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 September 30, 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 November 11, 2005: 201,625,542

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





<PAGE>
                                 POWERLINX, INC.


                                      INDEX



Part I.  FINANCIAL INFORMATION                                          Page No.


         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 September 30,
                        2005 and 2004........................................F-5

         Item 2. Management's  Discussion and Analysis of Financial  Conditions
                 and Results of Operations ....................................3

         Item 3. Controls and Procedures......................................13

Part II. OTHER INFORMATION

         Item 1. Legal Proceedings............................................12

         Item 2. Unregistered Sale of Equity Securities and Use of Proceeds...14

         Item 3. Defaults Upon Senior Securities..............................16

         Item 4. Submission of Matters to a Vote of Security Holders..........16

         Item 5. Other Information............................................16

         Item 6. Exhibits.....................................................16

Signatures....................................................................17




                                       2
<PAGE>
PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements


                                 POWERLINX, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                     ASSETS
                                                                                  September 30,       December 31,
                                                                                      2005                2004
                                                                                  (Unaudited)
                                                                                -----------------  ------------------
<S>                                                                                     <C>               <C>
Current assets:
   Cash and cash equivalents                                                    $          10,902  $          497,663
   Accounts receivable, net                                                               289,693             282,480
   Employee Advances                                                                       68,257              51,930
   Inventories                                                                            423,928             913,467
   Prepaid expenses and other current assets                                              119,931              48,990
   Assets of discontinued operations                                                       16,937             137,904
                                                                                -----------------  ------------------
     Total current assets                                                                 929,648           1,932,434

Intangible assets, net                                                                    697,678           1,124,479
Deposits                                                                                   19,460              40,334
Property and equipment, net                                                               226,849             297,044
                                                                                -----------------  ------------------
     Total assets                                                               $       1,873,635  $        3,394,291
                                                                                =================  ==================

                                          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                             $         653,845  $          528,961
   Accrued expenses                                                                       171,533             164,912
   Accrued severance payable, current portion                                              25,500                   -
   Deferred revenue                                                                             -             173,483
   Due to related parties                                                                                      60,151
   Current maturities of notes payable                                                    601,765               1,765
   Litigation settlement                                                                  300,000             300,000
   Liabilities of discontinued operations                                                 159,126              84,603
                                                                                -----------------  ------------------
     Total current liabilities                                                          1,911,769           1,313,875
Accrued severance payable, less current portion                                           144,000                   -
Note payable, less current maturities                                                      28,235              28,235

     Total Liabilities                                                                  2,084,004           1,342,110
                                                                                -----------------  ------------------
Commitments and contingencies (Note 10)                                                         -                   -

Stockholders' equity (deficit):
   Series A convertible preferred stock, $1.00 par value;
     authorized 10,000,000 shares; issued 1,825,520 shares;
     outstanding (606,408 - 2005; 880,608 - 2004)                                         534,730             776,519
   Common stock, $.001 par value, authorized
     250,000,000 shares; issued (201,625,542 - 2005;
     172,646,130 - 2004) outstanding (201,151,967 -
     2005; 172,172,555 - 2004)                                                            201,626             172,646
   Additional paid-in capital                                                          23,426,420          21,335,484
   Treasury stock, at cost, 473,575 shares                                               (287,757)           (287,757)
   Accumulated deficit                                                                (24,085,388)        (19,944,711)
                                                                                -----------------  ------------------
   Total stockholders' equity (deficit):                                                 (210,369)          2,052,181
                                                                                -----------------  ------------------
     Total liabilities and stockholders' equity                                 $       1,873,635  $        3,394,291
                                                                                =================  ==================

</TABLE>

              The accompanying notes are an integral part of these
                        condensed financial statements.

                                       F-1
<PAGE>
                                 POWERLINX, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                        Three Months Ended                       Nine Months Ended
                                                           September 30,                          September 30,
                                               -------------------------------------  -----------------------------------
                                                     2005                2004               2005              2004
                                               -----------------  ------------------  --------------    -----------------
<S>                                                    <C>                <C>                 <C>               <C>
Net revenue                                    $         223,945  $           85,951  $    1,155,573    $         871,492
Cost of goods sold                                       136,529              56,680         804,100              532,880
                                               -----------------  ------------------  --------------    -----------------
           Gross profit                                   87,416              29,271         351,473              338,612
                                               -----------------  ------------------  --------------    -----------------
Operating expenses:
   Salaries and wages                                    285,809             308,392       1,246,092              833,912
   Professional and consulting fees                      201,042             274,260         730,215              739,651
   Depreciation and amortization                         165,326             163,109         500,941              461,621
   Research and development                              178,129             304,615         498,288              456,860
   Advertising and promotions                             30,875              37,726         149,914              119,992
   Rent and utilities                                     36,965              38,128         144,150               96,912
   Provision for doubtful accounts                             -              24,660          13,166               34,660
   Travel and entertainment                               47,885              55,492         158,004              148,809
   Royalty expense                                             -              75,000               -              225,000
   Other expenses                                         65,614             139,095         251,110              317,763
   Restructuring Expense                                       -                   -         598,286                    -
                                               -----------------  ------------------  --------------    -----------------
       Total operating expenses                        1,011,645           1,420,477       4,290,169            3,435,179
                                               -----------------  ------------------  --------------    -----------------
Loss from operations                                    (924,229)         (1,391,206)     (3,938,696)          (3,096,567)

