Document:

EXHIBIT 10.31

                         EXECUTIVE EMPLOYMENT AGREEMENT

                                     between

                           AMERICAN VANTAGE COMPANIES

                                       and

                                ANNA M. MORRISON

This Executive  Employment  Agreement (this "Agreement"),  dated as of August 1,
2004 (the "Effective  Date"),  is by and between American Vantage  Companies,  a
Nevada corporation (the "Corporation"), and Anna M. Morrison ("Executive").

      WHEREAS, Executive is employed by the Corporation pursuant to an Executive
Employment  Agreement,  dated as of April  16,  2003  (the  "Prior  Agreement"),
between the Corporation and Executive; and

      WHEREAS,  the Corporation  desires to continue to employ  Executive as the
Corporation's  Chief  Accounting  Officer,  upon the terms and conditions as set
forth in this Agreement; and

      WHEREAS,  Executive desires to accept such employment with the Corporation
upon such terms and conditions.

      NOW,  THEREFORE,  in consideration of the mutual covenants and obligations
set forth in this  Agreement  and other  good and  valuable  consideration,  the
receipt and adequacy is hereby acknowledged, the parties to this Agreement agree
as set forth below.

      1.    Termination of Prior Agreement.

            This  Agreement   supersedes  the  Prior  Agreement  and  the  Prior
            Agreement  hereby is terminated in its entirety and hereby made null
            and void with no party to the Prior  Agreement  having  any  rights,
            obligations or liabilities under the Prior Agreement.

            Notwithstanding  the immediately  preceding  sentence,  all benefits
            received by Executive under the Prior Agreement,  including, but not
            limited  to,  compensation,  bonuses,  contributions  to  retirement
            programs and option  grants,  shall remain the property of Executive
            and, with respect to option grants, remain exercisable and vested in
            accordance with their terms.

      2.    Employment and Duties.

            (a) The Corporation employs Executive for the Term of this Agreement
      (as such term is  defined in  paragraph  3(b) of this  Agreement)  as, and
      Executive  accepts  employment  with the  Corporation  in the position of,
      Chief Accounting Officer of the Corporation.

            (b) As Chief Accounting Officer of the Corporation,  Executive shall
      perform such duties and services,  consistent with such positions,  as may
      be assigned to  Executive  from time to time by the Board of  Directors of
      the  Corporation  (the "Board") or the Board's  designee,  which designee,
      absent notice actually given Executive by the Board to the contrary, shall
      be the President and/or Chief Executive Officer of the Corporation.

            (c) Executive  covenants and agrees to perform faithfully and to the
      best of Executive's  abilities such duties and other reasonable  executive
      duties and responsibilities assigned to Executive from time to time by the
      Board or the Board's designee.

<PAGE>

      3.    Term of Agreement.

            (a) Subject to the terms and conditions set forth in this Agreement,
the term of Executive's  employment by the  Corporation and this Agreement shall
commence on the  Effective  Date and shall  terminate  on December 31, 2005 (the
"Initial Term").

            (b) The term of employment of Executive and this  Agreement,  as set
forth in paragraph  3(a) of this  Agreement,  shall  automatically  be extended,
without any further action by the  Corporation or Executive,  for successive one
year periods (each,  an "Option Term" and,  collectively  with the Initial Term,
the "Term of this Agreement"),  on the same terms and conditions as set forth in
this Agreement. If either party shall desire to terminate Executive's employment
by the  Corporation  or this  Agreement  at the end of the  Initial  Term or any
Option Term,  such party shall give  written  notice of such desire to the other
party at  least 60 days  prior to the  expiration  of the  Initial  Term or such
Option Term,  as the case may be. At the  expiration of the Initial Term or then
existing Option Term, as the case may be, the Corporation  shall have no further
obligation  to  Executive,  and  Executive  shall have no further  obligation to
Corporation,   except  with  respect  to  (i)  Executive's  obligations  to  the
Corporation  pursuant to sections  8, 9, 10 and 11 of this  Agreement,  (ii) the
Corporation's  obligations to Executive  pursuant to section 6 of this Agreement
and (iii) any other  obligations the  Corporation  may have to Executive  and/or
Executive  may  have to the  Corporation  under  applicable  law  governing  the
relationship  of an employer  to an  employee  and/or an employee to an employer
upon and following termination of such relationship.

      4.    Time to be Devoted to Employment.

            (a) Executive  agrees to devote  Executive's  full time,  attention,
efforts,  loyalties and energies to the business and affairs of the Corporation.
Notwithstanding the immediately preceding sentence, Executive shall be permitted
to devote a reasonable  amount of time,  attention  and  energies to  reasonable
community  activities and public affairs,  provided such engagement shall not in
any way  conflict  with the  business of any of the  Companies  (as such term is
defined in section 5 of this Agreement).

            (b)  Executive  shall be entitled to the number of paid vacation and
personal days in each calendar year as determined by the Board for its executive
officers, but in no event less than twenty work days per calendar year (prorated
for any  period  during  the Term of this  Agreement  which is less  than a full
calendar year).  Executive shall not be permitted to use more than ten work days
of vacation or personal days  consecutively  without the written approval of the
Board or the Board's designee.

      5.    Restriction  on Other  Employment;  Relationship  of  Corporation to
            Parent and the Companies.

            (a)  During  the  term of  employment  and  Term of this  Agreement,
Executive agrees that, without the prior approval of the Board,  Executive shall
not accept a membership on or otherwise become a member of a board of directors,
act as an  officer,  employee  or  consultant  or engage  in any other  business
activity,  whether or not such other business is a similar or competing business
with  the  Corporation  or any  subsidiary  (each,  a  "Subsidiary")  or  parent
("Parent"  and,  as  a  whole  with  the  Corporation  and   Subsidiaries,   the
"Companies"),  whether presently existing or hereafter created or acquired, that
would in any way conflict  with the business of any of the Companies or the time
required by Executive to perform Executive's duties to the Corporation.

            (b) It is  expressly  understood  that the  Corporation  may require
Executive to devote  Executive's  efforts and be assigned duties relating to the
operations of any or all of the Companies, without further compensation from the
Corporation or any of the Companies.  It is understood and agreed that Executive
will hold the same  offices with all of the  Companies  as Executive  shall hold
under this Agreement,  unless the Board, in the Board's sole  discretion,  shall
determine otherwise.

<PAGE>

      6.    Compensation; Reimbursement.

            (a) Commencing as of the Effective Date, the  Corporation  shall pay
to Executive an annual base salary (the "Base  Salary") of $205,000,  payable in
equal  bi-weekly  installments  or in the manner and on the timetable  which the
Corporation's  payroll  is  customarily  handled  or at  such  intervals  as the
Corporation and Executive may hereafter  agree to from time to time.  Commencing
on January 1, 2006 and on each  anniversary  thereafter  during the Term of this
Agreement  (each,  a "Base Salary  Adjustment  Date"),  the Base Salary shall be
subject to a cost of living  adjustment equal to the Base Salary as in effect on
such Base Salary  Adjustment  Date  multiplied  by a fraction,  the numerator of
which shall be the Consumer  Price Index for all Urban Areas (All  Employees) as
published by the Bureau of Labor  Statistics of the United States  Department of
Labor (the "COLA Index") in effect on such Base Salary  Adjustment  Date and the
denominator  of which  shall be the COLA Index in effect on the later of the (i)
Effective Date or (ii) immediately preceding Base Salary Adjustment Date. In any
year in which the COLA Index is not available,  the Board shall,  in the Board's
reasonable  discretion,  find  and use a  similar  governmental  publication  or
similar  criteria  for the  COLA  Index  to be used  for the  numerator  for the
purposes of this  paragraph  6(a) and shall,  retroactively,  establish the COLA
Index to be used for the  denominator  for the purposes of this  paragraph  6(a)
using such similar publication or criteria.  Executive's Base Salary may, but is
not  required  to,  be  increased  from  time to time,  based  upon  Executive's
performance  and other  relevant  factors,  as the  Board may deem  appropriate,
without  affecting any other provisions of this Agreement.  Once so increased in
accordance with the immediately  preceding sentence,  the Base Salary may not be
thereafter decreased without the prior written consent of Executive.

            (b) In  addition  to  receiving  the  Base  Salary  provided  for in
paragraph 6(a) of this Agreement,  during the Term of this  Agreement,  Employee
shall be entitled to receive such fringe  benefits,  including,  but not limited
to, participation in any  Corporation-sponsored  retirement plan, profit sharing
plan,  savings  plan,  stock option or  ownership  plan and  medical/health  and
disability insurance benefits,  as are made available from time to time to other
executive  officers of the  Corporation or any of the Companies.  Whether or not
available  to  others,  Executive  shall  specifically  be  entitled  to medical
insurance coverage,  paid for by the Corporation,  provided that Executive shall
qualify for such coverage.

            (c) The  Corporation  shall  reimburse the Executive,  in accordance
with the practice followed from time to time for other executive officers of the
Corporation,  for all reasonable and necessary  business and traveling  expenses
and  other  disbursements  incurred  by  Executive  for  or  on  behalf  of  the
Corporation in the  performance of Executive's  duties under this Agreement upon
presentation  by the Executive to the  Corporation  of an  appropriate  detailed
accounting of such expenses and disbursements.

            (d) In  addition  to  receiving  the  Base  Salary  provided  for in
paragraph  6(a) of  this  Agreement  and the  fringe  benefits  provided  for in
paragraph 6(b) of this Agreement,  the Corporation shall use its best efforts to
obtain and maintain for the Term of this  Agreement  term life  insurance on the
life of  Executive  in the  amount  of  $250,000,  which  shall  be  payable  to
Executive's  designee(s),  provided,  in all events that Executive shall qualify
for such insurance and cooperate in obtaining and  maintaining  such  insurance.
Executive shall have the right to change Executive's designee(s), at Executive's
sole discretion,  subject to the provisions of the applicable  insurance policy.
The  entire  premium  expense  for  such  life  insurance  shall  be paid by the
Corporation.

            (e) If requested by the Board,  Executive shall use Executive's best
efforts to obtain and  maintain  for the Term of this  Agreement  "key man" term
life  insurance on the life of Executive in an amount  determined  by the Board,
which  amount shall be payable to the  Corporation  as  beneficiary.  The entire
premium expense for such life insurance shall be paid by the Corporation.

      7.    Termination of Employment.

            (a)  Executive's  employment by the  Corporation  and this Agreement
shall terminate in the event of the death of Executive.

            (b) The  Corporation  may terminate this  Agreement and  Executive's
employment  for cause,  and,  in such an event,  the  Corporation  shall only be
obligated to pay Executive the Base Salary through the date of such termination.
Prior to any termination  pursuant to this paragraph 7(b), the Corporation  must
give Executive  reasonable written notice and adequate opportunity to respond to
the reasons for such  termination  or, where  applicable,  cure. For purposes of
this  paragraph  7(b),  "cause"  shall mean that the Board has made a reasonable
determination that Executive has:

      (i)   committed a fraud against any of the Companies,

      (ii)  misappropriated or done material, intentional damage to the property
            of any of the Companies,

<PAGE>

      (iii) been  convicted of a felony  involving  personal  dishonesty,  moral
            turpitude, or willfully violent conduct,

      (iv)  engaged in gross business misconduct,

      (v)   engaged in gross malfeasance of Executive's duties,

      (vi)  materially breached any provision of this Agreement, or

      (vii) failed, on account of a medical disability, to substantially perform
            Executive's  duties of  employment  for a period  of 90  consecutive
            calendar  days and the finding by the Board,  in the exercise of the
            Board's  reasonable  discretion,  that Executive will not be able to
            substantially  perform  Executive's duties for the shorter of (A) at
            least a period of an  additional 90 calendar days during the Term of
            this  Agreement  or (B)  for  the  remainder  of the  Term  of  this
            Agreement.

            (c) The Executive may terminate this Employment Agreement should the
Corporation  insist that the Executive relocate to offices located at a distance
in excess of 50 miles from the location of the Executive's  employment as of the
Effective Date.

