SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q


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

                  For the quarterly period ended March 31, 2005

                 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.
                         1700 66th St. North, Suite 300
                             ST.PETERSBURG, FL 33710

                                 (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 May 12, 2005: 174,376,130

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


                                       1

<PAGE>

                                 POWERLINX, INC.


                                      INDEX

<TABLE>
<CAPTION>

Part I.  FINANCIAL INFORMATION                                               Page No.


<S>                                                                            <C>
         Item 1. Condensed Financial Statements

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

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

                        Powerlinx, Inc. Condensed Consolidated
                        Statements of Cash Flows (Unaudited)...................F-3

                        Powerlinx, Inc. Notes to
                        Condensed Consolidated Financial Statements March 31,
                        2004 and 2003..........................................F-5

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

         Item 3. Controls and Procedures.........................................8

Part II. OTHER INFORMATION

         Item 1. Legal Proceedings...............................................9

         Item 2. Changes in Securities and Use of Proceeds......................10

         Item 3. Defaults Upon Senior Securities................................11

         Item 4. Submission of Matters to a Vote of Security Holders............11

         Item 5. Other Information..............................................11

         Item 6. Exhibits and Reports on Form 8-K...............................11

Signatures......................................................................13
</TABLE>


                                       2

<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements






                                 POWERLINX, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 2005 AND DECEMBER 31, 2004

<TABLE>
<CAPTION>

                                     ASSETS
                                                                                        March 31,
                                                                                         2005           December 31,
                                                                                      (Unaudited)         2004
                                                                                -----------------  ------------------
<S>                                                                                    <C>                 <C>
Current assets:
   Cash and cash equivalents                                                    $          24,739  $         497,663
   Accounts receivable, net                                                               513,355            282,480
   Employee Advances                                                                       70,700             51,930
   Inventories                                                                            632,371            913,467
   Prepaid expenses and other current assets                                               85,493             48,990
   Assets of discontinued operations                                                       82,371            137,904
                                                                                -----------------  ------------------
     Total current assets                                                               1,409,029          1,932,434

Intangible assets, net                                                                    982,212          1,124,479
Deposits                                                                                   20,334             40,334
Property and equipment, net                                                               273,968            297,044
                                                                                -----------------  ------------------
     Total assets                                                               $       2,685,543  $       3,394,291
                                                                                =================  ==================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                             $         711,088  $         528,961
   Accrued expenses                                                                       268,404            164,912
   Accrued severance payable, current portion                                             407,000                  -
   Deferred revenue                                                                       109,268            173,483
   Due to related parties                                                                  38,623             60,151
   Current maturities of notes payable                                                    301,765              1,765
   Litigation settlement                                                                  300,000            300,000
   Liabilities of discontinued operations                                                 190,529             84,603
                                                                                -----------------  ------------------
     Total current liabilities                                                          2,326,677          1,313,875

Accrued severance payable, less current portion                                           144,000                  -
Note payable, less current maturities                                                      28,235             28,235
                                                                                -----------------  ------------------

     Total Liabilities                                                                  2,498,912          1,342,110
                                                                                -----------------  ------------------

Commitments and contingencies (Note 10)                                                        -                   -

Stockholders' equity:
   Series A convertible preferred stock, $1.00 par value; authorized 10,000,000
     shares; issued 1,825,520 shares;
     outstanding (760,608 - 2005; 880,608 - 2004)                                        670,703             776,519
   Common stock, $.001 par value, authorized
     250,000,000 shares; issued (174,849,705 - 2005;
     173,119,705 - 2004) outstanding (174,376,130 -
     2005; 172,646,130 - 2004)                                                           174,376             172,646
   Additional paid-in capital                                                         21,598,070          21,335,484
   Treasury stock, at cost, 473,575 shares                                              (287,757)           (287,757)
   Accumulated deficit                                                               (21,968,761)        (19,944,711)
                                                                                -----------------  ------------------
   Total stockholders' equity                                                            186,631           2,052,181
                                                                                -----------------  ------------------
     Total liabilities and stockholders' equity                                 $      2,685,543   $       3,394,291
                                                                                =================  ==================
         The accompanying notes are an integral part of these condensed
                             financial statements.
</TABLE>

                                       F-1

<PAGE>



                                 POWERLINX, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         Three Months Ended
                                   March 31,

                                                                                       2005                2004
                                                                                -----------------  ------------------
<S>                                                                                     <C>                <C>
Net revenue                                                                     $        427,434   $         351,199
Cost of goods sold                                                                       315,182             214,366
                                                                                -----------------  ------------------

            Gross profit                                                                 112,252             136,833
                                                                                -----------------  ------------------

Operating expenses:
   Salaries and wages                                                                    424,207             333,736
   Professional and consulting fees                                                      388,446             169,492
   Depreciation and amortization                                                         166,890             147,932
   Research and development                                                              171,119              18,673
   Advertising and promotions                                                             56,170              24,889
   Rent and utilities                                                                     48,145              23,055
   Travel & entertainment                                                                 51,261              56,119
   Royalties expense                                                                           -              75,000

   Other expenses                                                                        107,442             150,182
   Restructuring charges                                                                 582,683                   -
                                                                                -----------------  -----------------

     Total operating expenses                                                          1,996,363             999,078
                                                                                -----------------  ------------------

Loss from operations                                                                  (1,884,111)           (862,245)

Interest income (expense), net                                                            (1,057)                131
                                                                                 ----------------  ------------------

Loss before discontinued operations                                                   (1,885,168)           (862,114)

Loss from discontinued operations                                                       (138,882)                  -
                                                                                 ----------------  ------------------

Net loss                                                                             ($2,024,050)          ($862,114)
                                                                                =================  ==================

Net loss per common share                                                                  ($.01)              ($.01)

Weighted average common shares outstanding, basic
   and diluted                                                                       172,700,598         136,225,783

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


                                       F-2

<PAGE>

                                 POWERLINX, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                                       Three Months Ended
                                   March 31,
                                                                                      2005                2004
                                                                                -----------------  ------------------
<S>                                                                                   <C>                  <C>
Cash flows from operating activities:
   Net loss                                                                     $     (2,024,050)  $       (862,114)
   Adjustments to reconcile net loss to net cash flows
     from operating activities:
       Depreciation                                                                       24,623              21,860
       Amortization                                                                      142,267             126,072
       Stock based compensation                                                          100,750             274,955
       Changes in operating assets and liabilities:
         Accounts receivable                                                            (230,875)           (165,062)
         Employee advances                                                               (18,770)                  -
         Inventories                                                                     281,096               2,811
         Prepaid expenses and other current assets                                        21,247            (175,813)
         Assets of discontinued operations                                                55,533                   -
         Deposits                                                                         20,000                   -
         Accounts payable                                                                182,127            (123,979)
         Accrued expenses                                                                103,492             (25,841)
         Accrued severance                                                               551,000                   -
         Due to related parties                                                          (21,528)                  -
         Deferred revenue                                                                (64,215)                  -
         Liabilities of discontinued operations                                          105,926                   -
                                                                                -----------------  ------------------


