2,362,564Net
                    (loss)
                
                $
                (3,245,966
                )
                $
                (2,421,852
                )
                $
                (14,769,116
                )Other
                    comprehensive loss - foreign currency translation
                
                
                (1,378
                )
                
                —
                
                
                (1,378
                )Comprehensive
                    loss
                
                $
                (3,247,344
                )
                $
                (2,421,852
                )
                $
                (14,770,494
                )Weighted
                    average number ofcommon
                    shares outstanding-basic and fully diluted
                
                
                133,781,064
                
                
                92,024,718Net
                    (loss) per share-basic and fully diluted
                
                $
                (0.02
                )
                $
                (0.03
                )
 
 The
          accompany notes are an integral part of these financial statements
  F-3
 
 POWER
          TECHNOLOGY, INC.
 (a
          Development Stage Company)
 Consolidated
          Statements of Changes in Stockholders' (Deficit)
 for
          the
          period June 3, 1996 (inception) to January 31, 2006
 
 **Common
                    Stock**
                ****
                **Additional****Paid-In**
                ****
                **(Deficit)**
                      **Accumulated****DuringDevelopment**
                ****
                **Accumulated****Other****Comprehensive**
                ****
                **Prior****Period**
                ****
                **Total****Stockholders'****Shares**
                ****
                **Amount**
                ****
                **Capital**
                ****
                **Stage**
                ****
                **Gain/(Loss)**
                ****
                **Adjustments**
                ****
                **(Deficit)**Balance
                    June 3, 1996
                
                
                2,500,000
                
                $
                2,500
                
                $
                22,500
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                25,000Net
                    (loss) for the period endedJanuary
                    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 endedJanuary
                    31, 1998
                
                
                —
                
                
                —
                
                
                —
                
                
                (51,374
                )
                
                —
                
                
                —
                
                
                (51,374
                )Balance
                    January 31, 1998
                
                
                2,500,000
                
                
                2,500
                
                
                22,500
                
                
                (191,281
                )
                
                —
                
                
                —
                
                
                (166,281
                )Reorganization
                    of Company,reverse
                    acquisition of Zepplin, Inc.
                
                
                2,800,000
                
                
                2,800
                
                
                (2,573
                )
                
                
                
                
                
                
                
                
                
                
                227Shares
                    issued for cash
                
                
                6,900,000
                
                
                6,900
                
                
                683,300
                
                
                
                
                
                
                
                
                
                
                
                690,200Shares
                    issued for patents
                
                
                200,000
                
                
                200
                
                
                19,800
                
                
                
                
                
                
                
                
                
                
                
                20,000Shares
                    issued for consulting services
                
                
                134,700
                
                
                135
                
                
                134,565
                
                
                
                
                
                
                
                
                
                
                
                134,700Net
                    (loss) for the year endedJanuary
                    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
                
                
                
                
                
                
                
                
                
                
                
                289,999Shares
                    issued for consulting services
                
                
                548,800
                
                
                549
                
                
                329,001
                
                
                
                
                
                
                
                
                
                
                
                329,550Shares
                    issued for debt conversion
                
                
                1,034,000
                
                
                1,034
                
                
                205,766
                
                
                
                
                
                
                
                
                
                
                
                206,800Prior
                    period adjustment
                
                
                
                
                
                (200
                )
                
                (20,000
                )
                
                
                
                
                —
                
                
                20,000
                
                
                (200
                )Net
                    (loss) for the year endedJanuary
                    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
                
                
                
                
                
                
                
                
                
                
                
                598,875Shares
                    issued for consulting services
                
                
                1,055,000
                
                
                1,055
                
                
                465,395
                
                
                
                
                
                
                
                
                
                
                
                466,450Reversal
                    of prior period adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                —
                
                
                (20,000
                )
                
                (20,000
                )Net
                    (loss) for the year endedJanuary
                    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
                
                
                
                
                
                
                
                
                
                
                
                2,339,456Shares
                    issued for debt conversion
                
                
                1,050,000
                
                
                1,050
                
                
                523,950
                
                
                
                
                
                
                
                
                
                
                
                525,000Share
                    issued for interest
                
                
                171,780
                
                
                172
                
                
                59,951
                
                
                
                
                
                
                
                
                
                
                
                60,123Shares
                    issued for cash
                
                
                20,500
                
                
                205
                
                
                76,595
                
                
                
                
                
                
                
                
                
                
                
                76,800Net
                    (loss) for the year endedJanuary
                    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
                
                
                
                
                
                
                
                
                
                
                
                1,761,416Shares
                    issued for debt conversion
                
                
                293,958
                
                
                294
                
                
                195,206
                
                
                
                
                
                
                
                
                
                
                
                195,500Shares
                    issued for cash
                
                
                207,500
                
                
                208
                
                
                182,083
                
                
                
                
                
                
                
                
                
                
                
                182,291Net
                    (loss) for the year endedJanuary
                    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
                
                
                
                
                
                
                
                
                
                
                
                225,160Shares
                    issued for consulting services-
                    related party
                
                
                372,000
                
                
                372
                
                
                28,668
                
                
                
                
                
                
                
                
                
                
                
                29,040Shares
                    issued for debt conversion
                
                
                10,000,000
                
                
                10,000
                
                
                690,000
                
                
                
                
                
                
                
                
                
                
                
                700,000Share
                    issued for interest
                
                
                —
                
                
                —
                
                
                27,800
                
                
                
                
                
                
                
                
                
                
                
                27,800Shares
                    issued for cash
                
                
                1,207,500
                
                
                1,208
                
                
                28,793
                
                
                
                
                
                
                
                
                
                
                
                30,001Shares
                    cancelled
                
                
                (165,500
                )
                
                (166
                )
                
                —
                
                
                
                
                
                
                
                
                
                
                
                (166
                )Net
                    (loss) for the year endedJanuary
                    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
                
                
                
                
                
                
                
                
                
                
                
                852,412Shares
                    issued for debt conversion
                
                
                13,435,600
                
                
                13,436
                
                
                322,454
                
                
                
                
                
                
                
                
                
                
                
                335,890Shares
                    issued for financing fees
                
                
                8,849,558
                
                
                8,850
                
                
                416,150
                
                
                
                
                
                
                
                
                
                
                
                425,000Share
                    issued for interest
                
                
                —
                
                
                .
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                —Shares
                    issued for legal fees
                
                
                5,750,000
                
                
                5,750
                
                
                166,500
                
                
                
                
                
                
                
                
                
                
                
                172,250Shares
                    issued for executive compensation
                
                
                24,026,658
                
                
                24,026
                
                
                617,122
                
                
                
                
                
                
                
                
                
                
                
                641,148Net
                    (loss) for the year endedJanuary
                    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
                )Shares
                    issued for consulting services
                
                
                9,064,967
                
                
                9,064
                
                
                675,756
                
                
                
                
                
                
                
                
                
                
                
                684,820Shares
                    issued for debt conversion
                
                
                —
                
                
                —
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                —Shares
                    issued for financing fees
                
                
                —
                
                
                —
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                —Share
                    issued for interest
                
                
                —
                
                
                .
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                —Shares
                    issued for legal fees
                
                
                —
                
                
                —
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                —Shares
                    issued for executive compensation
                
                
                1,250,577
                
                
                1,251
                
                
                98,343
                
                
                
                
                
                
                
                
                
                
                
                99,594Share
                    issued for cash
                
                
                3,000,000
                
                
                3,000
                
                
                110,000
                
                
                
                
                
                
                
                
                
                
                
                113,000Share
                    rescission
                
                
                (4,000,000
                )
                
                (4,000
                )
                
                4,000
                
                
                
                
                
                
                
                
                
                
                
                —Other
                    comprehensive loss on translation valuation
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,378
                )
                
                
                
                
                (1,378
                )Net
                    (loss) for the year ended
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                —January
                    31, 2006
                
                
                —
                
                
                —
                
                
                —
                
                
                (3,245,966
                )
                
