SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                   FORM 10-QSB


                X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15d
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2004

                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15d
                     OF THE SECURITIES EXCHANGE ACT OF 1934

          For the transition period from: ____________ to ____________

                             Commission file number:
                                   33-55254-26

                                 POWERLINX, INC.
             (exact name of registrant as specified in its charter)

                NEVADA                                        50-0006815
   (State or other jurisdiction of                           (IRS Employer
    incorporation or organization)                         Identification No.)

                                 POWERLINX, INC.
                              200 MADONNA BOULEVARD
                             ST.PETERSBURG, FL 33701

                                 (727) 866-7440
              (Registrant's telephone number, including area code)


              (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15d of the Securities and Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes   [ ] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practical date.

Total number of shares of Common Stock, as of August 13, 2004: 149,829,575

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one): Yes [  ]  No [X]


                                       1

<PAGE>
                                 POWERLINX, INC.


                                      INDEX



Part I.  FINANCIAL INFORMATION                                          Page No.


         Item 1. Financial Statements

                        Powerlinx, Inc. Condensed
                        Balance Sheets.......................................F-1

                        Powerlinx, Inc. Condensed
                        Statements of Operations (Unaudited).................F-2

                        Powerlinx, Inc.
                        Statement of Stockholders'
                        Equity (Deficit).....................................F-3

                        Powerlinx, Inc. Condensed
                        Statements of Cash Flows (Unaudited).................F-5

                        Powerlinx, Inc. Notes to
                        Condensed Financial Statements June 30,
                        2004 and 2003 (Unaudited)............................F-6

         Item 2. Management's Discussion and Analysis or Plan
                 of Operations.................................................3

         Item 3. Controls and Procedures......................................19

Part II. OTHER INFORMATION

         Item 1. Legal Proceedings............................................20

         Item 2. Changes in Securities and use of Proceeds....................21

         Item 3. Defaults Upon Senior Securities..............................22

         Item 4. Submission of Matters to a Vote of Security Holders..........22

         Item 5. Other Information............................................22

         Item 6. Exhibits and Reports on Form 8-K.............................22

Signatures....................................................................23




                                       2

<PAGE>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements



                                 POWERLINX, INC.
                            CONDENSED BALANCE SHEETS
                    AS OF JUNE 30, 2004 AND DECEMBER 31, 2003
<TABLE>
<CAPTION>


                                     ASSETS
                                                                                     June 30,
                                                                                      2004          December 31,
                                                                                   (Unaudited)         2003
                                                                                   ------------    ------------
Current assets:
<S>                                                                                <C>             <C>
   Cash and cash equivalents ...................................................   $     91,858    $    160,157
   Accounts receivable, net of allowance for doubtful accounts
     of $39,510 in 2004 and $29,510 in 2003 ....................................        411,772         201,853
   Due from related parties ....................................................         97,534          20,000
   Inventories .................................................................        488,687         557,947
   Prepaid expenses and other current assets ...................................        288,697          19,079
                                                                                   ------------    ------------

     Total current assets ......................................................      1,378,548         959,036

Intangible assets, net .........................................................      1,118,711       1,213,430
Property and equipment, net ....................................................        298,633         325,160
                                                                                   ------------    ------------
     Total assets ..............................................................   $  2,795,892    $  2,497,626
                                                                                   ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable ............................................................   $    488,538    $    557,524
   Accrued liabilities .........................................................        250,788         447,381
   Notes payable, related parties ..............................................        150,000            --

   Deferred revenue ............................................................         19,092          86,600
   Litigation settlement .......................................................        300,000         300,000
                                                                                   ------------    ------------
     Total current liabilities .................................................      1,208,418       1,391,505
                                                                                   ------------    ------------

Stockholders' equity:
    Series A convertible preferred stock, $1.00 par value; authorized 10,000,000
     shares; 1,825,520 shares issued
     and outstanding ...........................................................      1,609,740
   Common stock, $.001 par value, 250,000,000 shares authorized;
     issued(139,557,075 - 2004; 137,837,887 - 2003)
     outstanding ( 139,083,500 - 2004; 135,364,312 -2003) ......................        139,557         135,837
   Additional paid-in capital ..................................................     18,068,872      15,834,345
   Treasury stock, at cost, 473,575 shares .....................................       (287,757)       (287,757)
   Unearned restricted stock compensation ......................................           --           (29,422)
   Stock subscription receivable ...............................................     (1,275,000)         (3,250)
   Equity units subscribed .....................................................           --           250,000
   Accumulated deficit .........................................................    (16,667,938)    (14,793,632)
                                                                                   ------------    ------------
   Total stockholders' equity ..................................................      1,587,474       1,106,121
                                                                                   ------------    ------------
     Total liabilities and stockholders' equity ................................   $  2,795,892    $  2,497,626
                                                                                   ============    ============

</TABLE>
   The accompanying notes are an integral part of these financial statements.


                                      F-1
<PAGE>
                                 POWERLINX, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

<TABLE>
<CAPTION>

                                                        Three Months Ended                       Six Months Ended
                                                            June 30,                                June 30,
                                               -------------------------------------  -----------------------------------
                                                      2004                2003               2004              2003
                                               -----------------  ------------------  ---------------   -----------------
<S>                                             <C>                <C>                 <C>               <C>
Net revenue                                     $        559,713   $         275,364   $      910,913    $        620,965
Cost of goods sold                                       344,165             206,139          558,531             468,972
                                               -----------------  ------------------  ---------------   -----------------

           Gross profit                                  215,548              69,225          352,382             151,993
                                               -----------------  ------------------  ---------------   -----------------

Operating expenses:
   Salaries and wages                                    319,550             220,038          578,286             440,863
   Professional and consulting fees                      220,899             139,715          465,391             279,968
   Depreciation and amortization                         150,580             129,254          298,512             259,572
   Research and development                              158,557              22,275          177,230              56,141
   Advertising and promotions                             27,633              35,537           52,522              65,741
   Rent and utilities                                     42,647              22,454           65,702              48,367
   Provision for doubtful accounts                        10,000                   -           10,000                   -
   Postage and delivery                                   31,045              22,616           52,027              77,145
   Royalty expense                                        75,000              50,000          150,000              70,000
   Financing fees                                         55,356                   -          124,106                   -
   Litigation settlement                                      -              (16,250)               -             (16,250)
   Other expenses                                        107,156              56,580          223,725             146,349
                                               -----------------  ------------------  ---------------   -----------------

       Total operating expenses                        1,198,423             682,219        2,197,501           1,427,896
                                               -----------------  ------------------  ---------------   -----------------

Loss from operations                                    (982,875)           (612,994)      (1,845,119)         (1,275,903)

Other income (expense):
   Interest expense                                      (29,318)            (314,363)        (29,187)           (611,379)
   Other                                                       -              (26,276)              -             (43,838)

Loss before taxes                                     (1,012,193)           (953,633)      (1,874,306)         (1,931,120)

Income tax expense                                             -                   -                -                   -
                                               -----------------  ------------------  ---------------   -----------------

Net loss                                        $     (1,012,193)  $        (953,633)  $   (1,874,306)   $     (1,931,120)
                                               =================  ==================  ===============   =================

Basic and diluted net loss per
   common share                                             (.01)               (.02)            (.01)               (.04)

Basic and diluted weighted
   average shares outstanding                        138,460,754          59,218,892      137,343,268          49,750,394

</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>

                                 POWERLINX, INC
                   STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                                          Unearned
                                                    Common    Additional                 Restricted
                                       Common       Stock      Paid-In      Treasury       Stock
                                       Stock     ($.001 par)   Capital       Stock      Compensation
                                   -------------- ---------- ------------- ----------- --------------
<S>                                    <C>          <C>        <C>           <C>              <C>
Balances, January  1, 2004           135,837,887  $ 135,837  $ 15,834,345  $ (287,757) $      (29,422)

Net loss                                       -          -             -           -               -

Stock subscriptions receivable                                  1,275,000

Issuance of stock for patents            441,176        441       149,559           -               -

Issuance of warrants for trademarks                                 9,925

Issuance of stock to consultant        1,182,000      1,182       223,398

Issuance of stock to directors         1,025,000      1,025       203,975           -               -

Issuance of stock for royalties          223,897        224        74,776           -               -

Issuance of stock for liabilities        158,235        158        29,057

Issuance of stock and warrants
  under Equity Unit offering             456,380        456       269,071           -               -

Sales of common stock                    232,500        232          (232)          -               -

Adjustment                                     -          2            (2)          -               -

Amortization of unearned
  restricted stock compensation                -          -             -           -          29,422
                                   -------------- ---------- ------------- ----------- ---------------

Balances, June 30, 2004              139,557,075  $ 139,557  $ 18,068,872  $ (287,757) $            -
                                   ============== ========== ============= =========== ===============

</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F-3
<PAGE>
                                 POWERLINX, INC
             STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) continued;

<TABLE>
<CAPTION>

                                                                              Series A
                                      Stock        Equity                   Convertible
                                   Subscription     Units     Accumulated    Preferred
                                    Receivable   Subscribed     Deficit        Stock          Total
                                  -------------- ------------ ------------- ------------- --------------
<S>                                <C>            <C>         <C>           <C>            <C>
Balances, January  1, 2004         $     (3,250)  $  250,000  $(14,793,632) $          -   $   1,106,121

Net loss                                      -            -    (1,874,306)                   (1,874,306)

Stock subscriptions receivable       (1,275,000)                                                       -

Issuance of stock for patents                 -            -             -                       150,000

Issuance of warrants for trademarks                                                                9,925

Issuance of stock to consultant                                                                  224,580

Issuance of stock to directors                -            -             -                       205,000

Issuance of stock for royalties               -            -             -                        75,000

Issuance of stock for liabilities                                                                 29,215

Issuance of stock and warrants
  under Equity Unit offering                  -     (250,000)            -     1,609,740       1,629,267

Sales of common stock                     3,250            -             -                         3,250

Adjustment                                    -            -             -                             -

Amortization of unearned
  restricted stock compensation               -            -             -             -          29,422
                                   ------------- ------------ ------------- ------------- ---------------

Balances, June 30, 2004            $ (1,275,000)  $        -  $(16,667,938) $  1,609,740   $   1,587,474
                                   ============= ============ ============= ============= ===============
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                             Six Months Ended
                                                                  June 30,
                                                            2004            2003
                                                         -----------    -----------
<S>                                                      <C>            <C>
Cash flows from operating activities:
   Net loss ..........................................   $(1,874,306)   $(1,931,120)
   Adjustments to reconcile net loss to net cash flows
     from operating activities:
       Depreciation ..................................        43,868         31,178
       Amortization ..................................       254,644        281,959
       Accretion of debt discount ....................          --
                                                                            462,928
       Stock-based compensation expenses .............       587,749        170,997
       Changes in operating assets and liabilities:
         Accounts receivable trade ...................      (209,919)      (101,363)
         Due from related parties ....................       (77,534)          --
         Inventories .................................        69,260         59,838
         Prepaid expenses and other current assets ...      (269,618)         3,105
         Accounts payable ............................       (18,771)       129,105
         Accrued liabilities .........................        42,927        256,267
         Deferred revenue ............................       (67,508)       110,500
                                                         -----------    -----------

Net cash flows from operating activities .............    (1,519,208)      (526,606)
                                                         -----------    -----------

Cash flows from investing activities:
   Purchases of property and equipment ...............       (17,341)        (9,137)
                                                         -----------    -----------

Net cash flows from investing activities .............       (17,341)        (9,137)
                                                         -----------    -----------

Cash flows from financing activities:
   Proceeds from sale of equity units ................     1,315,000           --
   Proceeds from stock subscription receivable .......         3,250           --
   Proceeds from sales of common stock & warrants ....                       91,500
   Proceeds from convertible debentures ..............                      471,824
   Repayments of related debt ........................                      (98,655)
   Proceeds from factoring receivables ...............                       75,000
   Purchase of treasury stock ........................                      (10,000)
   Proceeds from notes payable- related parties ......       150,000
   Proceeds of notes payable .........................                       37,000
   Repayments of notes Payable .......................                      (30,000)
                                                         -----------    -----------

Net cash flows from financing activities .............     1,468,250        536,669
                                                         -----------    -----------

Net change in cash and cash equivalents ..............       (68,299)           926
Cash and cash equivalents at beginning of year .......       160,157          5,364
                                                         -----------    -----------

Cash and cash equivalents at end of period ...........   $    91,858    $     6,290
                                                         ===========    ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
                                   (Unaudited)
                   NONCASH INVESTING AND FINANCING ACTIVITIES
<TABLE>
<CAPTION>



                                                                                        Six Months Ended
                                                                                             June 30,
                                                                                    2004                2003
                                                                             ------------------  ------------------
<S>                                                                          <C>                 <C>
Conversion of vendor debt to equity units                                    $          50,215   $               -
                                                                             ==================  ==================

Conversion of accrued payroll to equity units                                $         239,520   $               -
                                                                             ==================  ==================

Conversion of equity units subscribed to equity
   units issued                                                              $         250,000   $               -
                                                                             ==================  ==================

Issuance of common stock for patents                                         $         150,000   $               -
                                                                             ==================  ==================

Issuance of warrants for trademark                                           $           9,925   $               -
                                                                             ==================  ==================

Conversion of convertible debentures to common stock                         $               -   $         134,000
                                                                             ==================  ==================

Issuance of common stock for licensing rights                                $               -   $          37,500
                                                                             ==================  ==================

Issuance of common stock in connection
  with distributorship agreement                                             $               -   $          25,000
                                                                             ==================  ==================

Issuance of common stock for financing fees                                  $               -   $          28,000
                                                                             ==================  ==================

Deferred finance costs funded through proceeds from
   convertible debentures                                                    $               -   $          47,500
                                                                             ==================  ==================

Conversion of accounts payable into common shares                            $               -   $             600
                                                                             ==================  ==================

</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F-6

<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003



1.   Basis of presentation and significant accounting policies:

     The  accompanying   unaudited  condensed  financial  statements  have  been
     prepared in accordance with generally  accepted  accounting  principles for
     interim  financial  information and with the  instructions to Form 10-Q and
     Rule 10-01 of Regulation S-X.  Accordingly,  they do not contain all of the
     information  and  footnotes  required  by  generally  accepted   accounting
     principles for complete financial statements

     In  the  opinion  of  management,   the  accompanying  unaudited  condensed
     financial  statements  reflect all adjustments  (consisting  only of normal
     recurring  adjustments)  considered  necessary for a fair  presentation  of
     Powerlinx, Inc.'s (the "Company") financial position and the results of its
     operations  and its cash flows for the six months  ended June 30,  2004 and
     2003.  These unaudited  condensed  financial  statements  should be read in
     conjunction with the Company's audited 2003 financial statements, including
     the notes  thereto,  and the other  information  set forth  therein  in the
     Company's  Annual  Report on Form  10-KSB for the year ended  December  31,
     2003.  Operating  results for the six month period ended June 30, 2004, are
     not  necessarily  indicative of the results that can be expected for a full
     fiscal year.