Net cash flows from operating activities                                                (771,377)           (927,111)
                                                                                -----------------  ------------------

Cash flows from investing activities:
   Purchases of property and equipment                                                    (1,547)            (16,057)
                                                                                -----------------  ------------------

Net cash flows from investing activities                                                  (1,547)            (16,057)
                                                                                -----------------  ------------------

Cash flows from financing activities:
   Proceeds from sales of equity units                                                         -
1,315,000
   Proceeds from stock subscription receivable                                                 -
3,250
   Proceeds from notes payable                                                           400,000                   -
   Repayment of notes payable                                                           (100,000)                  -
                                                                                -----------------  ------------------


Net cash flows from financing activities                                                 300,000           1,318,250
                                                                                -----------------  ------------------

Net change in cash and cash equivalents                                                 (472,924)            375,082
Cash and cash equivalents at beginning of period                                         497,663             160,157
                                                                                -----------------  ------------------

Cash and cash equivalents at end of period                                      $         24,739   $         535,239
                                                                                =================  ==================
         The accompanying notes are an integral part of these condensed
                             financial statements.
</TABLE>

                                       F-3
<PAGE>
                                 POWERLINX, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
                                   (Unaudited)
<TABLE>
<CAPTION>

                   NONCASH INVESTING AND FINANCING ACTIVITIES

                                                                                       Three Months Ended
                                   March 31,
                                                                                    2005                2004
                                                                                ------------------  ------------------

<S>                                                                                   <C>                 <C>
Conversion of vendor debt to equity units                                       $               -   $          21,000
                                                                                ==================  ==================

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
                                                                                ==================  ==================

Conversion of Series A Preferred stock
   to common stock                                                              $         105,816   $               -
                                                                                ==================  ==================

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

                                      F-4

<PAGE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004



1.   Basis of presentation and significant accounting policies:

     The accompanying unaudited condensed consolidated 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
     consolidated 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 three months ended
     March 31, 2005 and 2004. These unaudited  consolidated financial statements
     should be read in  conjunction  with the Company's  audited 2004  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, 2004. Operating results for the three month period ended
     March 31, 2005, 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,

                                       F-5

<PAGE>
                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


     Accounting for Stock Issued to 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>
                                                                                    March 31,           March 31,
                                                                                      2005                2004
                                                                                    ---------           --------

<S>                                                                                  <C>                   <C>
       Net loss, as reported                                                    $     (2,024,050)  $        (862,114)
                                                                                =================  ==================
       Stock-based compensation, as reported                                    $       (100,750)  $        (274,955)
                                                                                =================  =================
       Stock-based compensation under fair value method                         $       (100,750)  $        (274,955)
                                                                                =================  ==================
       Pro-forma net loss under fair value method                               $     (2,024,050)  $        (862,114)
                                                                                =================  ==================

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

     Concentrations:

     Accounts  receivable are concentrated in the Security and DC Transportation
     products   industry  and  credit  losses  have  been  within   management's
     expectations.  Although  the  Company  serves a large and  varied  group of
     customers,  two customers  accounted for 40% of total revenue for the three
     months ended March 31, 2005 while two customers  accounted for 39% of total
     revenue for the three months ended March 31, 2004.

                                      F-6
<PAGE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


    The  Company's  product  assembly is dependent  upon the  operations of two
     primary  labor  suppliers,  one of which is outside the United  States.  At
     March 31, 2005 and December 31, 2004 a non-material amount of 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  consolidated  financial  statements  have been  prepared
     assuming that the Company will continue as a going  concern.  However,  the
     Company has incurred operating losses of $1,884,111 and $862,245 during the
     three  months  ended March 31, 2005 and 2004,  respectively.  In  addition,
     during those  quarters,  the Company has used cash of $771,377 and $927,111
     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 the Security and DC  Transportation  Products Segment products and (iii)
     ultimately  the  achievement  of  profitable  operations.  During the three
     months ended March 31, 2005, the Company  raised  $300,000 from issuance of
     two separate notes payable (See Note 6). Management is currently addressing
     several additional financing sources to fund operations until profitability
     can be achieved.  Management  is currently  addressing  several  additional
     financing  sources to fund operations until  profitability  can be achieved
     (See Note 11). 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-7
<PAGE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004

3.   Segment information:

     The Company operates in three identifiable  industry  segments.  The Marine
     Products Segment markets and sells  underwater video cameras,  lighting and
     accessories  principally to retail sporting goods businesses throughout the
     United States. The Security Products Segment develops,  markets,  licenses,
     and sells  proprietary  power  line video  security  devices  and  consumer
     electronic  products;  to  retailers,   governmental  agencies,  commercial
     businesses,  and original  equipment  manufacturers,  throughout the United
     States.  The DC  Transportation  Products  Segment develops and sells power
     line 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 operated a fourth
     segment,  the Hotel/MDU  (Multi-dwelling  unit) Products  Segment which was
     discontinued  during the quarter  ended March 31, 2005 after  commencing in
     the second quarter of 2004.  (See Note 9 for  presentation  of discontinued
     operations.)   The   Company's   facilities   and  other   assets  are  not
     distinguished among the identifiable segments.  Other financial information
     about the Company's segments is as follows:

<TABLE>
<CAPTION>
                                                                            2005

                                          Security         Marine         DC Trans
                                          Products        Products        Products          Total
-----------------------------          -----------      -----------     -----------     ------------

<S>                                        <C>              <C>             <C>             <C>
Net revenue                            $   225,379      $    49,229     $   152,826     $    427,434
Cost of sales                          $   192,436      $    31,617     $    91,129     $    315,182
Gross profit                           $    32,943      $    17,612     $    61,697     $    112,252
Research and development:
          Stock based                  $     7,681                                      $      7,681
          Other                        $   127,483      $     3,268     $    32,687     $    163,438