                —
                
                
                —
                
                
                (3,245,966
                )Balance
                    January 31, 2006
                
                
                135,495,745
                
                
                135,495
                
                
                12,082,640
                
                
                (14,769,116
                )
                
                (1,378
                )
                
                —
                
                
                (2,552,359
                )
 
 The
          accompanying notes are an integral part of these financial
          statements.
  F-4
  POWER
          TECHNOLOGY, INC.
 (a
          Development Stage Company)
 Consolidated
          Statements of Cash Flows
 for
          the
          years ended January 31, 2006 and 2005 and
 the
          period from June 3, 1996 (inception) to January 31, 2006
 
 **For
                    the years ended January 31,**
                ****
                **June
                    3, 1996**
                  **(inception)
                    to**
                  **January
                    31,**
                ********
                ****
                **2006**
                ****
                **2005**
                ****
                **2006**Cash
                    flows from operating activitiesNet
                    (loss)
                
                $
                (3,245,966
                )
                $
                (2,421,852
                )
                $
                (14,769,116
                )Adjustments
                    to reconcile net (loss) to net cash(used)
                    by operating activitiesDepreciation
                    expense
                
                
                2,079
                
                
                10,000
                
                
                32,996Impairment
                    of long lived assets
                
                
                18,700
                
                
                55,000
                
                
                73,700Loss
                    from impairment of related party advances
                
                
                —
                
                
                —
                
                
                127,000Amortization
                    of debt discount
                
                
                461,383
                
                
                72,917
                
                
                534,300Amortization
                    of deferred financing costs
                
                
                3,562
                
                
                —
                
                
                3,562Loss
                    on derivatives
                
                
                1,521,299
                
                
                —
                
                
                1,521,299Stock
                    issued for executive compensation and reimbursement
                    expenses
                
                
                61,941
                
                
                641,149
                
                
                703,090Stock
                    issued for director fees
                
                
                37,653
                
                
                —
                
                
                37,653Stock
                    issued for consulting services
                
                
                684,820
                
                
                821,597
                
                
                6,115,409Stock
                    issued for consulting fees-related party
                
                
                —
                
                
                —
                
                
                212,530Stock
                    issued for legal fees-related party
                
                
                —
                
                
                22,500
                
                
                22,500Stock
                    issued for patent litigation legal fees
                
                
                —
                
                
                152,000
                
                
                152,000Stock
                    issued for interest expense
                
                
                —
                
                
                —
                
                
                60,123Stock
                    issued to acquire patents
                
                
                —
                
                
                —
                
                
                (20,000
                )Warrants
                    issued for consulting fees
                
                
                —
                
                
                28,564
                
                
                56,364Increase
                    in prepaid expenses
                
                
                (1,278
                )
                
                —
                
                
                (1,278
                )Decrease
                    in employee advance
                
                
                —
                
                
                1,000
                
                
                1,000(Decrease)
                    increase in accounts payable
                
                
                (26,303
                )
                
                107,158
                
                
                139,128Net
                    cash used by operating activity
                
                
                (9,470
                )
                
                (509,967
                )
                
                (92,733
                )Cash
                    flows from investing activitiesPurchase
                    of equipment
                
                
                —
                
                
                (3,096
                )
                
                (24,763
                )Payment
                    of deposit for equipment
                
                
                (9,470
                )
                
                —
                
                
                (9,470
                )Patent
                    acquisition
                
                
                —
                
                
                —
                
                
                (58,500
                )Net
                    cash used by investing activities
                
                
                (9,470
                )
                
                (3,096
                )
                
                (92,733
                )Cash
                    flows from financing activitiesProceeds
                    from debt
                
                
                1,682,237
                
                
                49,000
                
                
                1,811,323Repayments
                    of debt
                
                
                (1,101,657
                )
                
                83,811
                
                
                (864,377
                )Proceeds
                    from convertible debentures
                
                
                —
                
                
                425,000
                
                
                1,300,010Payment
                    of deferred financing costs
                
                
                (65,000
                )
                
                —
                
                
                (65,000
                )Other
                    comprehensive loss on translation valuation
                
                
                (1,378
                )
                
                —
                
                
                (1,378
                )Issuance
                    of common stock
                
                
                113,000
                
                
                —
                
                
                3,090,478Net
                    cash provided by financing activities
                
                
                627,202
                
                
                557,811
                
                
                5,271,056Net
                    increase in cash
                
                
                135,622
                
                
                44,748
                
                
                180,583Cash
                    and equivalents - beginning
                
                
                44,961
                
                
                213
                
                
                —Cash
                    and equivalents - ending
                
                $
                180,583
                
                $
                44,961
                
                $
                180,583Supplemental
                    disclosuresInterest
                    paid
                
                $
                66,769
                
                $
                6,424
                
                $
                73,193Income
                    taxes paid
                
                $
                —
                
                $
                —
                
                $
                —Non-cash
                    investing and financing activitiesValue
                    of shares issued for note payable and interest expense
                
                $
                —
                
                $
                335,890
                
                $
                335,890Value
                    of shares issued for debt conversion
                
                $
                —
                
                $
                —
                
                $
                1,627,300Value
                    of shares issued to acquire patents
                
                $
                —
                
                $
                —
                
                $
                20,000
 
 The
          accompanying notes are an integral part of these financial
          statements.
  F-5
 **POWER
          TECHNOLOGY, INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  NOTE
        1 -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Organization
  Power
          Technology, Inc. (“Power Technology” or the "Company") was originally
          incorporated as PowerTek in Nevada on January 19, 1996. Power Technology
          was
          organized primarily for the purpose of developing an advanced battery technology
          for use in the growing electric car industry. As of January 31, 2006, Power
          Technology 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.
 
 Power
        Technology 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 Power Technology
        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.
 Revenue
        Recognition
 
 Power
        Technology 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,
        Power Technology 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 Power Technology are reviewed for possible
        impairment whenever events or circumstances indicate the carrying amount
        of an
        asset may not be recoverable or are impaired. Power Technology 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
 
 Power
        Technology 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 Power Technology's foreign operations is the local
          currency. Assets and liabilities of Power Technology'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-6
  Stock-Based
        Compensation
 
 Power
        Technology 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
        Power Technology had applied the fair value provisions of SFAS No. 123,
        Accounting for Stock-Based Compensation, to stock-based employee
        compensation.
 
 **2006**
              ****
              **2005**Net
                  loss as reported
              
              $
              (3,245,966
              )
              $
              (2,421,852
              )Add:
                  Stock based compensation determinedunder
                  intrinsic value-based method
              
              
              -
              
              
              25,000Less:
                  stock based compensation seterminedunder
                  fair value-based method
              
              
              -
              
              
              (27,765
              )Pro
                  forma net loss
              
              $
              (3,245,966
              )
              $
              (2,424,617
              )Basic
                  and diluted net loss per common share:As
                  reported
              
              $
              (0.01
              )
              $
              (0.03
              )Pro
                  forma
              
              $
              (0.01
              )
              $
              (0.03
              )
 
 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
 
 Power
        Technology 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. Power Technology provides a valuation
        allowance for deferred tax assets for which it does not consider realization
        of
        such assets to be more likely than not.
 