     Revenue recognition:

     Sales revenue is recognized  when the earnings  process is complete and the
     risks and rewards of ownership of the product,  including title,  have been
     transferred to the customer, which is generally considered to have occurred
     upon delivery of the product to the customer's  premises.  Shipping  costs,
     which have been  nominal,  are billed to the customer and are included as a
     component of cost of goods sold.  Returns are provided for as reductions of
     revenue recorded based upon the Company's historical return experience. Any
     related deferred revenue  represents  sales  transactions  where all of the
     conditions necessary for revenue recognition have not been met.

     Fee revenue is recognized over the life of the respective  agreements.  The
     related deferred revenue represents fees received for which the revenue has
     not been earned.

     Stock based compensation:

     Compensation  expense  related  to the  grant  of  equity  instruments  and
     stock-based  awards to  employees  are  accounted  for using the  intrinsic
     method in  accordance  with  Accounting  Principles  Board  Opinion No. 25,
     Accounting for Stock Issued to


                                      F-7
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003



1.   Basis of presentation and significant accounting policies (continued):

     Stock based compensation (continued):

     Employees   and   related   interpretations.   Stock   based   compensation
     arrangements involving non-employees are accounted for using the fair value
     methodology under Financial  Accounting  Standards No. 123,  Accounting for
     Stock-Based Compensation.

     The Black-Scholes  option pricing model was developed for use in estimating
     the fair value of traded options that have no vesting  restrictions and are
     fully transferable.  In addition, option valuation models require the input
     of  highly  subjective  assumptions  including  the  expected  stock  price
     volatility.   Because   the   Company's   employee   stock   options   have
     characteristics  significantly  different from those of traded options, and
     because changes in the subjective input  assumptions can materially  affect
     the fair value estimate,  in management's  opinion,  the existing models do
     not necessarily  provide a reliable single measure of the fair value of its
     employee stock options.  The Company accounts for unregistered common stock
     issued for services or asset  acquisitions  at the estimated  fair value of
     the stock  issued.  Fair value is  determined  based  substantially  on the
     average cash price of recent  sales of the  Company's  unregistered  common
     stock.

     The following table reflects supplemental  financial information related to
     stock-based  employee  compensation,  as required by Statement of Financial
     Accounting  Standards No. 148,  Accounting for  Stock-Based  Compensation -
     Transition and Disclosure:
<TABLE>
<CAPTION>
                                                                                    June 30,            June 30,
                                                                                     2004                2003
                                                                                -----------------  ------------------
<S>                                                                             <C>                <C>
       Net loss, as reported                                                    $     (1,874,306)  $      (1,931,120)
                                                                                =================  ==================
       Stock-based compensation, as reported                                    $              -   $               -
                                                                                =================  ==================
       Stock-based compensation under fair value method                         $              -   $               -
                                                                                =================  ==================
       Pro-forma net loss under fair value method                               $     (1,874,306)  $      (1,931,120)
                                                                                =================  ==================

       Net loss per share, as reported                                          $           (.01)  $            (.04)
                                                                                =================  ==================
       Pro-forma net loss per share under fair value method                     $           (.01)  $            (.04)
                                                                                =================  ==================
</TABLE>
     Concentrations:

     Accounts  receivable are concentrated in the security products industry and
     credit  losses have been within  management's  expectations.  Although  the
     Company  serves a large and  varied  group of  customers,  three  customers
     accounted  for 44% of total revenue for the six months ended June 30, 2004,
     while two  customers  accounted for 32% of total revenue for the six months
     ended June 30, 2003.

     The  Company's  product  assembly is dependent  upon the  operations of two
     primary labor suppliers, one of which is outside the United States. At June
     30, 2004 and


                                      F-8
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003




1.   Basis of presentation and significant accounting policies (continued):

     Concentrations (continued):

     December 31, 2003  approximately  $69,000 and $81,000,  respectively of the
     Company's  inventory was held off-site at these  locations.  If the Company
     should  lose  these  suppliers  of  assembly  servicing  there  could  be a
     disruption in the operations of the Company.  The Company is in the process
     of securing alternative sources of these services.

     Reclassifications

     Certain  reclassifications have been made to prior year balances to conform
     to the current year presentation.

2. Liquidity and management's plans:

     The accompanying condensed financial statements have been prepared assuming
     that the Company will continue as a going concern. However, the Company has
     incurred  operating  losses of  $1,874,306  and  $1,931,120  during the six
     months  ended June 30, 2004 and 2003,  respectively.  In  addition,  during
     those quarters, the Company has used cash of $1,519,208 and $526,606 in its
     operating  activities.  These conditions raise  substantial doubt about the
     Company's ability to continue as a going concern.

     The Company has devoted  significant efforts in the further development and
     marketing  of  products  in its  Security  and DC  Transportation  Products
     Segments,  which,  while  now  showing  improved  revenues  cannot  yet  be
     considered  as sufficient to fund  operations  for any sustained  period of
     time.

     The Company's  ability to continue as a going concern is dependent upon (i)
     raising additional capital to fund operations (ii) the further  development
     of products in the Security  and DC  Transportation  Products  Segments and
     (iii) ultimately the achievement of profitable operations.  During the year
     ended December 31, 2003, the Company generated net cash flows of $3,238,832
     from financing  activities,  consisting mainly of sales of common stock and
     the issuance of convertible debt securities.

     Additionally,  during  the six  months  ended June 30,  2004,  the  Company
     generated net cash flows of 1,468,250 from financing  activities  primarily
     through  sales of  equity  units  (see  Note 9).  Management  is  currently
     addressing  several  additional  financing sources to fund operations until
     profitability  can be achieved.  However,  there can be no  assurance  that
     additional financing can be obtained on conditions considered by management
     to be reasonable and  appropriate,  if at all. The financial  statements do
     not  include  any  adjustments  that  might  arise  as  a  result  of  this
     uncertainty.


                                      F-9
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003


3.   Segment information:

     Since  June 30,  2003,  the  Company  has  operated  in three  identifiable
     industry  segments.  The  Company  introduced  the  Hotel/MDU  Connectivity
     Products  Segment  in the  second  quarter of 2004.  The  Company's  Marine
     Products Segment is engaged in the sale of underwater video cameras, lights
     and accessories, principally to retail sporting goods businesses throughout
     the United States.  The Company's  Security  Products Segment is engaged in
     the  development and sale of video security  systems to retail,  commercial
     and governmental  entities  throughout the United States.  The Company's DC
     Transportation  Products  Segment is engaged in the development and sale of
     powerline  rear and side vision  systems for all classes of vehicles in the
     transportation    industry   to   distributors   and   original   equipment
     manufacturers   throughout  the  United  States.  The  Company's  Hotel/MDU
     Connectivity  Products Segment is engaged in the marketing and installation
     of broadband Internet connectivity  equipment in hotels,  business campuses
     and other business infrastructure.  There are no significant concentrations
     of revenue with any one customer. The Company's facilities and other assets
     are, generally,  not distinguished among the identifiable  segments.  Other
     financial information about the Company's segments for the six months ended
     June 30, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                                 2004
                                                                              Hotel/MDU
                                   Security          Marine     DC Trans    Connectivity
                                   Products         Products    Products      Products       Total
<S>                                <C>             <C>          <C>           <C>          <C>
Net revenue                        $ 408,545       $ 139,703    $ 237,293     $ 125,371    $ 910,913
Cost of sales                      $ 299,179       $  70,074    $ 106,946     $  82,332    $ 558,531
Gross profit                       $ 109,366       $  69,629    $ 130,347     $  43,039    $ 352,382
Research and development:
         Stock based               $  49,084       $       -    $       -     $  24,985    $  74,069


         Other                     $  95,661       $       -    $   7,500     $       -    $ 103,161

</TABLE>

                                      F-10
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003




3.   Segment information (continued):


<TABLE>
<CAPTION>
                                                                 2003
                                                                              Hotel/MDU
                                   Security          Marine     DC Trans    Connectivity
                                   Products         Products    Products      Products       Total
<S>                                <C>             <C>          <C>           <C>          <C>
Net revenue                        $ 262,439       $ 208,062    $ 150,464     $       -    $ 620,965
Cost of sales                      $ 310,808       $  97,785    $  60,379     $       -    $ 468,972
Gross profit                       $ (48,369)      $ 110,277    $  90,085     $       -    $ 151,993
Research and development:
         Stock based               $  20,000       $       -    $   5,520     $       -    $  25,520
         Other                     $  14,220       $       -    $  16,401     $       -    $  56,141
</TABLE>
4.   Factored accounts receivable:

     During the third  quarter of 2002,  the  Company  entered  into an accounts
     receivable  financing  facility  under  which cash  collections  on certain
     eligible accounts receivable are assigned to a financial institution. Under
     this  arrangement,  eligible  customers make their payments directly to the
     financial  institution.  Upon receipt of payment, the financial institution
     remits the balance of the factored account,  less its fees, to the Company.
     During the six months ended June 30, 2003, the Company  received  aggregate
     proceeds  of  $45,000  under the  factoring  arrangement,  related to gross
     factored accounts receivable of $56,000. The Company is accounting for this
     accounts receivable  factoring  arrangement as a secured borrowing pursuant
     to SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets
     and  Extinguishments  of  Liabilities.   The  Company's  assets,  including
     accounts  receivable,  inventory  and  property  and  equipment  secure the
     agreement.  The related service charge is reflected in interest  expense in
     the period that the accounts receivable are transferred.  Factoring fees of
     approximately  $2,000 were  incurred  during the six months  ended June 30,
     2003. There were only nominal factored accounts  receivable  outstanding as
     of June 30, 2003.


                                      F-11
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003


5.   Inventories:
<TABLE>
<CAPTION>
     Inventories consisted of the following:

                                                          June 30,         December 31,
                                                           2004                2003
                                                     -----------------   -----------------
<S>                                                  <C>                 <C>
           Raw materials                             $         114,280   $         323,547
           Finished goods                                      374,407             234,400
                                                     -----------------   -----------------
                                                     $         488,687   $         557,947
                                                     =================   =================
</TABLE>
6.   Intangible assets:

     During the six months  ended June 30,  2004,  the  Company  issued  441,176
     shares of  restricted  common  stock in  conjunction  with the  purchase of
     patents.  The  restricted  common  stock  issued was valued  based upon the
     previous 20 day  average  closing  price prior to the date of the  purchase
     agreement.  The fair value of the patents  was  capitalized  as  intangible
     assets and is being amortized over estimated useful lives of five years.

     During the six months ended June 30, 2003,  the Company  issued 750,000 and
     500,000 shares of restricted  common stock in conjunction  with a licensing
     agreement and a  distributorship  agreement,  respectively.  The restricted
     common stock issued was valued based upon the trading  market prices on the
     dates of issuance, or $37,500 and $25,000,  respectively, in the aggregate.
     The fair value of the licensing  rights and the  distributorship  agreement
     were  capitalized as intangible  assets and are being  amortized over their
     estimated useful lives of five years.

     The  Company  recorded   amortization  expense  of  $235,894  and  $18,750,
     respectively,  in connection with patents and licensing  rights for the six
     months ended June 30, 2004.

     Intangible assets consist of the following at June 30, 2004:
<TABLE>
<CAPTION>
                                                                             DC            Hotel/MDU
                                       Security           Marine       Transportation    Connectivity     Total
<S>                                   <C>                <C>               <C>            <C>         <C>
Patents                               $ 1,577,813        $ 741,148         $       -      $    -      $ 2,318,961
Licensing rights                           37,500                -                 -           -           37,500
Software license agreement                150,000                -                 -           -          150,000
Trademark                                  46,963                -            46,962           -           93,925
Less accumulated
     amortization                        (988,618)        (493,057)                -           -       (1,481,675)
                                        ---------        ---------                                     -----------
                                      $   823,658        $ 248,091         $  46,962      $    -      $ 1,118,711
</TABLE>

                                      F-12
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

6.   Intangible assets (continued):

     Estimated future amortization is as follows:


         Year ending June 30,
                        2005                                 $         514,288
                        2006                                           346,748
                        2007                                            67,500
                        2008                                            63,750
                        2009                                            32,500
                                                             -----------------
                                                             $       1,024,786



7.   Notes Payable, related parties:

     During the six months ended June 30, 2004, the Company borrowed $150,000 in
     the form of three  $50,000  short-term  notes  payable  from members of the
     Company's  Board of Directors and their immediate  families.  The notes are
     due 45 days from the date of issuance and are non-interest  bearing.  As of
     June 30, 2004, the full $150,000 remained outstanding.


8.   Convertible debentures:

     2002 Securities Purchase Agreement:

     On  September  20,  2002  (Commitment  Date),  the Company  entered  into a
     Securities Purchase Agreement that provided for the issuance of convertible
     notes payable up to an aggregate  face value of $1,000,000  and warrants to
     acquire up to an aggregate  3,000,000 shares of the Company's common stock.
     The agreement provided for the funding of the notes in three traunches,  of
     which the first two,  amounting to $350,000  each with  1,050,000  warrants
     each  were  issued  on  September   20,  2002  and   September   30,  2002,
     respectively.  Each  traunch  matures on the one year  anniversary  date of
     issuance,  assuming no conversion or  prepayment.  On February 7, 2003, the
     remaining  traunch  ($300,000 in convertible  notes and warrants to acquire
     900,000 shares of common stock) was funded upon the effective  registration
     of the common  shares  underlying  the debt and warrants.  The  convertible
     notes  bear  interest  at 12% and are  payable in one year from the date of
     issuance; interest is payable quarterly.

     The convertible  notes were  convertible into shares of common stock solely
     at the creditor's option at a conversion rate amounting to the lower of (i)
     $0.075 or (ii) 50% of the  average  of the three  lowest  intraday  trading
     prices for the  Company's  common  stock for the 20 trading days before the
     conversion date. On the Commitment Date, the Company's closing market value
     was $0.13 and the three lowest  intraday  trading prices for the 20 trading
     days before the Commitment Date were all $0.12; thus the conversion rate on
     the Commitment Date amounted to $0.06 per common share. The warrants, which
     have an exercise price of $0.10 and a three-year term, were fully issued on
     the Commitment Date.


     The effective interest rate on the convertible notes payable issued in 2002
     amounted  to 126%,  assuming  that the  notes  are  held to  maturity.  The
     effective  interest rate results from the  amortization of discounts to the
     face value of the  convertible  notes payable,  amortization  of debt issue
     costs  and the  contractual  interest  rate  over the term of the  notes as
     follows:


                                      F-13
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003




<TABLE>
<CAPTION>
8.   Convertible debentures (continued):

     2002 Securities Purchase Agreement (continued):
                                                                                   Amount              Percent
                                                                             ------------------  ------------------
<S>                                                                          <C>                              <C>
         Discounts to face value:
           Beneficial conversion feature                                     $          583,000               83.0%
           Allocation to warrants                                                       117,000               18.0%
                                                                             ------------------  ------------------
                                                                                        700,000              100.1%

         Other interest expense:
           Amortization of debt costs                                                    88,000               13.0%
           Contractual interest rate                                                     84,000               12.0%
                                                                             ------------------  ------------------
                                                                             $          420,600              126.0%
                                                                             ==================  ==================
</TABLE>

     During February 2003, the Company  allocated the proceeds received from the
     third and final  traunch of  convertible  notes and  warrants  between  the
     securities  based  upon  their  relative  fair  values.  Fair value for the
     warrants was determined  using the  Black-Scholes  pricing model;  the face
     value of the notes was  considered by management to equal their  respective
     fair  values.  As a result of this  allocation,  approximately  $9,800  was
     recorded for the warrants as paid in capital in the month of February.  The
     assumptions  used to determine fair value under the  Black-Scholes  pricing
     model included an exercise price of $1.00,  market price of $0.05,  term of
     1,080 days,  volatility  of 50%,  and  interest  rate of 16%.  There was no
     beneficial conversion feature related to the third traunch of financing.