                                                                            2004

                                        Security           Marine         DC Trans
                                         Products         Products        Products          Total
-----------------------------          -----------      -----------     -----------     ------------
Net revenue                            $   202,575      $   87,599      $    61,025     $   351,199
Cost of sales                          $   143,828      $   43,790      $    26,748     $   214,366
Gross profit                           $    58,747      $   43,809      $    34,277     $   136,833
Research and development:
         Stock based                   $         -      $        -      $         -     $         -
         Other                         $    16,023      $        -      $     2,650     $    18,673

</TABLE>

                                      F-8
<PAGE>
<TABLE>
<CAPTION>

4.   Inventories:

     Inventories consisted of the following:
                                                                              March 31,        December 31,
                                                                               2005                2004
                                                                         -----------------   -----------------

<S>                                                                              <C>                 <C>
           Raw materials                                                 $         362,483   $         428,512
           Finished goods                                                          269,888             484,955
                                                                         -----------------   -----------------
                                                                         $         632,371   $         913,467
                                                                         =================   =================

</TABLE>


5.   Intangible assets:

     Intangible assets consisted of the following at March 31, 2005:

<TABLE>
<CAPTION>
                                                                                                       DC
                                                              Security         Marine           Transportation             Total
                                                       -----------------  -----------------    -----------------   -----------------
<S>                                                             <C>                <C>                  <C>                 <C>
Patents                                                $      1,577,813   $        741,148     $              -    $      2,318,961
Licensing rights                                                 37,500                  -                    -              37,500
Software license agreement                                      461,360                  -                    -             461,360
Trademark                                                        46,962                  -               46,963              93,925
Acumulated amortization                                      (1,321,975)          (607,559)                   -          (1,929,534)
                                                       -----------------  -----------------    -----------------   -----------------
                                                       $        801,660   $        133,589     $         46,963    $        982,212
                                                       =================  =================    =================   =================

     Intangible assets consisted of the following at December 31, 2004:

                                                                                                       DC
                                                            Security             Marine         Transportation             Total
                                                       -----------------  -----------------    -----------------   -----------------

Patents                                                $      1,577,813   $        741,148     $              -    $      2,318,961
Licensing rights                                                 37,500                  -                    -              37,500
Software license agreement                                      461,360                  -                    -             461,360
Trademark                                                        46,962                  -               46,963              93,925
Acumulated amortization                                      (1,217,875)          (569,392)                   -          (1,787,267)
                                                       -----------------  -----------------    -----------------   -----------------
                                                       $        905,760   $        171,756     $         46,963    $      1,124,479
                                                       =================  =================    =================   =================
</TABLE>



                                      F-9
<PAGE>
                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004

6.   Notes Payable:

     On February  18, 2005,  the Company  executed a 30 day note payable with an
     individual  in the amount of  $200,000.  Under the terms,  the lender  will
     receive  100,000  shares of the  Company's  restricted  stock,  along  with
     registration  rights,  in lieu of any cash interest  payments.  The Company
     repaid  $100,000 of the note prior to the March 17, 2005 due date,  and the
     lender  extended the due date on the  remaining  principal  until April 16,
     2005. The Company repaid the note in full in April 2005.

     On March 7,  2005,  the  Company  executed  a 90 day note  payable  with an
     institution  in the amount of $200,000.  The note bears an annual  interest
     rate of 8% and is due on June 5, 2005.  The note is  collateralized  by the
     Company's finished goods and raw material inventory held at its Clearwater,
     Florida  distribution   center.  The  Company  has  subsequently   received
     notification  from the lender that it desires to convert the note to common
     stock at a price to be negotiated upon the due date of the note.


7.   Accrued Severance Payable:

     During the period  ending March 31, 2005,  the Company  incurred  severance
     expenses related to the departure of two officers of the Company. The total
     amount  payable  amounts to $551,000  and is  comprised of payments of both
     cash and common stock.  $407,000 of the liability was classified as a short
     term  liability,  and the remaining  $144,000 was classified as a long term
     liability.  Under the separation agreements, the Company will issue a total
     of 2.5  million  shares  of  restricted  common  stock  to the  two  former
     officers.  The stock was valued at $275,000 or $.11 per share,  the closing
     market price of the Company's  common stock on March 31, 2005;  the date at
     which the liability was probable.  Cash payments  totaling $276,000 will be
     paid to the two former  officers over a two year period;  $132,000 of which
     is due during  2005,  and $144,000  due during  2006.  Severance  costs and
     related  legal fees have been  recorded  as  restructuring  charges for the
     three months ended March 31, 2005.

8.   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

                                      F-10
<PAGE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


     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%.

     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 to
     the common stock,  the Series A Convertible  Preferred Stock and the common
     stock purchase warrants based on their relative fair values. The fair value
     of the common stock was based on the market price per share on the date the
     offering was  completed  (the  "measurement  date").  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%.

     2005 Common Stock Issuances:

     During the three months ended March 31, 2005,  the Company  issued  480,000
     shares of free trading common stock for the conversion of 120,000 shares of
     the Company's preferred A stock, as a result of conversion notices received
     by the Company,  from  preferred  stockholders.  The  conversion  rate,  in
     accordance  with the  terms and  provisions  of the  offering  was $.25 per
     share.

     During the three  months  ended March 31, 2005 the Company  issued  250,000
     shares of  restricted  common stock to an employee in  accordance  with his
     employment  contract.  The  shares  were  valued at  $45,000,  based on the
     closing market price of the Company's common stock on February 1, 2005, the
     date of  issuance.  The amount was fully  expensed  during the period ended
     March 31, 2005.

     During the three months ended March 31, 2005,  the Company  issued  700,000
     shares of restricted  common stock to the members of the Board of Directors
     in accordance with the Board of Directors compensation  resolution approved

                                      F-11
<PAGE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


     on October 15, 2003. The value of the  compensation  was $77,000,  based on
     the closing  market price of the Company's  common stock on March 31, 2005,
     the date of issuance. The cost is being amortized over the fiscal year 2005
     beginning January 1, 2005 and ending December 31, 2005.

     During the three months ended March 31, 2005,  the Company  issued  300,000
     shares of restricted  common stock to the Company's interim Chief Executive
     Officer,  Mark Meagher.  Mr. Meagher was originally  hired by the Company's
     Board of Directors as a consultant  and 50,000 shares were issued  pursuant
     to his consulting  agreement effective February 10, 2005. These shares were
     valued at $6,500, based on the closing market price of the Company's common
     stock on the effective date of the agreement.  The remaining 250,000 shares
     were  issued  pursuant  to  Mr.  Meagher's  interim  employment   agreement
     effective  March 4, 2004.  The shares were valued at $30,000,  based on the
     closing market price of the Company's common stock on the effective date of
     the employment agreement.