 Secured
        Convertible Debentures and Warrants- Derivative Financial
        Instruments
 
 The
          Convertible Debentures and the Warrants have been accounted for in accordance
          with SFAS No. 133, “Accounting for Derivative Instruments and Hedging
          Activities,” and Emerging Issues Task Force Issue No. 00-19, “Accounting for
          Derivative Financial Instruments Indexed to, and Potentially Settled in,
          a
          Company’s Own Stock” (“EITF No. 00-19”). EITF No. 98-5, "Accounting for
          Convertible Securities with Beneficial Conversion Features or Contingently
          Adjustable Conversion Ratios", EITF No. 00-27, “Application of Issue 98-5 to
          Certain Convertible Instruments”, EITF No. 05-02 “Meaning of ‘Conventional
          Convertible Debt Instrument’ in Issue No. 00-19”, EITF No. 05-04 “The Effect of
          a Liquidated Damages Clause on a Freestanding Financial Instrument Subject
          to
          Issue No. 00-19,” and EITF No. 96-19 “Debtor’s Accounting for a Modification or
          Exchange of Debt Instruments” were also considered.
 Power
        Technology has identified the following instruments and
        derivatives:
 
 Convertible
        Debentures
 Conversion
        Feature
 Company’s
        Optional Redemption right
 Warrant
        Feature
 
 Power
        Technology has identified the Conversion Feature and Power Technology’s Optional
        Redemption within the Convertible Debentures to represent embedded derivatives.
        These embedded derivatives have been bifurcated from their respective host
        debt
        contracts and accounted for as derivative liabilities because they are subject
        to a Registration Rights Agreement (“RRA”). The Conversion Feature and Power
        Technology’s Optional Redemption within the Convertible Debentures have been
        bundled together as a single hybrid compound instrument in accordance with
        SFAS
        No. 133 Derivatives Implementation Group Implementation Issue No. B-15,
“Embedded Derivatives: Separate Accounting for Multiple Derivative Features
        Embedded in a Single Hybrid Instrument.”
 F-7
 
 Power
        Technology has identified the Warrant Feature to be detachable
        derivatives.
 
 The
        Single Compound Embedded Derivatives within Convertible Debentures and the
        Derivative Liability for Warrants have been recorded at their respective
        fair
        values at the date of issuance (December 22, 2005); and are marked-to-market
        each quarter with changes in fair value recorded to Power Technology’s
        consolidated statements of operations as “Net change in fair value of derivative
        liabilities.” Power Technology has utilized a third party valuation firm to fair
        value these derivative liabilities under the following methods: a layered
        discounted probability-weighted cash flow approach for the Single Compound
        Embedded Derivatives within Convertible Debentures; and the Black-Scholes
        model
        for the Derivative Liability for Warrants based on a probability-weighted
        exercise price.
 
 The
        fair
        value of the derivative liabilities are subject to the changes in the trading
        value of Power Technology’s common stock. As a result, Power Technology’s
        financial statements may fluctuate from quarter-to-quarter based on factors,
        such as the price of Power Technology’s stock at the balance sheet date, the
        amount of shares converted by debenture holders and/or exercised by warrant
        holders. Consequently, Power Technology’s financial position and results of
        operations may vary from quarter-to-quarter based on conditions other than
        operating revenues and expenses.
 
 Recent
        Pronouncements
 
 In
        April
        2005, the Securities and Exchange Commission amended the effective date of
        Statement of Financial Accounting Standards No. 123R, “Share Based Payment”
(‘SFAS 123R”), from the first interim or annual period after June 15, 2005 to
        the beginning of the next fiscal year that begins after June 15, 2005. SFAS
        123R
        requires that the cost of all share-based payments to employees, including
        grants of employee stock options, be recognized in the financial statements
        based on their fair values. That cost will be recognized as an expense over
        the
        vesting period of the award. Pro forma disclosures previously permitted under
        SFAS 123 no longer will be an alternative to financial statement recognition.
        In
        addition, Power Technology will be required to determine fair value in
        accordance with SFAS 123R. Power Technology does not expect that SFAS 123R
        will
        have a material impact on its consolidated financial statements.
 
 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 Power
          Technology will continue as a going concern which contemplates the
          recoverability of assets and the satisfaction of liabilities in the normal
          course of business. As noted above, Power Technology is in the development
          stage
          and, accordingly, has not yet generated revenues from operations. Since
          its
          inception, Power Technology has been engaged substantially in financing
          activities and developing its product line, incurring substantial costs
          and
          expenses. As a result, Power Technology incurred net losses of $3,247,344
          during
          the year ended January 31, 2006, and $2,423,481 during the year ended January
          31, 2005. In addition, Power Technology's development activities since
          inception
          have been financially sustained by debt and capital contributions from
          its
          affiliates and others.
 The
        ability of Power Technology to continue as a going concern is dependent upon
        its
        ability to raise additional capital from the sale of common stock and,
        ultimately, the achievement of significant operating revenues. The accompanying
        financial statements do not include any adjustments that might be required
        should Power Technology be unable to recover the value of its assets or satisfy
        its liabilities.
  F-8
 
 NOTE
        3 -
        FIXED ASSETS
 
 Fixed
        assets as of January 31, 2006 consisted of the following:
 
 Prototype
                  Plant
              
              $
              94,700Office
                  equipment
              
              
              21,737Manufacturing
                  equipment
              
              
              4,076Leasehold
                  improvements
              
              
              2,164Less:
                  Accumulated depreciation
              
              
              (27,156
              )Fixed
                  assets, net
              
              $
              95,521
 
 Depreciation
        expense for the years ended January 31, 2006 and 2005 was $2,079 and $4,160,
        respectively. On January 12, 2006 Power Technology contracted with a third
        party vendor to deliver a Prototype Plant to demonstrate the feasibility
        of
        manufacture battery cells based on the patent that the company holds. The
        plant
        will start production in 2006 therefore no depreciation was expensed for
        it as
        of January 31, 2006.
 
 NOTE
        4 -
        PATENTS
 
 Certain
        costs were capitalized for patents. All other related patent acquisition
        and
        development costs have been expensed. During fiscal 2005, $55,000 was deemed
        impaired and written off. During fiscal 2006, the remaining amount was written
        off.
 
 NOTE
        5 -
        NOTE PAYABLE AND SECURED CONVERTIBLE DEBENTURES
 
 Note
        Payable-
 
 In
        July
        2004, Power Technology borrowed $49,000 from a third party. This loan is
        non-interest bearing and is due on demand.
 
 Convertible
        Debentures-
 
 In
        August
        and November 2004, Power Technology borrowed $500,000 from Cornell Capital
        Partners, L.P. (“Cornell” or “CCP”) through two issuances of 5% Convertible
        Debentures (“CCP-1” and “CCP-2”), secured by substantially all of Power
        Technology's assets. On May 10, 2005, Power Technology refinanced CCP-1 and
        CCP-2 with a new Convertible Debenture (“CCP-3”) in the principal amount of
        $514,657, which comprised the original $500,000 principal plus accrued interest.
        On December 22, 2005, CCP-3 was replaced by a new Convertible Debenture
        (“CCP-4”), which was issued in the principal amount of $530,580, comprising the
        original $500,000 principal plus accrued interest. CCP-4 has a due date of
        December 22, 2007, and bears interest at 10% per annum. CCP-1 through CCP-4
        (and
        later, CCP-5) are collectively referred to as the “Convertible
        Debentures.”
 
 The
        Convertible Debentures are convertible (“Conversion Feature”) into the common
        stock of Power Technology at any time until repayment of the Convertible
        Debentures at the price per share equal to the lesser of:
 
 a.
              an
                  amount equal to 120% of the closing bid price of the common stock
                  (the
                  “Optional Redemption Feature”); or
 
 b.
              an
                  amount equal to 100% of the average of the three lowest closing
                  bid prices
                  of the common stock for the 30trading days immediately preceding the
                  conversion date.
  However,
        in no event shall Cornell convert the Convertible Debentures in such manner
        that
        would cause Cornell to beneficially own more than 4.99% of the then total
        issued
        and outstanding shares of Power Technology's common stock.
 
 If
        CCP-4
        is repaid under the Optional Redemption Feature, Power Technology must issue
        a
        warrant (the “Warrant Feature”) to Cornell to purchase 1,000,000 shares
        (formerly 50,000 shares for CCP-1 through CCP-3) of its common stock for
        each
        $100,000 redeemed, exercisable at 120% of the closing bid price of the common
        stock. CCP-4 is secured by substantially all of Power Technology’s assets, is
        subject to a RRA, and includes default provisions.
 