     During the six months  ended June 30,  2003,  $210,000 of the face value of
     these debentures was converted into 11,639,027  shares of common stock at a
     conversion  price of between  $0.015 and  $0.026.  The shares  issued  were
     valued in accordance with the Securities Purchase Agreement dated September
     20, 2002, which approximates a 50% discount to market price.

     2003 Securities Purchase Agreement:

     On May 9, 2003  (Commitment  Date),  the Company  entered into a Securities
     Purchase  Agreement  that  provided for the issuance of  convertible  notes
     payable up to an  aggregate  face value of $440,000 and warrants to acquire
     up to an aggregate  1,320,000  shares of the Company's  common  stock.  The
     agreement provided for the funding of the notes in five traunches, of which
     the first two,  amounting to $260,000 with 520,000  warrants were issued on
     May 9, 2003 and June 3, 2003,  respectively.  Each  traunch  matures on the
     one-year   anniversary   date  of  issuance,   assuming  no  conversion  or
     prepayment. On July 1, 2003, the third traunch of the May 10, 2003


     Securities Purchase Agreement ($60,000 in convertible notes and warrants to
     acquire 180,000 shares of common stock) was funded. Each traunch matures on
     the one year  anniversary  date of  issuance,  The  convertible  notes bear
     interest  at 12% and are  payable  in one year  from the date of  issuance;
     interest is payable quarterly.


                                      F-14
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003


8.   Convertible debentures (continued):

     2003 Securities Purchase Agreement (continued):

     The convertible notes are convertible into shares of common stock solely at
     the  creditor's  option at a conversion  rate amounting to the lower of (i)
     $0.05 or (ii) 50% of the  average  of the  three  lowest  intraday  trading
     prices for the  Company's  common  stock for the 20 trading days before the
     conversion date. On the Commitment Date, the Company's closing market value
     was $0.06 and the three lowest  intraday  trading prices for the 20 trading
     days before the  Commitment  Date  averaged  $0.03 and $0.037 and $0.03 for
     Traunch 1, Traunch 2 and Traunch 3, respectively;  thus the conversion rate
     on the  Commitment  Date amounted to $0.015,  $0.0185 and $0.015 per common
     share, respectively. The warrants, which have an exercise price of $0.5 and
     a three-year  term,  were fully issued upon the funding of each  respective
     traunch.

     During May, June and July 2003, the Company allocated the proceeds received
     from the first three  traunches of convertible  notes and warrants  between
     the securities  based upon their  relative fair values.  Fair value for the
     warrants was determined  using the  Black-Scholes  pricing model;  the face
     value of the notes was  considered by management to equal their  respective
     fair  values.  As a result of this  allocation,  approximately  $22,100 and
     $2,600 was recorded  for the warrants as paid-in  capital in the second and
     third quarters of 2003,  respectively.  The  assumptions  used to determine
     fair value under the Black-Scholes pricing model included an exercise price
     of $0.05,  market  price of $0.06 and  $0.04,  respectively,  term of 1,080
     days, volatility of 50%, and interest rate of 12%. In addition, the Company
     allocated the remaining  proceeds of the convertible  notes to the embedded
     beneficial  conversion  feature  represented  by the excess that the market
     value of the common stock on the  commitment  date exceeded the  conversion
     rate.  The debt has been accreted  towards its face value through  periodic
     charges to interest  expense over the  outstanding  term of the  underlying
     notes.

     The  effective  interest rate on the first three  traunches of  convertible
     notes payable from the May 9, 2003 Securities Purchase Agreement amounts to
     131.4%,  assuming  that the  notes  are  held to  maturity.  The  effective
     interest rate results from the  amortization of discounts to the face value
     of the convertible notes payable,  amortization of debt issue costs and the
     contractual interest rate over the term of the notes as follows:


                                      F-15
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

8.   Convertible debentures (continued):

     2003 Securities Purchase Agreement (continued):
<TABLE>
<CAPTION>

                                                                                   Amount              Percent
                                                                             ------------------  ------------------
<S>                                                                          <C>                              <C>
         Discounts to face value:
           Beneficial conversion feature                                     $          295,300               92.3%
           Allocation to warrants                                                        24,700                7.7%
                                                                             ------------------  ------------------
                                                                                        320,000              100.0%

         Other interest expense:
           Amortization of debt costs                                                    62,200               19.4%

           Contractual interest rate                                                     38,400               12.0%
                                                                             ------------------  ------------------
                                                                             $          420,600              131.4%
                                                                             ==================  ==================
</TABLE>
     Cumulative amortization of the beneficial conversion feature and debt issue
     costs  during  the  year  ended  December  31,  2003  for the 2002 and 2003
     Securities Transactions amounted to $526,000 and $63,000, respectively.

     During 2003, $1,000,000 of the face value of these debentures was converted
     into  45,748,151  shares of common stock at a  conversion  price of between
     $0.015 and $0.538.  The shares  issued were valued in  accordance  with the
     Securities  Purchase Agreement dated September 20, 2002, which approximates
     a 50% discount to market price.

     On August 26, 2003, the Company repaid the remaining $320,000 face value of
     these  debentures.  In  connection  therewith,  the Company  paid $9,800 in
     interest and $148,000 in pre-payment  penalty fees. The Company effectively
     terminated the agreement  during August 2003, and  accordingly,  funding of
     the remaining two traunches is no longer required.


9.   Stockholders' equity:

     Series A Convertible Preferred Stock:

     Effective  September 30, 2003, the Company  designated  5,000,000 shares of
     authorized  preferred stock as Series A Convertible  Preferred Stock. There
     were  no  shares  outstanding  as  of  December  31,  2003.  The  Series  A
     Convertible Preferred Stock has a liquidation preference of $1.00 per share
     and  is  non-voting.   It  is  convertible  into  common  stock  only  upon
     registration of the underlying common shares into which the preferred stock
     can be converted.  The conversion  rate is variable.  During the first year
     following issuance,  and assuming the registration  described earlier,  the
     preferred stock is convertible into the number of common shares that result
     from dividing the par value by the average market price of the common stock
     for a period of five days. Commencing the month following the first year of
     issuance,  and again assuming the registration,  the conversion methodology
     provides for a market discount of 20%, increasing 1% monthly thereafter, up
     to 130%.



                                      F-16
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003


9.   Stockholders' equity (continued):

     2004 Equity Unit Issuance:

     On March 31, 2004, the Company  issued  228,190 units (the "equity  units")
     for sale to accredited  investors at a price of $8.00 per equity unit. Each
     equity  unit  consists  of (i) 8 shares of Series A  Convertible  Preferred
     Stock;  (ii) 2 shares of the Company's common stock; and (iii) three common
     stock purchase warrants. Each warrant is exercisable until May 15, 2006, at
     a price of $0.50.  Proceeds from the equity unit  offering  were  allocated
     first to common  stock based on the market  price per share on the date the
     offering was completed (the  "measurement  date").  The remaining  proceeds
     were allocated to the Series A Convertible  Preferred  Stock and the common
     stock purchase warrants based on their relative fair values. The fair value
     of the preferred stock was based on the number of shares of common stock to
     be received  upon  conversion at the common stock market share price on the
     measurement  date. The fair value of the warrants was determined  using the
     Black-Scholes  pricing model with the following  inputs:  exercise price of
     $0.50,  market price of $0.19,  days to  expiration  of 783,  volatility of
     193%, and an interest rate of 4%.

     2004 Common Stock Issuances:

     During the six months  ended June 30,  2004,  the  Company  issued  456,380
     shares of common stock in  connection  with the equity unit  issuance  (see
     above).

     During the six months ended June 30, 2004,  232,500 shares of the Company's
     restricted common stock were sold through a private equity placement exempt
     from  registration  under Section 4(2) of the  Securities  Act of 1933, and
     Rule 506 of  Regulation  D,  thereof.  The  placement  was  open to  select
     officers,  employees,   representatives  of  the  Company,  and  accredited
     investors for the purchase of restricted common stock. The Company received
     total  proceeds  from the  offering  of $23,250 in 2003.  The $3,250  stock
     subscription  receivable was from a 2003 private  placement and it was paid
     in full as of June 30, 2004.

     During the six months ended June 30,  2004,  the Company  issued  1,025,000
     shares  of  restricted  common  stock  to  directors  as  compensation  for
     services.  The  restricted  common  stock,  which  was  fully  vested  upon
     issuance,  was valued based upon the trading  market prices on the dates of
     issuance, or $205,000 in the aggregate.


                                      F-17
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

9.   Stockholders' equity (continued):

     2004 Common Stock Issuances (continued):

     During the six months  ended June 30,  2004,  the  Company  issued  932,000
     shares  of  free  trading  common  stock  to   professional   research  and
     development  consultants  relating  to the  development  of  the  Company's
     security and hotel/MDU  connectivity  products. The common stock was valued
     based upon the closing  market price on the date of issuance,  or $177,080.
     $58,235 was recognized as Research & Development  expense during the period
     while  the  remaining  $118,845  is being  amortized  over the lives of the
     various agreements.

     During the six months  ended June 30,  2004,  the  Company  issued  250,000
     shares of restricted  common stock to TSK Design Group, LLC for development
     and design services relating to the Company's security products. The common
     stock  was  valued  based  upon  the  closing  market  price on the date of
     issuance,  or $47,500.  $15,834 was  recognized  as Research &  Development
     expense  during the period while the remaining  $31,666 is being  amortized
     over the remaining life of the six month project.

     During the six months  ended June 30,  2004,  the  Company  issued  223,897
     shares  of  free  trading  common  stock  to   professional   research  and
     development  consultants  under an  agreement to license  certain  patented
     technology. The common stock was valued based upon the trading market price
     on the date of issuance,  or $75,000  which was  recognized  as  royalties'
     expense in connection with the issuance.


     During the six months  ended June 30,  2004,  the  Company  issued  441,176
     shares of  restricted  common  stock in  conjunction  with the  purchase of
     patents.  The  restricted  common  stock  issued was valued  based upon the
     previous 20 day  average  closing  price prior to the date of the  purchase
     agreement.  The fair value of the patents  was  capitalized  as  intangible
     assets and is being amortized over estimated useful lives of five years.

     During the six months ended June 30, 2004, the Company issued 73,235 shares
     of restricted  common stock for the  conversion of $13,915 of  liabilities;
     and 85,000 shares of restricted  common stock,  valued at $15,300,  for the
     pre-payment  of one years rent,  commencing May 15, 2004, for the warehouse
     space the Company  occupies for its  distribution  center.  The  restricted
     common stock  issued was valued based upon the closing  market price of the
     Company's common stock on the date of issuance.

     Compensation  expense of $29,422 and $71,577 for the six months  ended June
     30, 2004 and 2003, respectively, was recognized in relation to amortization
     of unearned restricted stock compensation  relating to common shares issued
     to consultants as compensation in previous years.


                                      F-18
<PAGE>

                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

9.   Stockholders' equity (continued):

     2004 Common Stock Issuances (continued):

     On June 30, 2004,  the Company  signed and agreement  for a $1.275  million
     private placement to certain institutional  investors for 10 million shares
     of restricted  common stock,  together with 1.5 million warrants to acquire
     additional shares of common stock, and registration  rights.  The stock was
     priced at $.1275 per share,  and the warrants were priced at $.50 per share
     and expire on June 30, 2009.

     2003 Transactions:

     During the six months ended June 30, 2003,  125,000 shares of the Company's
     restricted common stock were sold through a private equity placement exempt
     from  registration  under Section 4(2) of the  Securities  Act of 1933, and
     Rule 506 of  Regulation  D,  thereof.  The  placement  was  open to  select
     officers,  employees,   representatives  of  the  Company,  and  accredited
     investors  for the purchase of restricted  common stock.  Proceeds from the
     offering amounted to $6,500.

     During the six months ended June 30, 2003, the Company issued 42,000 shares
     of restricted  common stock to employees and directors as compensation  for
     services.  The  restricted  common  stock,  which  was  fully  vested  upon
     issuance,  was valued based upon the trading  market prices on the dates of
     issuance, or $2,100 in the aggregate.

     During the six months ended June 30, 2003,  the Company  issued  11,639,027
     shares of free trading common stock in accordance  with several  conversion
     notices  received by the  Company  from the  holders of the  Company's  12%
     convertible  debentures.  The shares issued were valued in accordance  with
     the  Securities   Purchase   Agreement  dated  September  20,  2002,  which
     approximates  a 50% discount to the market  price.  The average share price
     for  all of the  conversions  was  $.018  per  share,  or  $210,000  in the
     aggregate.

     During  the six  months  ended  June  30,  2003,  2,662,662  shares  of the
     Company's restricted common stock were sold in connection with a consulting
     services agreement. The Company received $85,000 in proceeds and recognized
     $15,000 in consulting expense related to this issuance.


     During the six months ended June 30,  2003,  the Company  issued  1,899,000
     shares  of  free  trading  common  stock  to   professional   research  and
     development   consultants  as  compensation  for  consulting  services  and
     royalties.  The  restricted  common  stock issued was valued based upon the
     trading  market  prices  on  the  dates  of  issuance,  or  $82,920  in the
     aggregate.  Additionally, $71,577 of compensation expense was recognized in
     relation to amortization of unearned restricted stock compensation relating
     to common shares issued to consultants as compensation in previous years.

                                      F-19
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

9.   Stockholders' equity (continued):

     2003 Transactions (continued):

     During the six months ended June 30, 2003,  the Company  issued 750,000 and
     500,000 shares of restricted  common stock in conjunction  with a licensing
     agreement and a  distributorship  agreement,  respectively.  The restricted
     common stock issued was valued based upon the trading  market prices on the
     dates of issuance, or $37,500 and $25,000,  respectively, in the aggregate.
     The fair value of the licensing  rights and the  distributorship  agreement
     were  capitalized as intangible  assets and are being  amortized over their
     estimated  useful lives of five years.  The Company  recorded  amortization
     expense  of $1,875  and  $1,250,  respectively,  in  connection  with these
     licensing rights and the distributorship agreement for the six months ended
     June 30, 2003.

     During the six months  ended June 30,  2003,  the  Company  issued  559,350
     shares of  restricted  common stock to investors for  financing  fees.  The
     common stock was valued based upon the trading  market  prices on the dates
     of issuance, or $28,292 in the aggregate.