            (d) If, for any reason,  Executive's  employment is terminated under
paragraph  7(a) or  clause  (vii)  of  paragraph  7(b) of  this  Agreement,  any
compensation  payable  under section 6 of this  Agreement  which shall have been
earned  but not yet  paid  shall  be paid by the  Corporation  to  Executive  or
Executive's estate, guardian or custodian, as the case may be.

            (e) If, for any reason,  Executive's employment is terminated by the
Corporation  prior to the last day of the Term of this  Agreement  without cause
and  other  than for any of the  reasons  set  forth in  paragraph  7(a) of this
Agreement or if the Executive terminates this Agreement for the reason set forth
in paragraph 7(c) or if there is a "change in control" and Executive  shall have
terminated  Executive's  employment with the Corporation within twelve months of
such change in control, Executive shall be entitled to a severance payment equal
to 100% of Executive's Base Salary as in effect on the date of such termination,
payable  over a period  equal in length to the period in which  Executive  would
have received  Executive's Base Salary equal to the aggregate  severance payment
had  Executive  remained  in the  employ  of the  Corporation  pursuant  to this
Agreement.  Such  severance  payments  shall  commence with the first pay period
immediately following the date of such termination.

            (f) For the purposes of paragraph 7(e) of this Agreement,  a "change
in  control  shall be  deemed to occur  when and only when any of the  following
events first occurs:

      (i) any person who is not currently a stockholder  of the Company  becomes
      the beneficial owner, directly or indirectly, of securities of the Company
      representing  30% or more of the combined  voting  power of the  Company's
      then outstanding voting securities;

      (ii) two or more  directors,  whose election or nomination for election is
      not approved by a majority of the  "incumbent  board," are elected  within
      any single 24-month consecutive period to serve on the Board;

      (iii) members of the incumbent board cease to constitute a majority of the
      Board  without the  approval  of the  remaining  members of the  incumbent
      board; or

      (iv) any merger (other than a merger where the Corporation is the survivor
      and there is no accompanying  change in control under clauses (i), (ii) or
      (iii) of this paragraph 7(f), consolidation, liquidation or dissolution of
      the Corporation,  or the sale of all or substantially all of the assets of
      the Corporation.

<PAGE>

      Notwithstanding the foregoing,  a change in control shall not be deemed to
occur  pursuant to clause (i) of this  paragraph 7(f) solely because 30% or more
of the combined  voting power of the  Corporation's  outstanding  securities  is
acquired by one or more employee  benefit plans maintained by the Corporation or
by any other  employer,  the  majority  interest  in which is held,  directly or
indirectly,  by the Corporation.  For purposes of this paragraph 7(f), the terms
"person"  and  "beneficial  owner"  shall have the meaning set forth in Sections
3(a)  and  13(d)  of  the  Securities  Exchange  Act,  and  in  the  regulations
promulgated  thereunder,  and the  term  "incumbent  board"  shall  mean (x) the
members of the Board on the Effective  Date, to the extent that they continue to
serve as members of the Board,  and (y) any  individual  who becomes a member of
the Board after the Effective Date, if such individual's  election or nomination
for election as a director was approved by a vote of at least  three-quarters of
the then incumbent board.

      8.    Disclosure of Information.

      Executive  agrees that Executive will not, at any time during or after the
Term of this Agreement,  disclose,  reproduce, assign or transfer to any person,
firm,  corporation  or other  business  entity,  except as required by law,  any
non-public  information  concerning  the business,  clients,  affairs,  business
plans,  strategies,  compounds,   formulations,   methods,  devices,  apparatus,
preparations,  results from ongoing  investigations  by others,  and present and
future plans of the  Corporation,  any  subsidiary  or affiliate  thereof or any
company formed or funded by the Corporation ("Confidential Information") for any
reason or purpose  whatsoever,  without the Corporation's  written consent;  nor
shall Executive make use of any of such Confidential Information for Executive's
own  purpose  or for the  benefit  of any  person,  firm,  corporation  or other
business entity, except the Corporation or any subsidiary or affiliate thereof.

      9.    Restrictive Covenants.

            (a) Executive  hereby  acknowledges  and recognizes  that during the
term of employment by the Corporation,  Executive will be privy to trade secrets
and confidential  proprietary information critical to the Corporation's business
and Executive  further  acknowledges  and recognizes that the Corporation  would
find it extremely difficult or impossible to replace Executive and, accordingly,
Executive agrees that, in  consideration  of the premises  contained herein and,
the consideration to be received by the Executive hereunder, Executive will not,
from the date  hereof  through the end of the Term of this  Agreement  and for a
six-month period thereafter,  (i) directly or indirectly engage in, represent in
any way, or be  connected  with,  any  business or  activity  (such  business or
activity being hereinafter called a "Competing  Business"),  in competition with
the  Corporation or any Subsidiary in any location  throughout the United States
of America (the "Restricted Territory"),  at the time of Executive's termination
of  employment  with the  Corporation,  whether such  engagement  shall be as an
officer,  director, owner, employee,  partner, affiliate or other participant in
any Competing Business, (ii) assist others in engaging in any Competing Business
in the manner  described in the  foregoing  clause (i) of this  paragraph  9(a),
(iii)  induce  other  employees  of any  of  the  Companies  to  terminate  such
employee's  employment  with any of the  Companies,  or engage in any  Competing
Business  and (iv) induce  customers of any of the  Companies to terminate  such
customer's  relationship with any of the Companies, or to purchase the goods and
services  previously  supplied by any of the Companies to such customer from any
Competing Business.  In the event that termination of Executive is without cause
under paragraph 7(b) of this Agreement,  the restrictions  specified above shall
be applicable for the Restricted  Territory and for the period of time Executive
continues  to  receive  compensation  from  the  Corporation  pursuant  to  this
Agreement,  but in no event  for  less  than  six  months  from the date of such
termination without cause.

            (b)  Executive  understands  that  the  restrictions   contained  in
paragraph  9(a)  of this  Agreement  may  limit  Executive's  ability  to earn a
livelihood in a business similar to the businesses of any of the Companies,  but
Executive   nevertheless   believes  that  Executive  will  receive   sufficient
consideration  under this Agreement and as an employee of the Corporation and as
otherwise provided in this Agreement clearly to justify such restrictions which,
in any event (given Executive's education,  skills and ability),  Executive does
not believe would prevent Executive from earning a living.

            (c) Executive represents and warrants that:

<PAGE>

      (i)  Executive is familiar  with the covenants not to compete as set forth
      in paragraph 9(a) of this Agreement;

      (ii)  Executive has had the  opportunity  to discuss the provisions of the
      covenants  as set  forth  in  this  section  9 with  Executive's  personal
      attorney  and has  concluded  that  such  provisions  (including,  without
      limitation,  the right of equitable relief and the length of time provided
      for herein) are fair, reasonable and just under the circumstances;

      (iii)  Executive  is  fully  aware  of the  obligations,  limitations  and
      liabilities  included in the  covenants as set forth in paragraph  9(a) of
      this Agreement;

      (iv) the scope of  activities  covered as set forth in  paragraph  9(a) of
      this  Agreement  is  substantially  similar  to  those  activities  to  be
      performed by Executive pursuant to this Agreement;

      (v) the  duration  of  covenants  as set forth in  paragraph  9(a) of this
      Agreement  have  been  agreed  upon as a  reasonable  restriction,  giving
      consideration to the following factors:

            (A) Executive and the  Corporation  reasonably  anticipate that this
            Agreement,  although terminable in accordance with section 7 of this
            Agreement  or  otherwise,  may  continue  in effect  for  sufficient
            duration to allow Executive to attain superior  bargaining  strength
            and an ability for unfair  competition with respect to the customers
            of the Companies and

            (B)   the duration of the  covenants as set forth in paragraph  9(a)
                  of this  Agreement is a reasonably  necessary  period to allow
                  the  Corporation  to restore  the  Corporation's  position  of
                  equivalent  bargaining  strength  and  fair  competition  with
                  respect to such customers;

      (vi) the geographical  territory  covered hereby has been agreed upon as a
      reasonable geographical restriction; and

      (vii) the Corporation is relying upon the representations,  warranties and
      covenants of Executive  contained in this section 9 in entering  into this
      Agreement and, without such representations, warranties and covenants, the
      Corporation would not enter into this Agreement.

      10.   Corporation's Right to Inventions and Work Product.

      Executive shall promptly disclose, grant and assign to the Corporation for
the  Corporation's  sole use and benefit any and all  inventions,  improvements,
technical information and suggestions relating in any way to the business of any
of the  Companies,  which  Executive  may develop or acquire  during the term of
employment  with the  Corporation  (whether or not during normal working hours),
together with all patent applications, letters, patents, copyrights and reissues
thereof  that  may at any  time be  granted  for or  upon  any  such  invention,
improvement or technical information. In connection therewith:

      (a) Executive shall, without charge but at the expense of the Corporation,
      promptly at all times  hereafter  execute  and deliver to the  Corporation
      and/or the Companies  such  applications,  assignments,  descriptions  and
      other  instruments  as may be  necessary  or proper in the  opinion of the
      Corporation to vest title to any such inventions,  improvements, technical
      information, patent applications,  patents, copyrights or reissues thereof
      in the  Corporation  and/or the  Companies  and to enable the  Corporation
      and/or the  Companies  to obtain and  maintain  the entire right and title
      thereto throughout the world; and

      (b) Executive shall render to the Corporation  and/or the Companies at the
      Corporation's  and/or  the  Companies'  expense  (including  a  reasonable
      payment  for the  time  involved  in  case  Executive  is not  then in the
      Corporation's  employ) all such assistance as the  Corporation  and/or the
      Companies may require in the prosecution of applications  for said patents
      or  copyrights  or  reissues  thereof,  in the  prosecution  or defense of
      interferences  which may be declared  involving any of said  applications,
      patents  or  copyrights  and in any  litigation  in which the  Corporation
      and/or  the  Companies  may be  involved  relating  to any  such  patents,
      inventions, improvements or technical information.

<PAGE>

      11.   Enforcement.

      It is the desire and intent of the parties  hereto that the  provisions of
this  Agreement  shall be enforced to the fullest extent  permissible  under the
laws and public policies  applied in each  jurisdiction in which  enforcement is
sought.  Accordingly,  to  the  extent  that a  restriction  contained  in  this
Agreement is more  restrictive  than  permitted by the laws of any  jurisdiction
where this Agreement may be subject to review and  interpretation,  the terms of
such  restriction,  for the purpose only of the operation of such restriction in
such jurisdiction,  shall be the maximum restriction allowed by the laws of such
jurisdiction  and  such  restriction  shall  be  deemed  to  have  been  revised
accordingly in this agreement.

      12.   Representations, Warranties, and Covenants of the Executive.

      Executive  hereby  represents,  warrants and covenants to the  Corporation
that Executive has the capacity to enter into this Agreement, and the execution,
delivery and  performance of this  Agreement and compliance  with the provisions
hereof by Executive will not conflict with or result in any breach of any of the
terms,  conditions,  covenants or provisions  of, or constitute a default under,
any note,  mortgage,  agreement,  contract or instrument to which Executive is a
party or which Executive may be bound or affected.

      13.   Remedies; Survival.

      (a) Executive  acknowledges  and  understands  that the provisions of this
      Agreement are of a special and unique nature,  the loss of which cannot be
      accurately  compensated  for in damages by an action at law,  and that the
      breach or  threatened  breach of the  provisions of this  Agreement  would
      cause the Corporation and/or the Companies  irreparable harm. In the event
      of a breach or threatened breach by the Executive of any of the provisions
      of sections 8, 9 and 10 of this Agreement,  the Corporation  and/or any of
      the  Companies  shall be entitled to an injunction  restraining  Executive
      from  such  breach.   Nothing  herein  contained  shall  be  construed  as
      prohibiting the Corporation from pursuing any other remedies available for
      any breach or threatened breach of this Agreement.

      (b) Notwithstanding  anything contained in this Agreement to the contrary,
      the provisions of sections 8, 9 and 10 of this Agreement shall survive the
      expiration or other  termination of this Agreement  until, by their terms,
      such provisions are no longer operative.