     2004 Common Stock Issuances:

     During the three months ended March 31, 2004,  the Company  issued  456,380
     shares of common stock in  connection  with the equity unit  issuance  (see
     above).

     During  the three  months  ended  March  31,  2004,  107,500  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 $10,750 in 2003.  The $3,250  stock
     subscription  receivable was from a 2003 private  placement and it was paid
     in full as of March 31, 2004.

     During the three months ended March 31, 2004,  the Company  issued  900,000
     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 $180,000 in the aggregate.

     During the three months ended March 31, 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  royalty's
     expense in connection with the issuance.

                                      F-12
<PAGE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


     During the three months ended March 31, 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.

9.   Discontinued Operations:

     During the period  ended March 31, 2005,  the Company  formalized a plan to
     dispose  of  its  Hotel/MDU   products  segment.   The  plan  included  the
     termination of all employees  associated with the segment,  and the closing
     of the Company's sales office in South Carolina.  At the end of the period,
     the majority of the plan had been  implemented  and the Company is pursuing
     an agreement with an outside party to sell the remaining  installation  and
     monthly service contracts.

     Operating   results  for  the  discontinued   segment  have  been  reported
     separately as  discontinued  operations in the  consolidated  statements of
     income for all periods  presented in accordance with Statement of Financial
     Accounting  Standards  ("SFAS") No. 144,  "Accounting for the Impairment or
     Disposal of Long-Lived Assets." Following are the components of the amounts
     disclosed: Period Ending
<TABLE>
<CAPTION>

                                                              March 31,               March 31,
                                                                2005                    2004
                                                          ------------------      ------------------
<S>                                                                 <C>                   <C>
Net Revenues                                                        242,504                       -
Cost of Goods Sold                                                  228,438                       -
                                                          ------------------      ------------------
     Gross Profit                                                    14,066                       -

Operating Expenses                                                  152,948                       -
                                                          ------------------      ------------------
Net Loss from discontinued operations                              (138,882)                      -
                                                          ==================      ==================

                                      F-13
<PAGE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004



                                                              March 31,             December, 31
                                                                2005                    2004
                                                          ------------------      ------------------
Total assets related to discontinued operations:
     Accounts Receivable                                             55,789                  91,616
     Inventory                                                       19,414                  39,120
     Property Plant & Equipment                                       7,168                   7,168
                                                          ------------------      ------------------
                                                                     82,371                 137,904
                                                          ==================      ==================
Total liabilities related to discontinued operations:
     Accounts Payable                                               190,529                  84,603
                                                          ==================      ==================
</TABLE>

10.   Commitments and contingencies:

     Litigation, claims and assessment:

     Satius, Inc License Agreement

     In July 2004,  Satius,  Inc. and its principal Charles Abraham attempted to
     terminate  a license  agreement  between  Satius and the  Company  based on
     alleged  breaches  of  contract  by the  Company.  We dispute the claims of
     breach that have been alleged  against us.  Satius  further  asserts  that,
     without a license to Satius' patents, a substantial amount of the Company's
     products are now infringing  Satius'  patents.  We dispute the infringement
     allegation.  Satius also claims that it owns certain technologies that were
     independently  developed by the Company.  We dispute this claim as well. To
     our knowledge as of the date this  Questionnaire  was prepared,  Satius and
     Charles Abraham have not brought suit against the Company. Should a suit be
     brought, we intend to defend the matter vigorously.  However,  there can be
     no  assurance  that the  Company  will  prevail  on the merits of the case.
     Litigation  of this  matter  will be  expensive  and will  divert  time and
     financial  resources  away from the  Company's  business.  In addition,  an
     unfavorable  outcome in this matter  would result in  substantial  harm and
     possibly severe damage to the Company.

     Class Action Lawsuit

     Commencing in May 2001, 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.  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.  In the settlement,  the Company will

                                      F-14
<PAGE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


     issue  6,000,000  shares of common stock to the class  participants.  There
     were no significant  amendments to the nature or terms of the  Stipulation.
     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.  The
     Company is awaiting instructions from the plaintiff for the issuance of the
     shares.


     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 March 31,
     2005,  the matter  remains in the discovery  stage,  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.

     SEC Investigation

     The Securities and Exchange  Commission's  Division of Enforcement began an
     investigation in January 2001 relating to the Company's  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. The Company has cooperated fully with the SEC, which included
     the  testimony of former  employees,  Col.  Larry  Hoffman  (retired),  and
     Christy Mutlu. George Bernardich and current officers and employees Douglas
     Bauer, CFO, 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:
                                      F-15
<PAGE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


     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),  afforded  the  Company  the  opportunity  to  make  a  "Wells
     Submission"  regarding the Staff's  intended  recommendations.  The Company
     retained  its counsel to prepare such a Wells  Submission  on behalf of the
     Company,  its  officers,  and  employees,  as it  believed  that there were
     meritorious   factual,   legal  and   policy   reasons   why  the   Staff's
     recommendation  should  not be  followed  by  the  Commission.  The  "Wells
     Submission" documents were prepared and submitted to the Staff near the end
     of March of 2004.

     In June of 2004, counsel notified the Company that as a result of the Wells
     Submission,  the staff may modify its  recommendations  to the  Commission;
     however, the Company had no specific details as to what those modifications
     would be or whether they would be accepted by the commission.  The Company,
     twice, in August and November of 2004, sent updated  financial  information
     to the Staff,  at their  request,  but  received no further  correspondence
     regarding a proposed recommendation. If the Staff's original 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.

     In December  2004,  the Staff notified the Company that it wanted to review
     documentation  regarding a purchase  contract that the Company had executed
     with Universal General  Corporation,  LLC (UGC), on September 17, 2004, and
     the subsequent  November 15, 2004 initial  shipment of product to UGC under
     the contract.  The Company,  through its counsel,  has cooperated  with the
     Staff's  request and has forwarded the requested  documents  during January
     and February of 2005.  In addition,  the Staff has  indicated  that certain
     officers, employees, and former employees, may be required to appear before
     the Staff to testify on the circumstances  relating to the UGC matter.  The
     current investigation remains in the initial stages and it is impossible at

                                      F-16
<PAGE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004


     this time to  determine  what the  outcome  may be, or if it will cause the
     Staff to alter its initial recommendations.