Interest expense, net                                     (6,156)                 11         (20,255)             (29,177)
                                               -----------------  ------------------  --------------    -----------------
Loss before discontinued operations                     (930,385)         (1,391,195)     (3,958,951)          (3,125,744)

 Loss from discontinued
       Operations                                        (10,638)            (29,302)       (181,726)             (44,955)
                                               -----------------  ------------------  --------------    -----------------
Net loss                                               ($941,023)        ($1,420,497)     (4,140,677)         ($3,170,699)
                                               =================  ==================  ==============    =================
Net loss per common share                                   (.01)               (.01)           (.02)                (.01)

 Weighted average common shares
   Outstanding, basic and diluted                    200,269,646         150,257,756      183,508,481         141,661,721
</TABLE>

              The accompanying notes are an integral part of these
                        condensed financial statements.

                                       F-2
<PAGE>
                                 POWERLINX, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
                                   (Unaudited)
<TABLE>
<CAPTION>



                                                                                       Nine Months Ended
                                                                                          September 30,
                                                                                       -----------------
                                                                                      2005                2004
                                                                                   -----------         ----------
<S>                                                                                    <C>                <C>
Cash flows from operating activities:
   Net loss                                                                        ($4,140,677)       ($3,170,699)
   Adjustments to reconcile net loss to net cash flows
     from operating activities:
       Depreciation                                                                     74,140             68,206
       Amortization                                                                    426,801            393,594
       Stock based compensation                                                        670,861            635,124
       Changes in operating assets and liabilities:
         Accounts receivable                                                            (7,231)          (212,072)
         Due from related parties                                                      (16,327)          (148,534)
         Inventories                                                                   489,539           (143,926)
         Prepaid expenses and other current assets                                     (51,691)          (169,959)
         Assets of discontinued operations                                             120,967                  -
         Deposits                                                                       20,874                  -
         Accounts payable                                                              124,884             33,261
         Accrued liabilities                                                            33,339            (54,929)
         Accrued severance                                                             169,500                  -
         Due to related parties                                                        (60,151)                 -
         Deferred revenue                                                             (173,483)           (42,923)
         Liabilities of discontinued operations                                         74,523                  -
                                                                                    -----------         ----------

Net cash flows from operating activities                                            (2,244,114)        (2,812,856)
                                                                                   -----------         ----------
Cash flows from investing activities:
   Purchases of property and equipment                                                  (3,945)           (25,496)
                                                                                   -----------         ----------
Net cash flows from investing activities                                                (3,945)           (25,496)
                                                                                   -----------         ----------
Cash flows from financing activities:
   Proceeds from sales of equity units                                                       -           1,315,000
   Proceeds from stock subscription receivable                                               -               3,250
   Proceeds from sale of common stock                                                1,161,298           2,975,843
   Proceeds from convertible debentures                                                                    516,774
Proceeds from notes payable -related parties                                                              (100,000)
   Proceeds from notes payable                                                         800,000             150,000
   Repayment of notes payable                                                         (200,000)                  -
                                                                                   -----------         ----------

Net cash flows from financing activities                                             1,761,298           4,294,093
                                                                                   -----------         ----------
Net change in cash and cash equivalents                                               (486,761)          1,455,741
Cash and cash equivalents at beginning of period                                       497,663             160,157

Cash and cash equivalents at end of period                                         $    10,902         $ 1,615,898
                                                                                   ===========         ===========
</TABLE>

              The accompanying notes are an integral part of these
                        condensed financial statements.