      14.   Notices.

      All  requests,  demands,  notices  and other  communications  required  or
otherwise  given  under  this  Agreement  shall  be  sufficiently  given  if (a)
delivered by hand against written receipt  therefor,  (b) forwarded by overnight
courier or (c) mailed by registered or certified mail,postage prepaid, addressed
as follows:

If to the Corporation, to:      American Vantage Companies
                                4735 South Durango Drive - Suite 105
                                Las Vegas, Nevada 89147
                                Attention: President

with a copy to:                 Jack Becker, Esq.
                                Snow Becker Krauss P.C.
                                605 Third Avenue - 25th Floor
                                New York, New York 10158-0125

If to Executive, to:            Anna M. Morrison
                                9520 Marina Valley Avenue
                                Las Vegas, Nevada 89147

or, in the case of any of the  parties  hereto,  at such  other  address as such
party shall have  furnished in writing,  in accordance  with this section 14, to
the other party hereto. Each such request, demand, notice or other communication
shall be deemed  given  (a) on the date of  delivery  by hand,  (b) on the first
business day following the date of delivery to an overnight courier or (c) three
business days following mailing by registered or certified mail.

<PAGE>

      15.   Indemnification.

      (a) The  Corporation  agrees to  indemnify  Executive  and hold  Executive
      harmless  against any and all losses,  claims,  damages,  liabilities  and
      costs (and all actions in respect  thereof and any legal or other expenses
      in giving  testimony or furnishing  documents in response to a subpoena or
      otherwise),  including,  without  limitation,  the costs of investigating,
      preparing  or  defending  any such  action  or  claim,  whether  or not in
      connection  with  litigation  in which  Executive is a party,  as and when
      incurred,  directly or  indirectly  caused by,  relating to, based upon or
      arising out of any work  performed by Executive  in  connection  with this
      Agreement to the full extent  permitted by the Nevada General  Corporation
      Law and by the Certificate of Incorporation and Bylaws of the Corporation,
      as may be amended from time to time.

      (b) The indemnification  provision of this section 15 shall be in addition
      to any liability which the Corporation may otherwise have to Executive.

      (c) If any action,  proceeding or  investigation  is commenced as to which
      Executive proposes to demand such indemnification,  Executive shall notify
      the Corporation with reasonable promptness. The Corporation shall have the
      right to retain  counsel  of the  Corporation's  own  choice to  represent
      Executive in such action,  proceeding or investigation,  which counsel may
      be, subject to such counsel's  professional  responsibilities,  counsel to
      the Corporation. In the event that a conflict exists between the interests
      of Executive and interests of the Corporation with respect to such action,
      proceeding  or  investigation,  separate  counsel for  Executive  shall be
      retained.  In either event, the Corporation  shall pay all reasonable fees
      and expenses of such counsel(s) and such counsel(s)  shall, to the fullest
      extent  consistent  with  such  counsel's  professional  responsibilities,
      cooperate  with the  Corporation  and any other counsel  designated by the
      Corporation.  The  Corporation  shall be liable for any  settlement of any
      claim against Executive made with the Corporation's written consent, which
      consent  shall  not  be  unreasonably  withheld,  to  the  fullest  extent
      permitted by the Nevada  General  Corporation  Law and the  Certificate of
      Incorporation  and Bylaws of the Corporation,  as may be amended from time
      to time.

      16.   Prior Agreements/Oral Modification.

      This Agreement  supersedes all prior agreements and constitutes the entire
agreement and understanding  between parties. This Agreement may not be amended,
modified in any manner or terminated  orally;  and no  amendment,  modification,
termination or attempted waiver of any of the provisions hereof shall be binding
unless in writing and signed by the parties  against  whom the same is sought to
be enforced;  provided,  however, that Executive's compensation may be increased
at any time by the  Corporation  without in any way  affecting  any of the other
terms and conditions of this Agreement  which in all other respects shall remain
in full force and effect.

      17.   Attorney's Fees.

      In the event of any litigation  between the parties to this Agreement,  or
any of them,  concerning this Agreement,  the prevailing party shall be entitled
to recover the prevailing party's reasonable attorney's fees, including, but not
limited to, the  prevailing  party's  reasonable  attorney's  fees for  services
rendered on appeal, as determined by a court of competent jurisdiction.

      18.   Binding Agreement; Benefit.

      The  provisions of this  Agreement will be binding upon, and will inure to
the benefit of, the respective heirs,  legal  representatives  and successors of
the parties hereto.

      19.   Governing Law.

      This  Agreement  will be  governed  by,  and  construed  and  enforced  in
accordance with the laws of the State of Nevada.

<PAGE>

      20.   Arbitration.

      (a) Any dispute arising between the parties to this Agreement,  including,
      but  not  limited  to,  those  pertaining  to  the  formation,   validity,
      interpretation,  effect or alleged breach of this  Agreement  ("Arbitrable
      Dispute") will be submitted to arbitration in Las Vegas, Nevada, before an
      experienced  employment  arbitrator  and selected in  accordance  with the
      rules of the American Arbitration  Association labor tribunal.  Each party
      shall pay the fees of their  respective  attorneys,  the expenses of their
      witnesses and any other expenses  connected with  presenting  their claim.
      Other costs of the arbitration, including the fees of the arbitrator, cost
      of any record or transcript of the arbitration,  administrative  fees, and
      other  fees and  costs  shall  be borne  equally  by the  parties  to this
      Agreement.

      (b)  Should  any party to this  Agreement  hereafter  institute  any legal
      action or administrative proceedings against another party with respect to
      any claim waived by this Agreement or pursue any other Arbitrable  Dispute
      by any method other than said  arbitration,  the responding party shall be
      entitled to recover from the initiating party all damages, costs, expenses
      and attorney's fees incurred as a result of such action.

      21.   Proper Construction.

      (a) The  language  of all  parts of this  Agreement  shall in all cases be
      construed as a whole  according to its fair meaning,  and not strictly for
      or against any of the parties.

      (b) As used in this  Agreement,  the term "or"  shall be deemed to include
      the term  "and/or"  and the  singular or plural  number shall be deemed to
      include the other whenever the context so indicates or requires.

      22.   Waiver of Breach.

      The waiver by either party of a breach of any provision of this  Agreement
by the other party must be in writing and shall not operate or be construed as a
waiver of any subsequent breach by such other party.

      23.   Entire Agreement; Amendments.

      This  Agreement  contains  the entire  agreement  between the parties with
respect to the subject  matter  hereof and  supersedes  all prior  agreements or
understandings  among the parties with respect  thereto.  This  Agreement may be
amended only by an agreement in writing signed by the parties hereto.

      24.   Headings.

      The section and  paragraph  headings  contained in this  Agreement are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

      25.   Severability.

      Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction  shall,  as to such  jurisdiction,  be ineffective to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

      26.   Assignment.

      This Agreement is personal in its nature and the parties hereto shall not,
without  the  consent of the other,  assign or transfer  this  Agreement  or any
rights or obligations hereunder;  provided,  however, that the provisions hereof
shall  inure to the  benefit  of, and be binding  upon,  each  successor  of the
Corporation whether by merger,  consolidation,  transfer of all or substantially
all assets, or otherwise.

<PAGE>

      27.   Counterparts.

      This  Agreement may be executed in any number of  counterparts  and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken  together  shall  constitute one
and the same agreement.

      IN WITNESS  WHEREOF,  the parties have duly executed this  Agreement as of
the date first above written.

CORPORATION:

American Vantage Companies

By:

/s/  Ronald J. Tassinari
-------------------------------------
Ronald J. Tassinari
President and Chief Executive Officer

EXECUTIVE:

/s/  Anna M. Morrison
-------------------------------------
Anna M. MorrisonExhibit 10.1

                      STANDBY EQUITY DISTRIBUTION AGREEMENT

         THIS STANDBY EQUITY  DISTRIBUTION  AGREEMENT (the "Agreement") dated as
of May 10, 2005 by and between CORNELL CAPITAL PARTNERS,  LP, a Delaware limited
partnership (the "Investor"),  and POWER TECHNOLOGY,  INC., a Nevada corporation
(the "Company").

         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein,  the Company shall issue and sell to the Investor,
from time to time as provided  herein,  and the Investor shall purchase from the
Company up to Five Million Dollars  ($5,000,000) of the Company's  common stock,
par value $0.001 per share (the "Common Stock"); and

         WHEREAS,  such investments will be made in reliance upon the provisions
of Regulation D ("Regulation D") of the Securities Act of 1933, as amended,  and
the regulations  promulgated thereunder (the "Securities Act"), and or upon such
other exemption from the registration  requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.

         WHEREAS, the Company has engaged Newbridge Securities  Corporation (the
"Placement  Agent"),  to act as  the  Company's  exclusive  placement  agent  in
connection with the sale of the Company's Common Stock to the Investor hereunder
pursuant to the Placement Agent Agreement dated the date hereof by and among the
Company, the Placement Agent and the Investor (the "Placement Agent Agreement").

         NOW, THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I.
                               Certain Definitions

         Section 1.1.  "Advance" shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.

         Section  1.2.  "Advance  Date"  shall mean the date the David  Gonzalez
Attorney  Trust  Account is in receipt of the funds from the  Investor and David
Gonzalez,  Esq., is in  possession  of free trading  shares from the Company and
therefore  an  Advance  by the  Investor  to the  Company  can be made and David
Gonzalez,  Esq. can release the free trading shares to the Investor. The Advance
Date shall be the first (1st)  Trading Day after  expiration  of the  applicable
Pricing Period for each Advance.

         Section  1.3.  "Advance  Notice"  shall  mean a  written  notice to the
Investor  setting  forth the Advance  amount that the Company  requests from the
Investor and the Advance Date.

<PAGE>

         Section  1.4.  "Advance  Notice  Date" shall mean each date the Company
delivers to the  Investor an Advance  Notice  requiring  the Investor to advance
funds to the Company,  subject to the terms of this Agreement. No Advance Notice
Date shall be less than five (5)  Trading  Days after the prior  Advance  Notice
Date.

         Section 1.5. "Bid Price" shall mean, on any date, the closing bid price
(as reported by Bloomberg  L.P.) of the Common Stock on the Principal  Market or
if the Common Stock is not traded on a Principal  Market,  the highest  reported
bid price for the Common  Stock,  as furnished by the  National  Association  of
Securities Dealers, Inc.

         Section 1.6. "Closing" shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.3.

         Section 1.7.  "Commitment Amount" shall mean the aggregate amount of up
to Five Million Dollars ($5,000,000) which the Investor has agreed to provide to
the Company in order to purchase  the  Company's  Common  Stock  pursuant to the
terms and conditions of this Agreement.

         Section 1.8.  "Commitment  Period" shall mean the period  commencing on
the earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the  Investor  may  mutually  agree in writing,  and expiring on the
earliest to occur of (x) the date on which the Investor  shall have made payment
of Advances  pursuant to this Agreement in the aggregate  amount of Five Million
Dollars  ($5,000,000),  (y) the date this  Agreement is  terminated  pursuant to
Section  2.4,  or (z) the date  occurring  twenty-four  (24)  months  after  the
Effective Date.

         Section 1.9.  "Common Stock" shall mean the Company's common stock, par
value $0.001 per share.

         Section 1.10. "Condition  Satisfaction Date" shall have the meaning set
forth in Section 7.2.

         Section 1.11. "Damages" shall mean any loss, claim, damage,  liability,
costs and expenses (including,  without limitation,  reasonable  attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).

         Section  1.12.  "Effective  Date"  shall mean the date on which the SEC
first declares effective a Registration  Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).

         Section 1.13.  "Escrow Agreement" shall mean the escrow agreement among
the Company, the Investor, and David Gonzalez, Esq., dated the date hereof.

         Section 1.14.  "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.

         Section  1.15.  "Material  Adverse  Effect"  shall mean any  condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations

                                       2
<PAGE>

under this  Agreement  or the  Registration  Rights  Agreement  in any  material
respect.

         Section 1.16.  "Market  Price" shall mean the lowest VWAP of the Common
Stock during the Pricing Period.