11.   Subsequent events:

     As of the  time of  filing,  the  Company  has  secured  a  private  equity
     investment  commitment  from certain  institutional  investors,  accredited
     investors,  and  directors;  to purchase  common  stock and  warrants  with
     anticipated  proceeds  between $1.12  million and $1.4 million.  All of the
     investment  participants are current  shareholders in the Company. To date,
     the Company has received proceeds totaling $933,000 in conjunction with the
     investment,  and expects to receive the remaining proceeds within two weeks
     from the time of this  filing.  The shares  were priced at $.063 per share,
     together  with  warrants to acquire an  additional  20% of the common stock
     purchased in the investment.  The investment  includes  registration rights
     for both the common stock and warrants.  The offering and sale is deemed to
     be exempt under Rule 506 of Regulation D and Section 4(2) of the Securities
     Act.


                                      F-17

<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

We develop, license, manufacture, and market products and applications developed
to transmit  voice,  video,  audio and data either  individually  or any and all
combinations  over power lines,  twisted pair wires, and coax in AC and DC power
environments.  We also manufacture and market underwater video cameras,  lights,
and  accessories for the marine  industry.  Our products are sold in both retail
and  commercial  markets.  Our  principal  products are sold in the security and
transportation industries.

Net  revenues of $427,434  for the period  ended  March 31, 2005  increased  22%
compared to net  revenues  for the same period ended March 31, 2004. A highlight
to  the  quarterly  results  was a  150%  increase  in  net  revenues  in the DC
Transportation  products  segment.  Net  revenues  increased to $152,826 for the
period  ended March 31,  2005,  from $61,025 for the same period ended March 31,
2004.

Net  revenues  for the period  ended  March 31,  2005  including  the  Hotel/MDU
products segment would have exceeded $660,000,  however,  as previously reported
in our Form  10-KSB  filed on April 14,  2005,  we decided to  discontinue  this
product  segment and operating  results for the  discontinued  segment have been
reported separately as discontinued operations in the consolidated statements of
operations for all periods  presented in accordance  with Statement of Financial
Accounting  Standards  ("SFAS")  No.  144,  "Accounting  for the  Impairment  or
Disposal of Long-Lived Assets." The discontinuance of this segment resulted in a
loss from  discontinued  operations  of $139,000  for the period ended March 31,
2005. (See Note 9 to the financial statements).

In addition  to the  business  segment  restructuring,  we also  reported in our
10-KSB that we were actively engaged in a plan to restructure our management and

                                       3
<PAGE>
our  research  and  development  initiatives  in an effort to allow for the most
efficient  allocation of resources and management  focus. The  implementation of
this plan was nearly complete as of the first of May 2005.

We have recorded a restructuring  charge for the period ended March 31, 2005, in
the amount of $582,683.  Included in this charge are severance  expenses related
to the  departure  of two of our  officers,  legal costs  associated  with their
separation agreements,  and consulting and travel expenses related to the hiring
of a consultant by our Board of Directors to oversee the restructuring process.

Sales of our SecureView  product on Home Shopping  Network (HSN) has accelerated
as a result of  improvements  made in the  marketing of the product.  The period
ended March 31, 2005 included our largest  shipment to HSN since  acquiring them
as a customer,  and the  majority of the units  shipped  during the quarter were
sold by HSN prior to the end of the period.

As  previously   mentioned,   sales  of  our  Rear  Vision  systems  in  the  DC
Transportation product segment continue to increase substantially.  Net revenues
for the period ended March 31, 2005  approximated  50% of the total revenues for
the  entire  previous  year  ended  December  31,  2004.  We  are  currently  in
discussions  with  several  distributors  and  fleets  prospects  which  we  are
attempting to convert into a solid revenue stream moving forward.

As of the time of filing,  the Company has secured a private  equity  investment
commitment  from certain  institutional  investors,  accredited  investors,  and
directors;  to purchase  common stock and  warrants  with  anticipated  proceeds
between $1.12 million and $1.4 million.  All of the investment  participants are
current  shareholders in the Company. To date, the Company has received proceeds
totaling $933,000 in conjunction with the investment, and expects to receive the
remaining proceeds within two weeks from the time of this filing. See "Liquidity
& Capital Resources" for further details of the term of the offering.

RESULTS OF OPERATIONS

See Note 3 to the financial statements for additional segment reporting.

THREE MONTHS ENDED MARCH 31, 2005 AND MARCH 31, 2004

NET REVENUE.  Net revenue increased 22% from $351,199 for the three months ended
March 31, 2004 to $427,434 for the three  months  ended March 31,  2005.  Marine
product segment sales were $49,229 or 12% of total revenues for the three months
ended March 31, 2005  compared to  $87,599,  or 25% of total  revenues,  for the
three months ended March 31,  2004.  Overall,  marine  product  sales  decreased
$38,370,  or 44%.  Security  product segment sales were $225,379 or 53% of total
revenues for the three months ended March 31, 2005 compared to $202,575,  or 58%
of total revenues, for the three months ended March 31, 2004. Overall,  security
product sales increased $22,804, or 11%. DC Transportation product segment sales
were  $152,826,  or 36% of total  revenues  for the three months ended March 31,
2005  compared to $61,025,  or 17% of total  revenues for the three months ended
March 31, 2004. Overall,  DC Transportation  product sales increased $91,801, or
150%. The decrease in the marine product segment sales was due to a reduction in
the number of regional boat shows, and the sales volume at these shows, at which
the Company  participated in the quarter ended March 31, 2005. The growth in the
security  products segment is due primarily to the increase of sales volume from
on air sales on Home  Shopping  Network.  The  increase in  revenues  for the DC
transportation  product  segment was driven by two factors.  First,  the Company
allocated additional resources to the sales efforts in this segment. Second, the
Company is  beginning  to  benefit  from sales  quotations  made to  prospective
customers   throughout  the  2004  fiscal  year,  as  the  sales  cycle  in  the
transportation industry appears to be 6 months to one year.