 Also
        on
        December 22, 2005, Power Technology issued $500,000 of new Convertible
        Debentures due 2007 (“CCP-5”), bearing an annual interest rate of 10%, and
        providing for the same Conversion Feature, Optional Redemption Feature, Warrant
        Feature, RRA, default and other provisions as under the terms of CCP-4.
  F-9
 
 For
        each
        of CCP-4 and CC-5, the Conversion Feature and Optional Redemption Feature
        were
        designated as embedded derivatives, and have been bundled together as a single
        compound embedded derivative liability. Power Technology utilized a layered
        discounted probability-weighted cash flow approach to determine the initial
        fair
        values of these Convertible Debentures at issuance date (December 22, 2005),
        which were as follows: CCP-4- $370,601 and CCP-5- $381,398. The fair value
        model
        comprises multiple probability-weighted scenarios under various assumptions
        reflecting the economics of CCP-4 and CCP-5, such as the risk-free interest
        rate, expected Company stock price and volatility, likelihood of conversion
        and/or redemption, and likelihood of default status and timely registration.
        At
        inception, the fair values of these single compound embedded derivatives
        were
        bifurcated from their respective debt host contracts and recorded as derivative
        liabilities, which resulted in a reduction of the initial notional carrying
        amount of the Convertible Debentures (as unamortized discount, which will
        be
        amortized over the two-year life of the notes under the effective interest
        method). For each of CCP-4 and CCP-5, the Warrant Feature has been designated
        as
        a freestanding derivative liability and has been fair valued utilizing the
        Black-Scholes method with a probability-weighted exercise price. At inception
        (December 22, 2005), the fair values of the Warrant Feature were as follows:
        CCP-4 - $641,478 and CCP-5 - $664,957.
 
 With
        respect to CCP-4, the fair value of the Warrant Feature at inception of $641,478
        was recorded as a loss on early extinguishment of debt in the accompanying
        consolidated statements of operations. With respect to CCP-5, the excess
        of the
        unamortized discount over its notional balance amounting to $561,356 (including
        financing costs of $65,000 paid to a related party of Cornell) at inception,
        was
        charged to interest expense in the accompanying consolidated statements of
        operations.
 
 The
        assumptions used in both the layered discount probability-weighted cash flow
        approach for the compound single embedded derivatives within the Convertible
        Debentures and the Black-Scholes approach for the Warrant derivative liability
        comprised the following: risk-free interest rate of 4.4%, volatility of 100%,
        expected stock price average growth of 31.5%, no registration default, 2.5%
        default status, no assumption of alternative financing, expected Warrant
        term of
        5 years, dividend yield of zero percent, and a probability-weighted exercise
        price of $0.075.
 
 The
        Convertible Debentures (CCP-4 and CCP-5) were balances at January 31, 2006
        as
        adjusted:
 
 **CCP-4**
              ****
              **CCP-5**
              ****
              **Total**Convertible
                  Debentures Notional balance at inception
              
              $
              530,580
              
              $
              550,000
              
              $
              1,080,580Adjustment-Discount
                  for Single CompoundEmbedded
                  Derivative within Convertible Debentures
              
              
              (370,601
              )
              
              (550,000
              )
              
              (920,601
              )Adjustment-Discount
                  for Warrant Feature
              
              
              -
              
              
              -
              
              
              -Amortization
                  of discount
              
              
              11,338
              
              
              22,962
              
              
              34,300Convertible
                  Debentures January 31, 2006, as adjusted
              
              
              171,317
              
              
              22,962
              
              
              194,279
 
 For
        the
        period from inception (December 22, 2005) through January 31, 2006, the
        amortization of unamortized discount on the Convertible Debentures (CCP-4
        and
        CCP-5) was $34,300, which has been classified as interest expense in the
        accompanying consolidated statements of operations.
 
 The
        Compound Embedded Derivatives within Convertible Debentures (CCP-4 and CCP-5)
        derivative liability reflects the following activity for the period from
        inception (December 22, 2005) through January 31, 2006:
 
 **CCP-4**
              ****
              **CCP-5**
              ****
              **Total**Balance
                  at inception
              
              $
              370,601
              
              $
              381,399
              
              $
              752,000Mark-to-market
                  for the period from inception through January 31, 2006
              
              
              81,620
              
              
              75,858
              
              
              157,478Balance
                  January 31, 2006
              
              $
              452,221
              
              $
              457,257
              
              $
              909,478
 
 The
        Derivative-Compound Embedded Derivatives within Warrants reflect the following
        activity from inception to January 31, 2006.
 
 **CCP-4**
              ****
              **CCP-5**
              ****
              **Total**Balance
                  at inception
              
              $
              641,478
              
              $
              664,957
              
              $
              1,306,435Mark-to
                  market for the period from inception through January 31,
                  2006
              
              
              110,963
              
              
              115,024
              
              
              225,987Balance
                  January 31, 2006
              
              $
              752,441
              
              $
              779,981
              
              $
              1,532,422
 
 Change
        in
        fair value of derivative liabilities-
 
 For
        the
        period from inception (December 22, 2005) of the Convertible Debentures (CCP-4
        and CCP-5) through January 31, 2006, the net increase in fair value of the
        derivative liabilities reflected as other expense in the accompanying statements
        of operations, comprised the following:
  F-10
 
 Derivative
                  Liability- Compound Embedded Derivative within Convertible
                  Debentures
              
              $
              157,478Derivative
                  Liability- Warrant Feature
              
              
              225,987Net
                  increase in fair value of derivative liabilities
              
              $
              383,465
 
 Subsequent
        to January 31, 2006, Power Technology issued Secured Convertible Debentures
        with
        Cornell in the principal amount of $550,000 (“CCP-6”- see Note
        11).
 
 NOTE
        6 -
        RELATED PARTY TRANSACTIONS
 Power
          Technology 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. Power Technology paid $144,894 in research fees to Neo-Dyne
          Research,
          Inc. during the year ended January 31, 2003.
 
 Lee
          Balak, Power Technology's former president, loaned $273,913 to Power Technology
          during the years ended January 31, 2005, 2004 and 2003. Power Technology
          accrued
          interest expense of $19,073 on these loans. Power Technology repaid $35,490
          in
          cash and the balance by issuing 14,714,055 shares of common stock valued
          at
          $367,851 in May 2004.
 
 Power
          Technology issued 8,571,428 shares of common stock valued at $214,286 to
          Balak
          as salary for the fiscal year ended January 31, 2004.
 
 Power
          Technology 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.
 
 Power
          Technology issued 721,165 shares of common stock valued at $62,020 to Bernard
          Walter and 529,412 shares of common stock valued at $33,000 to directors
          as
          compensation for fiscal year ended January 31, 2006.
 
 Lee
          Balak
          made cash payments of $16,907 to third parties to pay expenses of Power
          Technology during the years ended January 31, 2005, 2004 and 2003. Power
          Technology repaid $16,907 in cash to Mr. Balak during the year ended
          January 31, 2006.
 
 Lee
          Balak
          surrendered ownership of 4,000,000 shares of Power Technology common stock
          to
          the Company during the year ended January 31, 2006 to settle a potential
          claim.
  NOTE
        7 -
        INCOME TAXES
  Power
          Technology 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 2006 and 2005, Power Technology
          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, 2006, and will expire in the years 2016 through 2024.
 
 The
          utilization of the net operating loss carry-forward is limited under Section
          382
          of the Internal Revenue Code due to the change in control of Power Technology.
          At January 31, 2006, deferred tax assets consisted of the
          following:
 Deferred
                  tax assetsNet
                  operating losses
              
              
              163,000Less:
                  valuation allowance
              
              
              (163,000
              )Net
                  deferred tax asset
              
              $
              -
 
 NOTE
        8 -
        STOCKHOLDERS' EQUITY
 
 During
        the year ended January 31, 2005, Power Technology 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.
  During
        the year ended January 31, 2006, Power Technology issued common shares as
        follows:
 
 -
              9,064,000
                  shares to unrelated parties for consulting services valued at
                  $684,818
 
 -
              1,251,000
                  issued to officers and directors of Power Technology for services
                  valued
                  at $82,077
 
 -
              3,000,000
                  shares for exercise of warrants for cash of
                  $113,000
  F-11
  NOTE
        9 -
        OPTIONS AND WARRANTS
 
 Stock
        options
 
 On
        August
        1, 2004, Power Technology'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 Power Technology's common stock or a comparable number
        of
        SAR's or stock bonuses.
 