         Section  1.17.  "Maximum  Advance  Amount"  shall be Two Hundred  Fifty
Thousand Dollars ($250,000) per Advance Notice.

         Section 1.18 "NASD" shall mean the National  Association  of Securities
Dealers, Inc.

         Section  1.19  "Person"  shall mean an  individual,  a  corporation,  a
partnership, an association, a trust or other entity or organization,  including
a government or political subdivision or an agency or instrumentality thereof.

         Section  1.20  "Placement   Agent"  shall  mean  Newbridge   Securities
Corporation, a registered broker-dealer.

         Section  1.21  "Pricing  Period"  shall  mean the five (5)  consecutive
Trading Days after the Advance Notice Date.

         Section 1.22 "Principal  Market" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange,  the OTC Bulletin Board
or the New York Stock Exchange,  whichever is at the time the principal  trading
exchange or market for the Common Stock.

         Section 1.23  "Purchase  Price"  shall be set at ninety  seven  percent
(97%) of the Market Price during the Pricing Period.

         Section 1.24  "Registrable  Securities" shall mean the shares of Common
Stock to be issued hereunder (i) in respect of which the Registration  Statement
has not been declared  effective by the SEC, (ii) which have not been sold under
circumstances  meeting  all of the  applicable  conditions  of Rule  144 (or any
similar  provision then in force) under the Securities Act ("Rule 144") or (iii)
which have not been otherwise  transferred to a holder who may trade such shares
without  restriction  under the Securities  Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.

         Section   1.25   "Registration   Rights   Agreement"   shall  mean  the
Registration Rights Agreement dated the date hereof, regarding the filing of the
Registration  Statement for the resale of the  Registrable  Securities,  entered
into between the Company and the Investor.

         Section  1.26  "Registration   Statement"  shall  mean  a  registration
statement on Form S-1 or Form SB-2 (if use of such form is then available to the
Company  pursuant  to the  rules  of the SEC and,  if not,  on such  other  form
promulgated  by the SEC for which the Company then  qualifies  and which counsel
for the Company  shall deem  appropriate,  and which form shall be available for
the  resale  of  the  Registrable  Securities  to be  registered  thereunder  in
accordance  with the  provisions of this Agreement and the  Registration  Rights

                                       3
<PAGE>

Agreement,  and in accordance  with the intended  method of distribution of such
securities),  for  the  registration  of  the  resale  by  the  Investor  of the
Registrable Securities under the Securities Act.

         Section  1.27  "Regulation  D" shall have the  meaning set forth in the
recitals of this Agreement.

         Section 1.28 "SEC" shall mean the Securities and Exchange Commission.

         Section 1.29  "Securities  Act" shall have the meaning set forth in the
recitals of this Agreement.

         Section 1.30 "SEC Documents"  shall mean Annual Reports on Form 10-KSB,
Quarterly  Reports  on  Form  10-QSB,  Current  Reports  on Form  8-K and  Proxy
Statements  of the  Company as  supplemented  to the date  hereof,  filed by the
Company for a period of at least twelve (12) months  immediately  preceding  the
date  hereof or the  Advance  Date,  as the case may be,  until such time as the
Company  no  longer  has  an  obligation  to  maintain  the  effectiveness  of a
Registration Statement as set forth in the Registration Rights Agreement.

         Section 1.31 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.

         Section 1.32 "VWAP" shall mean the volume weighted average price of the
Company's Common Stock, as quoted by Bloomberg, LP.

                                   ARTICLE II.
                                    Advances

         Section 2.1.      Investments.

                  (a) Advances.  Upon the terms and  conditions set forth herein
(including,  without  limitation,  the provisions of Article VII hereof), on any
Advance  Notice Date the  Company may request an Advance by the  Investor by the
delivery  of an Advance  Notice.  The number of shares of Common  Stock that the
Investor  shall  receive for each Advance  shall be  determined  by dividing the
amount of the Advance by the  Purchase  Price.  No  fractional  shares  shall be
issued.  Fractional  shares  shall be rounded to the next higher whole number of
shares.  The aggregate maximum amount of all Advances that the Investor shall be
obligated to make under this Agreement shall not exceed the Commitment Amount.

         Section 2.2.      Mechanics.

                  (a) Advance Notice. At any time during the Commitment  Period,
the  Company  may  deliver an  Advance  Notice to the  Investor,  subject to the
conditions  set forth in Section  7.2;  provided,  however,  the amount for each
Advance as designated by the Company in the applicable Advance Notice, shall not
be more than the Maximum  Advance Amount.  The aggregate  amount of the Advances
pursuant to this Agreement shall not exceed the Commitment  Amount.  The Company
acknowledges  that the  Investor may sell shares of the  Company's  Common Stock

                                       4
<PAGE>

corresponding  with a particular Advance Notice on the day the Advance Notice is
received by the  Investor.  There  shall be a minimum of five (5)  Trading  Days
between each Advance Notice Date.

                  (b) Date of  Delivery  of Advance  Notice.  An Advance  Notice
shall be deemed  delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon Eastern
Time,  or (ii) the  immediately  succeeding  Trading  Day if it is  received  by
facsimile or otherwise  after 12:00 noon Eastern Time on a Trading Day or at any
time on a day  which is not a  Trading  Day.  No  Advance  Notice  may be deemed
delivered on a day that is not a Trading Day.

         Section 2.3.  Closings.  On each Advance Date, which shall be the first
(1st) Trading Day after  expiration of the  applicable  Pricing  Period for each
Advance,  (i) the Company  shall  deliver to David  Gonzalez,  Esq. (the "Escrow
Agent")  shares of the Company's  Common Stock,  representing  the amount of the
Advance by the Investor  pursuant to Section 2.1 herein,  registered in the name
of the  Investor  which shall be  delivered  to the  Investor,  or  otherwise in
accordance  with the Escrow  Agreement  and (ii) the Investor  shall  deliver to
Escrow Agent the amount of the Advance  specified in the Advance  Notice by wire
transfer of immediately available funds which shall be delivered to the Company,
or otherwise in accordance with the Escrow Agreement.  In addition,  on or prior
to the Advance Date,  each of the Company and the Investor  shall deliver to the
other through the Investor's  counsel,  all documents,  instruments and writings
required to be delivered by either of them  pursuant to this  Agreement in order
to implement and effect the transactions  contemplated herein.  Payment of funds
to the Company and delivery of the Company's  Common Stock to the Investor shall
occur in accordance  with the conditions set forth above and those  contained in
the Escrow Agreement;  provided, however, that to the extent the Company has not
paid the fees,  expenses,  and  disbursements  of the Investor,  the  Investor's
counsel, or the Company's counsel in accordance with Section 12.4, the amount of
such fees,  expenses,  and  disbursements  may be deducted by the Investor  (and
shall be paid to the  relevant  party)  from the amount of the  Advance  with no
reduction in the amount of shares of the Company's  Common Stock to be delivered
on such Advance Date.

         Section 2.4. Termination of Investment.  The obligation of the Investor
to make an Advance to the Company  pursuant to this  Agreement  shall  terminate
permanently  (including  with  respect  to an  Advance  Date  that  has  not yet
occurred)  in the event that (i) there shall occur any stop order or  suspension
of the  effectiveness  of the  Registration  Statement for an aggregate of fifty
(50)  Trading  Days,  other  than due to the acts of the  Investor,  during  the
Commitment  Period,  and (ii) the Company  shall at any time fail  materially to
comply with the  requirements of Article VI and such failure is not cured within
thirty (30) days after receipt of written  notice from the  Investor,  provided,
however,  that  this  termination  provision  shall  not  apply  to  any  period
commencing upon the filing of a  post-effective  amendment to such  Registration
Statement  and ending upon the date on which such post  effective  amendment  is
declared effective by the SEC.

         Section 2.5. Agreement to Advance Funds. The Investor agrees to advance
the amount  specified in the Advance  Notice to the Company after the completion
of each of the following  conditions and the other  conditions set forth in this
Agreement:

                   (a)  the  execution  and  delivery  by the  Company,  and the
Investor, of this Agreement and the Exhibits hereto;

                                       5
<PAGE>

                   (b) The Escrow Agent shall have received the shares of Common
Stock  applicable  to the Advance in  accordance  with Section 2.3.  Such shares
shall be free of restrictive legends.

                   (c) the Company's  Registration Statement with respect to the
resale  of the  Registrable  Securities  in  accordance  with  the  terms of the
Registration Rights Agreement shall have been declared effective by the SEC;

                   (d) the Company shall have obtained all material  permits and
qualifications  required by any  applicable  state for the offer and sale of the
Registrable Securities,  or shall have the availability of exemptions therefrom.
The sale and issuance of the Registrable  Securities shall be legally  permitted
by all laws and regulations to which the Company is subject;

                   (e) the  Company  shall have filed with the  Commission  in a
timely manner all reports,  notices and other documents required of a "reporting
company" under the Exchange Act and applicable Commission regulations;

                   (f) the fees as set forth in Section  12.4  below  shall have
been paid or can be withheld as provided in Section 2.3; and

                   (g) the  conditions  set forth in Section 7.2 shall have been
satisfied.

                   (h)  the Company  shall  have  provided  to the  Investor  an
acknowledgement,  from  Beckstead and Watts,  LLP,  Malone & Bailey,  PC and any
other of the Company's independent  registered certified public accounting firms
as to  their  ability  to  provide  all  consents  required  in  order to file a
registration statement in connection with this transaction;

                   (i) The Company's transfer agent shall be DWAC eligible.

         Section  2.6.  Lock Up Period.  On the date hereof,  the Company  shall
obtain from each officer and director a lock-up agreement,  as defined below, in
the form annexed hereto as Schedule 2.6 agreeing to only sell in compliance with
the volume limitation of Rule 144.

         Section 2.7.  Hardship.  In the event the Investor  sells shares of the
Company's  Common Stock after receipt of an Advance Notice and the Company fails
to perform its  obligations  as mandated in Section  2.3, and  specifically  the
Company  fails to deliver to the Escrow  Agent on the Advance Date the shares of
Common Stock corresponding to the applicable Advance,  the Company  acknowledges
that the Investor shall suffer financial  hardship and therefore shall be liable
for any and all losses,  commissions,  fees, or financial hardship caused to the
Investor.

                                  ARTICLE III.
                   Representations and Warranties of Investor

         Investor  hereby  represents  and  warrants  to, and agrees  with,  the
Company  that the  following  are true and as of the date  hereof and as of each
Advance Date:

                                       6
<PAGE>

         Section  3.1.  Organization  and  Authorization.  The  Investor is duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and has all  requisite  power and  authority to
purchase and hold the securities issuable hereunder.  The decision to invest and
the execution and delivery of this Agreement by such Investor,  the  performance
by such  Investor of its  obligations  hereunder  and the  consummation  by such
Investor of the transactions  contemplated  hereby have been duly authorized and
requires no other  proceedings on the part of the Investor.  The undersigned has
the right,  power and  authority to execute and deliver this  Agreement  and all
other  instruments  (including,  without  limitations,  the Registration  Rights
Agreement), on behalf of the Investor. This Agreement has been duly executed and
delivered by the Investor and,  assuming the  execution and delivery  hereof and
acceptance thereof by the Company,  will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.

         Section 3.2.  Evaluation of Risks.  The Investor has such knowledge and
experience in financial, tax and business matters as to be capable of evaluating
the  merits  and risks of,  and  bearing  the  economic  risks  entailed  by, an
investment  in the Company and of protecting  its  interests in connection  with
this  transaction.  It recognizes that its investment in the Company  involves a
high degree of risk.

         Section  3.3.  No  Legal   Advice  From  the   Company.   The  Investor
acknowledges  that it had the  opportunity  to  review  this  Agreement  and the
transactions  contemplated  by this  Agreement  with its own legal  counsel  and
investment and tax advisors.  The Investor is relying solely on such counsel and
advisors and not on any statements or  representations  of the Company or any of
its  representatives  or agents for legal, tax or investment advice with respect
to this  investment,  the  transactions  contemplated  by this  Agreement or the
securities laws of any jurisdiction.

