SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D C 20549

                                   FORM 10-Q

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                    FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

                        COMMISSION FILE NUMBER 33-19584


                            POWERCOLD  CORPORATION
       (Exact name of small business issuer as specified in its charter)

        NEVADA                                23-2582701
     (State of Incorporation)                                  (IRS Employer
                              Identification No.)

                               115 CANFIELD ROAD
                            LA VERNIA, TEXAS 78121
                   (Address of principal executive offices)

                                 830 -779-5223
                        (Registrant's telephone number)


 Check  whether  the  issuer  (1)  filed  all  reports required to be filed by
 Section13  or  15(d)  of  the  Securities Exchange Act  of  1934  during  the
 preceding  12months (or for such  shorter  period  that  the  registrant  was
 required to  file  such  reports),  and  (2)  has been subject to such filing
 requirements for the past 90 days.    (X) Yes  ( ) No

 Indicate the number of shares outstanding of the  Registrant's  Common Stock,
 par value $0.001 - 17,631,808 shares outstanding at June 30, 2002.
























<page>  1
                             POWERCOLD CORPORATION
                               AND SUBSIDIARIES

                                     INDEX


                                                                     PAGE

PART I.    FINANCIAL INFORMATION

     ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS

             Accountants Review Report                                   4

             Consolidated Balance Sheets                                 5

             Consolidated Statement of Operations - Three Months         6

             Consolidated Statement of Operations - Six Months           7

             Consolidated Statement of Stockholders' Equity              8

             Consolidated Statement of Cash Flows                        10

             Notes to Consolidated Financial Statements                  12

     ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS.              33

PART II.   OTHER INFORMATION                                             39

     ITEM 1. LEGAL PROCEEDINGS.

     ITEM 2. CHANGES IN SECURITIES.

     ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

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

     ITEM 5. OTHER INFORMATION.

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

             SIGNATURES                                                 40


















<page>  2









                             POWERCOLD CORPORATION

                       CONSOLIDATED FINANCIAL STATEMENTS

                                 JUNE 30, 2002






                             WILLIAMS & WEBSTER PS
                         CERTIFIED PUBLIC ACCOUNTANTS
                       BANK OF AMERICA FINANCIAL CENTER
                          W 601 RIVERSIDE, SUITE 1940
                               SPOKANE, WA 99201
                                (509) 838-5111






                             POWERCOLD CORPORATION
                               TABLE OF CONTENTS
                                 June 30, 2002



ACCOUNTANT'S REVIEW REPORT                                1


FINANCIAL STATEMENTS

     Consolidated Balance Sheets                          2

     Consolidated Statements of Operations                3

     Consolidated Statement of Stockholders' Equity       5

     Consolidated Statements of Cash Flows                6


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                7









<PAGE>  3






To the Board of Directors
PowerCold Corporation
Cibolo, Texas

                          ACCOUNTANT'S REVIEW REPORT


We  have  reviewed  the  accompanying  consolidated  balance sheet of PowerCold
Corporation  as  of June 30, 2002, and the related consolidated  statements  of
operations, stockholders'  equity, and cash flows for the six months ended June
30,  2002,  2001,  and  2000.  All  information  included  in  these  financial
statements is the representation of the management of PowerCold Corporation.

We  conducted  our review in  accordance  with  standards  established  by  the
American Institute  of  Certified  Public  Accountants.   A  review  of interim
financial information consists principally of applying analytical procedures to
financial  data  and making inquiries of persons responsible for financial  and
accounting matters.   It  is  substantially  less  in  scope  than  an audit in
accordance  with auditing standards generally accepted in the United States  of
America, the  objective  of which is the expression of an opinion regarding the
financial statements taken  as a whole.  Accordingly, we do not express such an
opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial  statements  in  order  for them to be in
conformity with accounting principles generally accepted in the  United  States
of America.

The consolidated financial statements for the year ended December 31, 2001 were
audited  by  us  and  we expressed an unqualified opinion on them in our report
dated March 4, 2002.  We  have not performed any auditing procedures since that
date.

The accompanying financial  statements  have  been  prepared  assuming that the
Company will continue as a going concern.  As discussed in Note  3, the Company
has  sustained  substantial  operating  losses  in  recent  years and has  used
substantial amounts of working capital in its operations.  These  factors raise
substantial  doubt about the Company's ability to continue as a going  concern.
Management's plans  regarding  those matters also are described in Note 3.  The
financial statements do not include  any adjustments that might result from the
outcome of this uncertainty.

/s/ Williams & Webster, P.S.

Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington

August 15, 2002







<page>  4
POWERCOLD CORPORATION
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               June 30,            December31,
                                                                2002           2001           2000
                                                              Unaudited      Restated       Restated
                                                            -------------  -------------  -------------

                                                         <c>            <c>            <c>
ASSETS
  CURRENT ASSETS
        Cash                                                $    517,017   $    290,174   $    106,864
        Trade accounts receivable, net of allowance              508,003        173,769         38,665
        Receivables from related parties                             -            1,686            -
        Loan receivable, Alturdyne                               400,000            -              -
        Inventory                                                280,125        241,853        241,272
        Prepaid expenses                                          13,125         22,500        307,500
                                                            -------------  -------------  -------------
               Total Current Assets                            1,718,270        729,982        694,301
                                                            -------------  -------------  -------------

        Property and equipment, net                              140,230         41,113         19,499
        Patent rights and related technology, net                344,336        382,108        459,343
        Goodwill, net                                             16,866         16,866         27,392
        Securities available for sale                            601,400        970,000            -
        Deposits and prepaid rent                                  4,125          9,645          7,705
                                                            -------------  -------------  -------------
        Net assets from discontinued operations                      -          689,810        572,620
                                                            -------------  -------------  -------------
                 TOTAL ASSETS                               $  2,825,227   $  2,839,524   $  1,780,860
                                                            =============  =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES
        Accounts payable and accrued expenses               $    420,576   $    232,204   $  177,725
        Account payable - related party                              -              -         10,567
        Commissions and royalty payable                           55,067         55,067       42,240
        Advances from affiliate                                      -              -         73,636
        Notes payable                                             31,824         36,329       43,328
        Current portion of capital lease payable                   3,018          3,018        3,419
                                                            -------------  -------------  -------------
            Total Current Liabilities                            510,485        326,618        350,915

   CAPITAL LEASE PAYABLE, net of current portion                  2,404          5,413          6,826

    COMMITMENTS AND CONTINGENCIES                                153,204        168,300        168,300

    STOCKHOLDERS'     EQUITY
        Convertible preferred stock, Series A, $0.001
            par value; 5,000,000 shares authorized, 0
            shares issued and outstanding, respectively              -              -              -

        Common stock, $0.001 par value; 200,000,000
            shares authorized, 17,631,807, 16,027,882 and
            12,669,383, shares issued and outstanding
            respectively                                          17,631         16,027         12,669
        Additional paid-in capital                            12,661,963     10,210,665      8,243,227

        Stock options and warrants                               384,040        471,980            -
        Accumulated deficit                                  (11,505,900)    (9,329,479)    (7,001,077)
        Accumulated other comprehensive income                   601,400        970,000            -
                                                            -------------  -------------  -------------
                                                               2,159,134      2,339,193      1,254,819
                                                            -------------  -------------  -------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $  2,825,227   $  2,839,524   $  1,780,860
                                                            =============  =============  =============
</TABLE>








See accompanying notes and accountant's review report.
<page>  5
POWERCOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

<TABLE>
<CAPTION>
                                                   Three Months Ended June 30,
                                            -----------------------------------------
                                                2002           2001         2000
                                                            (Restated)   (Restated)
                                              Unaudited      Unaudited    Unaudited
                                            -------------  ------------  ------------

                                         <c>            <c>           <c>
REVENUES
  Product sales                            $     475,702   $   109,241   $    63,818
  Services                                        20,038        24,747           -
                                            -------------  ------------  ------------
  Total Revenues                                 495,740       133,988        63,818
                                            -------------  ------------  ------------
COST OF REVENUES                                 323,880        92,110        40,754
                                            -------------  ------------  ------------
GROSS PROFIT (LOSS)                              171,860        41,878        23,064
                                            -------------  ------------  ------------

OPERATING EXPENSES
  Sales and marketing                             86,012       499,785           -
  General and administrative                     756,390       187,478        96,146
  Depreciation and amortization                    7,140        37,836        15,863
                                            -------------  ------------  ------------
  Total Operating Expenses                       849,542       725,099       112,009
                                            -------------  ------------  ------------

LOSS FROM OPERATIONS                            (677,682)     (683,221)      (88,945)
OTHER INCOME (EXPENSES)
  Other income                                     3,495           -             -
  Interest income                                    472         1,197           -
  Interest and financing expense                  (3,052)          108          (667)
                                            -------------  ------------  ------------
  Total Other Income (Expenses)                      915         1,305          (667)
                                            -------------  ------------  ------------

LOSS BEFORE INCOME TAX                          (678,597)     (681,916)      (89,612)

INCOME TAX EXPENSE                                   -             -         (52,222)
                                            -------------  ------------  ------------
Net loss from continuing operations             (678,597)     (681,916)     (141,834)
Loss from discontinued operations               (659,461)      (25,630)      (53,952)
                                            -------------  ------------  ------------
NET LOSS                                      (1,338,058)     (707,546)     (195,786)
                                            -------------  ------------  ------------

OTHER COMPREHENSIVE INCOME
  Unrealized gain on investments                (368,600)    1,455,000           -
                                            -------------  ------------  ------------

COMPREHENSIVE LOSS                          $ (1,706,658)  $    39,908   $  (391,572)
                                            =============  ============  ============

LOSS PER COMMON SHARE, BASIC AND DILUTED,
  CONTINUING OPERATIONS                     $      (0.04)  $     (0.05)  $     (0.01)
                                            =============  ============  ============

LOSS PER COMMON SHARE, BASIC AND DILUTED,
DISCONTINUED OPERATIONS                     $      (0.04)  $        Nil   $    (0.01)
                                            =============  ============  ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING, BASIC AND DILUTED              16,281,220    13,560,305    10,273,012
                                            =============  ============  ============
</TABLE>








See accompanying notes and accountant's review report.
<page>  6
POWERCOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


<TABLE>
<CAPTION>
                                                    Six Months Ended June 30,
                                            -----------------------------------------
                                                2002           2001         2000
                                                            (Restated)   (Restated)
                                              Unaudited      Unaudited    Unaudited
                                            -------------  ------------  ------------

                                         <c>            <c>           <c>
REVENUES
  Product sales                             $    803,289   $   356,245   $    92,526
  Services                                        43,201        67,853        14,190
                                            -------------  ------------  ------------
    Total Revenues                               846,490       424,098       106,716

COST OF REVENUES                                 611,010       241,801        85,575
                                            -------------  ------------  ------------
GROSS PROFIT (LOSS)                              235,480       182,297        21,141
                                            -------------  ------------  ------------
OPERATING EXPENSES
  Sales and marketing                            138,286       630,501           -
  General and administrative                   1,564,204       467,244       337,546
  Depreciation and amortization                   44,175        60,981        49,058
                                            -------------  ------------  ------------
  Total Operating Expenses                     1,746,665     1,158,726       386,604
                                            -------------  ------------  ------------