 Activity
        of options during the years ended January 31, 2006 and 2005 is as
        follows:
 
 **2006**
              ****
              **2005**
              ********
              ****
              **Options**
              ****
              **Weighted
                  Average Share Price**
              ****
              **Options**
              ****
              **Weighted
                  AverageShare Price**Outstanding
                  at beginning of year
              
              
              1,000,000
              
              $
              0.005
              
              
              -
              
              
              -Granted
              
              
              -
              
              
              -
              
              
              1,000,000
              
              
              0.005Exercised
              
              
              -
              
              
              
              
              
              -Forfieted
              
              
              -
              
              
              -
              
              
              -
              
              
              -Outstanding
                  at end of year
              
              
              1,000,000
              
              $
              0.005
              
              
              1,000,000
              
              $
              0.005
 
 Exercise
        prices, number of exercisable options and weighted-average contractual lives
        of
        stock options outstanding as of January 31, 2006 are $0.005, 100,000 options
        and
        1.8 years, respectively.
 
 Warrants
 
 Warrants
        issued by Power Technology are valued on the date of grant using the
        Black-Scholes pricing model using assumptions.
 
 Activity
        of warrants during 2006 and 2005 is as follows:
 
 **2006**
              
              **2005**
              ********
              ****
              **Warrants**
              
              **Weighted
                  Average Share Price**
              ****
              **Warrants**
              ****
              **Weighted
                  AverageShare Price**Outstanding
                  at beginning of year
              
              
              13,240,000
              
              $
              0.12
              
              
              11,990,000
              
              $
              0.12Granted
              
              
              1,750,000
              
              
              0.04
              
              
              6,250,000
              
              
              0.02Excersied
              
              
              (3,000,000
              )
              
              0.04Forfieted
              
              
              (10,490,000
              )
              
              0.12
              
              
              (5,000,000
              )
              
              0.01Outstanding
                  at end of year
              
              
              1,500,000
              
              $
              0.06
              
              
              13,240,000
              
              $
              0.12
 
 Warrants
        outstanding and exercisable as of January 31, 2006:
 
 **Outstanding**
              ****
              **Exercisable**
              ******Exercise
                  Price**
              ****
              **Number
                  of Shares**
              ****
              **Remainig
                  life**
              ****
              **Number
                  of shares**0.06
              
              
              1,500,000
              
              
              0.3
              
              
              1,500,000
 
 NOTE
        10 -
        SUBSEQUENT EVENTS
 
 On
        February 8, 2006, Power Technology adopted the 2006 Stock Option, SAR and
        Stock
        Bonus Consultant Plan. The terms of this plan allow for the issuance of
        non-qualified stock options with or without appreciation rights to purchase
        up
        to 13,000,000 shares of Power Technology's common stock or a comparable number
        of SAR's or stock bonuses.
  F-12
 
 In
        February 2006, Power Technology entered into a consulting contract with Timothy
        J. Connolly ("Connolly") to provide general business strategic consulting
        and
        management advisory services for the period January 1, 2006 through December
        31,
        2006. Connolly agreed to provide Power Technology office space, a conference
        room, telecommunication equipment, secure high speed internet access, computer
        equipment, copying equipment, a receptionist and clerical assistance for
        Power
        Technology's use during the term of the agreement. Power Technology agreed
        to
        pay Connolly, the sum of $ 50,000 cash, plus $6,000 per month, paid quarterly
        in
        cash or stock. Power Technology agreed to pay Connolly an advisory fee equal
        to
        5% of the total transaction value of any acquisition, merger, or debt financing
        which is consummated during the term of this agreement. Power Technology
        granted
        Connolly fully vested options for the right to purchase on demand, for one
        year,
        up to 5,000,000 shares of the common stock of Power Technology at $.06 per
        share. All the shares and underlying the options are to be registered by
        Power
        Technology upon demand by Connolly under Form S-8. Connolly will not own
        more
        than 4.9% of Power Technology at any time, unless mutually agreed by Connolly
        and Power Technology. In April 2006, Connolly purchased 3,366,667 shares
        of
        common stock at $0.06 per share by exercising options.
 
 On
        February 10, 2006, Power Technology entered into a consulting contract with
        Yoshi Yamanashi ("Yamanashi") to provide general business strategic consulting
        and management advisory services for the two year period of January 1, 2006
        through December 31, 2007. Power Technology will pay Yamanashi a commission
        of 10% of the total net licensing fees Power Technology actually receives
        from
        those companies to whom Power Technology is introduced by Yamanashi. Power
        Technology will also pay Yamanashi a commission of 5% of the net royalties
        actually received by Power Technology from those companies for Power Technology
        products manufactured by those companies, for the first three years of the
        royalty agreement.
  On
        February 21, 2006, Power Technology borrowed an additional $550,000 from
        Cornell. The debenture was part of the Securities Purchase Agreement with
        Cornell dated December 30, 2005, which provided for the sale of a total of
        $1,630,580 in redeemable secured convertible debentures and warrants to purchase
        20,904,875 shares of common stock.
 
 On
        April
        11, 2006, Power Technology’s wholly owned subsidiary, Sentry Power Technology,
        Inc. (“SPT”) and Power Technology entered into an Asset Purchase Agreement with
        Sentry Power, LLC (“Sentry”). Pursuant to the terms of the agreement, SPT will,
        subject to closing, acquire the assets of Sentry for a total purchase price
        of
        $1,195,000 which is to be paid at closing by issuing $960,000 worth of Power
        Technology’s restricted common stock. Additionally, SPT will assume $235,000 in
        debt presently owed by Sentry to CSI Business Finance, Inc. (“CSI”).
  With
        regard to the debt, SPT will assume the debt to CSI and will execute a new
        security agreement and Power Technology will guarantee the note. At closing,
        Power Technology will execute a stock pledge agreement granting CSI a first
        lien
        on all capital stock or other interest of SPT which Power Technology holds.
        Power Technology’s agreement to guarantee the debt is conditioned upon and
        subject to the terms and conditions of a Guaranty Stock Pledge Agreement
        (the
“Stock Pledge Agreement”) to be entered into at closing between Sentry and Power
        Technology which will provide for Sentry to pledge as collateral for the
        Stock
        Pledge Agreement an amount equal to $250,000 of the Power Shares.
 F-13




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




Beckstead
      and Watts, LLP, the previous independent registered accounting firm of Power
      Technology, Inc. for the fiscal years ended January 31, 2003 and 2004, resigned
      on March 10, 2005, from further audit services to the Company because the firm
      has been the auditor of the Registrant for more than five years, as required
      by
      the Sarbanes-Oxley Act of 2002, as amended.





During
      the fiscal years ended January 31, 2003 and 2004, the financial statements
      of
      the Company did not contain any adverse opinion or a disclaimer of opinion,
      nor
      were they qualified or modified as to any uncertainty, audit scope, or
      accounting principles, except that the reports of Beckstead and Watts, LLP
      for
      such fiscal years indicated conditions which raised substantial doubt about
      the
      Company's ability to continue as a going concern.





For
      the
      two fiscal years ended January 31, 2003 and 2004, and the subsequent interim
      periods ended October 31, 2004, there were no disagreements between the Company
      and Beckstead and Watts, LLP on any matter of accounting principles or practice,
      financial statement disclosure, or auditing scope or practices which if not
      resolved to the satisfaction of Beckstead and Watts, LLP would have caused
      Beckstead and Watts, LLP to make reference to the subject matter of the
      disagreement in connection with its reports.





On
      March
      11, 2005, the Company executed an engagement letter to Malone & Bailey, PC.,
      located at 2925 Briarpark, Suite 930, Houston, TX 77042 to audit the
      consolidated financial statements of the Company for its fiscal year ended
      January 31, 2005, and the related statements of income, stockholders' equity,
      and cash flows for the year then ending. The Board of Directors approved the
      appointment of Malone & Bailey, PC on May 10, 2005. During the two most
      recent fiscal years or any subsequent interim period, the new independent
      registered accounting firm had not previously been engaged as either the
      principal accountant of the Company to audit its financial statements or of
      any
      significant subsidiary, nor has the Company consulted with the firm regarding
      any accounting issue, auditing or financial reporting issue regarding such
      financial statements or any reportable event prior to March 31,
      2005.