     On May 19,  2003,  the  Company  entered  into  three  separate  consulting
     agreements  wherein  the Company  granted  4,200,000  shares of  restricted
     common  stock to  consultants  as  compensation  for  consulting  services.
     1,025,000 of these shares were issued  immediately upon registration of the
     shares on Form S-8 to begin the first phase of the services to be provided.
     Subsequent  issuances  of shares,  up to the total  amount  outlined in the
     agreements,   will  be  issued  at  the  Company's  discretion,   based  on
     performance,  as  defined by the  Company,  over a period not to exceed one
     year. The restricted  common stock issued was valued based upon the trading
     market prices on the dates of issuance,  or $41,000 in the aggregate.  This
     amount was recognized as stock-based compensation during the second quarter
     of 2003.

          Total  stock-based  compensation  cost  recognized  for the six months
     ended June 30, 2004 and 2003 is as follows:

                                              2004                   2003
                                          ------------            ------------
     Employee and directors                  $ 205,000              $    2,100
     Consultants                               224,580                  47,320
     Royalties                                  75,000                  50,000
     Financing fees                             53,745                       -
     Unearned Stock Compensation                29,422                  71,577
                                          ------------             ------------
                                             $ 587,749                $170,997
                                          ============             ============


                                      F-20
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

9.   Stockholders' equity (continued):

     Common stock Warrants:

     During the period  ended June 30,  2004,  the  Company  issued  warrants to
     purchase 50,000 shares of common stock, in conjunction with the purchase of
     the  Powerlinx  trademark.  The warrants have a three year term and have an
     exercise price of $.20 per share.

     During the period  ended June 30,  2004,  the  Company  issued  warrants to
     purchase  200,000 shares of common stock in conjunction with a research and
     development  agreement.  The  warrants  have a ten  year  term  and have an
     exercise price of $.20 per share.

     During the years  ended  December  31, 2003 and 2002,  the  Company  issued
     warrants  to  purchase  1,860,000  and  2,100,000  shares of common  stock,
     respectively,  in connection  with the sale of the  Convertible  Debentures
     described  in  Note  8.  The  warrants  have  three-year  terms  and can be
     exercised at prices between $0.05 and $0.10.  Warrants to purchase  960,000
     shares of common stock remain outstanding as of June 30, 2004 at a weighted
     average  exercise price of $0.05.  There were no warrants  exercised during
     the six months ended June 30, 2004.

     Options granted to employees:

     The Company granted  7,422,635  stock options to employees  during the year
     ended December 31, 2003.  Stock options have terms of 10 years and exercise
     prices were equal to the closing market price on the day granted. All stock
     options  issued in 2003 were fully vested on the date of grant.  There were
     7,076,635  options  outstanding at June 30, 2004 having a weighted  average
     exercise  price of $0.05.  There were no options  exercised  during the six
     months ended June 30, 2004.




                                      F-21
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003


10.  Due from related parties:

     Included in the amount is $20,000 in non-interest  bearing notes from loans
     made to officers of the Company in 2001.  The original  amount of the loans
     were  $50,000,  of which,  $10,000 and $20,000 were repaid  during 2003 and
     2002  respectively.  The remainder is due in December  2004.  The remaining
     amounts are advances  made to employees  and are  scheduled to be repaid by
     the end of fiscal year 2004.

11. Commitments and contingencies:

     License agreement and royalties:

     In December  2002,  the Company  entered  into a licensing  agreement  with
     Satius,  Inc. (formerly  VideoCom,  Inc. and Wire21 Inc.) for its powerline
     technologies,  which are  utilized in the  SecureView  product  line.  This
     agreement  replaces the original license  agreement entered into in October
     1999 in its entirety.  The agreement is effective through the expiration of
     the patents licensed in the agreement (through October 2012). The agreement
     obligates the Company to pay royalties  equal to between $1 and $3 per unit
     of  licensed  products  sold,  with  minimum  annual  royalties  of between
     $240,000  and  $480,000.  Expense of $75,000 and $40,000 for the six months
     ended

     June 30,  2004 and  2003,  respectively  was  recognized  relating  to this
     agreement.  Additionally, during 2003, the Company issued 750,000 shares of
     the Company's  common stock in connection with this license and recorded an
     intangible  asset for the  estimated  fair value of the  shares  ($37,500),
     which is being amortized over 5 years.  Amortization  charged to operations
     in relation to these  licensing  rights was $1,875 for the six months ended
     June 30, 2004 and 2003.

     On May 4, 2004,  the Company  signed an exclusive and  irrevocable  license
     agreement with TSK Design Group,  LLC, in which it has no equity  ownership
     interest,  for the joint development of intellectual property to be used in
     the Company's future powerline products.

     Non-exclusive finder's agreements:

     The Company entered into three  non-exclusive  finder's  agreements whereby
     the finders  introduce  potential  investors to the Company.  In return for
     these services the Company pays 5% of gross Offering proceeds received from
     introductions made that result in investment in the Company. As of June 30,
     2004, the finders had been paid cash amounts connected with the equity unit
     offering.  In addition,  according to the  agreements,  the finders were to
     receive  warrants  to  purchase  shares of common  stock equal to 5% of the
     gross Offering  proceeds raised by the finder divided by the exercise price
     of the warrants.  The exercise  price is equal to 120% of the 5 day average
     prior to closing,  not to exceed $0.50 per share.  As of June 30, 2004, the
     Company had issued, to the finders,  warrants to purchase 305,556 shares of
     common stock at an exercise  price of $0.225 per share.  The warrants  were
     valued at $53,747 and were recorded as an expense as of June 30, 2004.



                                      F-22

<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003


11.  Commitments and contingencies (continued):

     Service agreement:

     The Company  entered into an  agreement  on March 1, 2004 for  professional
     services  including  but not limited to investor  relations  and  financial
     media relations. The agreement calls for a cash payment, issuance of equity
     units  under the equity  unit  offering  (see Note 9) valued at $21,000 and
     50,000 shares of the Company's restricted common stock deliverable 180 days
     after the signing of the agreement. Term of the agreement is six months.

     Litigation, claims and assessment:

     Class Action Lawsuit

     The Company was a defendant in a consolidated class action lawsuit that was
     pending in the United  States  District  Court for the Middle  District  of
     Florida against the Company and Richard McBride, the Company's former chief
     executive  officer.  Commencing in May 2001,  five nearly  identical  class
     action  lawsuits were filed  against the Company and McBride,  and, on July
     24, 2001, those lawsuits were consolidated. In the five initial complaints,
     the plaintiffs  thereto  claimed  violations of Sections 10(b) and 20(a) of
     the Securities Exchange Act of 1934 and Rule 10b-5 promulgated  thereunder.
     In the five initial  complaints,  the plaintiffs to those actions  alleged,
     among other things, that from March 30, 2000 to March 19, 2001, the Company
     and McBride  misstated  sales and revenue  figures;  improperly  recognized
     revenues;  misrepresented  the nature and  extent of the  Company's  dealer
     network; falsely touted purported sales contracts and agreements with large
     retailers;  misrepresented the Company's ability to manufacture, or to have
     manufactured,  its products; and misrepresented the Company's likelihood of
     achieving  certain  publicly  announced  sales  targets.  The  consolidated
     amended class action complaint was filed in December 2001. As amended,  the
     consolidated  complaint seeks compensatory and other damages, and costs and
     expenses  associated  with the litigation and now also seeks relief against
     James Cox, former  director,  on the same grounds as the claims against the
     Company and McBride.

     In February  2002,  the Company filed a motion to dismiss.  The  plaintiffs
     responded  to the motion to dismiss in early April 2002.  On May 17,  2002,
     the parties reached an agreement in principle,  in the form of a Memorandum
     of  Understanding,  to settle the class action lawsuit.  In the settlement,
     the  Company  will issue  6,000,000  shares  our common  stock to the class
     participants.




                                      F-23
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

11.  Commitments and contingencies (continued):

     Litigation, claims and assessment (continued):

     During the 2nd and 3rd  quarters of 2002,  the Company and the  plaintiffs'
     counsel  agreed  to  prepare  and  execute  a  definitive   Stipulation  of
     Settlement  and jointly  seek  preliminary  and final Court  approval.  The
     Settlement would be conditional  upon receiving final judicial  approval of
     the Stipulation, among other things.

     At the end of the  Company's  2nd fiscal  quarter of 2002,  management  had
     determined that the impending settlement was highly probable.  Accordingly,
     the Company accrued for the cost of the settlement by recording a liability
     of  $1,200,000,  this was equal to the  current  fair  market  value of the
     settlement  shares at June 30, 2002, plus an estimated amount for expenses.
     On  December  17,  2002,  the Joint  Motion  for  Preliminary  Approval  of
     Settlement  and the Amended  Stipulation  of Settlement  was filed with the
     United  States  District  Court of Florida,  and  approved by the  residing
     justice. There were no significant amendments to the nature or terms of the
     Stipulation as outlined above. The actual liability,  based on the value of
     the  Company's  stock as December 17, 2002,  was $300,000 plus an estimated
     $125,000 in legal fees.  The Company  recorded its revised  estimate of the
     liability in the fourth  quarter and has disclosed this 2002 fourth quarter
     adjustment in the financial statements.


     On May 2, 2003,  the  United  States  District  Court of  Florida,  through
     issuance of its Order and Final Judgment, approved the settlement.

     Pro-Marketing of Texas

     The Company is a defendant in a lawsuit  filed by  Pro-Marketing  of Texas,
     Inc. in the Circuit  Court of Pinellas  County,  Florida.  The suit alleges
     breach of contract relating to a payment of a convertible debenture, with a
     maximum  potential  exposure of $100,000 plus interests costs and attorneys
     fees. The Company  intends to vigorously  contest the claim. As of June 30,
     2004,  the  matter  is in the  stage of  discovery  and it is too  early to
     determine the ultimate  outcome.  Accordingly,  no liability,  if any, that
     might result from the  resolution  of this matter has been  recorded in the
     financial statements.



                                      F-24
<PAGE>
                                 POWERLINX, INC.
                        CONDENSED STATEMENTS OF CASHFLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003


11.  Commitments and contingencies (continued):

     Litigation, claims and assessment (continued):

     SEC Investigation

     The Securities and Exchange  Commission's  Division of Enforcement began an
     investigation in January 2001 relating to our financial  results and common
     stock  performance  during  2000.  As  a  result  Richard  McBride,  former
     chairman,   president  and  chief  executive  officer,  resigned  from  all
     positions  with the Company.  Further,  all  executives  involved  with the
     allegations  were  replaced  during  2001 and Mr.  McBride  passed  away in
     October 2001. We have  cooperated  fully with the SEC,  which  included the
     testimony of former employees,  Col. Larry Hoffman  (retired),  and Christy
     Mutlu.   Current  officers  and  employees   Douglas  Bauer,   CFO,  George
     Bernardich, CEO, and J. R. Cox, former director, have also testified before
     the SEC.

     On February 12,  2004,  the SEC's staff  advised the  Company,  through its
     counsel,  that  they  intend  to  recommend  that  the  SEC  bring  a civil
     injunctive action against the Company and certain of its current and former
     officers and/or directors.  As it relates to the Company, the Staff alleges
     that the  Company  violated  Section  17(a) of the  Securities  Act of 1933
     ("Securities Act") and Sections 10(b), 13(a), 13(b)(2)(A),  and 13(b)(2)(B)
     of the Securities  Exchange Act of 1934  ("Exchange  Act") and Rules 10b-5,
     13a-1,  13a-11,  13a-13,  and  12b-20  thereunder,  and is liable for civil
     penalties  pursuant  to Section  20(d) of the  Securities  Act and  Section
     21(d)(3)(A) of the Exchange Act.

     The SEC's Staff, in accordance with Rule 5(c) of the Commission's  Rules of
     Informal and Other  Procedures,  17 C.F.R.  ss.202.5(c),  have afforded the
     Company the opportunity to make a "Wells Submission"  regarding the Staff's
     intended  recommendations.  The Company has retained its current counsel to
     prepare such a Wells  Submission on its behalf,  and it believes that there
     are  meritorious  factual,   legal  and  policy  reasons  why  the  Staff's
     recommendation  should not be followed by the Commission.  However, at this
     time, it is impossible to determine whether the Staff's recommendation will
     be adopted by the Commission, or will be modified in some fashion.

     If the Staff's present  recommendation  is accepted by the Commission and a
     civil injunctive action were to be subsequently  filed against the Company,
     no  decision  has been made at this time as to whether  the  Company  would
     vigorously  defend  that  matter,  or  would  seek to  reach  a  negotiated
     settlement.  The Staff has informally  advised counsel of their belief that
     if they were  successful  in  litigating  this matter,  a civil  penalty in
     excess of $100,000 could be imposed against the Company.  However,  counsel
     believes that there are numerous mitigating factors, which could cause this
     amount to be reduced, even if the Company's efforts to defend the suit were
     unsuccessful.  Therefore  it is  impossible  at this time to  estimate  the
     likelihood of an unfavorable outcome, or to estimate the amount of any such
     loss from this matter.  Accordingly, no liability, if any that might result
     from the  resolution  of this  matter has been  recorded  in the  financial
     statements.



                                      F-25
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

        Some of the information in this report contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "expect," "anticipate,"
"believe," "estimate" and "continue," or similar words. You should read
statements that contain these words carefully because they:

     o    discuss our future expectations;
     o    contain  projections  of our future  results of  operations  or of our
          financial condition; and
     o    state other "forward-looking" information

         We believe it is important to communicate our expectations. However,
there may be events in the future that we are not able to accurately predict or
over which we have no control. Our actual results and the timing of certain
events could differ materially from those anticipated in these forward-looking
statements as a result of certain factors.

OVERVIEW

For the three months ended June 30, 2004, the Company was able to report its
eighth consecutive quarter of comparative sales growth along with several
noteworthy achievements in its quest to execute its business plan which is
focused on growth, profitability, and technological innovation.

Net Revenue increased 103% for the three months ended June 30, 2004 compared to
the three months ended June 30, 2003. It marks the 8th consecutive quarterly
sales increase on a quarterly comparative basis; and for the trailing four
comparable quarters net revenue has increased 59%.

Gross profit increased 211% for the three months ended June 30, 2004 compared to
the three months ended June 30, 2003. It continues the effects of an improved
cost structure generated from the Company's overseas sourcing. The Company has
continued expanding the sourcing of its products beyond China to include Hong
Kong, Taiwan, and Korea. The ability to source product overseas should continue
to be a major strength of the Company in an effort to improve gross profit
margins in future reporting periods.

The Company's patented power-line SecureView(TM) "Camera in a light bulb"
continues to be the primary product sold in the consumer market of our security
segment. The product is aired on a regular basis on Shop At Home Network, LLC
and Home Shopping Network. The airings maintain Secure View's initial success in
the direct television retailing arena and the exposure should provide a
continuing opportunity to educate consumers on the advantages of SecureView and
power-line technology in general. In addition, SecureView continues to be sold
via Internet and catalog retailers. In April 2004, the Company announced a
comprehensive collaboration with Cenuco, Inc. of Boca Raton, Fla., to deploy the
first integrated CCTV solution utilizing PowerLinx power line video transmission
technologies and camera systems, combined with Cenuco's mobile software
technology to transmit live CCTV video onto cellular phones, Pocket PC devices,
and remote computers. With an estimated annual $39 billion global security and
CCTV market, the PowerLinx and Cenuco combined offerings will be available for
the residential, small to large enterprise, and Homeland Security/Government
sectors. As part of this relationship, PowerLinx ordered 4,500 licenses of
Cenuco's mobile remote video viewing software, which are inserted into the
PowerLinx SecureView(TM) "Camera in a light bulb" systems. Distribution of this
combined offering will include selected internet, catalog and direct response
retailers. The Cenuco software package includes gateway access from anywhere in
the world to view live video, unlimited off-site digital video recording (48
hour increments), and unlimited access to previously recorded video, for a
monthly service fee of $19.95. PowerLinx will share in revenues derived from the
monthly monitoring fees collected by Cenuco. The revenue sharing arrangement
covers PowerLinx-Cenuco bundled products sold by either PowerLinx or Cenuco in
their respective market segments.