LOSS FROM OPERATIONS                          (1,511,185)     (976,429)     (365,463)

OTHER INCOME (EXPENSES)
  Royalty income                                   3,495        44,785           -
  Interest income                                  2,044         3,193           -
  Interest and financing expense                  (3,052)      (55,726)      (11,984)
  Other expenses                                     -             -          (1,322)
                                            -------------  ------------  ------------
  Total Other Income (Expenses)                    2,487        (7,748)      (13,306)
                                            -------------  ------------  ------------

LOSS BEFORE INCOME TAX                        (1,508,698)     (984,177)     (378,769)

INCOME TAX EXPENSE                                   -             -         (52,222)
                                            -------------  ------------  ------------

NET LOSS FROM CONTINUING OPERATIONS           (1,508,698)     (984,177)     (430,991)
LOSS FROM DISCONTINUED OPERATIONS               (667,723)      (51,259)     (107,904)
                                            -------------  ------------  ------------
NET LOSS                                      (2,176,421)   (1,035,436)     (538,895)

OTHER COMPREHENSIVE INCOME
  Unrealized gain on investments                (368,600)    1,455,000           -
                                            -------------  ------------  ------------

COMPREHENSIVE LOSS                          $ (2,545,021)  $   419,564   $  (538,895)
                                            =============  ============  ============

LOSS PER COMMON SHARE, BASIC AND DILUTED,
CONTINUING OPERATIONS                       $      (0.09)  $     (0.07)  $     (0.04)
                                            =============  ============  ============

LOSS PER COMMON SHARE, BASIC AND DILUTED,
DISCONTINUED OPERATIONS                     $      (0.04)  $       Nil   $     (0.01)
                                            =============  ============  ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING, BASIC AND DILUTED              16,268,893    13,259,614    10,186,853
                                            =============  ============  ============
</TABLE>




See accompanying notes and accountant's review report.
<page>  7

POWERCOLD CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                         Accum-
                                                                                                          ulated
                         Preferred Stock          Common Stock                               Stock       Other       Total
                     ------------------------ ---------------------- Additional  Accum-      Options     Comphre-    Stock-
                     Number of                Number of              Paid-in      ulated     and          hensive     holders'
                     Shares      Amount       Shares     Amount      Capital     Deficit     Warrants    Income      Equity
                     ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<C>                  <S>         <S>         <S>         <S>         <S>         <S>         <S>         <S>         <S>
Balance, December
 31, 1999              1,250,000      1,250    7,876,641      7,876   6,034,592   (5,681,882)       -           -       362,836

Stock issued for
 cash at an average
 of $0.87 per
 common share                -          -      1,329,602      1,330   1,156,670          -          -           -     1,158,000

Stock issued as
 prepaid consulting
 fees at $0.50 per
 common share                -           -       615,000        615    306,885           -          -           -       307,500

Stock issued for
 services at an
 average of $.058
 per common share            -           -       593,355        593    296,085           -          -           -       296,678

Perferred stock
 converted to
 common stock at par  (1,250,000)     (1,250)  1,354,785      1,355       (105)          -          -           -         1,250

Stock issued and
 options exercised in
 exchange for
 technology license
 at $0.50 per
 common share                -           -       100,000        100     49,900           -          -           -        50,000

Stock issued and options
 exercised in
 exchange for debt at
 $0.50 per common share      -           -       800,000        800    399,200           -          -           -       400,000

Net loss, December
 31, 2000                    -           -           -          -          -      (1,319,195)       -           -    (1,319,195)
                     ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, December
 31, 2000                    -           -    12,669,383     12,669   8,243,227  (7,001,077)$       -           -     1,257,069
</table>






















See accompanying notes and accountants' review report.

<page>  8
POWERCOLD CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                                         Accum-
                                                                                                          ulated
                         Preferred Stock          Common Stock                               Stock       Other       Total
                     ------------------------ ---------------------- Additional  Accum-      Options     Comphre-    Stock-
                     Number of                Number of              Paid-in      ulated     and          hensive     holders'
                     Shares      Amount       Shares     Amount      Capital     Deficit     Warrants    Income      Equity
                     ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<C>                  <S>         <S>         <S>         <S>         <S>         <S>         <S>         <S>         <S>
Common stock issued
 for services at
 $0.59 per share             -           -        42,500         43      24,958         -           -           -        25,000
Common stock issued
 for consulting
 services at $0.50
 per  share                  -           -       230,000        230     114,770         -           -           -       115,000
Common stock issued
 for conversion of
 debt at $0.61
 per  share                  -           -       372,081        372     207,128         -           -           -       207,500
Common stock issued
 as pre payament of
 rent at $0.50
 per  share                  -           -        45,000         45      22,455         -           -           -        22,500
Common stock issued
 as interest and
 financing expense
 at $0.50 per share          -           -       240,419        240     122,010         -           -           -       122,250
Common stock issued
 as compensation at
 $0.50 per share             -           -       113,000        113      56,387         -           -           -        56,500
Common stock issued
 for payment of
 accounts payable at
 $0.75 per share             -           -        35,000         35      26,383         -           -           -        26,418
Common stock and
 options issued for
 acquisition of PSI
 at $2.16 per share          -           -        50,000         50     108,450         -        66,500         -       175,000
Common stock: 2,144,820
 shares issued with
 603,083 attached
 warrants for cash
 at $0.86 per share
 and 85,679 shares
 valued at $1.73 per
 share as issuing
 costs less total
 issuing costs of
 $296,142                    -           -     2,230,499      2,230   1,284,898         -       405,480         -     1,692,608
Other comprehensive
 income                      -           -           -          -           -           -           -       970,000     970,000
Net loss,
 December 31, 2001           -           -           -          -           -    (2,328,402)        -           -    (2,328,402)
                     ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
 December 31, 2001           -   $       -    16,027,882 $    16,027 $10,210,665 $(9,329,479)$  471,980  $  970,000  $2,341,443
Common stock issued
 for cash at $1.63
 per share less
 $4,642 for cost
 of insurance                -           -     1,284,970       1,285   2,097,877         -          -           -     2,099,162
Common stock issued
 as compensation
 at $1.00 per share          -           -        30,000          30      29,970         -          -           -        30,000
Common stock issued
 for services at
 $1.06  per share            -           -       356,955         357     378,393         -          -           -       378,750
Warrants exercised
 at $1.00 per share          -           -        32,000          32      53,408         -      (21,440)        -        32,000
Rescind common stock
 for failure to
 perform                     -           -       (50,000)        (50)         50         -          -           -           -
Rescind common stock
 and options for
 acquisition of PSI          -           -       (50,000)        (50)   (108,400)        -      (66,500)        -      (174,950)
Other comprehensive
 income (loss)               -           -           -           -           -           -          -      (368,600)   (368,600)
Net loss,
 June 30, 2002               -           -           -           -           -    (2,176,421)       -           -    (2,176,421)
                     ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 2002       -   $       -    17,631,807 $    17,631 $12,661,963 $(11,505,900)$  384,040 $   601,400 $2,159,134
(unaudited)          =========== =========== =========== =========== =========== =========== =========== =========== ===========
</table>
See accompanying notes and accountants' review report.
<page>  9
POWERCOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                    Six Months Ended June 30,
                                            -----------------------------------------
                                                2002           2001         2000
                                                            (Restated)   (Restated)
                                              Unaudited      Unaudited    Unaudited
                                            -------------  ------------  ------------

                                         <c>            <c>           <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                    $ (2,176,421)  $(1,035,436)  $  (538,895)
Discontinued operations                          667,723        51,259       107,904
                                            -------------  ------------  ------------
                                              (1,508,698)     (984,177)     (430,991)
                                            -------------  ------------  ------------
Adjustments to reconcile net loss to
  net cash used in operating activities:
    Depreciation and amortization                 44,715        60,982        20,496
    Issuance of common stock for services        378,750       207,500       139,065
    Issunace of common stock for current debt        -          26,418           -
    Issuance of common stock for compensation     30,000           -             -
    Issuance of common stock for interest
      and financing                                  -          54,000           -
  (Increase) decrease in assets:
    Accounts receivable                          586,916       (54,595)       69,932
    Receivable from related party                  1,686           -             -
    Inventories                                  (38,272)       18,600           -
    Prepaid expenses                               9,375        77,893           -
    Refundable income taxes                          -             -          52,222
  Increase (decrease) in liabilities:
    Accounts payable and accrued expenses       (619,724)         (872)     (122,511)
    Accounts payable, related party                  -           1,705        (1,312)
    Commitments and contingencies                (15,096)          -             -
    Deferred revenue                                 -          80,900           -
    Commissions payable                              -          20,363           -
                                            -------------  ------------  ------------
Net cash used in operating activities         (1,130,348)     (491,283)     (273,099)
                                            -------------  ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Deposits                                         5,520        (1,265)          -
  Purchase of property and equipment              (7,234)       (7,838)          -
  Loans to Alturdyne, Inc.                      (400,000)          -             -
  Payment on capital lease                        (3,009)          -             -
  Proceeds from advances from affilate               -             -             -
  Investment in discontinued operations         (364,743)      (54,713)      (61,607)
                                            -------------  ------------  ------------
Net cash provided by (used in investing
  activities                                    (769,466)      (63,816)      (61,607)
                                            -------------  ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments on capital lease                -          (1,351)          -
  Proceeds from issuance of shares under
     private placement                         2,131,162       337,500       451,000
  Repayment of borrowings                         (4,505)       (2,783)          -
  Proceeds from borrowing                            -         165,000           -
  Proceeds from advance from affiliate               -         127,500        26,616
  Repayment of short-term borrowings,
    affiliate                                        -        (137,196)          -
                                            -------------  ------------  ------------
Net cash provided by financing activities      2,126,657       488,670       477,616
                                            -------------  ------------  ------------

Net increase (decrease) in case                  226,843       (66,429)      142,910

Cash at beginning of year                        290,174       106,864        14,464
                                            -------------  ------------  ------------
Cash at end of year                         $    517,017   $    40,435   $   157,374
                                            =============  ============  ============
</table>



See accompanying notes and accountants' review report.
<page>  10
POWERCOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                    Six Months Ended June 30,
                                            -----------------------------------------
                                                2002           2001         2000
                                                            (Restated)   (Restated)
                                              Unaudited      Unaudited    Unaudited
                                            -------------  ------------  ------------

                                         <c>            <c>           <c>

Supplemental cash flow
information:
        Interest paid                        $       -     $    12,726   $    11,984
        Income taxes paid                    $       -     $       -     $       -

NON-CASH TRANSACTIONS:
        Unrealized gain (loss) on securities $  (368,600)  $ 1,455,000   $       -
        available for sale
        Issuance of common stock as
          prepayment for consulting services $             $    85,000   $   139,065
        Issuance of common stock for
          services and compensation          $   408,750   $   122,500   $       -
        and compensation
        Issuance of common stock for
          payment of accounts payable        $       -     $    26,418   $       -
        Issuance of common stock for
           payment of interest and
           financing expenses                $       -     $    54,000   $       -
        financing expenses
        Issuance of common stock as stock
           offering costs                    $       -     $    65,625   $       -
        Issuance of common stock for
           prepaid rent                      $       -     $    22,500   $       -
</TABLE>







































See accompanying notes and accountants' review report.
<page>  11
                            POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

PowerCold  Corporation,  formerly  International Cryogenic Systems Corporation,
(the Company) was incorporated on October  7,  1987  in  the  State  of Nevada.
PowerCold  is  a  solution  provider  of  energy  efficient  products  for  the
refrigeration,  air  conditioning  and  power  industries. The Company operates
across  many  market sectors from large industrial  food  processors  to  small
commercial air  conditioning  systems.  The  Company develops, manufactures and
markets  proprietary  equipment  to  achieve significant  electric  power  cost
savings for commercial and industrial  firms.  PowerCold's energy efficient and
environmentally  safe  products  are designed to reduce  power  costs  for  air
conditioning, refrigeration and on-site building power. The Company derives its
revenues  from  three  principal  product  lines.   The  first  is  a  line  of
evaporative heat exchange systems for  the HVAC and refrigeration industry. The
second  line  is  the  design  and  production   of  unique  products  for  the
refrigeration industry. The third is consulting engineering services, including
process  safety  management compliance, and ammonia  refrigeration  and  carbon
dioxide system design.