40


**ITEM
        8A. CONTROLS AND PROCEDURES**
 
 Our
        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, 2006, 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.
  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.
 
 **ITEM
        8B. OTHER INFORMATION**
 
 None.
 
 **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 Power Technology are as follows:
 
 **Name**
              **Age**
              **Position**Bernard
                  J. Walter
              58
              Director,
                  President, Secretary and TreasurerF.
                  Bryson Farrill
              78
              DirectorHugo
                  P. Pomrehn, PhD.
              68
              DirectorJoey
                  Jung
              33
              Chief
                  Technology Officer
 
 The
        background and principal occupations of each director and officer of Power
        Technology are as follows:
 
 Mr.
        Walter became a director of Power Technology 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
        Power
        Technology, and the Board of Directors appointed Mr. Walter to be the Chief
        Executive Officer, President, Treasurer and Secretary of Power Technology.
        From
        2000 to July of 2004, Mr. Walter was the General Counsel and a business and
        technical consultant to LFF Systems, Inc., a private roofing supply products
        company. From 2000 to December of 2004, Mr. Walter was a director, Vice
        President and General Counsel to eSimulation, Inc., a private technology
        development company that provides web based, online, process optimization
        systems for the operation of chemical and gas processing plants. From 1973
        until
        his employment by Power Technology, 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.
  41
 
 Mr.
        Farrill became a director of Power Technology 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 Swiss Medica,
        Inc. a
        publicly traded pharmaceutical products company and a director of Balaton
        Group,
        Inc. a private financial services company and a director of Devine
        Entertainment, Inc. a publicly traded film production company and senior
        partner
        of Belgravia Financial, Ltd, a private real estate firm. He is an accredited
        representative of the Financial Services Authority of the United Kingdom.
        From
        1968 to 1990, he was the President and Chairman of McLeod Young Weir
        International, a brokerage firm until it was acquired by Scotia Capital Markets.
        From 1962 to 1979, he was employed by McCleod Young Weir Ltd in Toronto,
        and was
        a director and member of its executive committee from 1964 to 1989. From
        1981 to
        1990, he was a Member of the New York Stock Exchange. 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 Power Technology 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. Dr. Pomrehn has
        tendered his resignation to the Company effective June 30, 2006.
 
 Mr.
        Jung
        became Chief Technology Officer of Power Technology 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, Power Technology 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 Power Technology's battery technology and is primarily
        responsible for Power Technology's research and product development.
 
 **Employment
        Agreements**
  We
        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 Power
        Technology annually thereafter. The Employment Agreement with Mr. Walter
        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 Power Technology. The Employment
        Agreement with Mr. Walter 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 Power Technology. His
        shares of common stock are to be non-dilutive and are not subject to any
        reverse
        stock split of the common stock of Power Technology. As of February 13, 2006,
        Mr. Walter owned 10,162,180, shares of the restricted common stock of Power
        Technology 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.
  42
 On
          October 30, 2004, Power Technology entered into an employment agreement
          with
          Joey Jung to retain him as an executive through November 21, 2006. Pursuant
          to
          the terms of the Employment Agreement, we 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
          our common stock at a price of one half of one cent, $0.005. Mr. Jung was
          granted to a stock option to acquire an additional 900,000 shares of Power
          Technology'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 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.
  **Change
        in Management**
 
 Effective
        June 30, 2004, Mr. Lee A. Balak resigned as a director and as the President,
        Treasurer and Secretary of Power Technology. Power Technology 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 Power Technology 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
        Power
        Technology without the permission of the Board of Directors of Power Technology.
 
 Effective
        July 1, 2004, Mr. Bernard J. Walter was appointed as a director of Power
        Technology 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 Power Technology, and the Board of Directors appointed
        Mr. Walter to be the Chief Executive Officer, President, Treasurer and Secretary
        of Power Technology.
 
 As
        a
        result of this change in the management of Power Technology, the Board of
        Directors authorized a change in the location of the principal executive
        office
        of Power Technology 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.
 
 **ITEM
        10. EXECUTIVE COMPENSATION**
 
 The
        following table discloses compensation during the three years ended January
        31,
        2006, for the Chief Executive Officer, President, Treasurer and Secretary
        of
        Power Technology.
  43
  **SUMMARY
        COMPENSATION TABLE**
 Long-Term
                  CompensationAnnual
                  Compensation
              
              Awards
              Payouts
  **Name
                  and Principal Position**
              
              **Fiscal**
                **Year**
                **Ending**
                **1/31:**
              
              **Salary**
                **($)**
              
              **Bonus
                  ($)**
              
              **Other****Annual****Compensation****($)****(1)**
              
              **Restricted**
                **Stock**
                **Awards**
                **($)**
              
              **Securities
                  Underlying Options/**
                **SARs
                  (#)**
              
              **LTIPPayouts**
                **($)**
              
              **All**
                **Other**
                **Compen**
                **sation
                  ($)**Bernard
                  J. Walter
                CEO/President
              
              
              2006
              
              $
              133,713
              
              
              -0-
              
              
              -0-
              
              $
              62,020(1)
              
              
              -0-
              
              
              -0-
              
              
              -0-2005
              
              $
              62,000
              
              
              -0-
              
              
              -0-
              
              $
              263,507(2)
              
              
              -0-
              
              
              -0-
              
              
              -0-Lee
                  A. Balak
                Former
                  CEO/ President
              
              
              2006
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-2005
              
              $
              37,500
              
              
              -0-
              
              
              -0-
              
              $
              150,000(3)
              
              
              -0-
              
              
              -0-
              
              
              -0-2004
              
              $
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
 
 (1)
              Mr.
                  Walter received 721,165 shares of our restricted common stock as
                  compensation for the fiscal year ended January 31, 2006, which
                  were valued
                  at $62,020 which was the fair market value of free trading share
                  as of the
                  date of issuance.
 (2)
              Mr.
                  Walter received 9,441.015 shares of our restricted stock as compensation
                  for the fiscal year ended January 31, 2005, which were valued at
                  $263,507
                  which was the fair market value of free trading shares of our common
                  stock
                  as of the date of issuance..
 (3)
              Mr.
                  Balak resigned as our CEO/President on June 30, 2004. During the
                  fiscal
                  year ended January 31, 2005, Mr. Balak received 8,571,428 shares
                  of our
                  restricted common stock in exchange for $150,000 of salary which
                  was due
                  to him for the fiscal year ended January 31,
                  2004.
 
 **OPTION/SAR
        GRANTS IN LAST FISCAL YEAR**
  (Individual
        Grants)
  **Name**
              
              **Number
                  of Securities Underlying Options/SARS Granted
                  (#)**
              
              **Percent
                  of Total Options/SARs Granted to Employees in Fiscal Year
                  (%)**
              
              **Exercise
                  of BasePrice ($/Sh)**
              
              **Expiration
                  Date**Bernard
                  J. Walter
              
              
              -0-
              
              
              N/A
              
              
              N/A
              
              
              N/A
 
  44
 
 **AGGREGATED
        OPTION/SAR EXERCISES IN**
 **LAST
        FISCAL YEAR AND FY-END OPTION/SAR VALUES**
 
 **Name**
              
              **Shares
                  Acquired on Exercise (#)**
              
              **Value
                  Realized ($)**
              
              **Number
                  of Unexercised Underlying Options/SARs at FY end
                  (#);**
                **Exercisable/
                  Unexercisable**
              
              **Value
                  of Unexercised In-The-Money Options/SARs at FY end
                  ($);**
                **Exercisable/
                  Unexercisable**Bernard
                  J. Walter
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
                  / -0-
 
 STOCK
        PLAN COMMITTEE
 
 A
        Stock
        Plan Committee of the Board of Directors administers Power Technology'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
 
 Power
        Technology 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
 
 Power
        Technology does not have any pension plan, profit sharing plan, or similar
        plans
        for the benefit of its officers, directors or employees. However, Power
        Technology may establish such plans in the future.
 