                                       3
<PAGE>
The Company continued development of its new mid-ware security solution for the
SOHO (Small Office Home Office) market in the quarter. This product, the PLVS
Plus Pro System(TM) and PLVS Plus System(TM) will focus on the
multi-camera/alarm/recording market which according to market research expects
products priced lower than one thousand dollars for a 3-4 node system. This
product will start at a basic system price of approximately $149.00 and will
allow the customer to purchase component system devices such as baby monitors,
sensors, alarms, and outdoor video cameras with recording capabilities all
priced from $49.00 - $199.00. This product will be focused on two levels of
application; the home DIY installation and the professionally installed systems.
The professionally installed system will come with many enhanced settings,
connectivity solutions, and attachment devices while the home DIY installed
units will focus on  ease of installation. As previously reported
the research and development began in July 2003 and the initial design drawings
were accomplished in the 1st quarter. The final printed circuit board and
software development was completed in the quarter. The product housing design
and packaging design phase also began in the quarter. In addition, product
sourcing, tooling, dies, and prototype testing have begun and are expected to be
completed in the 3rd quarter along with initial presentations to customers for
the product. Initial deliveries are expected to begin in the 4th quarter.

As previously discussed in the Company's 2003 10-KSB, the Company has
successfully completed the installation and deployment of its first digital
security system. This system comprises 21 total cameras, both fixed and
pan-tilt-zoom (PTZ), operating over power line, twisted pair, and coaxial
wiring. The monitoring-control-storage component allows the user to
simultaneously view, record, and control each of the 21 cameras. The system's
capacity allows storage of up to 30 days of digital recording for each camera.
To move the project forward, the customer has requested that the Company
collaborate with their current digital security provider to provide an interface
to the hard wire digital systems currently deployed to allow for seamless
installations and to eliminate the need for loss prevention personnel training
on new viewing software. The software development to accomplish this
specification began in the quarter. In addition, the Company continued its
research and development of digital products to incorporate coding and decoding
(codec) technology licensed from On2 Technologies Inc. utilizing the license
agreement completed and announced in the fourth quarter of 2003.

Sales and installations of the Company's PowerLine Vision Systems (PLVS) (TM)
continued to grow and gain traction throughout the quarter ended June 30, 2004.
The product is proving to be extremely reliable as there have been no failures
in any Company installed systems to date and loss savings have been significant
as there has not been a back-up accident reported to the Company on any vehicle
with a PLVS system installed since the initial installations began in September
2003. Initially, as communicated in previous filings, truck fleets including
Ryder, Sysco Foods, McKenzie Tank Lines, and McLane Trucking purchased and
installed test units for evaluation of performance and property loss savings. Of
these fleets, Ryder and Sysco have ordered and installed additional units while
the remaining fleets and new customers continue to purchase and evaluate the
systems. In addition to Ryder and Sysco, the Company now has approximately 26
fleet customers who have purchased and installed systems which include McLean
Trucking, US Foods, E-One, McKinsey, Integris, and Perdue. The Company also
expanded selling systems in the recreational vehicle market. Forest River, Inc.
has begun offering the PLVS systems as an option on two of their 2005 Class B/C
models. In addition to approximately 12 dealers, the PLVS system is also being
sold through the following RV wholesale distributors: Aralax (Canada),
Stagparkway, WinnTron Technologies, and RadarBusters.
However, in order to meet increasing demand, the Company enlisted the services
of Velociti, www.velociti.us, to serve as a nationwide installer of our
PowerLine Vision Systems(TM) (PLVS) in the Transportation market segment. Since
1975, Velociti has been a market leader in Transportation and Logistics by
providing mobile installation service throughout the United States. Velociti has
extensive experience in the installation of transportation technology systems
and solutions for large, medium and small fleets. The program to be implemented
by Velociti will initially focus on PLVS installations on mid-to-large size
fleets. Velociti began initial installations in late May for several fleet
customers after completing the necessary installation time studies in late
April. With the addition of Velociti to the PowerLinx Team, PowerLinx is now
poised to accomplish scalability of sales for our PowerLine Vision Systems(TM)
(PLVS) product line. Alcalde & Fay, the Company government relations firm
continues to work on the implementation of a formal study of the rear vision
safety solution. The Company is also seeking preferred vendor status with
several fleets along with continuing sales development with OEM's, distributors
and dealers.


                                       4
<PAGE>
Also during the quarter ended June 30, 2004, the Company launched the newly
redesigned Web site at www.power-linx.com. The Company's recent name change from
Seaview to PowerLinx, as well as its redesigned Web site, reflects on its
emphasis to continually develop new powerline products for the consumer,
transportation, and commercial security markets. The Web site is very customer
focused, and is expected to greatly facilitate converting visitors to customers.
The Company's products are grouped into six product lines with animated
illustrations to communicate more details about its products. For instance, each
product line has a unique URL that appears as a separate Web site. The customer
can access the product line of interest directly, without navigating to the
corporate home page and layers of menus. At the same time, a visitor can
navigate to any part of the Web site from any product URL. This makes it easier
and faster for visitors to get the information they are looking for and purchase
the product they want. The products are segmented as follows:

     o    Home Monitoring
     o    Transportation
     o    Commercial Security
     o    Home Networking
     o    Hotel Connectivity
     o    SeaView Marine

The investor or potential investor will continue to be able to access PWLX stock
quotes, up-to-date Company news, and our SEC filings. In the future, we expect
to provide access to our annual report and investor registration for our
shareholder database and investor package requests. The architecture makes the
site much more flexible allowing PowerLinx to display new products in
development. The Company expects to introduce several new products and new
product lines this year, and the Web site will easily integrate new products
with existing products. The site will be capable of highlighting new
introductions while fitting them into the overall site in a way that is very
intuitive for users. The new site will add online product registration with a
feature for e-mail capture, supplying PowerLinx with a direct customer care and
marketing program. The Company will be able to communicate with its customers to
increase customer satisfaction and to sell product line additions as well as new
product lines. Additional enhancements planned for the future are expected to
provide easy access and improved service for our dealers and commercial
customers.

The Company launched its Hotel and Multiple Dwelling Unit business segment in
May 2004 with the announcement of the strategic alliance agreement with Choice
Hotels International, one of the largest hotel franchise companies in the world
with more than 5,000 hotels, inns, all-suite hotels and resorts open and under
development in 44 countries under the Comfort Inn, Comfort Suites, Quality,
Clarion, Sleep Inn, Rodeway Inn, Econo Lodge and MainStay Suites brand names.
The launch and agreement were facilitated through the hiring of certain
employees of Guest ISP LLC.

The Business: High Speed Internet Access (HSIA) & Video On Demand (VOD)delivery
systems for Hotels and Multi Dwelling Units (MDU's) market.

The Company has developed and designed High Speed Internet Access (HSIA) & Video
On Demand (VOD) delivery systems for the Hospitality and Multi Dwelling Units
(MDU) markets which utilize powerline communications (PLC), Cat 3 & Cat 5 ADSL,
wireless along with hybrids and combinations of these technologies. The Company
also expects to develop a coaxial cable application for our products later this
year.

Principal Products: Hotel & MDU Segment

The Company specializes in providing the most technologically advanced and fully
integrated network (HSIA) solutions for hotels and (MDU's). Power-Linx product
line is as follows:

     o    Powerline PLC: This system utilizes the existing electrical grid in a
          hotel for total high speed Internet (HSI) coverage, anywhere there is
          an electrical outlet you can have (HSIA). This can also be used as
          backbone for wireless install.
     o    Cat 3 & Cat 5 ADSL: This system utilizes the existing telephone lines
          in a hotel or MDU and uses the two free pairs  to deliver ten Mbps to
          each room with RJ45 connection in each room. This can also be used for
          the backbone for a wireless install.
     o    Wireless 802.11b and 802.11g: Power-Linx can cover an entire building
          with wireless signals including all guest rooms, lobby, common areas,
          meeting rooms and administration offices. We use our ADSL or PLC
          technology to use existing wiring for the backbone for the wireless
          systems to keep our systems very affordable.

                                       5
<PAGE>

     o    Hybrid Systems: We can provide wireless and hardwired solutions and
          can provide wireless to a hardwired connection by using our (WiFi)
          bridges in the rooms that pick up wireless signals and have a RJ45
          connection for hard-wired connections.

     o    Video On Demand (VOD): Power-Linx can provide VOD via the Internet
          which until required the hotels to rely on cable providers for this
          service. There is no expensive equipment to install. Now hotel
          customers can purchase and watch a movie on their laptop in their
          rooms. Customers can download movies on computer and watch for a
          twenty-four hour period. Set top boxes for in room television are
          expected to be available later this year.

          The Company entered into a marketing and distribution agreement with
          B2 Networks LLC to distribute the new B2 Digital Services Product
          Line. The agreement also provides the Company the ability to market
          and distribute the Pay-Per-View and Digital Satellite Services of
          Telecommunication Products, Inc. ("Telpro") who is a strategic partner
          and minority shareholder of B2 Networks LLC. The distribution
          agreement complements and enhances the product offerings of high-speed
          internet and connectivity to the Hotel & MDU market segment. The
          agreement provides for recurring revenue sharing by all participants,
          including the hotel & MDU property owner, on the services used and
          purchased by customers.

          Pursuant to the agreement, B2 Networks and Telpro will be supplying
          Point-to-Point Wireless Local Loop internet connectivity in each hotel
          room through the B2 Wireless Access Point (B2WAP) which will connect
          to the in-room Hotellinktv.com for laptop users and the B2 Digital TV
          set top box and handheld remote control for in-room television. These
          products allow Powerlinx to market a large variety of in-room digital
          services, which include making airline reservations, ordering pizza,
          event ticketing, and transportation services, along with delivery of
          Hollywood movies, sports and live events, and distinct genres of
          Pay-Per-View content. The Company will actively market the B2Wap
          service and the B2 Digital TV Broadband Set Top Television System with
          our complete Hotel & MDU Connectivity products later this month
          through our business-to-business marketing partner, Winn Technology
          Group, Inc. These products may be viewed at the web site:
          www.hotellinktv.com.

     o    24/7 Call Center and Technical Support; The Company bills each
          property a monthly maintenance fee on a per day per room and/or unit
          basis through a system service agreement. For hotel properties, Tent
          Cards are provided in each room with a toll free number for the guest
          to use. The Company also utilizes its 24/7 online monitoring system to
          check and maintain installed hotel/MDU systems. Franchises like
          Holiday Inn, Hampton and Choice Hotels have mandated that hotels
          maintain 24/7 support for their guests. This provides recurring
          revenues for the Company.
     o    Internet Service Providers: The Company has negotiated agreements with
          these (ISP's) that provide the HSI connections to the hotels to
          promote their products such as DSL, cable, T1, wireless point to point
          and satellite. Through these agreements the Company earns a percentage
          of the monthly ISP charges to the hotel or MDU. This creates
          recurring revenue for the Company on a per installation basis. The
          Company is in the process of evaluating the creation of a wholly owned
          subsidiary to act as an agent for these ISP providers to maximize
          income opportunities for the Company. In addition, this would improve
          customer service to the property owner or management company since the
          Company currently provides the HSI connection specifications with a
          referral to several ISP providers for the hotel/MDU to negotiate and
          facilitate installation. Having a one-stop shop for the customer
          should also improve the entire sales and installation process.

The Company also expects to sell and market PowerLine Security systems which
integrate into the HSI systems the Company installs as it provides a value added
product to the property owners. Further, the Company expects to develop an
installation network similar to that developed in our Transportation segment.

Principle Markets: Hotel & MDU Market

One of the most requested services in hotels today is (HSIA) and there are over
sixty five thousand hotels and nearly 30 millons units in the MDU market in the
United States plus government installations throughout the world. Over fifty
percent of all travel plans will be booked online this year and over 35% of all
travelers

                                       6
<PAGE>
carry laptop computers. In the next five years most of these hotels will have
(HSIA) in their hotel rooms and meeting areas. Ninety two percent of travelers
who use laptops base their stay on availability of (HSIA) in the rooms. The
Hotel Franchises such as Hampton Inn, Holiday Inn have already mandated their
hotels to have (HSIA) installed in the rooms by January 2005. The Company is a
Choice Hotels Preferred Vendor, which means Choice Hotels International has
certified and recommends that its franchisees do business with PowerLinx. Choice
Hotels will release their mandate to their 4,400 hotels on or about August 16,
2004. Clarion, Comfort Suites, and Sleep Inns will be mandated to have (HSIA) by
December 31, 2004 and Comfort Inns, Quality Inns, Quality Inns Suites and
Mainstay Suites will be mandated by May 31, 2004.

The Company's principal markets are Hospitality, Multi Dwelling Units,
Hospitals, Schools and Government Facilities:
     o    Hospitality market is excellent because HSI is the number one amenity
          asked for by hotel guests. The market is also driven by competition
          between hotels and franchise mandates that require hotels to install
          systems by a certain date.
     o    Multi Dwelling Units: This covers apartments, condos, and tenant
          housing. Many apartments do not have coax cable or a method to have
          HSIA to individual apartments. Half the world's population lives in
          apartments. PowerLinx PLC and ADSL technologies using existing wiring
          provide a viable economical and secure solution for this market.
     o    Hospital: Hospitals are budgeting to put in Intranet systems for
          maintaining patient's records and more reliable operating systems in
          addition to providing HSIA and digital services to patient rooms.
     o    Schools: As the Internet grows there is a growing demand for school
          systems to provide HSIA to the children their school environment.
          Using the existing wiring in schools is a viable, economical and
          secure solution.
     o    Government Facilities: The Company expects to develop this market with
          the aid of our government relations group, Alcalde & Fay. The United
          States government is the largest owner of property in North America.

Distribution Methods: Hotel & MDU Segment

     o    Direct sales through a highly trained in house sales force that sells
          (HSIA) & (VOD) to hoteliers on daily basis.
     o    Strategic partners such as Winn Technologies that tele-markets to
          hotels nationwide and set qualified appointments for the HSIA & VOD
          sales force. The process provides for hot leads to be directly
          transferred to our in house sales force.
     o    Choice Hotels International provides in-house marketing that promotes
          PowerLinx as a preferred vendor and also transfers those leads to the
          Company. We are also listed at Choice.com, Primary Source and all
          promotional materials provided by Choice Hotels International.
     o    The Company entered into a strategic alliance agreement with Choice
          Hotels International, one of the largest hotel franchise companies in
          the world with more than 5,000 hotels, inns, all-suite hotels and

                                       7
<PAGE>
          resorts open and under development in 44 countries under the Comfort
          Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Rodeway Inn, Econo
          Lodge and MainStay Suites brand names in May 2004.