On December 28, 1992,  the  Company acquired the patent rights (U.S. Patent No.
5,501,269)  and related engineering  and  technology  to  a  process  of  quick
freezing food  products,  and  cleaning  and treating various nonfood products.
This  process was accomplished by using a circulating  cryogenic  liquid  in  a
closed  pressurized vessel system.  The patent acquisition was made in exchange
for 2,414,083  shares  of  the  Company's  common  stock.  Two directors of the
Company were also directors of the company selling the patent rights.

On August 4, 1995, the Company acquired Nauticon, Inc.,  including  its related
technology and assets for 900,000 shares and 300,000 options (expired  July 31,
2000)  of  the  Company's stock.  The assets currently include U.S. Patent  No.
5,501,269 issued  on  March  26,  1996,  and  entitled Condenser Unit, and U.S.
Patent No. 5,787,722 issued August 4, 1998, and  entitled  Heat  Exchange Unit.
During  the six months ended June 30 2002,  Nauticon's assets, liabilities  and
operations  have  been  absorbed  into  PowerCold Products, Inc., the Company's
wholly owned subsidiary.

On May 18, 1998, the Company incorporated  a  wholly  owned subsidiary, Channel
Freeze Technologies, Inc., to acquire intellectual property  rights  of Channel
Ice Technologies.  The Company has produced its first unit with this technology
(see  Note 17) and is awaiting its sale.  During the six months ended June  30,
2002 the Company has disposed of Channel Freeze.  See Note 18.

The Company  formed Alturdyne Energy Systems, Inc. in September 1999 to support
the natural gas  engine  driven  water  chiller  business.   Subsequent  to its
formation, the entity has been essentially dormant.













<PAGE>  12
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

On  December  1, 2000, the Company acquired assets of Ultimate Comfort Systems,
Inc.,  including   its  technology  rights,  patent  rights  (U.S.  Patent  No.
5,183,102), and license  agreement  for  integrated  piping  technology  for  a
heating  and  air  conditioning  system.   This  acquisition  gave  the Company
exclusive, non-transferable United States transfer rights to the aforementioned
technology  and  all  related  assets.  This technology was then placed into  a
newly formed, wholly-owned subsidiary of the Company, Ultimate Comfort Systems.
See Note 5.

On December 1, 2001, Powercold acquired  all  of  the  common  stock  of  Power
Sources,  Inc.  (hereinafter  "PSI"),  a  newly  formed  entity  engaged in the
development and marketing of cogeneration systems technology.  During  the  six
months ended June 30, 2002 the Company also disposed of PSI.  See Note 5.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This  summary  of  significant  accounting  policies  is presented to assist in
understanding the financial statements.  The financial statements and notes are
representations  of  the Company's management, which is responsible  for  their
integrity and objectivity.   These  accounting  policies  conform to accounting
principles  generally accepted in the United States of America  and  have  been
consistently applied in the preparation of the financial statements.

Accounting Methods
The Company's  financial  statements  are  prepared using the accrual method of
accounting.

Use of Estimates
The process of preparing financial statements  in  conformity  with  accounting
principles generally accepted in the United States of America requires  the use
of  estimates  and  assumptions regarding certain types of assets, liabilities,
revenues,  and  expenses.    Such   estimates  primarily  relate  to  unsettled
transactions  and  events  as  of  the  date   of   the  financial  statements.
Accordingly, upon settlement, actual results may differ from estimated amounts.

Interim Financial Statements
The interim financial statements for the period ended  June  30,  2002 included
herein have not been audited, at the request of the Company.  They  reflect all
adjustments,  which  are,  in  the  opinion of management, necessary to present
fairly the results of operations for  the  period.   All  such  adjustments are
normal  recurring  adjustments.   The  results  of  operations  for the  period
presented is not necessarily indicative of the results to be expected  for  the
full fiscal year.













<PAGE>  13
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Principles of Consolidation
The  consolidated  financial statements include the accounts of the Company and
its wholly owned subsidiaries,  after  elimination of the intercompany accounts
and transactions.  Wholly owned subsidiaries  of the Company are listed in Note
13.

Reclassification
Certain amounts from prior periods have been reclassified  to  conform  to  the
current  period presentation.  This reclassification has resulted in no changes
to the Company's accumulated deficit or net losses presented.

Cash and Cash Equivalents
For purposes  of the statements of cash flows, the Company considers all highly
liquid investments  with original maturities of three months or less to be cash
equivalents.

Inventories
Inventories are stated  at the lower of cost or market on a first-in, first-out
basis.  See Note 6.

Fair Value of Financial Instruments
The Company's financial instruments  as  defined  by SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments," include  cash,  advances to related
party, trade accounts receivable, accounts payable, accrued expenses  and notes
payable.   All  instruments  are  accounted  for  on the historical cost basis,
which, due to the short maturity of these financial  instruments,  approximates
fair value at June 30, 2002

Derivative Instruments
In  June  1998,  the  Financial Accounting Standards Board issued Statement  of
Financial Accounting Standards  No.  133  ("SFAS  No.  130"),  "Accounting  for
Derivative  Instruments  and  Hedging  Activities," as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB No. 133", and SFAS  No.  138,  "Accounting  for  Certain
Derivative Instruments and Certain Hedging Activities", which is effective  for
the  Company  as  of January 1, 2001.  This standard establishes accounting and
reporting standards  for  derivative  instruments, including certain derivative
instruments  embedded  in other contracts,  and  for  hedging  activities.   It
requires  that  an  entity  recognize  all  derivatives  as  either  assets  or
liabilities in the consolidated  balance sheet and measure those instruments at
fair value.















<PAGE>  14
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Derivative Instruments (continued)
If certain conditions are met, a derivative may be specifically designated as a
hedge,  the  objective  of  which is to  match  the  timing  of  gain  or  loss
recognition on the hedging derivative  with  the recognition of (i) the changes
in the fair value of the hedged asset or liability that are attributable to the
hedged risk or (ii) the earnings effect of the  hedged  forecasted transaction.
For a derivative not designated as a hedging instrument,  the  gain  or loss is
recognized in income in the period of change.

Historically,  the Company has not entered into derivatives contracts to  hedge
existing risks or for speculative purposes.

At June 30, 2002, the Company has not engaged in any transactions that would be
considered derivative instruments or hedging activities.

Property and Equipment
Property and equipment  are  stated  at  cost.   Depreciation  of  property and
equipment  is  calculated  using  the  straight-line  method over the estimated
useful lives of the assets, which range from three to ten years.  See Note 7.

Concentration of Credit Risk
The  Company  maintains  its  cash  in  several  commercial accounts  at  major
financial institutions.  At December 31, 2001, the  Company's  cash balance, in
two accounts, exceeded Federal Deposit Insurance Corporation (FDIC)  limits  by
$24,824  and  $54,568.   At  June 30, 2002, the Company's cash balance exceeded
FDIC limits by $428,961.

Goodwill
Goodwill represents the excess  of  the purchase price and related direct costs
over the fair value of net assets acquired  as  of the date of the acquisition.
Goodwill was amortized on a straight-line basis over  10 years through December
31,  2001.  At January 1, 2002 the Company adopted SFAS  142  which  eliminates
amortization  of  good  will.  The Company periodically reviews its goodwill to
assess  recoverability  based   on   projected  undiscounted  cash  flows  from
operations.  Impairments are recognized  in  operating results when a permanent
diminution in value occurs.

Revenue Recognition
The  Company  recognizes  revenue  from  product sales  upon  shipment  to  the
customer.  Service  revenue  is  recognized when  services  are  performed  and
billable.

Bad Debts
The Company estimates bad debts utilizing the allowance method, based upon past
experience and current market conditions.











<PAGE>  15
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Product Warranties
The Company sold the majority of its  products to consumers along with one-year
unconditional repair or replacement warranties.   Warranty  expense is included
in cost of sales.

Research and Development
Research  and development expenses are charged to operations as  incurred.  The
cost  of intellectual  property  purchased  from  others  that  is  immediately
marketable  or  that has an alternative future use is capitalized and amortized
as intangible assets.  Capitalized  costs are amortized using the straight-line
method over the estimated economic life,  typically  10  years,  of the related
asset. The Company periodically reviews its capitalized patent costs  to assess
recoverability  based on the projected undiscounted cash flows from operations.
Impairments are recognized  in operating results when a permanent diminution in
value occurs.

Advertising Expenses
Advertising  expenses consist  primarily  of  costs  incurred  in  the  design,
development, and  printing  of Company literature and marketing materials.  The
Company expenses all advertising expenditures as incurred.

Stock Based Compensation
The Company accounts for stock  issued  for compensation in accordance with APB
25,  "Accounting  for  Stock  Issued  to  Employee."    Under   this  standard,
compensation  cost is the difference between the exercise price of  the  option
and fair market  of the underlying stock on the grant date.  In accordance with
SFAS No. 123, "Accounting  for  Stock Based Compensation," the Company provides
the pro forma effects on net income  and  earnings per share as if compensation
had been measured using the "fair value method" described therein.

Compensated Absences
Employees of the Company are entitled to paid vacation, sick, and personal days
off, depending on job classification, length  of  service,  and  other factors.
The  Company accrues vacation expense throughout the year and, if employees  do
not utilize  their  allotment,  the Company will cash out all unused pay on the
last calendar day of the year.

Income Taxes
The  Company  accounts  for income taxes  in  accordance  with  SFAS  No.  109,
"Accounting for Income Taxes,"  which  requires  recognition  of  deferred  tax
liabilities  and assets for the expected future tax consequences of events that
have been included  in  the  financial  statements  or tax returns.  Under this
method,  deferred  tax  liabilities  and  assets are determined  based  on  the
difference  between  the financial statements  and  tax  basis  of  assets  and
liabilities using statutory  income  tax  rates in effect for the year in which
the differences are expected to reverse.