         Section 3.4. Investment Purpose.  The securities are being purchased by
the Investor  for its own account,  and for  investment  purposes.  The Investor
agrees  not to  assign  or in any way  transfer  the  Investor's  rights  to the
securities or any interest  therein and  acknowledges  that the Company will not
recognize  any  purported  assignment  or  transfer  except in  accordance  with
applicable Federal and state securities laws. No other person has or will have a
direct or indirect  beneficial  interest in the securities.  The Investor agrees
not to sell,  hypothecate or otherwise transfer the Investor's securities unless
the securities are registered under Federal and applicable state securities laws
or unless, in the opinion of counsel  satisfactory to the Company,  an exemption
from such laws is available.

         Section  3.5.  Accredited  Investor.  The  Investor  is an  "Accredited
Investor" as that term is defined in Rule  501(a)(3)  of  Regulation D under the
Securities Act.

         Section  3.6.  Information.  The  Investor  and its  advisors  (and its
counsel),  if any,  have  been  furnished  with all  materials  relating  to the
business,  finances  and  operations  of the Company and  information  it deemed
material  to  making an  informed  investment  decision.  The  Investor  and its
advisors,  if any,  have been afforded the  opportunity  to ask questions of the
Company and its  management.  Neither such inquiries nor any other due diligence
investigations  conducted  by such  Investor  or its  advisors,  if any,  or its
representatives  shall modify,  amend or affect the Investor's  right to rely on

                                       7
<PAGE>

the Company's  representations and warranties  contained in this Agreement.  The
Investor  understands  that its  investment  involves a high degree of risk. The
Investor is in a position  regarding the Company,  which, based upon employment,
family  relationship  or economic  bargaining  power,  enabled and enables  such
Investor to obtain  information from the Company in order to evaluate the merits
and risks of this investment. The Investor has sought such accounting, legal and
tax  advice,  as it has  considered  necessary  to make an  informed  investment
decision with respect to this transaction.

         Section 3.7.  Receipt of  Documents.  The Investor and its counsel have
received and read in their entirety: (i) this Agreement and the Exhibits annexed
hereto;  (ii) all due  diligence and other  information  necessary to verify the
accuracy and  completeness  of such  representations,  warranties and covenants;
(iii) the  Company's  Form 10-KSB for the year ended year ended January 31, 2004
and Form 10-QSB for the period ended  October 31, 2004;  and (iv) answers to all
questions the Investor  submitted to the Company  regarding an investment in the
Company;  and the Investor has relied on the information  contained  therein and
has  not  been  furnished  any  other  documents,   literature,   memorandum  or
prospectus.

         Section 3.8.  Registration  Rights Agreement and Escrow Agreement.  The
parties have  entered  into the  Registration  Rights  Agreement  and the Escrow
Agreement, each dated the date hereof.

         Section 3.9. No General  Solicitation.  Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation D under the Securities  Act) in connection  with the offer or sale of
the shares of Common Stock offered hereby.

         Section  3.10.  Not an  Affiliate.  The  Investor  is  not an  officer,
director  or  a  person  that  directly,  or  indirectly  through  one  or  more
intermediaries,  controls or is controlled  by, or is under common  control with
the Company or any  "Affiliate"  of the Company (as that term is defined in Rule
405 of the Securities Act).

         Section 3.11.  Trading  Activities.  The Investor's  trading activities
with  respect to the  Company's  Common  Stock shall be in  compliance  with all
applicable  federal and state  securities  laws,  rules and  regulations and the
rules and  regulations  of the Principal  Market on which the  Company's  Common
Stock is listed or traded.  Neither the Investor nor its  affiliates has an open
short position in the Common Stock of the Company,  the Investor  agrees that it
shall not,  and that it will cause its  affiliates  not to,  engage in any short
sales of or hedging transactions with respect to the Common Stock, provided that
the Company  acknowledges  and agrees that upon receipt of an Advance Notice the
Investor has the right to sell the shares to be issued to the Investor  pursuant
to the Advance Notice during the applicable Pricing Period.

                                   ARTICLE IV.
                  Representations and Warranties of the Company

         Except as stated below, on the disclosure  schedules attached hereto or
in the SEC Documents (as defined  herein),  the Company  hereby  represents  and
warrants to, and  covenants  with,  the Investor that the following are true and
correct as of the date hereof:

                                       8
<PAGE>

         Section  4.1.  Organization  and  Qualification.  The  Company  is duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation or organization  and has all requisite  corporate power to own its
properties  and to carry on its  business  as now being  conducted.  Each of the
Company and its  subsidiaries  is duly qualified as a foreign  corporation to do
business and is in good  standing in every  jurisdiction  in which the nature of
the business conducted by it makes such qualification  necessary,  except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect on the Company and its subsidiaries taken as a whole.

         Section  4.2.   Authorization,   Enforcement,   Compliance  with  Other
Instruments.  (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement,  the Registration  Rights Agreement,  the
Escrow Agreement,  the Placement Agent Agreement and any related agreements,  in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement,  the Registration  Rights Agreement,  the Escrow Agreement,  the
Placement  Agent  Agreement  and any related  agreements  by the Company and the
consummation by it of the  transactions  contemplated  hereby and thereby,  have
been duly  authorized by the Company's Board of Directors and no further consent
or  authorization  is required by the  Company,  its Board of  Directors  or its
stockholders,  (iii) this Agreement,  the  Registration  Rights  Agreement,  the
Escrow Agreement,  the Placement Agent Agreement and any related agreements have
been duly  executed  and  delivered  by the Company,  (iv) this  Agreement,  the
Registration  Rights  Agreement,  the  Escrow  Agreement,  the  Placement  Agent
Agreement and assuming the execution and delivery  thereof and acceptance by the
Investor and any related agreements constitute the valid and binding obligations
of the Company  enforceable  against the Company in accordance with their terms,
except as such  enforceability may be limited by general principles of equity or
applicable bankruptcy,  insolvency,  reorganization,  moratorium, liquidation or
similar laws relating to, or affecting generally,  the enforcement of creditors'
rights and remedies.

         Section  4.3.  Capitalization.  As of the date hereof,  the  authorized
capital stock of the Company consists of 750,000,000 shares of Common Stock, par
value $0.001 per share and 1,000,000  shares of Preferred  Stock. As of the date
hereof,  there were 129,924,358 shares of Common Stock and 0 shares of Preferred
Stock  issued and  outstanding.  Except as disclosed  in the SEC  Documents,  no
shares of Common  Stock are subject to  preemptive  rights or any other  similar
rights or any liens or encumbrances suffered or permitted by the Company. Except
as  disclosed  in the SEC  Documents,  as of the date  hereof,  (i) there are no
outstanding  options,   warrants,  scrip,  rights  to  subscribe  to,  calls  or
commitments  of any  character  whatsoever  relating to, or securities or rights
convertible  into,  any  shares of  capital  stock of the  Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the  Company  or  any of  its  subsidiaries  is or may  become  bound  to  issue
additional  shares of capital stock of the Company or any of its subsidiaries or
options,  warrants,  scrip,  rights to subscribe to, calls or commitments of any
character  whatsoever relating to, or securities or rights convertible into, any
shares of capital  stock of the Company or any of its  subsidiaries,  (ii) there
are no outstanding debt securities  (iii) there are no outstanding  registration
statements  other  than  on  Form  S-8  and  (iv)  there  are no  agreements  or

                                       9
<PAGE>

arrangements  under which the Company or any of its subsidiaries is obligated to
register the sale of any of their  securities  under the  Securities Act (except
pursuant to the  Registration  Rights  Agreement).  There are no  securities  or
instruments  containing   anti-dilution  or  similar  provisions  that  will  be
triggered by this Agreement or any related  agreement or the consummation of the
transactions  described  herein or therein,  except for the employment  contract
between the Company and Bernard J. Walter,  dated July 1, 2004.  The Company has
furnished to the Investor true and correct  copies of the Company's  Articles of
Incorporation,  as amended and as in effect on the date hereof (the "Articles of
Incorporation"), and the Company's By-laws, as in effect on the date hereof (the
"By-laws"),  and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.

         Section 4.4. No Conflict.  The execution,  delivery and  performance of
this  Agreement  by the  Company  and the  consummation  by the  Company  of the
transactions  contemplated  hereby  will not (i)  result in a  violation  of the
Articles of  Incorporation,  any  certificate of designations of any outstanding
series of  preferred  stock of the Company or By-laws or (ii)  conflict  with or
constitute  a default  (or an event  which with  notice or lapse of time or both
would  become a default)  under,  or give to others  any rights of  termination,
amendment,   acceleration  or  cancellation  of,  any  agreement,  indenture  or
instrument to which the Company or any of its subsidiaries is a party, or result
in a  violation  of  any  law,  rule,  regulation,  order,  judgment  or  decree
(including  federal and state  securities laws and regulations and the rules and
regulations  of the  Principal  Market  on which  the  Common  Stock is  quoted)
applicable  to the Company or any of its  subsidiaries  or by which any material
property or asset of the Company or any of its subsidiaries is bound or affected
and which would cause a Material Adverse Effect.  Except as disclosed in the SEC
Documents,  neither the Company nor its subsidiaries is in violation of any term
of or in  default  under its  Articles  of  Incorporation  or  By-laws  or their
organizational  charter or  by-laws,  respectively,  or any  material  contract,
agreement, mortgage,  indebtedness,  indenture,  instrument, judgment, decree or
order or any  statute,  rule or  regulation  applicable  to the  Company  or its
subsidiaries.  The  business of the Company  and its  subsidiaries  is not being
conducted  in  violation  of any  material  law,  ordinance,  regulation  of any
governmental entity.  Except as specifically  contemplated by this Agreement and
as required under the Securities Act and any applicable  state  securities laws,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental  agency in order
for  it to  execute,  deliver  or  perform  any  of  its  obligations  under  or
contemplated  by  this  Agreement  or  the  Registration   Rights  Agreement  in
accordance  with the terms  hereof or  thereof.  All  consents,  authorizations,
orders,  filings  and  registrations  which the  Company is  required  to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date  hereof.  The Company and its  subsidiaries  are unaware of any fact or
circumstance which might give rise to any of the foregoing.

         Section 4.5. SEC  Documents;  Financial  Statements.  Since  January 1,
2003, the Company has filed all reports,  schedules, forms, statements and other
documents required to be filed by it with the SEC under of the Exchange Act. The
Company has delivered to the Investor or its representatives,  or made available
through the SEC's website at http://www.sec.gov, true and complete copies of the
SEC Documents.  As of their respective  dates,  the financial  statements of the
Company disclosed in the SEC Documents (the "Financial  Statements") complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally  accepted  accounting
principles, consistently applied, during the periods involved (except (i) as may

                                       10
<PAGE>

be otherwise  indicated in such financial  statements or the notes  thereto,  or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary  statements) and, fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  No other  information  provided by or on behalf of the Company to
the  Investor  which is not  included in the SEC  Documents  contains any untrue
statement of a material  fact or omits to state any material  fact  necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they were made, not misleading.

         Section  4.6.  10b-5.  The SEC  Documents  do not  include  any  untrue
statements  of  material  fact,  nor do they  omit to state  any  material  fact
required to be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.

         Section 4.7. No Default. Except as disclosed in the SEC Documents,  the
Company is not in default  in the  performance  or  observance  of any  material
obligation,  agreement,  covenant  or  condition  contained  in  any  indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it is or its  property is bound and  neither the  execution,
nor the  delivery  by the  Company,  nor the  performance  by the Company of its
obligations  under this Agreement or any of the exhibits or  attachments  hereto
will  conflict  with or result in the breach or violation of any of the terms or
provisions  of, or  constitute a default or result in the creation or imposition
of any lien or  charge on any  assets or  properties  of the  Company  under its
Articles of Incorporation,  By-Laws, any material indenture,  mortgage,  deed of
trust or other  material  agreement  applicable  to the Company or instrument to
which the  Company is a party or by which it is bound,  or any  statute,  or any
decree, judgment, order, rules or regulation of any court or governmental agency
or body having  jurisdiction  over the Company or its  properties,  in each case
which  default,  lien or charge is likely to cause a Material  Adverse Effect on
the Company's business or financial condition.