 BOARD
        COMPENSATION
 
 For
        the
        period from July 1, 2004 though June 30, 2006 each non-employee director
        is
        entitled to be paid $3,000 per each month, $1,500 of which was payable in
        cash
        and $1,500 of which shall was payable in non assessable shares of the
        Corporation’s common stock at the closing bid price on the date preceding the
        stock’s issuance. Each non-employee director was entitled to receive
        reimbursement of travel expenses.
 
 In
        consideration of the services rendered to Power Technology by F. Bryson Farrill,
        as a director of Power Technology, for the period prior to July 1, 2004,
        Power
        Technology issued to Mr. Farrill 500,000 shares of its restricted shares
        of
        Power Technology's common stock. In consideration of the services rendered
        and
        to be rendered to Power Technology by Mr. Farrill, as a director of Power
        Technology, for the period from July 1, 2004 through June 30, 2006, Power
        Technology 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 Power
        Technology's common stock at the closing bid price on the date preceding
        the
        stock's issuance. During the fiscal year ending January 31, 2005, Power
        Technology paid Mr. Farrill a total of $9,000 cash and issued to Mr. Farrill
        a
        total of 800,000 shares of Power Technology's restricted common stock, as
        director's fees. During the fiscal year ending January 31, 2006, Power
        Technology paid Mr. Farrill a total of $18,000 cash and issued to Mr. Farrill
        a
        total of 264,706 shares of Power Technology's restricted common stock, as
        director's fees. In consideration of the services rendered to Power Technology
        by Hugo P. Pomrehn, as a director of Power Technology, for the period prior
        to
        July 1, 2004, Power Technology issued to Mr. Pomrehn 500,000 shares of its
        restricted shares of Power Technology's common stock. In consideration of
        the
        services rendered and to be rendered to Power Technology by Mr. Pomrehn,
        as a
        director of Power Technology, for the period from July 1, 2004 through June
        30,
        2006, Power Technology 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
        Power Technology's common stock at the closing bid price on the date preceding
        the stock's issuance. During the fiscal year ended January 31, 2005, Power
        Technology paid Mr. Pomrehn a total of $9,000 cash and issued to Mr. Pomrehn
        a
        total of 800,000 shares of Power Technology's restricted common stock, as
        director's fees. During the fiscal year ending January 31, 2006, Power
        Technology paid Mr. Pomrehn a total of $18,000 cash and issued to Mr. Pomrehn
        a
        total of 264,706 shares of Power Technology's restricted common stock, as
        director's fees.
  45
 
 **CODE
        OF ETHICS**
 
 Effective
        February 23, 2006, the Board of Directors adopted a Code of Ethics for our
        directors, officers and employees. A copy of our Code of Ethics is included
        as
        Exhibit 14.1.
  **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, 2006, 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, 2006.
 
 **ITEM
        11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.**
 
 The
        following table sets forth certain information at May 1, 2006 with respect
        to
        the beneficial ownership of shares of common stock by (i) each person known
        to
        us who owns beneficially more than 5% of the outstanding shares of common
        stock,
        (ii) each of our Directors, (iii) each of our Executive Officers, and (iv)
        all
        of our Executive Officers and Directors as a group. Unless otherwise indicated,
        each stockholder has sole voting and investment power with respect to the
        shares
        shown. As of May 1, 2006, we had 141,562,412 shares of common stock issued
        and
        outstanding.
 
 **Title
                  of class**
              **Name
                  and address of beneficial owner**
              **Number
                  of Shares of Class Beneficially Owned**
              **Percentage
                  of Shares Beneficially Owned****(1)**Common
                  Stock
              Bernard
                  J. Walter
                Chairman,
                  President and CEO
                109
                  North Post Oak Lane
                Suite
                  422
                Houston,
                  Texas 77024
              10,162,180(2)
              7.5%Common
                  Stock
              F.
                  Bryson Farrill
                Director
                77
                  Verplank Avenue
                Stanford,
                  Connecticut 06902
              1,064,706(3)
              0.75%Common
                  Stock
              Hugo
                  P. Pomrehn, Ph.D
                Director
                1017
                  South Mountain
                Monrovia,
                  California 91016
              1,824,706(4)
              1.29%Common
                  Stock
              Joey
                  Jung
                Vice
                  President/Technology
                6685
                  Berkeley Street
                Vancouver,
                  B.C.
                V5S
                  2J5 Canada
              150,000(5)
              0.10%Common
                  Stock
              All
                  Officers and Directors as a group (total of 4)
              13,701,592(6)
              9.67%Common
                  Stock
              Lee
                  A. Balak
                15
                  Ocean View Road
                Lions
                  Bay, BC
                V0N
                  2E0 Canada
              23,157,483
              16.36%Common
                  Stock
              Cornell
                  Capital Partners, L.P.
                101
                  Hudson Street
                Suite
                  3700
                Jersey
                  City, New Jersey 07302
              172,579,102(7)
              54.94%
  46
 
 (1)
        Except as otherwise noted, it is believed by Power Technology 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
        Power Technology.
 
 (2)
        Specifically excludes 86,468 shares to which Mr. Walter is entitled to be
        issued
        to him pursuant to his Employment Agreement but which have not yet been
        issued.
 
 (3)
        Specifically excludes 40,000 shares to which Mr. Pomrehn is entitled to be
        issued to him pursuant as Director’s compensation but which have not yet been
        issued.
 
 (4)
        Specifically excludes 40,000 shares to which Mr. Pomrehn is entitled to be
        issued to him pursuant as Director’s compensation but which have not yet been
        issued. Also includes 80,000 shares of common stock that are held by the
        Pomrehn
        Family Trust of which Mr. Hugo P. Pomrehn is a trustee.
 
 (5)
        Includes 100,000 options to purchase shares of our common stock and specifically
        excludes 900,000 options to purchase shares of our common stock which are
        not
        yet vested.
 
 (6)
        Specifically excludes 86,468 shares to which Mr. Walter is entitled to be
        issued
        to him pursuant to his Employment Agreement but which have not yet been issued,
        40,000 shares to which Mr. Pomrehn is entitled to be issued to him pursuant
        as
        Director’s compensation but which have not yet been issued, 40,000 shares to
        which Mr. Pomrehn is entitled to be issued to him pursuant as Director’s
        compensation but which have not yet been issued.
 Includes
        100,000 options to purchase shares of our common stock.
 
 (7)
        Includes 6,086,707 shares of our common stock held by its affiliate, Highgate
        House Funds, Ltd. Also includes 20,904,875 shares of our common stock underling
        warrants, and 145,587,520 shares of our common stock underlying convertible
        debentures held by Cornell Capital Partners, L.P. The Debenture provide that
        the
        number of shares of our common stock that may be issued by us or acquired
        by
        Cornell upon conversion of the Debenture shall not exceed 4.99% of the total
        number of the issued and outstanding shares of our common stock.
  47
  **ITEM
        12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**
 
 Except
        as
        described below, none of the following persons has any direct or indirect
        material interest in any transaction to which we were or are a party during
        the
        past two years, or in any proposed transaction to which we propose to be
        a
        party:
 
 (A)
            any
                of our directors or executive officers; 
 (B)
            any
                nominee for election as one of our
                directors; 
 (C)
            any
                person who is known by us to beneficially own, directly or indirectly,
                shares carrying more than 5% of the voting rights attached to our
                common
                stock; or 
 (D)
            any
                member of the immediate family (including spouse, parents, children,
                siblings and in-laws) of any of the foregoing persons named in paragraph
                (A), (B) or (C) above.  Effective
          June 30, 2004, Mr. Lee A. Balak resigned as a director and as the President,
          Treasurer and Secretary of Power Technology. Power Technology has entered
          into a
          consulting agreement with Mr. Balak. The consulting agreement was for a
          term of
          six months and the consulting fee paid was $5,000 per month.
 During
        the year ended January 31, 2006, Mr. Lee Balak, a former director and president
        of the Company, surrendered ownership of 4,000,000 shares of common stock
        of
        Power Technology to the Company pursuant to an agreement with Mr. Balak by
        which
        the Company released all claims it may have had against Mr. Balak which were
        related to any act that Mr. Balak did or failed to do in his capacity as
        an
        officer or director of Power Technology.
 