<PAGE>  16
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investment in Securities
Investments in debt and marketable equity securities are designated as trading,
held  to  maturity,  or  available for sale in  accordance  with  statement  of
Financial  Accounting  Standards   (SFAS)   No.  115  "Accounting  for  Certain
Investments in Debt and Equity Securities."  Trading securities are reported at
fair value, with changes in fair value included  in  earnings.   Available  for
sale  securities  are  reported  at  fair  value, with net unrealized gains and
losses  included  as  a component of equity.  Held-to-maturity  securities  are
reported at amortized cost.   Gains  and  losses  on the sale of securities are
determined  using  the  specific  identification method.   For  all  investment
securities, unrealized gains and losses  that  are  other  than  temporary  are
recognized  as a component of earnings in the period incurred.  Market value is
determined based  on  quoted  market  prices.   At  June  30,  2002, all of the
Company's  investment  securities were classified as available for  sale.   See
Note 8.

Earnings Per Share
On January 1, 1998, the  Company  adopted  SFAS  No.  128,  which  provides for
calculation  of  "Basic" and "Diluted" earnings per share.  Basic earnings  per
share includes no  dilution and is computed by dividing net income available to
common shareholders  by  the weighted average common shares outstanding for the
period.   Diluted  earnings   per  share  reflect  the  potential  dilution  of
securities that could share in  the  earnings  of  an  entity  similar to fully
diluted  earnings  per  share.   Although  there  are  common stock equivalents
outstanding, they were not included in the calculation of  earnings  per  share
because   they  would  have  been  considered  anti-dilutive  for  the  periods
presented.

Accounting Pronouncements
In April 2002,  the  Financial  Accounting  Standards Board issued Statement of
Financial Accounting Standards No. 145, "Rescission  of FASB Statements No. 44,
and 64, Amendment of FASB Statement No. 13, and Technical  Corrections",  which
updates, clarifies and simplifies existing accounting pronouncements.  FASB No.
4,  which  required  all gains and losses from the extinguishment of debt to be
aggregated and, if material,  classified  as  an  extraordinary  item,  net  of
related  tax  effect was rescinded, as a result, FASB 64, which amended FASB 4,
was rescinded as  it  was  no  longer  necessary.   FASB 145 amended FASB 13 to
eliminate an inconsistency between the required accounting  for  sale-leaseback
transaction  and  the required accounting for certain lease modifications  that
have  economic  effects   that  are  similar  to  sale-leaseback  transactions.
Management has determined there  will  be no effects of adopting this Statement
on the financial position or results of  operations  at  June  30, 2002 and the
years ended December 31, 2001 and 2000.











<PAGE>  17
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounting Pronouncements (continued)
In October 2001, the Financial Accounting Standards Board issued  Statement  of
Financial  Accounting  Standards  No.  144,  "Accounting  for the Impairment or
Disposal  of  Long-Lived Assets" (SFAS No. 144).  SFAS 144 replaces  SFAS  121,
"Accounting for  the  Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of."  This  new  standard  establishes a single accounting model
for  long-lived  assets  to  be  disposed of by  sale,  including  discontinued
operations.  Statement 144 requires that these long-lived assets be measured at
the lower of carrying amount or fair  value less cost to sell, whether reported
in  continuing  operations  or  discontinued  operations.   This  statement  is
effective beginning for fiscal years  after  December  15,  2001,  with earlier
application  encouraged.   The Company adopted SFAS 144, which did not  have  a
material impact on the financial statements of the Company at December 31, 2001
or at June 30, 2002.

In October 2001, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  No.  143, "Accounting  for  Asset  Retirement
Obligations" (SFAS No. 143).  SFAS No. 143  establishes  guidelines  related to
the  retirement of tangible long-lived assets of the Company and the associated
retirement  costs.   This statement requires that the fair value of a liability
for an asset retirement  obligation  be recognized in the period in which it is
incurred if a reasonable estimate of fair  value  can  be made.  The associated
asset retirement costs are capitalized as part of the carrying  amount  of  the
long-lived assets.  This statement is effective for financial statements issued
for the fiscal years beginning after June 15, 2002 and with earlier application
encouraged.   The  Company  adopted SFAS No. 143, which did not have a material
impact on the financial statements  of  the  Company at December 31, 2001 or at
June 30, 2002.

In June 2001, the FASB issued SFAS No. 141, "Business  Combinations"  and  SFAS
No.  142, "Goodwill and Other Intangible Assets". SFAS No. 141 provides for the
elimination  of  the  pooling-of-interests  method  of  accounting for business
combinations with an acquisition date of July 1, 2001 or  later.  SFAS  No. 142
prohibits  the  amortization  of  goodwill  and  other  intangible  assets with
indefinite lives and requires periodic reassessment of the underlying  value of
such  assets  for  impairment.  SFAS  No.  142  is  effective  for fiscal years
beginning  after  December  15,  2001.  An early adoption provision exists  for
companies with fiscal years beginning after March 15, 2001.  Application of the
nonamortization provision of SFAS No. 142  is expected to result in an increase
in net income of approximately $10,000 in fiscal 2002.














<PAGE>  18
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounting Pronouncements (continued)
In September 2000, the FASB issued SFAS No.  140  "Accounting for Transfers and
Servicing  of  Financial  Assets  and  Extinguishment  of  Liabilities."   This
statement  provides  accounting  and  reporting  standards  for  transfers  and
servicing  of  financial  assets  and  extinguishment of liabilities  and  also
provides consistent standards for distinguishing  transfers of financial assets
that are sales from transfers that are secured borrowings.   SFAS  No.  140  is
effective   for   recognition   and  reclassification  of  collateral  and  for
disclosures relating to securitization  transactions  and collateral for fiscal
years  ending  after  December  15, 2000, and is effective  for  transfers  and
servicing  of financial assets and  extinguishments  of  liabilities  occurring
after March  31, 2001.  The Company believes that the adoption of this standard
will not have  a  material  effect  on  the  Company's results of operations or
financial position.

Shipping and Handling Fees and Costs
The Emerging Issues Task Force ("EITF") issued  EITF No. 00-10, "Accounting for
Shipping and Handling Fees and Costs", which was  adopted  during  fiscal 2001.
The  impact  of  adopting  EITF No. 00-10 was to increase revenues and cost  of
sales  by  approximately  $19,489   and   $16,955  in  fiscal  2001  and  2000,
respectively.  All  amounts  in  the accompanying  consolidated  statements  of
operations  and comprehensive loss  have  been  reclassified  to  reflect  this
adoption


NOTE 3 - GOING CONCERN

The  accompanying   consolidated   financial   statements,   which  contemplate
continuation  of  the  Company  as  a  going  concern,  have  been prepared  in
conformity with accounting principles generally accepted in the  United  States
of  America.   The Company has, however, sustained substantial operating losses
in recent years  and  has  used  substantial  amounts of working capital in its
operations.  At June 30, 2002, property, equipment  and  other  intangibles and
non-current  assets  comprise a material portion of the Company's assets.   The
recovery upon these assets  is  dependent upon achieving profitable operations.
The ultimate outcome of these uncertainties  cannot  presently  be  determined.
Management  is  actively  seeking  additional  equity financing.  Additionally,
management  believes  that  prior acquisitions and  the  acquisition  of  Power
Sources, Inc. technology will  lead  to  the  overall  structure  necessary  to
fulfill the Company's current strategic plans.

In  view  of these matters, realization of a major portion of the assets in the
accompanying  balance  sheet  is  dependent  upon  continued  operations of the
Company,  and the success of its future operations.  Management  believes  that
actions presently  being  taken  to  obtain  additional  equity  financing  and
increase sales provide the opportunity to continue as a going concern.








<PAGE>  19
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 4 - RELATED PARTY TRANSACTIONS

The  Company  has  received funding on several occasions from Simco Group, Inc,
("Simco"), a separate  legal  entity wholly-owned by the Company's chairman and
chief executive officer.

During 2001, Simco was issued 262,500  shares  of  common  stock for payment of
loans, interest and financing fees and consulting services.

During 2000, Simco converted $400,000 of its loans to the Company  into 800,000
shares of the Company's common stock.  See Note 11.

See Note 10 regarding loans from shareholders.


NOTE 5 - ACQUISITIONS

Acquisition of Power Sources, Inc.
On December 1, 2001, PowerCold acquired all of Power Sources, Inc. (hereinafter
"PSI"),  a  privately  held  firm  engaged  in the developing and marketing  of
cogeneration systems technology.  PSI was a wholly  owned subsidiary of Utility
Metal Research Corp. (UMRI).  The business activity of  PSI had previously been
part of the activities of UMRI.

In the acquisition, PowerCold agreed to issue over a two-year period a total of
150,000 shares of PowerCold common stock and 150,000 common  stock  options  to
UMRI.  At December 31, 2001, the Company had issued 50,000 shares of its common
stock  (valued  at  $108,500) and 50,000 of its common stock options (valued at
$66,500) to PSI, and  had  recorded  a  commitment  of  $227,000 for the future
issuance  of the remaining stock and options.  This acquisition  was  accounted
for under the purchase method of accounting.

Acquired in  the  transaction  were  trade  receivables of $921,050, which were
December  31,  2001  revenues,  with  $721,392 accounts  payable  attached  and
contracts in place of $331,175 with $281,499  accounts  payable  attached.  The
Company  also  acquired  technology rights valued at $222,666.  The assets  and
liabilities of PSI had been  transferred  to  PSI  by UMRI upon the creation of
PSI.  PSI had no substantial operations prior to PowerCold's acquisition in the
month of December 2001.

During the six months ended June 30, 2002 the Company has disposed of PSI.  The
acquired  assets and liabilities have been returned to  UMRI.   The  stock  and
options given in exchange for the acquisition have been rescinded.  The Company
has recorded  a net gain on disposition of $45,000 which has been netted in the
loss from discontinued operations with the operating losses from this activity.











<PAGE>  20
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 5 - ACQUISITIONS (CONTINUED)

Acquisition of Heating and Air Conditioning System Technology
On December 1, 2000, the Company acquired the technology rights, patent rights,
and license agreement  for  integrated  piping technology for a heating and air
conditioning  system.   This  acquisition  gave  the  Company  exclusive,  non-
transferable United States transfer rights to  the  technology  and all related
assets.  In this transaction, the Company paid $65,000 cash, assumed  two lines
of credit (see Note 10), forgave a payment of $28,571 from projects in process,
issued  100,000  shares  of its common stock (see Note 12), granted 150,000  of
stock options at $1.00 per  share  (see  Note 13), and agreed to the payment of
royalties at no more than $3,000 per month  for  one  year.   In  addition, the
Company  hired  the  seller of the technology for an annual salary of  $70,000,
with annual renewals,  based  upon  performance  as defined within the purchase
agreement.  This technology was then placed into a  newly  formed, wholly-owned
subsidiary of the Company, Ultimate Comfort Systems.

Acquisition of Rotary Power Enterprise, Inc.
Pursuant  to  the  terms  of  the  Rotary  Power  Enterprise,  Inc. acquisition
agreement,  effective  October  1, 1998, the Company issued 100,000  shares  of
common stock in exchange for 100%  of  the  outstanding  stock  of Rotary Power
Enterprise, Inc.  Rotary Power Enterprise, Inc. was formed during  1998 for the
purpose of developing a new product line for PowerCold.  Rotary Power  has been
absorbed into PowerCold Corporation at June 30, 2002.


NOTE 6 - INVENTORY

Inventories  are  stated  at  the lower of average cost or market. The cost  of
finished goods includes the cost  of  raw  material, direct and indirect labor,
and other indirect manufacturing costs.