                                       F-3
<PAGE>
                                 POWERLINX, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
                                   (Unaudited)

<TABLE>
<CAPTION>


                   NONCASH INVESTING AND FINANCING ACTIVITIES

                                                                                       Nine Months Ended
                                                                                          September 30,
                                                                             --------------------------------------
                                                                                    2005                2004
                                                                             -----------------   ------------------
<S>                                                                                  <C>                <C>
Conversion of vendor debt to equity units                                    $                   $           50,215
                                                                             =================   ==================
Conversion of accrued payroll to equity units                                $               -   $          239,520
                                                                             =================   ==================
Conversion of equity units subscribed to equity
   units issued                                                              $               -   $          250,000
                                                                             =================   ==================
Issuance of common stock for patents                                         $               -   $          150,000
                                                                             =================   ==================
Issuance of warrants for trademark                                           $               -   $            9,925
                                                                             =================   ==================
Conversion of Series A Preferred stock
   to common stock                                                           $         241,798   $                -
                                                                             =================   ==================
</TABLE>


              The accompanying notes are an integral part of these
                        condensed financial statements.


                                       F-4
<PAGE>
                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 nine months ended  September 30, 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 nine month period ended  September 30, 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, 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



                                       F-5
<PAGE>
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>

                                                                                           Nine Months Ended
                                                                                       Sept. 30,        Sept. 30,
                                                                                         2005              2004
                                                                                -------------------------------------
<S>                                                                                      <C>                <C>
       Net loss, as reported                                                    ($     4,140,677)  ($      3,170,699)
                                                                                ================    =================
       Stock-based employee compensation, as reported                           ($       264,000)   $
                                                                                ================    =================
       Stock-based employee compensation under fair value method                ($       264,000)   $
                                                                                ================    =================
       Pro-forma net loss under fair value method                               ($     4,140,677)  ($      3,170,699)
                                                                                ================   ==================
       Net loss per share, as reported                                          ($           .02)  ($            .02)
                                                                                ================   ==================
       Pro-forma net loss per share under fair value method                     ($           .02)  ($            .02)
                                                                                ================   ==================
</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,  three
customers accounted for 66% of total revenue for the nine months ended September
30, 2005 while three customers  accounted for 70% of total revenue for the three
months ended September 30, 2005.

The Company's product assembly is dependent upon the operations of three primary
labor  suppliers,  two of which are outside the United States.  At September 30,
2005 and December 31, 2004 a non-material  amount of inventory was held off-site
at these locations.  The Company has diversified its product  manufacturing  and
component  sourcing options to minimize the risk of experiencing a disruption in
operations if a supplier becomes unavailable or unreliable.

Reclassifications

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


                                       F-6
<PAGE>
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, including discontinued operations, of $4,140,677, and
$3,170,699   during  the  nine  months  ended   September  30,  2005  and  2004,
respectively.  In  addition,  during that  period,  the Company has used cash of
$2,244,114 and $2,812,856 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 nine months
ended  September 30, 2005,  the Company  raised  $800,000 from issuance of three
separate  notes  payable  (See Note 6), and  $1,161,298  from the sale of common
stock  (See Note 8).  Management  is  currently  addressing  several  additional
financing  sources  to fund  operations  until  profitability  can be  achieved.
However,  there can be no assurance that additional financing can be obtained on
conditions considered by management to be reasonable and appropriate, if at all.
The financial  statements do not include any  adjustments  that might arise as a
result of this uncertainty.

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:



                                       F-7
<PAGE>
<TABLE>
<CAPTION>
                      Nine months ended September 30, 2005

                                    Security             Marine          DC Trans
                                    Products            Products         Products          Total
                                  -----------           ----------      -----------     -------------
<S>                                     <C>                   <C>             <C>             <C>
Net Revenue                       $   538,721           $   97,190      $   519,662     $   1,155,573
Cost of Sales                     $   439,895           $   54,720      $   309,485     $     804,100
Gross Profit                      $    98,826           $   42,470      $   210,177     $     351,473
Research and development
        Stock based               $     7,681                                           $       7,681
        Other                     $   414,094           $    5,726      $    70,787     $     490,607


                      Nine months ended September 30, 2004

                                    Security             Marine          DC Trans
                                    Products            Products         Products          Total
                                  -----------           ----------      -----------     -------------
Net Revenue                       $   453,185           $  161,249      $   257,058     $     871,492
Cost of Sales                     $   335,169           $   81,277      $   116,434     $     532,880
Gross Profit                      $   118,016           $   79,972      $   140,624     $     338,612
Research and development
        Stock based               $   106,084           $      -        $       -       $     106,084
        Other                     $   323,108           $      -        $    27,668     $     350,776


4. Inventories:

     Inventories consisted of the following:
                                                                   September 30,       December 31,
                                                                       2005               2004
                                                                -----------------   -----------------
           Raw materials                                        $         271,169   $         428,512
           Finished goods                                                 152,759             484,955
                                                                -----------------   -----------------
                                                                $         423,928   $         913,467
                                                                =================   =================