          The PowerLinx-Choice Hotels International agreement is an annual,
          renewable contract which appoints PowerLinx as a Choice Endorsed
          Vendor offering PowerLinx's high speed internet access and
          connectivity to Choice Hotels' United States franchisees. PowerLinx
          becomes one of only four Choice Endorsed Vendors offering these
          products which have been mandated for enterprise wide deployment by
          the end of 2007. In addition, PowerLinx and Choice Hotels
          International began cooperative efforts for the marketing, advertising
          and promotion of PowerLinx's internet access solution to their
          franchisees prior to and through the Choice Hotels national
          convention, May 12-14, 2004 in San Diego, CA.
     o    Outside sales partners and agents: The Company is hiring agents across
          the country to sell and promote its HSIA & VOD products. We are also
          partnering with companies that sell other products to the hotel market
          and have previous business relationships with hoteliers such as
          communication providers.

Competitive Business Conditions: Hotel & MDU Segment

The hospitality and MDU markets provide the Company a unique opportunity to
create revenues through the sales and marketing of HSIA and reoccurring revenue
from 24/7 technical support, VOD and ISP access to hotels and MDU's. Although
there is significant competition with many companies providing HSI to the
hospitality market through wireless, coax and other hardwired solutions, the
Company is positioned to garner market share. Through use of the Company
patented technologies, ADSL & PLC using existing wiring allows PowerLinx HSIA
products to be very competitive, reliable and economical for the property owner.
Also PowerLinx alliance with Choice Hotels International provides
standardization for the market along with certification of the PowerLinx product
line. The Company is actively soliciting and negotiating similar alliances with
other hotel chains to further solidify a strong market presence and to provide
stable future revenue growth for the Company.


                                        8

<PAGE>
The Company also continues to hire associates primarily in sales and engineering
to support future sales growth and expanding research and development projects.
The Company now employs a total of 26 employees which includes 13 employees
dedicated to sales. Of these 16, 3 serve as Sales Directors while the remaining
are Account Sales Executives compensated on a straight commission or draw versus
commission pay plan. The Company also continues to add manufacture sales
representatives. To provide the expanding sales team with qualified leads,
enlisted the services of Winn Technology Group, Inc., www.winntech.net, to serve
as the marketing resource to provide business-to-business marketing campaigns,
inbound sales management, first level tech support service, dealer database
management and competitive intelligence research. WTGI has extensive experience
in fielding and processing all types of inbound response to various client
marketing campaigns which includes inbound programs similar in nature to the
program being launched by PowerLinx. WTGI has provided lead qualification
services that included inbound response for clients such as Palm, Gartner,
TruSecure, McDATA, Cisco, PeopleSoft, Siemens CN and MercuryMD. The PowerLinx
program implemented by the Winn Technology Group initially focused on
business-to-business marketing campaigns in our home monitoring, transportation,
marine and recently launched hotel connectivity/MDU business segments. We expect
to generate qualified sales leads for the sales team. WTGI will take
responsibility for managing the daily sales orders to our toll-free order
number, 1-800-POWERLX along with the initial contact for product tech support
questions. In addition, WTGI has the ability to provide PowerLinx with extensive
marketing feedback and competitive intelligence research to continually improve
the process and provide maximum sales productivity.

                                       9
<PAGE>
The Company has chosen to present additional financial information regarding the
Company's financial condition and results of operations. As the Company's
results of operations as presented under Generally Accepted Accounting
Principles (GAAP) include material non-cash expenses, the Company has provided a
pro-forma statement that adds back these expenses to present a pro-forma net
loss that reconciles to its GAAP presentation. Given the net losses that have
been reported in current and prior reporting periods, and the Company's use of
cash to support operations, the Company believes this information will be useful
to current and potential investors.

<TABLE>
<CAPTION>

                                        Three months ended June 30,                     Six months ended June 30,
                                              2004              2003                          2004              2003


<S>                                <C>                        <C>                           <C>               <C>
Reported net loss                  $ (1,012,193)              $    (953,633)                $ (1,874,306)     $ (1,931,120)

Add:

     Depreciation                  $     22,008               $      15,682                 $     43,868            31,178
     Amortization                  $    128,572               $     114,822                 $    254,644      $    281,959


     Taxes                         $          -               $           -                 $          -      $          -

Net loss before taxes,
  depreciation & amortization      $   (861,613)              $    (823,129)                $ (1,575,794)     $ (1,617,983)


Add stock-based compensation:      $    312,792               $      72,367                 $    587,749      $    170,997

Pro forma net loss                 $   (548,821)              $    (750,762)                $   (988,045)     $ (1,446,986)
                                   =============              ==============                =============     =============
</TABLE>


                                       10
<PAGE>
SUBSEQUENT EVENTS

In July 2004, the Company announced the completion of a $1.275M private
placement to certain institutional investors of 10M shares of common stock,
together with 1.5M warrants to acquire additional shares of common stock. Upon
exercise these warrants would yield additional cash proceeds to the Company of
approximately $750,000 in total (See note 9 to the financial statements).

In July 2004, the Company engaged Bob Circosta, a legend in Direct Response
Retailing, as Spokesperson and On-Air talent for our powerline home monitoring
products which include SecureView(R), the "camera in a light bulb." Direct
television marketing segments have been airing on major shopping network
channels since early 2003 for PowerLinx's powerline home monitoring products.
Mr. Circosta's addition to this sales and distribution channel adds credibility
and will help maximize continued sales growth.

In August 2004, On2 Technologies, Inc., The Duck Corporation, and the Company
launched several strategic initiatives aimed at the surveillance, security, and
video-on-demand (VOD) markets. All of these products will use PowerLinx's
patented technology for sending audio and video over power lines, twisted pair
wires, and coaxial cable in AC and DC environments on any power grid. This
technology will be paired with On2's revolutionary VP6 codec and TrueCast
software.


RESULTS OF OPERATIONS


SIX MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003

NET REVENUE. Net revenue increased 47% from $620,965 for the six months ended
June 30, 2003 to $910,912 for the six months ended June 30, 2004. Marine product
segment sales were $139,703 or 15% of total revenues for the six months ended
June 30, 2004 compared to $208,062, or 33% of total revenues, for the six months
ended June 30, 2003. Overall, marine product sales decreased $68,359, or 33%.
Security product segment sales were $408,545 or 45% of total revenues for the
six months ended June 30, 2004 compared to $262,439, or 42% of total revenues,
for the six months ended June 30, 2003. Overall, security product sales
increased $146,106, or 56%. DC Transportation product segment sales were
$237,293, or 26% of total revenues for the six months ended June 30, 2004
compared to $150,463, or 24% of total revenues for the six months ended June 30,
2003. Overall, DC Transportation product sales increased $86,830, or 58%. Hotel
& MDU Connectivity product segment sales were $125,371, or 14% of total revenues
for the six months ended June 30, 2004. The Hotel & MDU Connectivity product
segment is a new segment, with initial revenues recorded during the quarter
ended June 30, 2004, therefore, no comparison to prior periods can be made. The
decrease in the marine product segment sales was due to a reduction in the
number of regional boat shows at which the Company participated in the period
ended June 30, 2004. The growth in the security products segment is due
primarily to the products exposure on various home shopping channels. The
revenues for the DC transportation product segment were derived primarily from
initial installations on new fleet customers and new distributors.


COST OF GOODS SOLD. Cost of Goods sold increased 19% from $468,972 (including
inventory write-down) for the six months ended June 30, 2003 to $558,531 for the
six months ended June 30, 2004. As a percentage of net revenue, cost of goods
sold decreased to 61% for the six months ended June 30, 2004 from 76% (including
inventory write-down) for the six months ended June 30, 2003. Cost of goods sold
for the marine products segment decreased $27,710 or 28%, from $97,784 for the
six months ended June 30, 2003 to $70,074 for the same period ended in 2004. As
a percentage of net revenue, cost of goods sold for the marine product segment
increased from 47% for the six months ended June 30, 2003 to 50% for same period
ended in 2004. Cost of goods sold for the security products segment decreased
$11,629 or 4%, from $310,808 (including inventory write-down) for the six months
ended June 30, 2003 to $299,179 for the same period ended in 2004. As a
percentage of revenue, cost of goods sold for the security product segment
decreased from 118% (including inventory write-down) for the six months ended
June 30, 2003 to 73% for same period ended in 2004. Cost of goods sold for the
DC Transportation product segment increased $46,567 or 77% from $60,379 for the
six months ended June 30, 2003 to $106,946 for the same period ended in 2004. As
a percentage of net revenue, cost of goods sold for the DC Transportation
product segment increased from 40% for the six months ended June 30, 2003 to 45%
for same period ended in 2004. Cost of goods sold for the Hotel & MDU
Connectivity product segment was $82,332, and 66% as a percentage of net
revenues, for the six months ended June 30, 2004. The Hotel & MDU Connectivity
product segment is a new segment, with initial revenues recorded during the
quarter ended June 30, 2004, therefore, no comparison to prior periods can be
made.

                                       11
<PAGE>
The increase in the cost of goods sold as a percentage of net revenues for the
marine products segment was driven primarily by the product mix sold during the
period. The decrease in the cost of goods sold as a percentage of net revenues
for the security products segment was driven primarily by the reduction of raw
material and component costs, as the Company's higher cost domestic inventory
was liquidated by year ended December 31, 2003. The increase in the cost of
goods sold as a percentage of net revenues for the DC Transportation product
segment was due to management's decision to implement a volume discount pricing
structure.

GROSS PROFIT MARGIN. Gross profits on sales for the six months ended June 30,
2004 amounted to $352,382, or 39% of net revenues, compared to
$468,972(including inventory write-down), or 24% of net revenues, for the six
months ended June 30, 2003. The marine products segment contributed $69,629 and
$110,278 of the total gross profit for the six months ended June 30, 2004 and
2003, respectively. The security products segment contributed $109,366 and
$(48,369) (including inventory write-down) of the total gross profit for the six
months ended June 30, 2004 and 2003, respectively. The DC Transportation product
segment contributed $130,347 and $90,084 of the total gross profit for the six
months ended June 30, 2004 and 2003, respectively. The Hotel & MDU Connectivity
product segment contributed $43,039 of the total gross profit for the six months
ended June 30, 2004. The Hotel & MDU Connectivity product segment is a new
segment, with initial revenues recorded during the quarter ended June 30, 2004,
therefore, no comparison to prior periods can be made. The gross profit
percentage for the marine products segment decreased from 53% for the six months
ended June 30, 2003 to 50% for the six months ended June 30, 2004. The gross
profit percentage for the security products segment increased from
(18)%(including inventory write-down)for the six months ended June 30, 2003 to
27% for the six months ended June 30, 2004. The gross profit percentage for the
DC Transportation products segment decreased from 60% for the six months ended
June 30, 2003 to 55% for the six months ended June 30, 2004. The gross profit
for the Hotel & MDU Connectivity product segment was 34%.

The decrease in the gross profit as a percentage of net revenues for the marine
products segment was driven primarily by the product mix sold during the period.
The increase in the gross profit as a percentage of net revenues for the
security products segment was driven primarily by the reduction of raw material
and component costs, as the Company's higher cost domestic inventory was
liquidated by year ended December 31, 2003. The decrease in the gross profit as
a percentage of net revenues for the DC Transportation product segment was due
to management's decision to implement a volume discount pricing structure.


SALARIES AND WAGES. Salaries and Wages increased 31% from $440,863 for the six
months ended June 30, 2003 to $578,286 for the six months ended June 30, 2004.
The increase was due to the continued hiring of additional sales associates for
the DC Transportation division and for the new Hotel & MDU Connectivity
division. Salary and Wages is comprised of employee wages and stock
compensation. During the six months ended June 30, 2004 there was no stock based
compensation.

                                       12
<PAGE>
PROFESSIONAL FEES. Professional and consulting fees increased 66% from $279,968
for the six months ended June 30, 2003 to $465,391 for the six months ended June
30, 2004. The increase was due to fees associated with the Company's 2003 year
ended audit, the hiring of a lobbying group related to the promotion of the
Company's DC Transportation products, consulting fees associated with the
improvement of the Company's IT infrastructure, fees for the Company's investor
relations firm, attorneys fees associated with the filing of the Company's
registration statement for its convertible preferred equity offering, and
compensation to the Company's Board of Directors. Professional and consulting
fees include fees paid to attorneys, accountants, and business consultants.
During the six months ended June 30, 2004, professional fees included $160,630
of non-cash stock based compensation.

DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization increased
15% from $259,572 for the six months ended June 30, 2003 to $298,512 for the six
months ended June 30, 2004. The increase is attributable to the amortization of
a new software license acquired on December 31, 2003, and the acquisition of
intellectual property relating to the Company's digital technology on January
20, 2004 (See discussion below). On February 14, 2001, the Company entered into
a Licensing Agreement with the former Chairman, Richard McBride that provided
for a license to exploit certain patented technologies owned by McBride that are
associated with technologies under development in connection with both the
Company's marine and security products segments. The Company exchanged 1,000,000
shares of restricted common stock having a value of $2,130,000 for the license
and related consulting services. The shares were based upon quoted market prices
on the date of the Agreement. The total value of the arrangement was allocated
between the consulting and license in the amounts of $2,066,100 and $63,900,
respectively, based upon the relative fair values of the consulting services and
license. The licensing rights are being amortized over their estimated useful
lives of five years. Annualized amortization of the license rights is
approximately $413,000. On December 12, 2002, the Company entered into a Patent
Assignment Agreement (the "2002 Agreement") with the McBride Estate that
provided for release of the Estate's obligations under the 2001 agreement in
return for termination of the license and assignment of the patents licensed in
the 2001 agreement. In consideration of this assignment, the Company exchanged
$93,856 in receivables from the Estate and 100,000 shares of restricted common
stock having a value of $9,000, based upon quoted market prices on the date of
the 2002 Agreement. The total value of the arrangement and the value of the
licensing rights were allocated to patent costs and are being amortized over the
remaining useful life assigned to these intangible assets of 5 years. On
December 31, 2003, the Company signed a software license agreement with ON2
Technologies for the use of its proprietary CODEC software for enhancing the
video transmission in the Company's new digital power-line products. On January
20, 2004 the Company acquired four patents relating to its new digital
power-line technology (See Note 6 to the Financial Statements).

RESEARCH & DEVELOPMENT. Research and development expense increased 216% from
$56,141 for the six months ended June 30, 2003, to $177,230 for the six months
ended June 30, 2004. The increase was attributable to increased funding for the
development of the Company's new PLVS+ consumer security system and digital
security system. Research and development costs consist of all expenditures
related to the improvement and development of the Company's current product
line, new product development, and engineering consulting fees associated with
licensed technology. Currently, substantially all of the Company's research and
development costs and efforts are dedicated to the development of the security
(both analog and digital), DC Transportation, and Hotel & MDU Connectivity
product segments. For the six months ended June 30, 2004, of the total Research
& Development expenditures, $144,745 or 82% was for development in the security
product segment, $7,500 or 4% for development in the DC Transportation product
segment, and $24,985, or 14% for development in the Hotel & MDU Connectivity
product segment. The cost of the Company's research and development activities
is borne directly by the Company; no amounts are borne by our customers, nor are
any contracts for customer funded research and development currently
anticipated. The Company plans to continue funding the security and DC
transportation product segments for the next several years. For the six months
ended June 30, 2004, research and development expense included $74,069 in
non-cash based stock compensation.