Inventories  at  June  30, 2002, December 31, 2001  and  2000  consist  of  the
following:

                          June 30, 2002   December 31, 2001  December 31, 2000
                          --------------  -----------------  -----------------
Materials inventory       $     171,704   $        133,432   $        132,851
Finished goods inventory        108,421            108,421            108,421
                          --------------  -----------------  -----------------
                          $     280,125   $        241,853   $        241,272
                          ==============  =================  =================

Finished goods inventory consists of the specialized quick-freezing unit of the
Company's Channel Freeze  Technology, Inc. subsidiary., and held as of June 30,
2002 by PowerCold Products, Inc.










<PAGE>  21
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JUNE 30, 2002



NOTE 7 - PROPERTY, EQUIPMENT AND INTANGIBLES

Property and equipment is summarized as follows:


                           June 30, 2002   December 31, 2001  December 31, 2000
                           --------------  -----------------  -----------------
Machinery and equipment    $     141,653   $         37,158   $         31,342
Prototypes and molds              71,030             71,030             71,030
Furniture and fixtures            30,480             30,480              7,614
Total Property and
  Equipment                      243,163            138,668            109,986
Less: Accumulated
   Depreciation                  102,933             97,555             90,487
                           --------------  -----------------  -----------------
Net Property and Equipment $     140,230   $         41,113   $         19,499
                           ==============  =================  =================

Depreciation expense for the six months ended June 30, 2002 and the years ended
December 31, 2001 and 2000 was $5,378, $7,068 and $4,616, respectively.

The Company's intangible assets are summarized as follows:


                           June 30, 2002   December 31, 2001  December 31, 2000
                           --------------  -----------------  -----------------
Patents and related
  technology               $     822,867   $        822,867   $        822,867
Goodwill                         105,269            105,269            105,269
Total Intangibles                928,136            928,136            928,136
Less:  Accumulated
  Amortization                   566,934            529,162            441,401
                           --------------  -----------------  -----------------
Net Intangibles            $     361,202   $        398,974   $        486,735
                           ==============  =================  =================

Amortization expense for the  six  months  ended  June 30, 2002 and years ended
December 31, 2001 and 2000 was $39,337, $87,761 and $119,550, respectively.


















<PAGE>  22
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 8 - INVESTMENTS

In  1996,  as  part of a planned merger, which never took  place,  the  Company
invested $1,000,000  in Rotary Power International, Inc. (hereinafter "RPI") in
exchange  for 2,000,000  shares  of  RPI's  common  stock.   As  the  Company's
investment  in  RPI represented more than 20% but less than 50% of RPI's common
stock outstanding,  the  equity  method  was  used to account for the Company's
interest.  Although the Company advanced additional  funds  of $216,768 to RPI,
deteriorating  financial  conditions  and increasing losses in RPI  caused  the
Company to write off its entire investment in RPI by the end of 1997.

During 2001, the Company's investment in  RPI  decreased  to  less  than 20% of
RPI's  stock  outstanding.  In view of the changed circumstances, the Company's
management elected  to  recognize  its  investment in RPI as available-for-sale
securities.  As of December 31, 2001, the fair market value of these securities
was  $970,000 at June 30, 2002 the fair market  value  of  the  securities  was
reduced to $601,400, which has been recognized as other comprehensive income in
accordance with SFAS No. 115.


NOTE 9 - LOAN RECEIVABLE

During  the six months ended June 30, 2002, the Company loaned Alturdyne, Inc.,
a privately  held  firm, $400,000, and the Company signed a letter of intent to
acquire Alturdyne, Inc.   Subsequent  to June 30, 2002 the Company withdrew its
offer to acquire Alterdyne, Inc.


NOTE 10 - NOTES PAYABLE

At December 31, 2001, notes payable consisted of the following:

A  note  payable  to  Southtrust Bank, secured  by  G.  Briley,  the  Company's
president, for $1,940 with  an  annual interest rate of 14.99%.  This unsecured
note was repaid in March 2002.

Two lines of credit were assumed  as part of the consideration for the December
2000 acquisition of a technology license  and  intellectual property. (See Note
5.)  One line of credit is payable to Royal Bank  of  Canada  for $34,014 U.S.,
and the second to T. D. Bank for $1,001 U.S. was repaid during  the  year ended
December 31, 2001.

In  2001, the Company received $165,000 in loan proceeds from its shareholders.
The unsecured  loans, bearing interest at 10% and with no stated maturity, were
repaid before year-end  with  a  combination  of  $140,000  of common stock and
$25,000 of cash.










<PAGE>  23
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 11 - PREFERRED STOCK

The  Company  is  authorized  to  issue  5,000,000 shares of $0.001  par  value
preferred stock, which contain no voting privileges.  Shareholders are entitled
to cumulative dividends, and each share of  preferred  stock  may  be converted
into the Company's common stock.

At  December  31,  1999,  the  Company had 1,250,000 shares of preferred  stock
issued and outstanding.  This stock  was  designated  as Series "A" Convertible
Preferred Stock and was issued to a single investor.

On  June  30,  2000, 100% of the Company's outstanding Series  "A"  Convertible
Preferred Stock  was  converted  to the Company's common stock.  The conversion
resulted in the issuance of 1,354,785  shares  of the Company's common stock at
an approximate conversion rate of one share of preferred  stock for 1.08 shares
of common stock.  Subsequent to the stock conversion, the Company  did not have
any shares of preferred stock outstanding.


NOTE 12 - COMMON STOCK

Upon incorporation, the Company was authorized to issue 200,000,000  shares  of
its $0.001 par value common stock.

During  the  six months ended June 30, 2002 the Company issued 1,316,970 shares
of common stock  for cash of $2,131,162 of which 32,000 warrents were exercised
at $1.07 per share.   30,000  shares  of  Company stock for compensation at the
fair market value of the stock of $1.00 per  share  and  an  additional 356,955
shares of common stock were issued for services at the fair market value of the
stock of $1.14 per share.

During the year ended December 31, 2001, the Company issued for  cash 1,836,214
shares of common stock with 603,083 warrants attached.  The stock was valued at
$1,284,020  and the warrants were valued at $405,480.  These warrants  have  an
average exercise price of $1.10 and expire between May 31, 2002 and December 6,
2003.  An additional  308,603  shares  of  common stock were issued for cash of
$150,833.  The Company issued 85,679 shares  of  common stock as commissions to
various promoters for selling its stock.  This stock  was  valued  at  the fair
market  value  of  $148,503.  The Company issued 385,500 shares of common stock
for consulting services  valued at $115,000, general services valued at $25,000
and compensation valued at  $56,500.   The  Company  issued  372,081  shares of
common stock to repay loans in the amount of $207,500 and 240,419 common  stock
shares  for  interest  and financing expenses of $122,250.  Additionally 45,000
common stock shares were issued for $22,500 in prepaid rent, 35,000 shares were
issued to satisfy $26,418  of  accounts  payable and 50,000 common stock shares
valued at $108,500 to acquire Power Sources, Inc.  See Note 5.










<PAGE>  24
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 12 - COMMON STOCK (CONTINUED)

During the year ended December 31, 2000, the Company issued 4,792,742 shares of
its common stock of which 1,329,602 shares  were issued for cash of $1,158,000,
615,000 shares for prepaid consulting valued  at $307,500, 593,355 for services
valued at $296,678, 100,000 shares for a technology license (see Note 5) valued
at $50,000, and 800,000 shares for debt valued  at  $400,000.   Included in the
aforementioned  issuances  is  a total of 1,480,000 shares issued to  officers,
directors,  or  affiliates  of  the  Company  which  are  subject  to  transfer
restrictions  as  defined by Rule 144  of  the  Securities  Act  of  1933.   In
addition, 1,354,785  shares  were  issued  for  the  conversion  of 100% of the
Company's Series "A" Convertible Preferred Stock.  See Note 11.

During the year ended December 31, 1999, the Company issued 1,042,641 shares of
its  common  stock of which 483,641 shares were issued for services  valued  at
$162,110 and 559,000 shares were issued for cash of $348,750.

In addition 50,000 shares of common stock were rescinded for failure to perform
services and 50,000  share  of common stock and 50,000 common stock option were
returned and cancelled by the  Company when PSI was disposed of and returned to
UMRI.  See Note 5.


NOTE 13 - STOCK-BASED COMPENSATION AND STOCK OPTIONS

During 2001, the Company authorized  and  issued  895,000 options at an average
exercise price of $0.96 for services, compensation  and the acquisition of PSI.
See Note 5.

During 2000, the Company authorized and issued a total of 750,000 options at an
average exercise price of $1.20 for investment funding,  and 250,000 options at
an average exercise price of $0.50 as compensation.

The  Company  applies  APB  Opinion  No.  25  in  accounting  for options  and,
accordingly,  recognized  no compensation cost for its stock options  in  2001,
2000 and 1999.  The following reflects the Company's pro forma net loss and net
loss per share had the Company  determined  compensation  costs based upon fair
market values of options at the grant date, as well as the  related disclosures
required by SFAS 123:

















<PAGE>  25
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 13 - STOCK-BASED COMPENSATION AND STOCK OPTIONS (CONTINUED)

Pro  forma  net loss and earnings per share had the Company accounted  for  its
options under the fair value method of SFAS 123 are as follows:

<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                                                  --------------------------------
                                                        2001            2000
                                                  ---------------  ---------------
<S>                                               <C>              <C>
Net loss as reported                              $   (2,328,402)  $   (1,319,195)
Adjustment required by SFAS 123
                                                        (345,277)        (287,273)
Pro forma net loss                                $   (2,673,679)  $   (1,606,468)
Pro forma net loss per share, Basic and diluted   $        (0.18)  $        (0.16)
</TABLE>

<TABLE>
<CAPTION>
                                      Number of                Weighted Average
                                      Shares Under Option      Exercise Price
                                      --------------------     -----------------
<S>                                   <C>                      <C>
Outstanding, January 1, 2000                    2,947,558      $        1.01
   Granted                                      1,000,000               0.77
   Exercised                                     (450,000)              0.50
   Forfeited                                          -                   -
   Expired                                       (700,000)              2.29
                                      --------------------     -----------------
Outstanding, December 31, 2000                  2,797,558               0.74
                                      ====================
Exercisable, December 31, 2000                  2,797,558               0.74
                                      ====================
Outstanding January 1, 2001                     2,797,558               0.74
   Granted                                        895,000               0.96
   Exercised                                          -                   -
   Forfeited                                          -                   -
   Expired                                            -                   -
                                      --------------------     -----------------
Outstanding December 31, 2001                   3,692,558               0.84
                                      ====================
   Rescinded                                      (50,000)              0.96
   Granted                                        150,000               1.00
                                      ====================
Outstanding at June 30, 2002                    3,792,558                .86
                                      --------------------     -----------------
Exercisable at June 30, 2002                    3,642,558                .83
                                      ====================
</TABLE>

Weighted average fair value  of options granted during 2002 $    1.14
                                                            =========











<PAGE>  26
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 13 - STOCK-BASED COMPENSATION AND STOCK OPTIONS (CONTINUED)

The  options  granted  at January 1, 2002 vest at 50,000 shares  each  year  on
January 1, 2003, 2004 and 2005.

At June 30, 2002, exercise  prices for outstanding options ranged from $0.50 to
$1.36.  The weighted average contractual life remaining of such options was 2.7
years.