         Section 4.8. Absence of Events of Default. Except for matters described
in the SEC Documents and/or this Agreement,  no Event of Default,  as defined in
the  respective  agreement to which the Company is a party,  and no event which,
with the giving of notice or the passage of time or both,  would become an Event
of Default (as so defined),  has occurred and is continuing,  which would have a
Material  Adverse  Effect  on the  Company's  business,  properties,  prospects,
financial condition or results of operations.

         Section 4.9.  Intellectual  Property Rights. Except as disclosed in the
SEC Documents,  the Company and its  subsidiaries own or possess adequate rights
or licenses to use all material trademarks,  trade names, service marks, service
mark  registrations,   service  names,  patents,   patent  rights,   copyrights,
inventions, licenses, approvals, governmental authorizations,  trade secrets and
rights  necessary to conduct their respective  businesses as now conducted.  The
Company and its  subsidiaries  do not have any knowledge of any  infringement by
the Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights,  inventions, licenses, service names, service marks, service
mark registrations,  trade secret or other similar rights of others, and, to the
knowledge of the Company,  there is no claim, action or proceeding being made or

                                       11
<PAGE>

brought against, or to the Company's  knowledge,  being threatened against,  the
Company or its subsidiaries  regarding  trademark,  trade name, patents,  patent
rights,  invention,  copyright,  license,  service names, service marks, service
mark registrations,  trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances  which might give rise to
any of the foregoing.

         Section 4.10.  Employee  Relations.  Neither the Company nor any of its
subsidiaries  is involved in any labor  dispute  nor,  to the  knowledge  of the
Company or any of its subsidiaries,  is any such dispute threatened. None of the
Company's or its subsidiaries'  employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.

         Section 4.11.  Environmental Laws. The Company and its subsidiaries are
(i) in compliance with any and all applicable material foreign,  federal,  state
and local laws and  regulations  relating to the  protection of human health and
safety,  the environment or hazardous or toxic substances or wastes,  pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits, licenses
or other  approvals  required  of them under  applicable  Environmental  Laws to
conduct their  respective  businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval.

         Section  4.12.  Title.  Except as set forth in the SEC  Documents,  the
Company has good and  marketable  title to its  properties  and material  assets
owned by it, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable  interest other than such as are not material to the business
of the Company. Any real property and facilities held under lease by the Company
and its  subsidiaries  are held by them under valid,  subsisting and enforceable
leases with such  exceptions as are not material and do not  interfere  with the
use made and proposed to be made of such  property and  buildings by the Company
and its subsidiaries.

         Section 4.13.  Insurance.  The Company and each of its subsidiaries are
insured by insurers of recognized financial  responsibility  against such losses
and risks and in such  amounts  as  management  of the  Company  believes  to be
prudent  and  customary  in  the   businesses  in  which  the  Company  and  its
subsidiaries  are engaged.  Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such  subsidiary has any reason to believe that it will not be able to renew
its existing  insurance  coverage as and when such coverage expires or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise,  or the earnings,  business or operations of the Company
and its subsidiaries, taken as a whole.

         Section  4.14.  Regulatory  Permits.  The Company and its  subsidiaries
possess all  material  certificates,  authorizations  and permits  issued by the
appropriate  federal,  state or  foreign  regulatory  authorities  necessary  to
conduct  their  respective  businesses,  and  neither  the  Company nor any such
subsidiary has received any notice of proceedings  relating to the revocation or
modification of any such certificate, authorization or permit.

         Section 4.15. Internal Accounting Controls. The Company and each of its
subsidiaries  maintain a system of internal  accounting  controls  sufficient to
provide  reasonable  assurance that (i)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (ii)  transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in

                                       12
<PAGE>

conformity with generally accepted  accounting  principles and to maintain asset
accountability,  (iii) access to assets is  permitted  only in  accordance  with
management's   general  or  specific   authorization   and  (iv)  the   recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate action is taken with respect to any differences.

         Section 4.16. No Material Adverse Breaches, etc. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is subject to
any charter,  corporate or other legal  restriction,  or any  judgment,  decree,
order, rule or regulation which in the judgment of the Company's officers has or
is expected  in the future to have a Material  Adverse  Effect on the  business,
properties,  operations, financial condition, results of operations or prospects
of the Company or its  subsidiaries.  Except as set forth in the SEC  Documents,
neither the Company nor any of its  subsidiaries is in breach of any contract or
agreement  which breach,  in the judgment of the Company's  officers,  has or is
expected  to  have  a  Material  Adverse  Effect  on the  business,  properties,
operations,  financial  condition,  results of  operations  or  prospects of the
Company or its subsidiaries.

         Section  4.17.  Absence of  Litigation.  Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency,  self-regulatory  organization
or body pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a Material Adverse Effect on the transactions  contemplated hereby (ii)
adversely affect the validity or enforceability  of, or the authority or ability
of the Company to perform its  obligations  under,  this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents,  have  a  Material  Adverse  Effect  on  the  business,   operations,
properties,  financial  condition or results of operation of the Company and its
subsidiaries taken as a whole.

         Section 4.18.  Subsidiaries.  Except as disclosed in the SEC Documents,
the Company  does not  presently  own or control,  directly or  indirectly,  any
interest in any other  corporation,  partnership,  association or other business
entity.

         Section 4.19. Tax Status. Except as disclosed in the SEC Documents, the
Company  and each of its  subsidiaries  has made or filed all  federal and state
income and all other tax  returns,  reports  and  declarations  required  by any
jurisdiction  to which it is subject and (unless and only to the extent that the
Company  and each of its  subsidiaries  has set  aside on its  books  provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other  governmental  assessments  and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except  those  being  contested  in good  faith  and has set  aside on its books
provision  reasonably  adequate  for  the  payment  of  all  taxes  for  periods
subsequent to the periods to which such returns,  reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction,  and the officers of the Company know of no basis
for any such claim.

         Section  4.20.  Certain  Transactions.  Except  as set forth in the SEC
Documents  none of the  officers,  directors,  or  employees  of the  Company is
presently a party to any  transaction  with the Company (other than for services
as employees,  officers and  directors),  including  any contract,  agreement or
other  arrangement  providing for the furnishing of services to or by, providing

                                       13
<PAGE>

for rental of real or  personal  property  to or from,  or  otherwise  requiring
payments to or from any officer,  director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer,  director,  or any such  employee has a  substantial  interest or is an
officer, director, trustee or partner.

         Section  4.21.  Fees and Rights of First  Refusal.  The  Company is not
obligated to offer the securities  offered hereunder on a right of first refusal
basis or otherwise to any third parties  including,  but not limited to, current
or former shareholders of the Company,  underwriters,  brokers,  agents or other
third parties.

         Section  4.22.  Use of Proceeds.  The Company  represents  that the net
proceeds  from  this  offering  will be used  for  general  corporate  purposes.
However,  in no event shall the net proceeds  from this  offering be used by the
Company for the  payment  (or loaned to any such person for the  payment) of any
judgment,  or other  liability,  incurred  by any  executive  officer,  officer,
director or  employee  of the  Company,  except for any  liability  owed to such
person for services rendered,  or if any judgment or other liability is incurred
by such person originating from services rendered to the Company, or the Company
has indemnified such person from liability.

         Section 4.23. Further Representation and Warranties of the Company. For
so  long as any  securities  issuable  hereunder  held  by the  Investor  remain
outstanding, the Company acknowledges,  represents,  warrants and agrees that it
will maintain the listing of its Common Stock on the Principal Market.

         Section  4.24.  Opinion of Counsel.  Investor  shall receive an opinion
letter from counsel to the Company on the date hereof.

         Section  4.25.  Opinion of  Counsel.  The  Company  will obtain for the
Investor, at the Company's expense, any and all opinions of counsel which may be
reasonably  required in order to sell the securities  issuable hereunder without
restriction.

         Section  4.26.  Dilution.  The Company is aware and  acknowledges  that
issuance  of shares of the  Company's  Common  Stock  could  cause  dilution  to
existing shareholders and could significantly increase the outstanding number of
shares of Common Stock.

                                   ARTICLE V.
                                 Indemnification

         The Investor and the Company  represent to the other the following with
respect to itself:

         Section 5.1.      Indemnification.

                  (a) In consideration of the Investor's  execution and delivery
of this  Agreement,  and in addition to all of the Company's  other  obligations
under this  Agreement,  the Company  shall defend,  protect,  indemnify and hold
harmless the Investor, and all of its officers,  directors,  partners, employees
and agents (including, without limitation, those retained in connection with the
transactions  contemplated  by  this  Agreement)  (collectively,  the  "Investor
Indemnitees")  from and against any and all  actions,  causes of action,  suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith  (irrespective of whether any such Investor Indemnitee is a
party  to the  action  for  which  indemnification  hereunder  is  sought),  and
including  reasonable   attorneys'  fees  and  disbursements  (the  "Indemnified

                                       14
<PAGE>

Liabilities"),  incurred by the Investor  Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation  or  warranty  made  by the  Company  in  this  Agreement  or the
Registration  Rights Agreement or any other certificate,  instrument or document
contemplated  hereby or thereby,  (b) any breach of any  covenant,  agreement or
obligation of the Company contained in this Agreement or the Registration Rights
Agreement or any other certificate,  instrument or document  contemplated hereby
or thereby,  or (c) any cause of action,  suit or claim  brought or made against
such  Investor  Indemnitee  not  arising  out of any  action or  inaction  of an
Investor  Indemnitee,  and  arising  out of or  resulting  from  the  execution,
delivery,  performance or enforcement of this Agreement or any other instrument,
document  or  agreement   executed  pursuant  hereto  by  any  of  the  Investor
Indemnitees.  To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and  satisfaction of each of the Indemnified  Liabilities,  which is
permissible under applicable law.

                  (b) In consideration  of the Company's  execution and delivery
of this Agreement,  and in addition to all of the Investor's  other  obligations
under this  Agreement,  the Investor shall defend,  protect,  indemnify and hold
harmless the Company and all of its officers, directors, shareholders, employees
and agents (including, without limitation, those retained in connection with the
transactions  contemplated  by  this  Agreement)  (collectively,   the  "Company
Indemnitees") from and against any and all Indemnified  Liabilities  incurred by
the  Company  Indemnitees  or any of them as a result of, or arising  out of, or
relating  to (a)  any  misrepresentation  or  breach  of any  representation  or
warranty  made  by the  Investor  in this  Agreement,  the  Registration  Rights
Agreement, or any instrument or document contemplated hereby or thereby executed
by the Investor, (b) any breach of any covenant,  agreement or obligation of the
Investor(s)  contained in this Agreement,  the Registration  Rights Agreement or
any other  certificate,  instrument or document  contemplated  hereby or thereby
executed by the Investor,  or (c) any cause of action,  suit or claim brought or
made against such Company  Indemnitee  based on  misrepresentations  or due to a
breach by the  Investor  and arising  out of or  resulting  from the  execution,
delivery,  performance or enforcement of this Agreement or any other instrument,
document  or  agreement   executed   pursuant  hereto  by  any  of  the  Company
Indemnitees. To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason,  the Investor shall make the maximum  contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.

                           (c) The  obligations  of the parties to  indemnify or
make contribution under this
Section 5.1 shall survive termination.

                                   ARTICLE VI.
                            Covenants of the Company

         Section  6.1.   Registration   Rights.  The  Company  shall  cause  the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.

                                       15
<PAGE>

         Section 6.2.  Listing of Common Stock.  The Company shall  maintain the
Common  Stock's  authorization  for  quotation  on the National  Association  of
Securities Dealers Inc.'s Over the Counter Bulletin Board.

         Section  6.3.  Exchange  Act  Registration.  The Company will cause its
Common Stock to continue to be  registered  under  Section 12(g) of the Exchange
Act, will file in a timely manner all reports and other documents required of it
as a reporting  company  under the  Exchange Act and will not take any action or
file any  document  (whether  or not  permitted  by  Exchange  Act or the  rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Exchange Act.