                                       13
<PAGE>
ADVERTISING AND PROMOTION. Advertising and promotions decreased 20% from $65,741
for the six months ended, June 30, 2003 to $52,522 for the six months ended,
June 30, 2004. The decrease was due directly to a reduction in trade show
attendance in both the marine and security product segments. The amount also
includes portions of postage, printing, and travel that are attributable to
advertising and promotions. The Company expects advertising and promotions
expense to increase in future financial periods.


RENT AND UTILITIES. Rent and utilities increased 36% from $48,367 for the six
months ended, June 30, 2003 to $65,702 for the six months ended, June 30, 2004.
The Company leases approximately 2,600 square feet in Tierra Verde, Florida that
serves as its corporate headquarters. The lease is currently on a month to month
basis which began on July 1, 2003 after the original one year lease expired. The
Company also leases space in Clearwater, Florida, on a month to month basis, for
its distribution and warranty & repair center. On April 1, 2004 he Company
signed a one year lease for office space in Pleasant Hill, California to house
its Research & Development staff. On May 1, 2004, the Company signed a one year
lease for office space in Myrtle Beach, South Carolina to house its sales staff
for the Company's Hotels & MDU Connectivity division. Rent and utilities
includes office rent, warehouse rent, storage, telephone, and utilities.

POSTAGE & DELIVERY EXPENSE. Postage & delivery expense decreased 33% from
$77,145 for the six months ended June 30, 2003 to $52,027 for the six months
ended June 30, 2004. The decrease was attributed to a reduction in expedited
freight charges and an increase in the volume of product sold under FOB
Clearwater, FL terms. Freight & delivery expenses include packaging supplies,
postage, and freight costs associated with both administrative and distribution
functions.

ROYALTIES EXPENSE. Royalties' expense increased 114% from $70,000 for the six
months ended June 30, 2003 to $150,000 for the six months ended June 30, 2004.
The increase is a result of a scheduled increase in minimum royalty fees
associated with the Company's license agreement with Satius, Inc. For fiscal
year 2004, the minimum quarterly royalty fee is fixed and is the same for each
quarter. During fiscal year 2003, the quarterly royalty fee increased each
quarter on a negotiated scale. Because of this, the increase in royalty expense
for the six months ended June 30, 2004 is inflated for the period ended. The
actual total increase in minimum royalty fees from fiscal year 2003 to 2004 will
be 20% on a full fiscal year basis. Royalties expense includes royalty payments
made to licensors under contractual license agreements for the use of
intellectual property.

FINANCING FEES EXPENSE. Financing fees expense was $124,106 for the six months
ended June 30, 2004. Financing fees was not used as an expense classification in
prior reporting periods. Financing fees are associated with commissions paid,
and warrants issued, to brokers in conjunction with the Company's convertible
preferred private equity offering (See Note 9 to the financial statements).

OTHER EXPENSES. Other expenses increased 53% from $146,349 for the six months
ended June 30, 2003 to $223,725 for the six months ended June 30, 2004. The
increase was due to three factors. First, travel expenses increased due to the
additional sales staff added at the beginning of the fiscal period and
management travel to China and Korea for research & development and supplier
arrangements. Second, the Company incurred additional insurance premiums with
the addition of a directors & officers policy acquired in November of 2003.
Third, the Company outsourced customer service and sales lead generation to a
local call center. Other expenses include travel, supplies, property taxes,
insurance, bank charges, temporary labor, outsourced labor, and various other
expenses that are classified as miscellaneous.

                                       14
<PAGE>
THREE MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003

NET REVENUE. Net revenue increased 103% from $275,364 for the three months ended
June 30, 2003 to $559,713 for the three months ended June 30, 2004. Marine
product segment sales were $52,104 or 9% of total revenues for the three months
ended June 30, 2004 compared to $70,172, or 25% of total revenues, for the three
months ended June 30, 2003. Overall, marine product sales decreased $18,068, or
26%. Security product segment sales were $205,970 or 37% of total revenues for
the three months ended June 30, 2004 compared to $112,561, or 41% of total
revenues, for the three months ended June 30, 2003. Overall, security product
sales increased $93,409, or 83%. DC Transportation product segment sales were
$176,268, or 31% of total revenues for the three months ended June 30, 2004
compared to $92,631, or 34% of total revenues for the three months ended June
30, 2003. Hotel & MDU Connectivity product segment sales were $125,371, or 22%
of total revenues for the three months ended June 30, 2004. The Hotel & MDU
Connectivity product segment is a new segment, with initial revenues recorded
during the quarter ended June 30, 2004, therefore, no comparison to prior
periods can be made. The decrease in the marine product segment sales was due to
a reduction in the number of regional boat shows at which the Company
participated in the quarter ended June 30, 2004. The growth in the security
products segment is due primarily to the products exposure on various home
shopping channels. The revenues for the DC transportation product segment were
derived primarily from initial installations on new fleet customers and new
distributors.

COST OF GOODS SOLD. Cost of Goods sold increased 67% from $206,139 (including
inventory write-down) for the three months ended June 30, 2003 to $344,165 for
the three months ended June 30, 2004. As a percentage of net revenue, cost of
goods sold decreased to 61% for the three months ended June 30, 2004 from 75%
(including inventory write-down) for the three months ended June 30, 2003. Cost
of goods sold for the marine products segment decreased $7,891 or 23%, from
$34,175 for the three months ended June 30, 2003 to $26,284 for the same period
ended in 2004. As a percentage of net revenue, cost of goods sold for the marine
product segment increased from 49% for the three months ended June 30, 2003 to
50% for same period ended in 2004. Cost of goods sold for the security products
segment increased $24,256 or 19%, from $131,095 (including inventory write-down)
for the three months ended June 30, 2003 to $155,351 for the same period ended
in 2004. As a percentage of revenue, cost of goods sold for the security product
segment decreased from 116% (including inventory write-down) for the three
months ended June 30, 2003 to 75% for same period ended in 2004. Cost of goods
sold for the DC Transportation product segment increased $39,329 or 96% from
$40,869 for the three months ended June 30, 2003 to $80,198 for the same period
ended in 2004. As a percentage of net revenue, cost of goods sold for the DC
Transportation product segment increased from 44% for the three months ended
June 30, 2003 to 45% for same period ended in 2004. Cost of goods sold for the
Hotel & MDU Connectivity product segment was $82,332, and 66% as a percentage of
net revenues, for the three months ended June 30, 2004. The Hotel & MDU
Connectivity product segment is a new segment, with initial revenues recorded
during the quarter ended June 30, 2004, therefore, no comparison to prior
periods can be made.


The increase in the cost of goods sold as a percentage of net revenues for the
marine products segment was driven primarily by the product mix sold during the
period. The decrease in the cost of goods sold as a percentage of net revenues
for the security products segment was driven primarily by the reduction of raw
material and component costs, as the Company's higher cost domestic inventory
was liquidated by year ended December 31, 2003. The increase in the cost of
goods sold as a percentage of net revenues for the DC Transportation product
segment was due to management's decision to implement a volume discount pricing
structure.


                                       15
<PAGE>
GROSS PROFIT MARGIN. Gross profit on sales for the three months ended June 30,
2004 amounted to $215,548, or 39% of net revenues, compared to $69,225(including
inventory write-down), or 25% of net revenues, for the three months ended June
30, 2003. The marine products segment contributed $25,820 and $35,997 of the
total gross profit for the three months ended June 30, 2004 and 2003,
respectively. The security products segment contributed $50,619 and $(18,534)
(including inventory write-down) of the total gross profit for the three months
ended June 30, 2004 and 2003, respectively. The DC Transportation products
segment contributed $96,070 and $51,762 of the total gross profit for the three
months ended June 30, 2004 and 2003, respectively. The Hotel & MDU Connectivity
product segment contributed $43,039 of the total gross profit for the three
months ended June 30, 2004. The Hotel & MDU Connectivity product segment is a
new segment, with initial revenues recorded during the quarter ended June 30,
2004, therefore, no comparison to prior periods can be made. The gross profit
percentage for the marine products segment decreased from 51% for the three
months ended June 30, 2003 to 50% for the three months ended June 30, 2004. The
gross profit percentage for the security products segment increased from
(16)%(including inventory write-down)for the three months ended June 30, 2003 to
25% for the three months ended June 30, 2004. The gross profit percentage for
the DC Transportation products segment decreased from 56% for the three months
ended June 30, 2003 to 55% for the three months ended June 30, 2004. The gross
profit for the Hotel & MDU Connectivity product segment was 34%.


The decrease in the gross profit as a percentage of net revenues for the marine
products segment was driven primarily by the product mix sold during the period.
The increase in the gross profit as a percentage of net revenues for the
security products segment was driven primarily by the reduction of raw material
and component costs, as the Company's higher cost domestic inventory was
liquidated by year ended December 31, 2003. The decrease in the gross profit as
a percentage of net revenues for the DC Transportation product segment was due
to management's decision to implement a volume discount pricing structure.


SALARIES AND WAGES. Salaries and Wages increased 45% from $220,038 for the three
months ended June 30, 2003 to $319,550 for the three months ended June 30, 2004.
The increase was due to two factors. The increase was due to the continued
hiring of additional sales associates for the DC Transportation division and for
the new Hotel & MDU Connectivity division. Salary and Wages is comprised of
employee wages and stock compensation. During the three months ended June 30,
2004 there was no stock based compensation.

PROFESSIONAL FEES. Professional and consulting fees increased 58% from $139,715
for the three months ended June 30, 2003 to $220,899 for the three months ended
June 30, 2004. The increase was due to the hiring of a lobbying group related to
the promotion of the Company's DC Transportation products, consulting fees
associated with the improvement of the Company's IT infrastructure, fees for the
Company's investor relations firm, attorneys fees associated with the filing of
the Company's registration statement for its convertible preferred equity
offering, and compensation to the Company's Board of Directors. Professional and
consulting fees include fees paid to attorneys, accountants, and business
consultants. During the three months ended June 30, 2004, professional fees
included $62,800 of non-cash stock based compensation.

DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization increased
16% from $129,254 for the three months ended June 30, 2003 to $150,580 for the
three months ended June 30, 2004. The increase is attributable to the
amortization of a new software license acquired on December 31, 2003, and the
acquisition of intellectual property relating to the Company's digital
technology on January 20, 2004 (See discussion below). On February 14, 2001, the
Company entered into a Licensing Agreement with the former Chairman, Richard
McBride that provided for a license to exploit certain patented technologies
owned by McBride that are associated with technologies under development in
connection with both the Company's marine and security products segments. The
Company exchanged 1,000,000 shares of restricted common stock having a value of
$2,130,000 for the license and related consulting services. The shares were
based upon quoted market prices on the date of the Agreement. The total value of
the arrangement was allocated between the consulting and license in the amounts
of $2,066,100 and $63,900, respectively, based upon the relative fair values of
the consulting services and license. The licensing rights are being amortized
over their estimated useful lives of five years. Annualized amortization of the
license rights is approximately $413,000. On December 12, 2002, the Company
entered into a Patent Assignment Agreement (the "2002 Agreement") with the
McBride Estate that provided for release of the Estate's obligations under the
2001 agreement in return for termination of the license and assignment of the
patents licensed in the 2001 agreement. In consideration of this assignment, the
Company exchanged $93,856 in receivables from the Estate and 100,000 shares of
restricted common stock having a value of $9,000, based upon quoted market
prices on the date of the 2002 Agreement. The total value of the arrangement and
the value of the licensing rights were allocated to patent costs and are being
amortized over the remaining useful life assigned to these intangible assets of
5 years. On December 31, 2003, the Company signed a software license agreement
with ON2 Technologies for the use of its proprietary CODEC software for
enhancing the video transmission in the Company's new digital power-line
products. On January 20, 2004 the Company acquired four patents relating to its
new digital power-line technology (See Note 6 to the Financial Statements).

                                       16
<PAGE>
RESEARCH & DEVELOPMENT. Research and development expense increased 612% from
$22,275 for the three months ended June 30, 2003, to $158,557 for the three
months ended June 30, 2004. The increase was attributable to increased funding
for the development of the Company's new PLVS+ consumer security system and
digital security system. Research and development costs consist of all
expenditures related to the improvement and development of the Company's current
product line, new product development, and engineering consulting fees
associated with licensed technology. Currently, substantially all of the
Company's research and development costs and efforts are dedicated to the
development of the security (both analog and digital), DC Transportation, and
Hotel & MDU Connectivity product segments. For the three months ended June 30,
2004, of the total Research & Development expenditures, $128,722 or 81% was for
development in the security product segment, $4,850 or 3% for development in the
DC Transportation product segment, and $24,985, or 16% for development in the
Hotel & MDU Connectivity product segment. The cost of the Company's research and
development activities is borne directly by the Company; no amounts are borne by
our customers, nor are any contracts for customer funded research and
development currently anticipated. The Company plans to continue funding the
security and DC transportation product segments for the next several years. For
the three months ended June 30, 2004, research and development expense included
$74,069 in non-cash based stock compensation.


ADVERTISING AND PROMOTION. Advertising and promotions decreased 22% from $35,537
for the three months ended, June 30, 2003 to $27,633 for the three months ended,
June 30, 2004. The decrease was due directly to a reduction in trade show
attendance in both the marine and security product segments. The amount also
includes portions of postage, printing, and travel that are attributable to
advertising and promotions. The Company expects advertising and promotions
expense to increase in future financial periods.


RENT AND UTILITIES. Rent and utilities increased 90% from $22,454 for the three
months ended, June 30, 2003 to $42,647 for the three months ended, June 30,
2004. The Company leases approximately 2,600 square feet in Tierra Verde,
Florida that serves as its corporate headquarters. The lease is currently on a
month to month basis which began on July 1, 2003 after the original one year
lease expired. The Company also leases space in Clearwater, Florida, on a month
to month basis, for its distribution and warranty & repair center. On April 1,
2004 he Company signed a one year lease for office space in Pleasant Hill,
California to house its Research & Development staff. On May 1, 2004, the
Company signed a one year lease for office space in Myrtle Beach, South Carolina
to house its sales staff for the Company's Hotels & MDU Connectivity division.
Rent and utilities includes office rent, warehouse rent, storage, telephone, and
utilities.

                                       17
<PAGE>
POSTAGE & DELIVERY EXPENSE. Postage & delivery expense decreased 37% from
$22,616 for the three months ended June 30, 2003 to $31,045 for the three months
ended June 30, 2004. The decrease was attributed to a reduction in expedited
freight charges and an increase in the volume of product sold under FOB
Clearwater, FL terms. Freight & delivery expenses include packaging supplies,
postage, and freight costs associated with both administrative and distribution
functions.