In accordance with Statement on Financial Accounting Standard No. 123, the fair
value of the options granted was estimated using the Black-Scholes Option Price
Calculation.  The following assumptions were made to value the stock options:


                      Risk-free Interest Rate            5%
                      Expected Life                 1 to 5 years
                      Expected Volatility               75%

The Black-Scholes option valuation  model  was  developed for use in estimating
the fair value of traded options, which have no vesting  restrictions  and  are
fully transferable.

In  addition,  option valuation models  require the input  of highly subjective
assumptions  including  the  expected  stock  price  volatility.   Because  the
Company's employee  stock  options have characteristics significantly different
from those of traded options,  and  because  changes  in  the  subjective input
assumptions  can  materially  affect  the  fair value estimate, in management's
opinion,  the  existing models do not necessarily  provide  a  reliable  single
measure of the fair value of its employee stock options.


NOTE 14 - REPORTABLE SEGMENTS

PowerCold currently  has  seven  reportable  segments: Nauticon Inc., PowerCold
Products  (formerly  known as RealCold Products,  Inc.,)  Technicold  Services,
Inc.,  Rotary  Power  Enterprise,  Inc.,  Channel  Freeze  Technologies,  Inc.,
Ultimate Comfort Systems,  Inc. and Power Sources, Inc.  Nauticon Inc. offers a
product  line  of  evaporative   heat   exchange   systems  for  the  HVAC  and
refrigeration   industry.    Technicold   Services,   Inc.  offers   consulting
engineering  services,  including  process  safety  management  compliance  and
ammonia  refrigeration  technicians  and supervisors. RealCold  Products,  Inc.
designs and produces unique products for  the  refrigeration  industry.  Rotary
Power Enterprise, Inc. provides customized rotary engines to power a variety of
chiller and refrigeration systems.  Channel Freeze Technologies, Inc. generates
revenue  through  the manufacture and sale of bulk freezing systems.   Ultimate
Comfort Systems, Inc.  holds  the  technology rights, patent rights and license
agreement for an integrated piping technology  for heating and air conditioning
systems.   Ultimate  Comfort  Systems, Inc. also provides  consulting  services
related to this technology.  Power  Sources,  Inc.  (PSI)  holds the technology
rights  to  design  and  engineer cogeneration systems that use  engine  driven
generators to produce both  electrical  and  thermal  energy.   PSI  will  also
package and market this technology.




<PAGE>  27
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 14 - REPORTABLE SEGMENTS (CONTINUED)

Segment  information (after intercompany eliminations) for the six months ended
June 30, 2002 and the years ended December 31, 2001, and 2000 are as follows:

<TABLE>
<CAPTION>
                                                   June 30,      December 31,     December 31,
                                                     2002            2001             2000
                                               ---------------  ---------------  ---------------
<S>                                            <C>              <C>              <C>
Revenues:
  Ultimate Comfort Systems, Inc.               $      396,310   $      282,733   $          -
  PowerCold Products, Inc.                            406,739          531,605          312,865
  Technicold Services, Inc.                            43,801           67,751           82,175
  Rotary Power Enterprise, Inc.                             -              -                -
  Power Sources, Inc.                                       -              -                -
  Corporate                                                 -              -                -
                                               ---------------  ---------------  ---------------
TOTAL REVENUES                                 $      846,490   $      882,089   $      395,040
  Operating income (loss):
  Ultimate Comfort Systems, Inc.               $     (53,772)   $     (209,908)  $          -
  PowerCold Products, Inc.                        (1,860,041)       (1,016,673)        (537,475)
  Technicold Services, Inc.                              (44)            7,295         (109,771)
  Corporate                                         (262,564)       (1,040,716)        (764,408)
                                               ---------------  ---------------  ---------------
TOTAL OPERATING LOSS                           $  (2,176,421)   $   (2,260,002)  $   (1,411,654)
Identifiable assets:
   Ultimate Comfort Systems, Inc.              $     144,781    $      150,429   $      152,415
   PowerCold Products, Inc.                          478,292           336,398          132,371
   Technicold Services, Inc.                          24,819            26,318          120,833
   Corporate                                       2,490,299         2,086,526        1,094,866
                                               ---------------  ---------------  ---------------
     TOTAL IDENTIFIABLE ASSETS                 $   2,841,931    $    2,839,524   $    1,780,860
Depreciation and amortization:
   Ultimate Comfort Systems, Inc.              $       4,590   $        10,593   $          -
   PowerCold Products, Inc.                           33,876            56,902           83,946
   Technicold Services, Inc.                           5,803            26,804           12,090
   Corporate                                             446               -             28,130
                                               ---------------  ---------------  ---------------
  TOTAL DEPRECIATION AND AMORTIZATION          $      44,715    $       94,829   $      124,166
                                               ===============  ===============  ===============
</TABLE>

All of the Company's assets are held within the United States.

PowerCold's  reportable  segments  are  strategic  business  units  that  offer
different  products  or  services.  They  are  managed  separately because each
business requires different technology and marketing strategies.


















<PAGE>  28
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002

NOTE 15 -INCOME TAXES

Income  taxes  are  provided  based  upon  the liability method  of  accounting
pursuant to SFAS No. 109 "Accounting for Income  Taxes."   Under this approach,
deferred  income taxes are recorded to reflect the tax consequences  in  future
years of differences  between the tax basis of assets and liabilities and their
financial  reporting amounts  at  each  year-end.   A  valuation  allowance  is
recorded against deferred tax assets if management does not believe the Company
has met the  "more  likely  than not" standard imposed by SFAS No. 109 to allow
recognition of such an asset.

At December 31, 2001, the Company  had  net  deferred tax assets of $1,380,000,
principally  arising  from  net  operating loss carryforwards  for  income  tax
purposes.  As management of the Company cannot determine that it is more likely
than not that the Company will realize  the  benefit  of  the  net deferred tax
asset,  a  valuation  allowance  equal to the net deferred tax asset  has  been
established at June 30, 2002.

The Company incurred accumulated net  operating  losses for income tax purposes
of approximately $3,400,000 for the year ended December  31, 2000.  At December
31,  2001,  the  Company's  net  operating  losses  increased by  approximately
$2,200,000.  At June 30, 2002, the Company's net operating  losses increased by
approximately  $1,300,000.  The Company's net operating loss carryforwards  for
income tax purposes  are approximately $6,900,000, which will expire on various
dates through the year 2021.

The Company recorded approximately  $400,000  and $341,000 paid by the issuance
of common stock for expenses in the six months ended June 30, 2002 and the year
ended December 31, 2001, respectively.

NOTE 16 - LEASES

Capital Lease
In 1999, the Company acquired a forklift, which  was financed through a capital
lease.   This capital lease is payable in monthly installments  of  $297,  with
interest at  9.5%,  through  April  2004.   Aggregate yearly maturities of this
capital lease for the years after June 30, 2002 are as follows:

  Year Ending
  December 31,       Amount
  -------------   -----------
      2002        $    1,509
      2003             3,298
      2004               615
                  -----------
           Total  $    5,422
                  ===========

Operating Leases
The Company leases sales offices and plant space  in  LaVernia,  Texas under an
operating  lease  agreement, which expires March 30, 2004.  Total rent  expense
for the six months  ended  June  30,  2002  was  $18,000 and for the year ended
December 31, 2001 was $89,999.





<PAGE>  29
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002

NOTE 16 - LEASES (CONTINUED)

The Company's subsidiary, Technicold Services, Inc.  has  a  one year lease for
office space in San Antonio, Texas.  The rent is $675 per month  and  the lease
expires September 30, 2002.

Future minimum rental commitments are as follows:


  Year Ending        Amount
  December 31,
  -------------   ----------
      2002        $  20,025
      2003           36,000
      2004           12,000
                  ----------
           Total  $  68,025
                  ==========

NOTE 17 - LITIGATION

On August 31, 2000, Nauticon Inc. and its former president agreed upon  a  full
and  final settlement of a lawsuit.  This settlement resulted in a gain for the
Company of $88,600 which was recorded as other income.

NOTE 18 - SUBSIDIARY - CHANNEL FREEZE TECHNOLOGIES, INC.

On May  18,  1998,  Channel  Freeze  Technologies,  Inc. (CFTI) was formed as a
wholly-owned  subsidiary  of  the  Company to accommodate  the  acquisition  of
intellectual property assets related  to  Channel Ice Technology.  On September
15, 1998, the Company entered into an agreement to acquire eighty percent (80%)
of  the  assets  (primarily  patents)  of Channel  Ice  Technologies  from  SIR
Worldwide LLC (SIR) for $850,000 and options for SIR to purchase 400,000 shares
of PowerCold stock at a price of $2.50 per  share,  for  a period not to exceed
two years from the date of closing.  After the Company made  cash  payments  of
$550,000  in  1998 and $100,000 in 1999, the remaining acquisition liability of
$200,000 is recorded  in  the accompanying financial statements as "acquisition
payable."  The agreement also  required  the Company to issue two-thirds of the
stock  of CFTI to SIR, which would leave the  Company  with  only  a  one-third
ownership  in  CFTI.  The board of directors of the Company passed a resolution
approving the issuance  of  two-thirds  of  the shares of stock of CFTI to SIR;
however, the shares were never issued.  The agreement  provided the Company the
ability to increase (buy back) their ownership interest  (up to 80%) in CFTI by
making additional payments totaling $5,950,000.  For each $1 million dollars in
Channel  Ice Technology unit sales, PowerCold shall acquire  an  additional  1%
equity interest  in CFTI for each payment of $85,000, up to a maximum ownership
interest by PowerCold in CFTI of 80%.











<PAGE>  30
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002


NOTE 18 -SUBSIDIARY - CHANNEL FREEZE TECHNOLOGIES, INC. (CONTINUED)

The Company has disposed of CFTI.  The remaining liability of $200,000 has been
recorded as part of a loss from discontinued operations.  There is no remaining
obligations for common stock or common stock options.

Also,  as  part of the  purchase  agreement,  CFTI  has  agreed  to  additional
compensation  to  SIR  by  payment of either a 10% net fee payment or a 13% net
sales fee payment.  Ten percent net fee payments are payments of 10% of the net
gross invoice price on all Channel  Ice  Technology Units sold to distributors.
Thirteen percent net fee payments are payments  of 13% of the net gross invoice
price on all Channel Ice Technology Units of direct  sales  to  end  users.  At
June 30, 2002 and at December 31, 2001 and 2000, no additional compensation was
paid or owed to SIR in connection with this purchase agreement.

Since 1999, the Company has maintained its investment in CFTI as a wholly owned
subsidiary.   The  patent and intellectual property owned by the subsidiary  is
consolidated with the Company's other activities.

The Company discontinued  Channel  Freeze  Technologies,  Inc.  as an operating
entity  and  negotiated  with the previous owners of the related technology  to
return all assets as liabilities,  except  inventory.   Inventory has a cost of
$108,422.  Since the Company is allocating all its resources  into  its current
product line, management has decided there is limited synergy with the  Channel
Freeze  technology  and  does  not  envision  continuing  development  of these
products.


NOTE 19 - COMMITMENTS AND CONTINGENCIES

Accounts Payable
The Company has trade accounts payable that date back to 1996.  Management  had
tried  to  contact these vendors to arrange settlement agreements.  Included in
the caption  Commitments  and  Contingencies on the Company's balance sheet are
the balances in the aggregate amount of $153,204 from vendors that could not be
contacted or did not respond to management's correspondence.