         Section 6.4.  Transfer Agent  Instructions.  Upon  effectiveness of the
Registration  Statement the Company shall deliver  instructions  to its transfer
agent to issue  shares  of  Common  Stock to the  Investor  free of  restrictive
legends on or before each Advance Date

         Section  6.5.  Corporate  Existence.  The  Company  will take all steps
necessary to preserve and continue the corporate existence of the Company.

         Section  6.6.   Notice  of  Certain  Events   Affecting   Registration;
Suspension of Right to Make an Advance.  The Company will immediately notify the
Investor  upon its  becoming  aware of the  occurrence  of any of the  following
events in respect of a registration  statement or related prospectus relating to
an offering of Registrable Securities: (i) receipt of any request for additional
information  by the SEC or any other  Federal  or state  governmental  authority
during the period of effectiveness of the Registration  Statement for amendments
or supplements to the  registration  statement or related  prospectus;  (ii) the
issuance by the SEC or any other Federal or state governmental  authority of any
stop order suspending the  effectiveness  of the  Registration  Statement or the
initiation  of  any  proceedings   for  that  purpose;   (iii)  receipt  of  any
notification  with respect to the suspension of the  qualification  or exemption
from  qualification  of  any of  the  Registrable  Securities  for  sale  in any
jurisdiction  or the  initiation  or  threatening  of any  proceeding  for  such
purpose;  (iv) the happening of any event that makes any  statement  made in the
Registration  Statement or related  prospectus of any document  incorporated  or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration  Statement,  related
prospectus or documents so that, in the case of the Registration  Statement,  it
will not contain any untrue  statement  of a material  fact or omit to state any
material fact required to be stated  therein or necessary to make the statements
therein not misleading,  and that in the case of the related prospectus, it will
not  contain  any  untrue  statement  of a  material  fact or omit to state  any
material fact required to be stated  therein or necessary to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the  Registration  Statement would be appropriate;  and the Company
will promptly make available to the Investor any such supplement or amendment to
the related  prospectus.  The  Company  shall not  deliver to the  Investor  any
Advance Notice during the continuation of any of the foregoing events.

         Section  6.7.   Restriction  on  Sale  of  Capital  Stock.  During  the
Commitment  Period,  the Company shall not issue or sell (i) any Common Stock or
Preferred Stock without consideration or for a consideration per share less than
the bid price of the Common Stock determined  immediately prior to its issuance,

                                       16
<PAGE>

(ii) issue or sell any Preferred Stock warrant,  option, right, contract,  call,
or other security or instrument granting the holder thereof the right to acquire
Common Stock without  consideration  or for a consideration  per share less than
such Common Stock's Bid Price determined  immediately prior to its issuance,  or
(iii) file any  registration  statement  on Form S-8;  however,  the Company may
issue shares of Common Stock to Bernard J. Walter,  pursuant to the terms of his
Employment  Agreement of July 1, 2004 and under the Company's Stock Option,  SAR
and  Stock  Bonus  Plan  (the  "Plan")  to  retain  and  compensate  independent
Consultants  by  way  of  granting  (i)   non-qualified   stock  options,   (ii)
non-qualified stock options with stock appreciation  rights attached,  and (iii)
Stock  bonuses.  Provided that the Plan shall have terms  identical to the Power
Technology 2004 Stock Option, SAR and Stock Bonus Plan attached as Exhibit 10 to
the Form S-8 Registration  Statement filed on June 18, 2004 and further provided
that the  total  number  of  shares  of  Common  Stock  available  for  grant to
participants  under the Plan shall not exceed twenty  percent (20%) of the total
number of issued and outstanding  shares of Common Stock upon the  establishment
of the Plan;  provided  that any  issuances  permitted  hereunder  shall only be
issued if the recipient  enters into a lock-up  agreement  pursuant to which the
recipient shall not sell,  transfer or assign any shares for a period commencing
on the date of issuance  and  expiring  six (6) months after the date upon which
the SEC declares effective the registration statement contemplated herein.

         Section 6.8.. Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into,  or a transfer  of all or  substantially  all the assets of the Company to
another  entity (a  "Consolidation  Event")  unless the  resulting  successor or
acquiring  entity  (if  not the  Company)  assumes  by  written  instrument  the
obligation to deliver to the Investor such shares of stock and/or  securities as
the Investor is entitled to receive pursuant to this Agreement.

         Section 6.9.  Issuance of the Company's  Common Stock.  The sale of the
shares of Common  Stock  shall be made in  accordance  with the  provisions  and
requirements of Regulation D and any applicable state securities law.

                                  ARTICLE VII.
                Conditions for Advance and Conditions to Closing

         Section 7.1.  Conditions  Precedent to the  Obligations of the Company.
The  obligation  hereunder of the Company to issue and sell the shares of Common
Stock to the Investor  incident to each Closing is subject to the  satisfaction,
or  waiver  by the  Company,  at or before  each  such  Closing,  of each of the
conditions set forth below.

                  (a) Accuracy of the Investor's Representations and Warranties.
The  representations and warranties of the Investor shall be true and correct in
all material respects.

                  (b)  Performance  by the  Investor.  The  Investor  shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions  required by this Agreement and the Registration Rights Agreement
to be performed,  satisfied or complied with by the Investor at or prior to such
Closing.

                                       17
<PAGE>

         Section  7.2.  Conditions  Precedent  to the  Right of the  Company  to
Deliver an Advance Notice and the Obligation of the Investor to Purchase  Shares
of Common Stock.  The right of the Company to deliver an Advance  Notice and the
obligation  of the  Investor  hereunder  to  acquire  and pay for  shares of the
Company's  Common Stock  incident to a Closing is subject to the  fulfillment by
the  Company,  on (i) the date of delivery of such  Advance  Notice and (ii) the
applicable Advance Date (each a "Condition  Satisfaction  Date"), of each of the
following conditions:

                  (a) Registration of the Common Stock with the SEC. The Company
shall have  filed  with the SEC a  Registration  Statement  with  respect to the
resale  of the  Registrable  Securities  in  accordance  with  the  terms of the
Registration  Rights  Agreement.   As  set  forth  in  the  Registration  Rights
Agreement, the Registration Statement shall have previously become effective and
shall remain effective on each Condition  Satisfaction  Date and (i) neither the
Company nor the Investor  shall have received  notice that the SEC has issued or
intends to issue a stop order with respect to the Registration Statement or that
the  SEC  otherwise  has  suspended  or  withdrawn  the   effectiveness  of  the
Registration  Statement,  either  temporarily or permanently,  or intends or has
threatened  to do so (unless  the SEC's  concerns  have been  addressed  and the
Investor  is  reasonably  satisfied  that the SEC no  longer is  considering  or
intends  to take  such  action),  and  (ii) no  other  suspension  of the use or
withdrawal  of  the  effectiveness  of the  Registration  Statement  or  related
prospectus  shall exist.  The  Registration  Statement  must have been  declared
effective by the SEC prior to the first Advance Notice Date.

                  (b) Authority. The Company shall have obtained all permits and
qualifications   required  by  any  applicable  state  in  accordance  with  the
Registration  Rights  Agreement  for the offer and sale of the  shares of Common
Stock,  or shall have the  availability  of exemptions  therefrom.  The sale and
issuance of the shares of Common  Stock shall be legally  permitted  by all laws
and regulations to which the Company is subject.

                  (c) Fundamental Changes. There shall not exist any fundamental
changes to the information set forth in the  Registration  Statement which would
require  the  Company to file a  post-effective  amendment  to the  Registration
Statement.

                  (d)  Performance  by  the  Company.  The  Company  shall  have
performed,  satisfied and complied in all material  respects with all covenants,
agreements  and  conditions  required  by  this  Agreement  (including,  without
limitation, the conditions specified in Section 2.5 hereof) and the Registration
Rights  Agreement to be performed,  satisfied or complied with by the Company at
or prior to each Condition Satisfaction Date.

                  (e) No Injunction.  No statute,  rule,  regulation,  executive
order,  decree,   ruling  or  injunction  shall  have  been  enacted,   entered,
promulgated  or endorsed by any court or  governmental  authority  of  competent
jurisdiction  that  prohibits  or  directly  and  adversely  affects  any of the
transactions  contemplated by this Agreement,  and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely  affecting any of
the transactions contemplated by this Agreement.

                  (f) No  Suspension of Trading in or Delisting of Common Stock.
The trading of the Common  Stock is not  suspended  by the SEC or the  Principal
Market (if the Common  Stock is traded on a Principal  Market).  The issuance of

                                       18
<PAGE>

shares of Common Stock with respect to the applicable Closing, if any, shall not
violate the shareholder  approval  requirements of the Principal  Market (if the
Common  Stock is traded  on a  Principal  Market).  The  Company  shall not have
received any notice threatening the continued listing of the Common Stock on the
Principal Market (if the Common Stock is traded on a Principal Market).

                  (g) Maximum Advance Amount. The amount of an Advance requested
by the Company shall not exceed the Maximum Advance Amount.  In addition,  in no
event shall the number of shares issuable to the Investor pursuant to an Advance
cause the aggregate number of shares of Common Stock  beneficially  owned by the
Investor and its  affiliates to exceed nine and 9/10 percent  (9.9%) of the then
outstanding  Common  Stock of the  Company.  For the  purposes  of this  section
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act.

                  (h) No  Knowledge.  The Company has no  knowledge of any event
which  would  be more  likely  than  not to have  the  effect  of  causing  such
Registration Statement to be suspended or otherwise ineffective.

                  (i) Other. On each Condition  Satisfaction  Date, the Investor
shall have received the certificate executed by an officer of the Company in the
form of Exhibit A attached hereto.

                                  ARTICLE VIII.
         Due Diligence Review; Non-Disclosure of Non-Public Information

         Section  8.1.  Due  Diligence  Review.  Prior  to  the  filing  of  the
Registration  Statement the Company  shall make  available  for  inspection  and
review by the Investor, its advisors and representatives,  any such registration
statement  or  amendment or  supplement  thereto or any blue sky,  NASD or other
filing,  all  financial and other  records,  all SEC Documents and other filings
with the SEC, and all other corporate documents and properties of the Company as
may be  reasonably  necessary  for the  purpose  of such  review,  and cause the
Company's  officers,  directors  and  employees  to supply all such  information
reasonably  requested  by the  Investor or any such  representative,  advisor or
underwriter in connection with such Registration  Statement (including,  without
limitation,  in response to all questions and other inquiries reasonably made or
submitted  by any of them),  prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investor  and  such   representatives,   advisors  and  underwriters  and  their
respective  accountants  and  attorneys  to  conduct  initial  and  ongoing  due
diligence  with  respect to the  Company and the  accuracy  of the  Registration
Statement.

         Section 8.2.      Non-Disclosure of Non-Public Information.

                  (a) The Company shall not disclose  non-public  information to
the Investor,  its advisors, or its representatives,  unless prior to disclosure
of such information the Company  identifies such information as being non-public
information and provides the Investor,  such advisors and  representatives  with
the  opportunity to accept or refuse to accept such  non-public  information for
review. The Company may, as a condition to disclosing any non-public information

                                       19
<PAGE>

hereunder,  require the Investor's  advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Investor.

                  (b)  Nothing  herein  shall  require  the  Company to disclose
non-public  information to the Investor or its advisors or representatives,  and
the Company  represents that it does not disseminate  non-public  information to
any investors who purchase stock in the Company in a public  offering,  to money
managers or to securities  analysts,  provided,  however,  that  notwithstanding
anything  herein to the contrary,  the Company will,  as  hereinabove  provided,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters,  of any event or the  existence of any  circumstance  (without any
obligation to disclose the specific event or  circumstance)  of which it becomes
aware,  constituting  non-public  information  (whether or not  requested of the
Company  specifically  or generally  during the course of due  diligence by such
persons or entities),  which, if not disclosed in the prospectus included in the
Registration  Statement  would  cause  such  prospectus  to  include a  material
misstatement  or to omit a material fact required to be stated  therein in order
to make the statements,  therein,  in light of the  circumstances  in which they
were made,  not  misleading.  Nothing  contained  in this  Section  8.2 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain  non-public  information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from  notifying the Company of their opinion that based
on such due  diligence  by such  persons  or  entities,  that  the  Registration
Statement contains an untrue statement of material fact or omits a material fact
required to be stated in the  Registration  Statement  or  necessary to make the
statements  contained therein,  in light of the circumstances in which they were
made, not misleading.