                                       4
<PAGE>
COST OF GOODS SOLD. Cost of Goods sold increased 47% from $214,366 for the three
months  ended March 31, 2004 to $315,182  for the three  months  ended March 31,
2005.  As a percentage of net revenue,  cost of goods sold  increased to 74% for
the three  months ended March 31, 2005 from 61% for the three months ended March
31, 2004. Cost of goods sold for the marine products segment  decreased  $12,173
or 28%,  from  $43,790 for the three  months ended March 31, 2004 to $31,617 for
the same period  ended in 2005.  As a percentage  of net revenue,  cost of goods
sold for the marine  product  segment  increased  from 50% for the three  months
ended March 31, 2004 to 64% for same  period  ended in 2005.  Cost of goods sold
for the security  products segment  increased  $48,608 or 34%, from $143,828 for
the three  months  ended March 31, 2004 to $192,436 for the same period ended in
2005.  As a percentage of revenue,  cost of goods sold for the security  product
segment  increased from 71% for the three months ended March 31, 2004 to 85% for
same period ended in 2005. Cost of goods sold for the DC Transportation  product
segment  increased $64,381 or 241% from $26,748 for the three months ended March
31, 2004 to $91,129 for the same period ended in 2005.  As a  percentage  of net
revenue, cost of goods sold for the DC Transportation  product segment increased
from 44% for the three  months ended March 31, 2004 to 60% for same period ended
in 2005.

The increase in the cost of goods sold as a  percentage  of net revenues for the
marine  products  segment was driven  primarily  by a sales  promotion  that ran
during the period ended March 31, 2005 to increase sales at regional boat shows.
The increase in the cost of goods sold as a  percentage  of net revenues for the
security  products segment was driven  primarily by pricing  concessions made to
Home Shopping  Network to improve on air product sales volumes.  The increase in
the cost of goods sold as a percentage of net revenues for the DC Transportation
product segment was due to the implementation of a distributor pricing structure
in lieu of direct sale pricing.

GROSS PROFIT MARGIN. Gross profits on sales for the three months ended March 31,
2005 amounted to $112,252 or 26% of net revenues,  compared to $136,834,  or 39%
of net revenues,  for the three months ended March 31, 2004. The marine products
segment  contributed $17,612 and $43,809 of the total gross profit for the three
months  ended  March 31,  2005 and 2004,  respectively.  The  security  products
segment  contributed $32,943 and $58,747 of the total gross profit for the three
months  ended  March 31,  2005 and  2004,  respectively.  The DC  Transportation
products segment  contributed  $61,697 and $34,277 of the total gross profit for
the three months ended March 31, 2005 and 2004,  respectively.  The gross profit
percentage  for the marine  products  segment  decreased  from 50% for the three
months  ended March 31, 2004 to 36% for the three  months  ended March 31, 2005.
The gross profit percentage for the security products segment decreased from 29%
for the three  months  ended  March 31, 2004 to 15% for the three  months  ended
March 31, 2005. The gross profit percentage for the DC  Transportation  products
segment  decreased from 56% for the three months ended March 31, 2004 to 40% for
the three months ended March 31, 2005.

The decrease in the gross profit as a percentage  of net revenues for the marine
products  segment was driven  primarily by a sales promotion that ran during the
period  ended  March 31,  2005 to increase  sales at  regional  boat shows.  The
decrease in the gross  profit as a  percentage  of net revenues for the security
products  segment  was  driven  primarily  by pricing  concessions  made to Home
Shopping  Network to improve on air product sales  volumes.  The decrease in the
gross profit as a percentage of net revenues for the DC  Transportation  product
segment was due to the implementation of a distributor pricing structure in lieu
of direct sale pricing.


SALARIES AND WAGES. Salaries and Wages increased 27% from $333,736 for the three
months  ended March 31, 2004 to $424,207  for the three  months  ended March 31,
2005.  The increase was due to the hiring of  additional  sales staff for the DC
Transportation products segment and the addition of administrative staff. Salary

                                       5
<PAGE>
and Wages is  comprised  of employee  wages and stock  compensation.  During the
three months ended March 31, 2005,  $45,000 of non-cash stock based compensation
was recorded in conjunction with common stock issued to an employee  pursuant to
employment contact obligations.

PROFESSIONAL & CONSULTING FEES.  Professional and consulting fees increased 129%
from  $169,492  for the three  months  ended March 31, 2004 to $388,446  for the
three months ended March 31, 2005.  The increase was due to an increase in legal
fees from  attorneys  handling  the  Company's  matters  with the  Securities  &
Exchange Commission and the Company's management restructuring. Professional and
consulting  fees  include  fees paid to  attorneys,  accountants,  and  business
consultants.  During the period  ended  March 31,  2005,  non-cash  stock  based
compensation of $19,250 was recorded in conjunction with common shares issued to
members of the  Company's  Board of  Directors as  compensation  for the current
year.

DEPRECIATION AND AMORTIZATION EXPENSE.  Depreciation and amortization  increased
13% from  $147,932 for the three months ended March 31, 2004 to $166,890 for the
three months ended March 31, 2005. The increase was attributable to the purchase
of patents in January 2004 and the signing of two software  license  agreements,
on December 31, 2003 and August 4, 2004 with On2 Technologies,  Inc. for the use
of its  proprietary  CODEC software for enhancing the video  transmission in the
Company's  new  digital  power-line  products  (See  Note  5  to  the  Financial
Statements).

RESEARCH & DEVELOPMENT.  Research and  development  expense  increased 816% from
$18,673 for the three  months  ended March 31,  2004,  to $171,119 for the three
months ended March 31, 2005. 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  our
research and  development  costs and efforts are dedicated to the development of
our security (both analog and digital) and DC  Transportation  product segments.
For the three months ended March 31, 2005,  of the total  Research & Development
expenditures,  $135,164 or 79% was  related to the  security  products  segment,
$32,687 or 19% was related to the DC Transportation products segment, and $3,268
or 2% was related to the marine products  segment.  The cost of our 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.

ADVERTISING  AND  PROMOTIONS.  Advertising  and  promotions  increased 126% from
$24,889  for the three  months  ended  March 31,  2004 to $56,170  for the three
months  ended March 31,  2005.  The  increase was due directly to an increase in
print  advertising for the DC  transportation  product segment.  The amount also
includes  portions of postage,  printing,  and travel that are  attributable  to
advertising and promotions.

RENT AND UTILITIES. Rent and utilities increased 109% from $23,055 for the three
months ended,  March 31, 2004 to $48,145 for the three months  ended,  March 31,
2005.  The increase is due to the Company's  expansion of its  corporate  office
space and warehouse space in Florida.  Rent and utilities  includes office rent,
warehouse rent, storage, telephone, and utilities.

TRAVEL & ENTERTAINMENT EXPENSE. Travel & entertainment expense decreased 9% from
$56,119  for the three  months  ended  March 31,  2004 to $51,261  for the three
months ended March 31, 2005. The decrease was  attributed to a reduced  overseas

                                       6
<PAGE>
travel associated with the sourcing and manufacturing of the Company's products.
Travel  &  entertainment   expenses  include  normal  expenses  associated  with
traveling including,  but not limited to; airfare, auto rental, parking & tolls,
hotels & lodging, taxis, meals, and entertainment.