Royalty Agreement
See Note 5 regarding December 1, 2001 royalty agreement.

Additional Compensation
See Note 18 regarding potential payments to SIR.















<PAGE>  31
                             POWERCOLD CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2002



NOTE 20 - SUBSEQUENT EVENT

Effective August 1, 2002, PowerCold Corporation acquired 100% of  the assets of
Applied  Building Technology, Inc.  (ABT),  a  St.  Petersburg,  Florida  based
supplier of  complete  standardized  heating,  ventilation and air conditioning
packages  for  standard-sized commercial buildings.   ABT's  assets  are  being
transferred into PowerCold's wholly owned subsidiary Ultimate Comfort Systems.

In  August  2002,   Alturdyne,  Inc.  has  granted  the  exclusive  license  to
manufacture, package,  market,  develop  and  use  the  Licensed Technology and
Licensed  Intellectual  Property in order to manufacture, package,  market  and
install, develop, service  and  warranty  the  Technology  for  a period not to
exceed ten years, unless otherwise extended.











































<page> v 32
ITEM  2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Forward looking statements made herein are based on current expectations of the
Company  that  involves a number of risks and uncertainties and should  not  be
considered as guarantees of future performance. These statements are made under
the Safe Harbor  Provisions  of the Private Securities Litigation Reform Act of
1995. The factors that could cause actual results to differ materially include;
interruptions or cancellation  of  existing  contracts,  impact  of competitive
products and pricing, product demand and market acceptance risks,  the presence
of  competitors  with  greater  financial  resources  than the Company, product
development and commercialization risks and an inability  to arrange additional
debt or equity financing.

GENERAL FINANCIAL ACTIVITY

POWERCOLD  CORPORATION - A solution provider of energy efficient  products  for
users of commercial  heating,  ventilating  and  air  conditioning  (HVAC)  and
refrigeration  systems  worldwide.  The  Company  operates  across  many market
sectors  from  large  commercial refrigeration systems to small commercial  air
conditioning systems. The  firm's  focus  is  to  give  customers  products and
systems  that  allow  them  to  benefit  from current changes occurring in  the
natural  gas  and  electrical  utility  marketplace.   Refrigeration   and  air
conditioning  are  the most energy intensive operations most business operators
face. PowerCold has  the  opportunity  to provide energy efficient products and
systems that customers require, taking advantage  of these industry changes, to
improve profitability by reducing their operating costs.

Deregulation  of  the  gas  and  electric  utilities  will  provide  continuing
opportunities, creating new markets for more efficient  HVAC  and refrigeration
systems. PowerCold has the products, experience and creative ability to package
unique  HVAC  and refrigeration systems for this multi-billion dollar  industry
market.  The  Company   has  acquired  synergistic  businesses,  and  marketing
alliances are being formed  with  major  utility companies and established HVAC
companies for these products and services.

The Company's business operations are supported  by a management team with over
(200) year's experience. The Company maintains administrative corporate offices
in   La  Vernia,  Texas,  and  Philadelphia,  Pennsylvania.   Engineering   and
manufacturing facilities are located in La Vernia, Texas.

The Company's mission is to be a solution provider of energy efficient products
for  the  multi-billion  dollar  heating,  ventilating  and  air  conditioning,
refrigeration  and  power industry. The Company's goal is to achieve profitable
growth and increase shareholder  value - providing unique superior products and
services supported by experienced management.

The company reorganized into four  wholly owned subsidiary companies, effective
July 1, 2002: PowerCold Products, Inc., supporting all "Cold" related products,
Ultimate  Comfort  Systems,  Inc.,  supporting   proprietary  applications  for
heating,  ventilating  and  air conditioning systems  (HVAC),  Alturdyne  (AES)
Energy Systems, Inc., supporting  all  "Power" related products, and Technicold
Services, Inc. provides engineering consulting  services  to the air condition,
refrigeration and power industries.








<page>  33
POWERCOLD  PRODUCTS,  INC.  - designs, manufactures and markets  a  proprietary
product line of patented evaporative  condensers  and heat exchange systems for
the heating, ventilation and air condition (HVAC) and  refrigeration  industry.
PowerCold  Products supports the Company's Nauticon and EV Chill product  lines
by engineering  design,  manufacturing  and  packaging  its products. PowerCold
Products  also  support custom refrigeration systems by engineering,  designing
and packaging special customer orders.  There are proposed alliances with other
refrigeration  companies,  whereas  PowerCold  Products  will  package  various
components adding  value  for  a  total  turnkey air condition or refrigeration
system.

The  Nauticon patented products are innovative  in  design,  use  new  material
technology,  are simple to manufacture, and have a low operating cost. They are
used for evaporative  condensers,  fluid  coolers,  sub-coolers  commercial and
industrial  refrigeration system components, liquid recalculating packages  and
custom refrigeration  products  for  commercial  and  industrial  use. Nauticon
products can reduce power cost in the air condition and refrigeration  industry
by  up  to  40% making these units contribute to the utilities' needs to reduce
power demand.   PowerCold  has  invested over $1M in operating capital into the
Nauticon product over the last few  years.  Initially major operating and legal
expenses  due  to  previous  inept  Nauticon   management  hindered  sales  and
production. Therefore Nauticon did not meet its  sales  and revenue projections
over  the  past  few  years.   Subsequently during the past year  the  Nauticon
product  technology  was  greatly enhance  from  a  single  40-ton  evaporative
condenser up to five multi-configured  units  producing  up to 1,000 ton of air
conditioning  and  other multi-unit chiller installations. Management  believes
that Nauticon evaporative  condenser  will  meet  its sales objectives in 2002.
There are over 200 units installed in various commercial buildings.

The Chiller line of products includes: EV-Chill: water  chillers, namely, water
chilling and refrigeration systems utilizing water evaporative  condensers  for
commercial  and  industrial  use;  EV-Cool:  air  conditioning  units utilizing
evaporative   condensers   for   commercial   and   industrial   use;   EV-Dry:
dehumidification  system  utilizing evaporative fluid coolers to cool warm  dry
air for commercial and industrial  use; EV-Frig: refrigeration condensing units
utilizing evaporative condensers for commercial and industrial use.

ULTIMATE COMFORT SYSTEMS, INC. - On  December 1, 2000, the Company acquired the
technology rights, patent rights, and  license  agreement for integrated piping
technology for a heating and air conditioning system.  This technology was then
placed  into  a newly formed wholly owned subsidiary of the  Company,  Ultimate
Comfort Systems,  Inc.   This  acquisition  gave  the  Company  exclusive, non-
transferable  United States transfer rights to the technology and  all  related
assets.  There  are   15   installations  in  hotel/motels  and  extended  care
facilities. Some of the installations  are saving over 40% energy costs. During
2001  the Company invested some $300,00 supporting  engineering  and  marketing
programs  for  major  hotel  projects.  The  company  anticipates that Ultimate
Comfort Systems will have major growth in revenue and profits  for  this unique
proprietary application over the next few years.

Subsequent Event: Effective August 1, 2002, PowerCold Corporation acquired 100%
of  the  assets  of  Applied Building Technology, Inc. (ABT), a St. Petersburg,
Florida based supplier  of  complete  standardized heating, ventilation and air
conditioning (HVAC) packages for standard-sized  commercial  buildings  such as
national  chain  businesses.  ABT assets are being transferred into PowerCold's
wholly owned subsidiary  Ultimate  Comfort  Systems as an operating engineering
division. This merger will give PowerCold a strong engineering and design staff
with veteran technical and service personnel.




<page>  34
Applied  Building  Technology  designs  and supplies  a  complete  HVAC  system
including  equipment,  controls,  ductwork,  fans,  installation  and  warranty
service.  ABT also manufactures and  sells  desiccant  latent  air conditioners
with  its  HVAC  systems.  ABT  has  offices  in  St.  Petersburg, Florida  and
Philadelphia, PA. and manufacture representatives in Denver and Dallas.

ALTURDYNE  (AES)  ENERGY  SYSTEMS, INC. - AES designs and markets  cogeneration
systems, which use engine-driven  generators  to  produce  both electricity and
thermal power as a way of cutting power costs. Cogeneration systems, also known
as  distributed  generation;  use  engine  driven  generators  to produce  both
electric  power  and thermal energy. As a result of the acquisition,  PowerCold
will be able to offer  customers complete self-contained heating/chilling units
to reduce peak power requirements  as  well as the ability to self-generate all
the power needed for a commercial building.   Units  range  in  size  from  100
kilowatts to 2 megawatts.  Customers can expect to reduce power or energy costs
by 40% or more.

The  Company  has  a Strategic Alliance with Alturdyne, Inc., a San Diego based
company, for manufacturing and marketing of its respective products.  Alturdyne
is an innovative manufacturer  of  standby  diesel  generator sets, turbine and
rotary   generator   sets,  pumps  and  natural  gas  engine-driven   chillers.
Alturdyne's  strength  lies   in  its  power  engineering  personnel,  who  are
knowledgeable in the generator  set  business,  telephone company applications,
small  turbines, rotaries and chillers. Their capabilities  and  experience  in
developing  low  cost,  customer  power  packages that meet specific needs have
established Alturdyne's excellent reputation in the industry. Alturdyne's added
expertise is in the design and production of rotary engines.

On April 2, 2002, PowerCold Corporation signed  a  letter  of intent to acquire
Alturdyne,  Inc.  a  manufacturer  of diesel, natural gas, turbine  and  rotary
generator sets.  PowerCold expected to complete the acquisition by May 31, 2002
after a further detailed audit. The  transaction,  which  would be non-dilutive
for present shareholders, involved a combination of cash and  stock.  Under the
proposed  agreement,  PowerCold  would  acquire  all  of Alturdyne's assets and
intellectual property. Alturdyne would then operate as  an  independent  wholly
owned PowerCold subsidiary. Alturdyne sales during the past 10 years have  been
in  the  $6.5  million  to  $11 million range with seven profitable sales years
including each of the last two  years.  Alturdyne  has  developed, packaged and
installed over 4,000 engine power units around the world.

Subsequent Event:  On August 2, 2002, PowerCold Corporation and Alturdyne, Inc.
terminated their Letter of Intent.  After thorough due diligence by the
Registrant's independent auditors, both parties agreed that it was best not to
proceed with the acquisition at this time.

PowerCold  Corporation  and  Alturdyne,  Inc.  executed  a  Technology  License
Agreement  on  August  9,  2002.   Alturdyne granted a Licensed Technology  and
Licensed Intellectual Property to PowerCold  for  Engine  Driven  Chillers  and
Rotary  Engine  Generator  Sets.   Engine  Driven Chillers include standard and
custom  packaging  of  natural gas, electric and  diesel-fueled  Engine  Driven
Chillers  used for heating,  ventilating  and  air-conditioning  (HVAC)  system
applications.  Rotary  Engine  Generator  Sets  include  a  family  of  Wankel,
including  Mazda Engine technology, type rotary internal combustion multi-rotor
engines used  for  pumps,  generator,  compressors,  and  auxiliary power units
applications.