                                   ARTICLE IX.
                           Choice of Law/Jurisdiction

         Section 9.1.  Governing  Law. This  Agreement  shall be governed by and
interpreted  in  accordance  with the laws of the  State of New  Jersey  without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in Hudson County,  New Jersey,  and expressly
consent  to the  jurisdiction  and venue of the  Superior  Court of New  Jersey,
sitting in Hudson County, New Jersey and the United States District Court of New
Jersey,  sitting in Newark, New Jersey, for the adjudication of any civil action
asserted pursuant to this paragraph.

                                   ARTICLE X.
                             Assignment; Termination

         Section 10.1. Assignment.  Neither this Agreement nor any rights of the
Company hereunder may be assigned to any other Person.

         Section  10.2.  Termination.  The  obligations  of the Investor to make
Advances under Article II hereof shall terminate  twenty-four  (24) months after
the Effective  Date.  The Company may terminate  this Agreement upon three days'
prior written notice,  provided that there is no outstanding balance owed to the
Investor by the Company  under the  Securities  Purchase  Agreement of even date

                                       20
<PAGE>

herewith and there are no pending  Advance  notices  submitted by the Company to
the Investor.  Any earlier  termination of this Agreement  shall have no effect,
and shall not terminate, the Company's obligations under the Registration Rights
Agreement of even date herewith to register the Investor's Stock issued pursuant
to Section 12.4 hereof.

                                   ARTICLE XI.
                                     Notices

         Section  11.1.  Notices.  Any  notices,  consents,  waivers,  or  other
communications  required  or  permitted  to be  given  under  the  terms of this
Agreement  must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered  personally;  (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S.  certified  mail,  return  receipt  requested;
(iii) three (3) days after being sent by U.S.  certified  mail,  return  receipt
requested,  or (iv)  one (1) day  after  deposit  with a  nationally  recognized
overnight  delivery  service,  in each case  properly  addressed to the party to
receive the same.  The addresses and facsimile  numbers for such  communications
shall be:

If to the Company, to:         Power Technology, Inc.
                               109 North Post Oak Lane, Suite 422
                               Houston, Texas 77024
                               Attention:        Bernard J. Walter
                               Telephone:        (713) 621-4310
                               Facsimile:        (713) 688-0622

With a copy to:                Stephen A. Zrenda, Jr., P.C.
                               100 N. Broadway, Suite 2440
                               Oklahoma City, OK 73102
                               Attention:         Stephen A. Zrenda, Jr.
                               Telephone:        (405) 235-2111
                               Facsimile:        (405) 235-2157

If to the Investor(s):         Cornell Capital Partners, LP
                               101 Hudson Street -Suite 3700
                               Jersey City, NJ 07302
                               Attention:        Mark Angelo
                                                 Portfolio Manager
                               Telephone:        (201) 985-8300
                               Facsimile:        (201) 985-8266

With a Copy to:                Cornell Capital Partners, LP
                               101 Hudson Street -Suite 3700
                               Jersey City, NJ 07302
                               Attention:        Troy J. Rillo
                                                 Senior Vice President
                               Telephone:        (201) 985-8300
                               Facsimile:        (201) 985-8266

                                       21
<PAGE>

Each party shall provide five (5) days' prior written  notice to the other party
of any change in address or facsimile number.

                                  ARTICLE XII.
                                  Miscellaneous

         Section 12.1.  Counterparts.  This  Agreement may be executed in two or
more identical  counterparts,  all of which shall be considered one and the same
agreement and shall become effective when  counterparts have been signed by each
party and  delivered  to the other  party.  In the event any  signature  page is
delivered  by  facsimile  transmission,  the party  using such means of delivery
shall  cause  four  (4)  additional  original  executed  signature  pages  to be
physically  delivered to the other party  within five (5) days of the  execution
and delivery hereof,  though failure to deliver such copies shall not affect the
validity of this Agreement.

         Section 12.2. Entire Agreement;  Amendments.  This Agreement supersedes
all other prior oral or written  agreements  between the Investor,  the Company,
their  affiliates and persons acting on their behalf with respect to the matters
discussed  herein,  and this  Agreement and the  instruments  referenced  herein
contain  the entire  understanding  of the parties  with  respect to the matters
covered  herein and therein  and,  except as  specifically  set forth  herein or
therein,  neither  the  Company  nor  the  Investor  makes  any  representation,
warranty,  covenant or undertaking with respect to such matters. No provision of
this  Agreement  may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.

         Section  12.3.  Reporting  Entity for the Common  Stock.  The reporting
entity relied upon for the  determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this  Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the  Investor  and the Company  shall be required to employ any other  reporting
entity.

         Section 12.4.  Fees and Expenses.  The Company hereby agrees to pay the
following fees:

                  (a)  Structuring  Fee.  Each of the parties  shall pay its own
fees and expenses (including the fees of any attorneys, accountants,  appraisers
or others  engaged by such  party) in  connection  with this  Agreement  and the
transactions contemplated hereby, except that the Company has previously paid to
Yorkville  Advisors  Management,  LLC,  the  Investor's  investment  manager,  a
structuring fee of Fifteen  Thousand  Dollars  ($15,000).  In addition,  on each
advance  date,  the Company  shall pay David  Gonzalez,  Esq.,  the escrow agent
hereunder, the sum of $500 for legal, administrative and escrow fees.

                  (b)      Commitment Fees.

                           (i) On each Advance Date the Company shall pay to the
Investor,  directly from the gross  proceeds held in escrow,  an amount equal to
five percent (5%) of the amount of each Advance.  The Company hereby agrees that
if such  payment,  as is  described  above,  is not made by the  Company  on the
Advance  Date,  such  payment  will be made at the  direction of the Investor as
outlined and mandated by Section 2.3 of this Agreement.

                                       22
<PAGE>

                           (ii)  The  Company  has  previously   issued  to  the
Investor  8,849,558  shares  of the  Company's  Common  Stock  (the  "Investor's
Shares").

                           (iii) Fully Earned.  The  Investor's  Shares shall be
deemed fully earned as of their date of issuance.

                           (iv) Registration  Rights. The Investor's Shares will
have "piggy-back" registration rights and registration rights under the terms of
the Registration Rights Agreement.

         Section 12.5. Brokerage.  Each of the parties hereto represents that it
has had no  dealings  in  connection  with this  transaction  with any finder or
broker who will demand  payment of any fee or  commission  from the other party.
The  Company on the one hand,  and the  Investor,  on the other  hand,  agree to
indemnify  the  other  against  and hold  the  other  harmless  from any and all
liabilities  to any person  claiming  brokerage  commissions or finder's fees on
account  of  services   purported  to  have  been  rendered  on  behalf  of  the
indemnifying  party  in  connection  with  this  Agreement  or the  transactions
contemplated hereby.

         Section  12.6.  Confidentiality.  If for any  reason  the  transactions
contemplated by this Agreement are not  consummated,  each of the parties hereto
shall keep  confidential  any information  obtained from any other party (except
information  publicly  available  or in such  party's  domain  prior to the date
hereof,  and except as required by court order) and shall promptly return to the
other  parties  all  schedules,  documents,  instruments,  work  papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       23
<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have caused this Standby Equity
Distribution  Agreement  to be  executed  by  the  undersigned,  thereunto  duly
authorized, as of the date first set forth above.

                                                 COMPANY:
                                                 POWER TECHNOLOGY, INC.

                                                 By:
                                                     ---------------------------
                                                 Name:   Bernard J. Walter
                                                 Title:  President

                                                 INVESTOR:
                                                 CORNELL CAPITAL PARTNERS, LP

                                                 By:     Yorkville Advisors, LLC
                                                 Its:    General Partner

                                                 By:
                                                     ---------------------------
                                                 Name:   Mark Angelo
                                                 Title:  Portfolio Manager

                                       24
<PAGE>

                                    EXHIBIT A

                      ADVANCE NOTICE/COMPLIANCE CERTIFICATE

                             POWER TECHNOLOGY, INC.

         The undersigned, _______________________ hereby certifies, with respect
to the  sale  of  shares  of  Common  Stock  of  Power  Technology,  Inc.,  (the
"Company"),  issuable in  connection  with this  Advance  Notice and  Compliance
Certificate dated ___________________ (the "Notice"),  delivered pursuant to the
Standby Equity Distribution Agreement (the "Agreement"), as follows:

         1. The undersigned is the duly elected President of the Company.

         2. There are no fundamental changes to the information set forth in the
Registration  Statement which would require the Company to file a post effective
amendment to the Registration Statement.

         3. The Company has performed in all material respects all covenants and
agreements  to be  performed  by the  Company  on or prior to the  Advance  Date
related  to the  Notice  and has  complied  in all  material  respects  with all
obligations and conditions contained in the Agreement.

         4. The undersigned  hereby  represents,  warrants and covenants that it
has made all  filings  ("SEC  Filings")  required  to be made by it  pursuant to
applicable securities laws (including,  without limitation, all filings required
under the Securities  Exchange Act of 1934, which include Forms 10-QSB,  10-KSB,
8-K,  etc.  All SEC Filings and other  public  disclosures  made by the Company,
including,  without limitation, all press releases, analysts meetings and calls,
etc. (collectively,  the "Public Disclosures"),  have been reviewed and approved
for release by the Company's attorneys and, if containing financial information,
the Company's  independent  certified public accountants.  None of the Company's
Public  Disclosures  contain any untrue  statement of a material fact or omit to
state any material fact  required to be stated  therein or necessary to make the
statements  therein,  in the light of the  circumstances  under  which they were
made, not misleading.

         5. The Advance requested is _____________________.

         The undersigned has executed this Certificate this ____ day of _______.

                                                   POWER TECHNOLOGY, INC.

                                                   By:
                                                      -------------------------
                                                   Name:   Bernard J. Walter
                                                   Title:  President

                                       25
<PAGE>

                                  SCHEDULE 2.6

                             POWER TECHNOLOGY, INC.

         The undersigned  hereby agrees that for a period commencing on May ___,
2005 and  expiring on the later of (a) the date that all amounts owed to Cornell
Capital Partners, LP (the "Investor"),  or any successors or assigns,  under the
Convertible  Debenture issued to the Investor on May ___, 2005 have been paid or
(b) the  termination of the Standby Equity  Distribution  Agreement dated May 6,
2005 between the Company and the Investor (the "Lock-up Period"),  he, she or it
will not,  directly  or  indirectly,  without the prior  written  consent of the
Investor,  issue,  offer,  agree or offer to sell, sell, grant an option for the
purchase  or sale of,  transfer,  pledge,  assign,  hypothecate,  distribute  or
otherwise  encumber  or dispose of except  pursuant  to Rule 144 of the  General
Rules  and  Regulations  under  the  Securities  Act of 1933,  as  amended,  any
securities of the Company,  including common stock or options,  rights, warrants
or other securities  underlying,  convertible into,  exchangeable or exercisable
for or  evidencing  any right to  purchase  or  subscribe  for any common  stock
(whether  or not  beneficially  owned  by the  undersigned),  or any  beneficial
interest therein (collectively, the "Securities").

         In  order  to  enable  the  aforesaid  covenants  to be  enforced,  the
undersigned  hereby  consents  to the  placing of legends  and/or  stop-transfer
orders with the transfer agent of the Company's  securities  with respect to any
of the  Securities  registered in the name of the  undersigned  or  beneficially
owned by the undersigned,  and the undersigned hereby confirms the undersigned's
investment in the Company.

Dated: _______________, 2005

                                              Signature

                                              Name:
                                                    ----------------------------
                                              Address:
                                                      --------------------------
                                              City, State, Zip Code:
                                                                    ------------

                                              ----------------------------------
                                              Print Social Security Number
                                              or Taxpayer I.D. Number

                                       26

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00084-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00084-of-00352.parquet"}]]