 During
        the year ended January 31, 2005, Bernard J. Walter, a Director, the Chief
        Executive Officer, President, Treasurer and Secretary of Power Technology,
        pursuant to an Employment Agreement, received stock grants and was issued
        9,441,015 shares of the restricted common stock of Power Technology. 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 Power Technology.
 
 During
        the year ended January 31, 2005, Hugo P. Pomrehn, one of our directors, was
        issued 800,000 shares of the restricted common stock of Power Technology
        and was
        paid $9,000 cash, as director's fees.
 
 During
        the year ended January 31, 2006, Hugo P. Pomrehn, one of our directors, was
        issued 264,706 shares of the restricted common stock of Power Technology
        and was
        paid $18,000 cash, as director's fees.
  48
 
 During
        the year ended January 31, 2005, F. Bryson Farrill, one of our directors,
        was
        issued 800,000 shares of the restricted common stock of Power Technology
        and was
        paid $9,000 cash, as director's fees.
 
 During
        the year ended January 31, 2005, Joey Jung, Chief Technology Officer of Power
        Technology, was granted a stock option to acquire 100,000 shares of Power
        Technology'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, Power Technology issued to Lee Balak, 4,037,485
            restricted shares of Power Technology's common stock (which had a market
            value
            of $100,937) in payment of a loan to Power Technology 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, Power Technology issued to Lee Balak, 10,676,570
            restricted shares of Power Technology's common stock (which had a market
            value
            of $266,914) in payment of previous loans to Power Technology 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, we issued to Lee Balak, Power Technology issued
            to Lee
            Balak, 8,571,428 shares of Power Technology's restricted common stock
            (which had
            a market value of $214,286) in payment of his annual salary in the amount
            of
            $150,000 for the fiscal year ended January 31, 2004.
  During
        the year ended January 31, 2006, Bernard J. Walter, a Director, the Chief
        Executive Officer, President, Treasurer and Secretary of Power Technology,
        pursuant to an Employment Agreement, received stock grants and was issued
        721,165 shares of our restricted common stock. 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 Power
        Technology.
 
 During
        the year ended January 31, 2006, Hugo P. Pomrehn, a Director of Power
        Technology, was issued 264,706 shares of our restricted common stock and
        was
        paid $18,000 cash, as director's fees.
 
 During
        the year ended January 31, 2006, F. Bryson Farrill, a Director of Power
        Technology, was issued 264,706 shares of our restricted common stock and
        was
        paid $18,000 cash, as director's fees.
 
 During
        the year ended January 31, 2006, Joey Jung, Chief Technology Officer of Power
        Technology, was granted a stock option to acquire 900,000 shares of our common
        stock at a price of one half of one cent ($0.005) per share.
 
 During
        the year ended January 31, 2006, Mr. Lee Balak, a former director and president
        of the Company, was paid $16,906.62 as reimbursement for cash advances Mr.
        Balak
        personally made to third parties to pay expenses of the Company during the
        period prior to July of 2004, while he was a director and president of the
        Company.
 
 On
        April
        20, 2006, subsequent to the year ended January 31, 2006, Hugo P. Pomrehn,
        one of
        our directors, exercised a warrant and purchased, at $0.06 per share, 500,000
        shares of restricted common stock of Power Technology.
 
 49
 **ITEM
          13. EXHIBITS.**
 
 10.1
                Employment
                    Agreement with Bernard J. Walter dated July 1, 2004 (Incorporated
                    herein
                    by reference to our Form 8-K filing on July 13,
                    2004)
 10.2
              Employment
                  Agreement with Joey Jung dated October 30, 2004 (incorporate herein
                  by
                  reference to our Form 10-QSB for the period ending October 31,
                  2004 filed
                  on December 21, 2005)
 10.3
                Consulting
                    Services Contract with Trilogy and Associates, Inc. dated February
                    25,
                    2004 (Filed as Exhibit 99 to the Issuer’s Form S-8 filing on March 1, 2004
                    and incorporated herein by
                    reference)
 
 10.4
                Agreement
                    with Clearvision, Inc. dated February 1, 2005 (filed
                    herewith)
 
 10.5
                Addendum
                    to Consulting Agreement with SeaWay Trading, Inc. dated June
                    11, 2004
                    (filed herewith
 
 10.6
                Agreement
                    with SeaWay Trading, Inc. dated August 18, 2004 (filed
                    herewith)
 
 10.7
                Stock
                    Option Agreement with Joey C. Jung dated December 30, 2005 (filed
                    herewith)
 
 10.8
                Stock
                    Option Agreement with Joey C. Jung dated December 30, 2005 (filed
                    herewith)
 
 10.9
                Employment
                    Agreement with Joey C. Jung dated December 30, 2005 (filed
                    herewith)
 
 10.10
                Consulting
                    Services Agreement with Timothy J. Connolly dated January 1,
                    2006 (filed
                    herewith)
 
 10.11
                Consulting
                    Services Agreement Amendment with Timothy J. Connolly dated February
                    10,
                    2006 (filed herewith)
  14.1
              Code
                  of Ethics (filed herewith)
 
 99.1
              Stock
                  Option Plan with Timothy Connolly dated February 21, 2006 (filed
                  herewith)
 
 **ITEM
        14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES**
  The
        following table sets forth the aggregate fees paid or accrued for professional
        services rendered by Malone & Bailey, P.C. for the audit of our annual
        financial statements for fiscal year 2006 and fiscal year 2005 and the aggregate
        fees paid or accrued for audit-related services and all other services rendered
        by Malone & Bailey, P.C. for fiscal year 2006 and fiscal year 2005.
 
 **2006**
              
              **2005**Audit
                  fees
              
              $
              22,725
              
              $
              17,740Audit-related
                  fees
              
              $
              12,847
              
              
              641Tax
                  fees
              
              
              0
              
              
              0All
                  other fees
              
              
              0
              
              
              0Total
              
              $
              35,572
              
              $
              18,211
 
 The
        category of “Audit fees” includes fees for our annual audit, quarterly reviews
        and services rendered in connection with regulatory filings with the SEC,
        such
        as the issuance of comfort letters and consents.
  The
        category of “Audit-related fees” includes employee benefit plan audits, internal
        control reviews and accounting consultation.
  The
        category of “Tax fees” includes consultation related to corporate development
        activities.
  All
        above
        audit services, audit-related services and tax services were pre-approved
        by the
        Board of Directors, which concluded that the provision of such services by
        Malone & Bailey, P.C. was compatible with the maintenance of that firm’s
        independence in the conduct of its auditing functions.
  50
 
 **SIGNATURES**
 
 In
        accordance with the requirements of Section 13 of 15(d) of the Exchange Act,
        the
        Registrant has caused this report to be signed on its behalf by the undersigned,
        thereunto duly authorized, on May 16, 2006.
  **Power
                Technology, Inc.**/s/
                Bernard J. WalterBy:
                Bernard J. WalterDirector,
                President, Chief Executive Officer,Chief Financial Officer, Principal AccountingOfficer and Treasurer
  Pursuant
          to the requirements of the Exchange Act, this report has been signed below
          by
          the following persons in the capacities and on the dates
          indicated:
 Signature
                
                Title
                
                Date/s/
                    Bernard J. Walter
                
                Director,
                    President, Chief
                
                May
                    16, 2006Bernard
                    J. Walter
                
                Executive
                    Officer, Chief FinancialOfficer,
                    Principal Financial OfficerAnd
                    Treasurer/s/
                    Hugo Pomrehn, PhD .
                
                Director
                
                May
                    16, 2005Hugo
                    Pomrehn, PhD./s/
                    F. Bryson Farrill
                
                Director
                
                May
                    16, 2006F.
                    Bryson Farrill
 51