ROYALTIES EXPENSE.  Royalties' expense decreased 100% from $75,000 for the three
months  ended March 31, 2004 to $-0- for the three  months ended March 31, 2005.
The  elimination of royalty  expense  relates to the  termination of a licensing
agreement which had previously required minimum royalty payments (See Note 10 to
the financial statements).

OTHER EXPENSES.  Other expenses decreased 28% from $150,182 for the three months
ended March 31, 2004 to $107,442 for the three months ended March 31, 2005.  The
decrease  was  due  to  the  elimination  of  financing  fees  paid  brokers  in
conjunction with the Company's 2004 fund raising efforts that were  reclassified
to other  expenses  for  reporting  purposes.  Other  expenses  include  travel,
supplies,  property taxes, insurance,  financing fees, bank charges, and various
other expenses that are classified as miscellaneous.

RESTRUCTURING  CHARGES.  Restructuring charges amounted to $582,683. The charges
were attributable to severance expenses related to the departure of two officers
of the Company during the quarter ended March 31, 2005. The amount also includes
$21,470 in legal fees associated with those separation  agreements,  and $10,213
in consulting fees and travel expenses paid to a consultant hired to oversee the
restructuring  plan. The severance expenses include cash payments of $276,000 to
be paid over a 24 month period commencing in April 2005, and the issuance of 2.5
million shares of the Company's common stock, valued at $275,000 as of March 31,
2005 (See Note 9 to the financial statements).

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 loss
from  operations of $1,884,111 and $862,245  during the three months ended March
31, 2005 and 2004, respectively.  In addition, during those periods, the Company
has  used  cash  of  $771,377  and  $927,111  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 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. Ultimately,  the
Company's ability to continue is dependent upon achieving profitable  operations
in these business lines.

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  and  DC  Transportation   Products  Segment  products  and  (iii)
ultimately  the  achievement of profitable  operations.  During the three months
ended March 31, 2005, the Company raised  $300,000 from issuance of two separate
notes payable.  Management is currently  addressing several additional financing
sources to fund operations until profitability can be achieved.

As of the time of filing,  the Company has secured a private  equity  investment
commitment  from certain  institutional  investors,  accredited  investors,  and
directors;  to purchase  common stock and  warrants  with  anticipated  proceeds
between $1.12 million and $1.4 million.  All of the investment  participants are
current  shareholders in the Company. To date, the Company has received proceeds
totaling $933,000 in conjunction with the investment, and expects to receive the

                                       7
<PAGE>
remaining  proceeds  within two weeks from the time of this  filing.  The shares
were priced at $.063 per share,  together with warrants to acquire an additional
20% of the common stock  purchased in the  investment.  The investment  includes
registration  rights for both the common  stock and  warrants.  The offering and
sale is deemed to be exempt  under Rule 506 of  Regulation D and Section 4(2) of
the Securities Act.

The Company is uncertain whether this current financing  commitment will provide
enough working capital to fund operations until  profitability is achieved,  and
may have to pursue  additional  financing  sources  during the current year. The
financial statements do not include any adjustments that might arise as a result
of this uncertainty.

During the three months ended March 31, 2005 the Company  funded its losses from
operations through the following vehicles:

o    On February  18, 2005,  the Company  executed a 30 day note payable with an
     individual  in the amount of  $200,000.  Under the terms,  the lender  will
     receive  100,000  shares of the  Company's  restricted  stock,  along  with
     registration  rights,  in lieu of any cash interest  payments.  The Company
     repaid  $100,000 of the note prior to the March 17, 2005 due date,  and the
     lender  extended the due date on the  remaining  principal  until April 16,
     2005. The Company repaid the note in full in during April 2005.

o    On March 7,  2005,  the  Company  executed  a 90 day note  payable  with an
     institution  in the amount of $200,000.  The note bears an annual  interest
     rate of 8% and is due on June 5, 2005.  The note is  collateralized  by the
     Company's finished goods and raw material inventory held at its Clearwater,
     Florida  distribution   center.  The  Company  has  subsequently   received
     notification  from the lender that it desires to convert the note to common
     stock at a price to be negotiated upon the due date of the note.

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 March 31,  2005.  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.


                                       8
<PAGE>

PART II.    OTHER INFORMATION


Item 1.   Legal Proceedings

Litigation, claims and assessment:

Satius, Inc License Agreement
In July 2004,  Satius,  Inc.  and its  principal  Charles  Abraham  attempted to
terminate a license  agreement  between  Satius and the Company based on alleged
breaches of contract by the  Company.  We dispute the claims of breach that have
been alleged  against us.  Satius  further  asserts  that,  without a license to
Satius'  patents,  a  substantial  amount  of the  Company's  products  are  now
infringing Satius' patents. We dispute the infringement allegation.  Satius also
claims that it owns certain  technologies that were  independently  developed by
the Company. We dispute this claim as well. To our knowledge as of May 13, 2005,
Satius and Charles  Abraham have not brought suit against the Company.  Should a
suit be brought, we intend to defend the matter vigorously.  However,  there can
be no  assurance  that the  Company  will  prevail  on the  merits  of the case.
Litigation  of this matter will be expensive  and will divert time and financial
resources away from the Company's business.  In addition, an unfavorable outcome
in this matter would result in  substantial  harm and possibly  severe damage to
the Company.


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 May 13, 2005, the matter
remains in the  discovery  stage,  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

SEC Investigation
The  Securities  and  Exchange  Commission's  Division of  Enforcement  began an
investigation  in January 2001 relating to the Company's  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. The Company
has  cooperated  fully with the SEC,  which  included  the  testimony  of former
employees,  Col. Larry Hoffman (retired),  and Christy Mutlu.  George Bernardich
and current  officers and employees  Douglas Bauer,  CFO, 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

                                       9
<PAGE>
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),   afforded  the  Company  the
opportunity  to  make  a  "Wells  Submission"  regarding  the  Staff's  intended
recommendations.  The  Company  retained  its  counsel to  prepare  such a Wells
Submission on behalf of the Company, its officers, and employees, as it believed
that there were  meritorious  factual,  legal and policy reasons why the Staff's
recommendation should not be followed by the Commission.  The "Wells Submission"
documents  were  prepared  and  submitted  to the Staff near the end of March of
2004.