ROYALTIES EXPENSE. Royalties' expense increased 50% from $50,000 for the three
months ended June 30, 2003 to $75,000 for the three months ended June 30, 2004.
The increase is a result of a scheduled increase in minimum royalty fees
associated with the Company's license agreement with Satius, Inc. For fiscal
year 2004, the minimum quarterly royalty fee is fixed and is the same for each
quarter. During fiscal year 2003, the quarterly royalty fee increased each
quarter on a negotiated scale. Because of this, the increase in royalty expense
for the three months ended June 30, 2004 is inflated for the period ended. The
actual total increase in minimum royalty fees from fiscal year 2003 to 2004 will
be 20% on a full fiscal year basis. Royalties expense includes royalty payments
made to licensors under contractual license agreements for the use of
intellectual property.

FINANCING FEES EXPENSE. Financing fees expense was $55,356 for the three months
ended June 30, 2004. Financing fees was not used as an expense classification in
prior reporting periods. Financing fees are associated with commissions paid,
and warrants issued, to brokers in conjunction with the Company's convertible
preferred private equity offering (See Note 9 to the financial statements).

OTHER EXPENSES. Other expenses increased 89% from $56,580 for the three months
ended June 30, 2003 to $107,156 for the three months ended June 30, 2004. The
increase was due to two factors. First, the Company incurred additional
insurance premiums with the addition of a directors & officers policy acquired
in November of 2003. Second, the Company outsourced customer service and sales
lead generation to a local call center. Other expenses include travel, supplies,
property taxes, insurance, bank charges, temporary labor, outsourced labor, and
various other expenses that are classified as miscellaneous.



LIQUIDITY & CAPITAL RESOURCES
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company has incurred
operating losses of $1,874,306 and $1,931,120 during the six months ended June
30, 2004 and 2003, respectively. In addition, during those periods, the Company
has used cash of $1,519,208 and $526,606, respectively, in its operating
activities. These conditions raise substantial doubt about the Company's ability
to continue as a going concern.

The Company has devoted significant efforts in the further development and
marketing of products in its Security Products Segment, which, while now showing
improved revenues cannot yet be characterized as sufficient to fund operations
for any period of time.

The Company's ability to continue as a going concern is dependent upon (i)
raising additional capital to fund operations (ii) the further development of
the Security, DC Transportation, and Hotel/MDU Connectivity Products Segment
products and (iii) ultimately the achievement of profitable operations. During
the six months ended June 30, 2004, the Company raised $1,315,000 from the sale
of convertible preferred securities. Management is currently addressing several
additional financing sources to fund operations until profitability can be
achieved. However, there can be no assurance that additional financing can be
obtained on conditions considered by management to be reasonable and
appropriate, if at all. The financial statements do not include any adjustments
that might arise as a result of this uncertainty.

                                       18
<PAGE>
During the six months ended June 30, 2004 the Company funded its losses from
operations through the following vehicles:

     o    The receipt of $1,315,000 in proceeds through a convertible  preferred
          private equity offering exempt from registration under Section 4(2) of
          the Securities Act of 1933, and Rule 506 of Regulation D, thereof. The
          private  placement was conducted as a "Unit  Offering" with each $8.00
          Unit consisting of 8 shares of Series A Convertible Preferred stock, 2
          shares  of  restricted  common  stock  and a warrant  to  purchase  an
          additional 3 shares of common stock at $.50 per share.  In addition to
          a 6% coupon per share, the Series A Convertible  Preferred stock has a
          $1.00 per share value which may be converted to shares of common stock
          at a variable rate but not less than $.25 or 4 shares of common stock.
          The securities underlying the offering were subsequently registered on
          Form SB-2 with the Securities & Exchange Commission.  The registration
          was filed on March 30, 2004 and became effective on April 9, 2004 (See
          note 9 to the financial statements).

     o    The receipt of  $150,000  through the  issuance  of  short-term  notes
          payable to related parties (See Note 7 to the financial statements).

In addition, as of June 30, 2004, the Company had completed a $1,275,000 private
equity placement with certain institutional investors for 10 million shares of
the Company's common stock, and issued warrant to purchase an additional
1,500,000 shares (See Note 9 to the financial statements).

The Company has no material commitments for the purchase of raw materials or
components. The Company issues purchase orders for these items for the purposes
of fulfilling customer orders and maintaining reasonable levels of inventory.


Item 3.   CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based closely on the definition of "disclosure
controls and procedures" in Rule 13a-14(c). In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

An evaluation was carried out under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-14(c) under the Securities
Exchange Act of 1934) as of June 30, 2004. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the design and
operation of these disclosure controls and procedures were effective. No
significant changes were made in our internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.


                                       19
<PAGE>
PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings

Litigation, claims and assessment:

On October 28, 2002, the Company is a defendant in a lawsuit filed by
Pro-Marketing of Texas, Inc. in the Circuit Court of Pinellas County, Florida.
The suit alleges breach of contract relating to a payment of a convertible
debenture, with a maximum potential exposure of $100,000 plus interests costs
and attorneys fees. The Company intends to vigorously contest the claim. As of
June 30, 2004, the matter is in the stage of discovery and it is too early to
determine the ultimate outcome.

The Securities and Exchange Commission's Division of Enforcement began an
investigation in January 2001 relating to our financial results and common stock
performance during 2000. As a result Richard McBride, former chairman, president
and chief executive officer, resigned from all positions with the Company.
Further, all executives involved with the allegations were replaced during 2001
and Mr. McBride passed away in October 2001. We have cooperated fully with the
SEC, which included the testimony of former employees, Col. Larry Hoffman
(retired), and Christy Mutlu. Current officers and employees Douglas Bauer, CFO,
George Bernardich, CEO, and J. R. Cox, former director, have also testified
before the SEC.

On February 12, 2004, the SEC's staff advised the Company, through its counsel,
that they intend to recommend that the SEC bring a civil injunctive action
against the Company and certain of its current and former officers and/or
directors. As it relates to the Company, the Staff alleges that:

         The Company violated Section 17(a) of the Securities Act of 1933
         ("Securities Act") and Sections 10(b), 13(a), 13(b)(2)(A), and
         13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") and
         Rules 10b-5, 13a-1, 13a-11, 13a-13, and 12b-20 thereunder, and is
         liable for civil penalties pursuant to Section 20(d) of the Securities
         Act and Section 21(d)(3)(A) of the Exchange Act.

The SEC's Staff, in accordance with Rule 5(c) of the Commission's Rules of
Informal and Other Procedures, 17 C.F.R. ss.202.5(c), have afforded the Company
the opportunity to make a "Wells Submission" regarding the Staff's intended
recommendations. The Company has retained its current counsel to prepare such a
Wells Submission on its behalf, and it believes that there are meritorious
factual, legal and policy reasons why the Staff's recommendation should not be
followed by the Commission. However, at this time, it is impossible to determine
whether the Staff's recommendation will be adopted by the Commission, or will be
modified in some fashion.

If the Staff's present recommendation is accepted by the Commission and a civil
injunctive action were to be subsequently filed against the Company, no decision
has been made at this time as to whether the Company would vigorously defend
that matter, or would seek to reach a negotiated settlement. The Staff has
informally advised counsel of their belief that if they were successful in
litigating this matter, a civil penalty in excess of $100,000 could be imposed
against the Company. However, counsel believes that there are numerous
mitigating factors which could cause this amount to be reduced, even if the
Company's efforts to defend the suit were unsuccessful. Therefore it is
impossible at this time to estimate the likelihood of an unfavorable outcome, or
to estimate the amount of any such loss from this matter.


                                       20
<PAGE>
Item 2.   Changes in Securities and Use of Proceeds.

On January 20, 2004, the Company issued 441,176 shares of restricted common
stock for the acquisition of four patents solidifying the Company's digital
power line technology. The transaction was based on a 20 day average closing
price of the Company's common stock and was valued at $150,000 (See note 9 to
the financial statements). This sale was exempt under Section 4(2) of the
Securities Act of 1933. No advertising or general solicitation was employed in
offering the securities. Except as otherwise noted, the investors were
sophisticated investors and transfer was restricted by Powerlinx, Inc. in
accordance with the requirements of the Securities Act of 1933. In addition the
investors were provided with access to our Securities and Exchange Commission
filings

On February 26, 2004, the Company issued 900,000 shares of restricted common
stock to the members of the Board of Directors in accordance with the Board of
Directors compensation resolution approved on October 15, 2003. The value of the
compensation was $180,000, based on the closing market price of the Company's
common stock on the date of issuance. The cost is being amortized over the life
of each Board members term, which is one year. (See note 9 to the financial
statements). This sale was exempt under Section 4(2) of the Securities Act of
1933.

During the six months ended June 30, 2004, 232,500 shares of the Company's
restricted common stock were sold through a private equity placement exempt from
registration under Section 4(2) of the Securities Act of 1933, and Rule 506 of
Regulation D, thereof. The placement was open to select officers, employees,
representatives of the Company, and accredited investors for the purchase of
restricted common stock. The Company received total proceeds from the offering
of $23,250 in 2003. The $3,250 stock subscription receivable was from a 2003
private placement and it was paid in full as of June 30, 2004.


On April 6, 2004, the Company issued 125,000 shares of restricted common stock
to a new member of the Board of Directors in accordance with the Board of
Directors compensation resolution approved on October 15, 2003. The value of the
compensation was $25,000, based on the closing market price of the Company's
common stock on the date of issuance. The cost is being amortized over the life
of each Board members term, which is one year. (See note 9 to the financial
statements). This sale was exempt under Section 4(2) of the Securities Act of
1933.

On April 6, 2004 the Company issued 85,000 shares of restricted common stock,
valued at $15,300, as pre-payment for one year of rent, commencing on May 15,
2004, for the warehouse space that the Company leases for its distribution
center in Clearwater, Florida. The transaction was valued based on the closing
market price of the Company's common stock on the date of issuance.

On May 25, 2004 the Company issued 73,325 shares of restricted common stock as
payment for $13,915 of liabilities owed by the Company.

On May 28, 2004, the Company issued 932,000 shares of free trading common stock
to professional research and development consultants relating to the development
of the Company's security and hotel/MDU connectivity products. The common stock
was valued based upon the closing market price on the date of issuance, or
$177,080. The shares were register on a Form S-8 registration statement filed
with the Securities & Exchange Commission on May 28, 2004.

On June 1, 2004, the Company issued 250,000 shares of restricted common stock to
TSK Design Group, LLC for development and design services relating to the
Company's security products. The common stock was valued based upon the closing
market price on the date of contract approval (May 4, 2004), or $47,500.


                                       21
<PAGE>
Item 3.   Defaults Upon Senior Securities.

          Not Applicable.

Item 4.   Submission of Matters to a Vote of Security Holders.

          None

Item 5.   Other Information

On June 30, 2004, the Company signed and agreement for a $1.275 million private
placement to certain institutional investors for 10 million shares of restricted
common stock, together with 1.5 million warrants to acquire additional shares of
common stock, and registration rights. The stock was priced at $.1275 per share,
and the warrants were priced at $.50 per share and expire on June 30, 2009.

Item 6.   Exhibits and Reports of Form 8-K


      (a) Exhibits:

          31.1 Certification  by Chief  Financial  Officer  pursuant to Sarbanes
               -Oxley Section 302.
          31.2 Certification  by Chief  Executive  Officer  pursuant to Sarbanes
               -Oxley Section 302.

          32.1 Certification  by Chief Financial  Officer pursuant to 18 U.S. C.
               Section 1350
          32.2 Certification  by Chief Executive  Officer pursuant to 18 U.S. C.
               Section 1350

      (b) Reports on Form 8-K
<TABLE>
<CAPTION>
         ------------------------------------ --------------------------------------------------------------------
          DATE OF REPORT                       ITEM REPORTED ON
         ------------------------------------ --------------------------------------------------------------------
<S>              <C>                                   <C>
          March 24, 2004                       On March 19,  2004,  we concluded  our series A  convertible
                                               preferred   financing  in  which  we  issued  228,190  units
                                               consisting of (i)  1,825,520  shares of series A convertible
                                               preferred  stock;  (ii) Class B warrants to purchase 684,570
                                               shares  of  common  stock;   and  (iii)  456,380  shares  of
                                               restricted  common stock.  We received an aggregate total of
                                               $1,825,520,  which includes an aggregate of $260,520 in debt
                                               that was cancelled.

         ------------------------------------ --------------------------------------------------------------------
</TABLE>


                                       22
<PAGE>
                                  SIGNATURES


  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of St. Petersburg,
State of Florida on May 16, 2004.


                  POWERLINX, INC.




                  By: /s/ GEORGE S. BERNARDICH, III
                         ----------------------------
                          GEORGE S. BERNARDICH, III
                          Chief Executive Officer

                  By: /s/ DOUGLAS BAUER
                         ----------------------------
                          DOUGLAS BAUER
                          Chief Financial Officer



                                       23


<PAGE>
 EXHIBIT 31.1


                                 Powerlinx, Inc.
              CERTIFICATION PURSUANT TO SARBANES-OXLEY SECTION 302



I, Douglas Bauer, certify that:

     1. I have reviewed this quarterly report on Form 10-QSB of Powerlinx, Inc;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
Small  business  issuer as of, and for, the periods  presented in this quarterly
report;

     4.  The  Small  business  issuer's  other  certifying  officer  and  I  are
responsible for establishing and maintaining  disclosure controls and procedures
(as  defined  in  Exchange  Act Rules  13a-15(e)  and  15d-15(e))  for the Small
business issuer and have:


          (a)  Designed such  disclosure  controls and procedures or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               Small business issuer including its consolidated  subsidiary,  is
               made known to us by others  within those  entities,  particularly
               during the period in which this report is being prepared;

          (b)  Evaluated  the  effectiveness  of  the  Small  business  issuer's
               disclosure  controls and  procedures and presented in this report
               our  conclusions   about  the  effectiveness  of  the  disclosure
               controls and  procedures,  as of the end of the period covered by
               this report based on such evaluation; and

          (c)  Disclosed  in  this  report  any  change  in the  Small  business
               issuer's internal control over financial  reporting that occurred
               during the Small  business  issuer's most recent  fiscal  quarter
               (the Small business issuer's fourth fiscal quarter in the case of
               an annual report) that has materially affected,  or is reasonably
               likely to materially affect, the Small business issuer's internal
               control over financial reporting; and

     5.  The  Small  business  issuer's  other  certifying  officer  and I  have
disclosed,  based  on our  most  recent  evaluation  of  internal  control  over
financial  reporting,  to the Small  business  issuer's  auditors  and the audit
committee  of the  Small  business  issuer's  board  of  directors  (or  persons
performing the equivalent functions);

          (a)  All  significant  deficiencies  in the  design  or  operation  of
               internal  control over financial  reporting  which are reasonably
               likely to adversely affect the Small business issuer's ability to
               record, process, summarize and report financial information; and

          (b)  Any fraud,  whether or not material,  that involves management or
               other employees who have a significant role in the Small business
               issuer's internal controls over financial reporting.

Date: August 16, 2004

 /s/ Douglas Bauer
------------------
Douglas Bauer
Chief Financial Officer