Alturdyne,  Inc.  has granted the exclusive license and right  to  manufacture,
package (e.g. such as assembling of third party products), market, develop, and
use the Licensed Technology  and  Licensed  Intellectual  Property  in order to
manufacture,  package,  market  and install, develop, service and warranty  the
Technology  for  a  period not to exceed  ten   (10)  years,  unless  otherwise
extended.
<page>  35
TECHNICOLD SERVICES,  INC.  - offers consulting engineering services, including
process  safety management compliance  and  ammonia  refrigeration  and  carbon
dioxide system  design.  TSI  also  provides  operation, maintenance and safety
seminars for ammonia refrigeration technicians and supervisors.

Effective  as of June 30, 2002, the Registrant dissolved  four  of  its  wholly
owned operating  companies:  Nauticon, Inc., Channel Freeze Technologies, Inc.,
Rotary Power Enterprise, Inc. and Power Sources, Inc.

Nauticon,  Inc. has been dissolved  as  a  corporate  entity,  and  all  assets
including the  Nauticon  and  EV-Chiller  product line have been transferred to
PowerCold  Products,  Inc.,  which  will manufacture  and  market  all  related
Nauticon products.

Channel Freeze Technologies, Inc. has been dissolved as a corporate entity, and
the technology has been transferred back to the original owners. The Registrant
is allocating all its resources into  its  current  product  line's, therefore,
management  decided  there  was  no  current  synergy  for  the Channel  Freeze
technology  and  does  not  foresee  the technology in the Registrant's  future
business plans.

Power  Sources,  Inc.  has  been dissolved  as  a  corporate  entity,  and  the
Registrant has formed a new wholly  owned  subsidiary,  Alturdyne  (AES) Energy
Systems,  to  market  all  the  Registrants  power  related products, including
cogeneration, Combined Heat and Power (CHP), natural  gas  rotary power engines
and micro rotary generator sets. The restructure will provide  greater  revenue
and  profits for the cogeneration business, by facilitating maximum flexibility
with equipment  and construction vendors, and by supporting design, engineering
and installation projects.

The Registrant terminated  by mutual agreement all contracts with Utility Metal
Research, Inc. ("UMRI") and transferred all open contracts through May 31, 2002
back to UMRI without penalty.

Rotary Power Enterprise, Inc. has been dissolved as a corporate entity, and all
assets have been transferred  to  Alturdyne  (AES)  Energy Systems, Inc., which
will market the natural gas rotary power engine products.

RESULTS OF OPERATIONS

THE COMPANY'S CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SECOND QUARTER ENDED
JUNE 30, 2002 COMPARED TO THE SECOND QUARTER ENDED JUNE 30, 2001:

Revenue  for  the  six  months  period ended June 30, 2002  increased  100%  to
$846,490 from $424,098 for the same period ended June 30, 2001. Revenue for the
three months period ended June 30,  2002  was  $475,702  for  product sales and
$20,038 for services.

Gross operating margins for the six months period ended June 30, 2002 increased
to 27.8% from 5.9% for the year ended December 31, 2001. Gross  Profit  for the
six  months  period  ended  June  30,  2002  increased  to $235,480 compared to
$182,297  for the six months ended June 30, 2001. Gross Profit  for  the  three
months period ended June 30, 2002 was $171,860 or 34.6% of revenue.









<page>  36
Current revenue backlog pending some final purchase orders was some $2,156,861,
and current  work-in-process  was $869,115, as of July 31, 2002. The first half
of 2002 has brought rapidly increasing  orders  for the Company's energy saving
cooling systems and correspondingly an improved revenue  picture. The Company's
revenue in the first half of 2002 is nearly equal to the total  revenue for all
of  the  year 2001, as a result of growing sales of the patented energy  saving
cooling systems.   The  Company's sales and revenue should continue to increase
due to the increased volume  of  customer  proposals  for  the  newly  designed
Nauticon  Evaporative  Condenser,  which is the heart of its COLD product line,
and the exclusive Evaporative Chiller  Product  Line,  which  provides  chilled
water   (EV  Chill{trademark}),  air  conditioning  (EV  Cool{trademark}),  and
refrigeration  (EV Frig{trademark}). The basic Nauticon unit has evolved from a
40-ton condenser  into  a multi-unit condenser product line offering up to 350-
ton capacity. The outcome is a new evolved Nauticon unit with nearly double its
capacity. A patent has been  applied  for on the new more efficient unit. These
Nauticon systems save up to 50% in energy  costs.    Management  also  believes
that  product sales and revenues will continue to improve because of new  sales
programs  being implemented. Numerous proposals are continually being quoted to
prospective  customers  for  all  product lines. Gross margins will continue to
improve  as the Company begins to capture  economies  of  scale;  sales  volume
increases  and  manufacturing  production cycles shorten and overall production
methods improve.

Last year orders were predominantly  for  basic  Nauticon  cooling units with a
base  price of $6,000 to $8,000. This year, with the sales emphasis  on  larger
tonnage  cooling  systems,  the  majority  of  new sales have shifted to larger
chilling units in the $30,000 - $100,000 plus range.  Some  of the units exceed
$100,000 each when heating is added to the system installation.

PowerCold  recently  acquired  Applied Building Technology, based  supplier  of
complete standardized heating, ventilation and air conditioning (HVAC) packages
for standard-sized commercial buildings  such  as  national  chain  businesses.
This new proven entity is expected to generate substantial revenue and  profits
for the Company.

Operating  expenses for the six months period ended June 30, 2002 increased  to
$2,176,421 compared to $1,035,436 for the same period June 30, 2001,

Net Loss for  the  six  months  period  ended  June  30, 2002 increased 102% to
$2,176,421 from $1,035,436 for the same period ended June  30,  2001.  The  Net
Loss  for  the  six months period ended June 30, 2002 included some $430,000 in
excess corporate  expense,  as  referenced  below  and  loss  from discontinued
operations of $667,723.

Net  Loss  per  share for the six months period ended June 30, 2002  was  $0.09
compared to $0.07 for the same period ended June 30, 2001.

Net loss per share was based on weighted average number of shares of 16,268,893
for June 30, 2002 compared to 13,259,614 for the same six-month period in 2001.

The  current  quarter   operating   loss  was  due  to  increased  general  and
administrative sales and marketing activity,  and  maintaining  general Company
operating  overhead  including  additional  specific engineering and  marketing
costs  for  the  Nauticon  product  line.  The  Company  has  restructured  its
operations to comply with its current productive  product  line  of evaporative
condensers and new chiller systems. The large increase in operating expense for
the  first  six  months of operations was primarily due to the Company's  major
focus on sales and  marketing, and a sharp increase in research and development
and warranty work (new  Nauticon  units  and  new  EV  chiller  product  line).
Increased  operating  expenses  were  also  due  to  setting  up additional new
manufacturing  plant  operations  in  La  Vernia,  Texas, and establishing  new
facilities in Tampa, Florida for Ultimate Comfort Systems, Inc.
<page>  37
The Company is experiencing a unique sales momentum  as  customers aggressively
seek  ways  to  reduce  their  power  peak demand and energy costs  in  today's
escalating real time electricity world.  Management  believes  that  the wholly
owned  subsidiary,  Ultimate  Comfort  Systems  including the recently acquired
Applied  Building  Technology  business  will  be  the  largest  major  revenue
producers  for  the  Company.  The  sales  market for UCS  is  the  hospitality
industry;  packaged  (HVAC)  systems  for  larger-sized  commercial  buildings:
hotels/motels, nursing homes and extended care  facilities.  The  new ABT sales
market is (HVAC) packaged systems for standard-sized commercial buildings  such
as  national  chain  businesses.  The hotel/motel industry is planning to build
some 1,000 new buildings  over  the  next  three  years. The numerous fast food
industry chains are continually remodeling and added  new  restaurants  both in
the U.S. and international.

THE COMPANY'S CONSOLIDATED BALANCE SHEET AS OF THE FIRST SIX MONTHS ENDED  JUNE
30, 2002 COMPARED TO YEAR ENDING DECEMBER 31, 2001.

Total  current  assets  increased  to $1,718,270 for the first six months ended
June 30, 2002 compared to $729,982 for the year ending December 31, 2001. Total
assets decreased to $2,825,227 for the  first  six  months  ended June 30, 2002
compared to $2,839,524 for the year ending December 31, 2001. Total liabilities
increased to $666,093 for the first six months ended June 30,  2002 compared to
$500,331  for  the  year  ending December 31, 2001. Total stockholders'  equity
decreased to $2,159,134 for  the  first six months ended June 30, 2002 compared
to $2,339,193 for the year ending December 31, 2001.

The decrease in total assets and liabilities  for  the  three months ended June
30,  2002  was  mainly  due  to  dissolving  four  wholly  owned non-productive
operating  companies.  Assets  decreased  $1,769,534 and liabilities  decreased
$1,218,392. Commitments and contingencies,  old  outstanding  accounts  payable
from  the previous RealCold products and Nauticon operations, are being written
down and have been reduced to $153,204.

Liquidity  and  Capital  Resources:   At  June  30, 2002, the Company's working
capital increased to $1,207,785 compared to $403,364  at December 31, 2001. The
increase in cash was primarily attributable to equity capital  from the sale of
Company stock.

During  the six months ended June 30, 2002, the Company issued 1,316,970  total
shares of common stock at $1.62 per share and canceled 100,000 shares of common
stock at  $1.09 per share. The Company issued 356,955 shares of common stock at
$1.06 per share  for  consulting  and other services and 2,813 shares of common
stock for stock issuance costs of $4,642.  The Company issues restricted common
shares for private placement funding on a negotiated  basis.   The Company also
issues 30,000 restricted common shares for compensation at $1.00 per share.

Status  of Operations:  Management intends to continue to utilize  and  develop
the intangible  assets  of  the  Company.   At June 30, 2002, intangible assets
comprise  less  than  13%  of  the Company's assets.   The  recovery  of  these
intangible assets is dependent upon  achieving  profitable  operations.  It  is
Management's  opinion  that  the  Company's  cash  flow  generated from current
intangible assets is not impaired, and that recovery of its  intangible assets,
upon which profitable operations will be based, will occur.

Management believes that its working capital may not be totally  sufficient  to
support   both  its  current  operations  and  growth  plans.   Management  has
implemented  a  new  operating  plan providing guidance for cash management and
revenue growth.  During the past  few  months the Company has raised sufficient
private placement capital for current cash requirements, and foresees continued
private placement funding to meet future production.


<page>  38


PART 11. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

           None

ITEM 2.  CHANGES IN SECURITIES

           None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

           None.
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           None.

ITEM 5.  OTHER INFORMATION.

           None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

           8-K filed April 5, 2002 - Alturdyne Letter of Intent
           8-K filed June 28, 2002 - Corporate Reorganization
           8-K filed August 1, 2002 - Applied Building Technology Acquisition
           8-K filed August 5, 2002 - Alturdyne Technology Agreement

































<page>  39
                             POWERCOLD CORPORATION
                                   FORM 10-Q
                                 JUNE 30, 2002

SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report  to  be  signed on its behalf by the
undersigned, thereunto duly authorized.



                                POWERCOLD CORPORATION


                                /s/ Francis L Simola
                                -----------------------
                                FRANCIS L. SIMOLA
                                PRESIDENT AND CEO

                                DATE: AUGUST 19, 2001