In June of 2004,  counsel  notified  the  Company  that as a result of the Wells
Submission, the staff may modify its recommendations to the Commission; however,
the Company had no specific details as to what those  modifications  would be or
whether they would be accepted by the commission.  The Company, twice, in August
and November of 2004, sent updated financial  information to the Staff, at their
request,   but   received  no  further   correspondence   regarding  a  proposed
recommendation.

If the Staff's original 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.

In  December  2004,  the Staff  notified  the  Company  that it wanted to review
documentation  regarding a purchase  contract that the Company had executed with
Universal  General  Corporation,  LLC (UGC),  on  September  17,  2004,  and the
subsequent  November  15,  2004  initial  shipment  of  product to UGC under the
contract.  The Company,  through its counsel,  has  cooperated  with the Staff's
request and has forwarded the requested documents during January and February of
2005. In addition, the Staff has indicated that certain officers, employees, and
former  employees,  may be required to appear before the Staff to testify on the
circumstances  relating to the UGC matter. The current  investigation remains in
the  initial  stages and it is  impossible  at this time to  determine  what the
outcome   may  be,  or  if  it  will  cause  the  Staff  to  alter  its  initial
recommendations.

Item 2.   Changes in Securities and Use of Proceeds.

On February 1, 2005,  the Company  issued  250,000  shares of restricted  common
stock to an employee in accordance with his employment contract. The shares were
valued at $45,000,  based on the closing  market price of the  Company's  common
stock on the date of issuance.  The amount was fully expensed  during the period
ended March 31, 2005.

On March 31, 2005, the Company issued 700,000 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 $77,000,  based on the closing  market price of the  Company's
common  stock on the date of  issuance.  The  cost is being  amortized  over the
fiscal year 2005 beginning January 1, 2005 and ending December 31, 2005.

On March 31, 2005, the Company issued 300,000 shares of restricted  common stock
to the Company's interim Chief Executive Officer,  Mark Meagher. Mr. Meagher was
originally  hired by the Company's Board of Directors as a consultant and 50,000
shares were issued pursuant to his consulting  agreement  effective February 10,
2005. The shares were valued at $6,500, based on the closing market price of the

                                       10
<PAGE>
Company's  common stock on the effective  date of the  agreement.  The remaining
250,000  shares  were  issued  pursuant  to  Mr.  Meagher's  interim  employment
agreement  effective March 4, 2005. The shares were valued at $30,000,  based on
the closing market price of the Company's  common stock on the effective date of
the employment agreement.


Item 3.     Defaults Upon Senior Securities.

            Not Applicable.

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

            None.

Item 5.     Other Information

During the period ending March 31, 2005, the Company incurred severance expenses
related to the  departure  of two  officers  of the  Company.  The total  amount
payable amounts to $551,000 and is comprised of payments of both cash and common
stock.  $407,000 of the liability was classified as a short term liability,  and
the  remaining  $144,000  was  classified  as a long term  liability.  Under the
separation  agreements,  the Company will issue a total of 2.5 million shares of
restricted  common  stock to the two  former  officers.  The stock was valued at
$275,000 or $.11 per share,  the closing  market price of the  Company's  common
stock on March 31, 2005;  the date at which the  liability  was  probable.  Cash
payments  totaling  $276,000 will be paid to the two former  officers over a two
year period; $132,000 of which is due during 2005, and $144,000 due during 2006.
Severance  costs and  related  legal fees have been  recorded  as  restructuring
charges for the three months ended March 31, 2005.  The  separation  agreements,
for both ex-officers, were executed on April 13, 2005.



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


 ------------------ ------------------------------------------------------------
   DATE OF REPORT                   ITEM REPORTED ON
 ------------------ ------------------------------------------------------------
                    The Company previously announced the execution of a purchase
  January 26, 2005  contract with Universal  General  Corporation  (UGC) for the
                    purchase of the Company's  digital  power line  surveillance
                    systems.  The purpose of this filing is to update the status
                    of the contract  with UGC. In  accordance  with the terms of
                    the contract,  in November of 2004, the Company  shipped the
                    initial 20 units to UGC. Payment for this product was due to
                    the Company in two equal  installments on December 15, 2004,
                    and January 15,  2005.  As of the date of this  filing,  the
                    Company has not  received  payment for the units  shipped to
                    UGC in the fourth  quarter of 2004. The Company is unable to
                    predict  whether  it  will  receive  any  payment  for  this
                    shipment. The Company has suspended all shipments of product
                    to UGC until full  payment  is  received,  including  the 20
                    additional  units  scheduled to ship in January 2005.  There
                    can be no  assurance  that future  units will be produced or
                    shipped pursuant to the UGC contract. Accordingly, there can
                    be no  assurance  that the UGC  contract  will result in any
                    particular  amount of revenue for the  Company,  or that any
                    revenue at all will result from the UGC contract.

 ------------------ ------------------------------------------------------------


                                       11
<PAGE>
 ------------------ ------------------------------------------------------------
     DATE OF REPORT                   ITEM REPORTED ON
 ------------------ ------------------------------------------------------------

                    The Company's  Board of Directors met February 4, 2005.  The
 February 10, 2005  Board of  Directors  accepted  the  resignation  of Chairman
                    George S.  Bernardich  III,  and elected  James  Williams to
                    succeed  him  as  Chairman  of  the  Board.  Mr.  Bernardich
                    continues to serve as a member of the Board of Directors and
                    its  committees.  The Board of  Directors  also  retained an
                    independent  management  consultant  to review the Company's
                    operational  focus,  allocation  of  financial  and staffing
                    resources,  and  organizational   structure.  The  Board  of
                    Directors  expects to  receive  his  recommendations  within
                    45-60   days.   Pending   the  receipt  and  review  of  the
                    consultant's   recommendations,   the  Board   limited   the
                    executive  authority  of CEO George  Bernardich  and that of
                    President-COO   Michael  Ambler.  During  this  time,  their
                    actions will require the additional approval of both the CFO
                    and the Chairman of the Audit Committee of the Board.  These
                    actions were taken to address the Board's concerns regarding
                    expenditures and managing growth properly.

                    Regarding its contract with Universal  General  Corporation,
                    the Company  announced it has yet to receive payment for the
                    units  shipped  to UGC in the fourth  quarter  of 2004.  The
                    Company  has sent UGC a demand for  payment  and will pursue
                    its rights pursuant to the contract.


 ------------------ ------------------------------------------------------------

                                       12
<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, 2005.


                  POWERLINX, INC.




                  By: /s/ MARK J. MEAGHER
                         ----------------------------
                          MARK J. MEAGHER
                          Chief Executive Officer

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




                                       13