5. Intangible assets:
</TABLE>

Intangible assets consisted of the following at September 30, 2005:



                                F-8
<PAGE>
<TABLE>
<CAPTION>
                                                                   DC
                                   Security        Marine     Transportaion     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         $  (1,530,175)  $  (683,893)  $          -   $  (2,214,068)
                                -------------   -----------   -------------  -------------
                                $     593,460   $    57,255   $     46,963   $     697,678
                                =============   ===========   =============  =============

Intangible assets consisted of the following at September 30, 2004:

                                                                   DC
                                   Security        Marine     Transportaion     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>

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 on April 12, 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 was
due on June 5, 2005.  Subsequently,  the lender has extended the due date of the
note to December 31, 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 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.

On  August  16,  2005,  the  Company  executed  a 90 day  note  payable  with an
institution in the amount of $400,000. The note bears an annual interest rate of
8% and was due on November 14, 2005.  Subsequently,  the lender extended the due



                                       F-9
<PAGE>
date of the  note to  December  31,  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 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.  Under  the  separation  agreements,  the  Company  issued a total of 2.5
million shares of restricted  common stock to the two former  officers (See Note
8). 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.

At September 30, 2005, the remaining liability related to severance payments was
$169,500.

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 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.



                                      F-10
<PAGE>
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 nine months ended  September  30, 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 nine months ended  September  30, 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 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 nine months ended  September  30, 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.

During the nine months  ended  September  30,  2005,  the Company  received  net
proceeds of $1,161,289  from the sale of common stock  through a private  equity
offering exempt from registration  under 4(2) of the Securities Act of 1933, and
Rule 506 of Regulation  D, thereof.  The offering was priced at $.063 per share,
resulting in the issuance of  20,542,325  shares of common  stock.  In addition,
investors  received warrants to purchase  additional  4,108,465 shares of common
stock, exercisable at $.25 per share, with five year expiration.  The securities
underlying the offering included registration rights.

During the nine months ended  September 30, 2005, the Company  issued  2,600,000
shares of restricted common stock,  valued at $211,500,  to employees as part of
the restructuring of management and employee  employment  contracts.  The shares



                                      F-11
<PAGE>
for each  issuance  were valued at the  closing  market  price of the  Company's
common  stock on the day the  shares  were  earned or the day the  issuance  was
granted.  The entire amount was expensed  during the quarter ended September 30,
2005. Of the total, 50,000 shares were valued at $.22 per share;  200,000 shares
were valued at $.18 per share; and 2,350,000 were valued at $.07 per share.

During the nine months ended  September 30, 2005, the Company  issued  2,748,268
shares of  restricted  common stock,  valued at $293,861,  in  conjunction  with
severance agreements for former officers and employees of the Company. 2,500,000
shares  were  issued  to two  former  officers  in  accordance  with  negotiated
severance  agreements  approved by the Company's Board of Directors.  The shares
were valued at $275,000, or $.11 per share, based on the closing market price of
the Company's stock on the date the agreements were approved. An accrual for the
entire amount was recorded during the quarter ended March 31, 2005 and was fully
expensed  during the same period and classified as  restructuring  expense.  The
remaining 248,268 shares,  valued at $18,861, were issued to former employees in
accordance with their separation agreements.  The former employees were assigned
to  operational  segments that were  discontinued  by the Company during the 1st
quarter  ended March 31, 2005,  and  therefore,  the total  expense was recorded
during the 2nd quarter ended September 30, 2005, in the Discontinued  Operations
classification  in  accordance  with  the  Statement  of  Financial   Accounting
Standards  ("SFAS")  No. 144,  "Accounting  for the  Impairment  or  Disposal of
Long-Lived Assets."

During the nine months ended  September  30, 2005,  the Company  issued  100,000
shares of  restricted  common  stock,  valued at $8,000,  or $.08 per share,  as
payment of interest  owed on a note  payable  issued on February  18,  2005,  in
accordance  with the terms of the note.  The shares  were  valued at the closing
market price of the Company's common stock on the date the note was repaid.

During the nine months ended  September  30, 2005,  the Company  issued  616,800
shares of common stock in connection  with the equity unit issuance (see "Equity
Unit Issuance" above).

During the nine months ended  September  30, 2005,  the Company  issued  100,000
shares of restricted  common stock,  valued at $7,000, or $.07 per share, to the
Company's  former interim Chief  Executive  Officer,  Mark Meagher.  Mr. Meagher
received these shares as compensation for extending his consulting agreement for
an additional 45 days. The shares were valued at the closing market price of the
Company's common stock on the date they were granted.

During the nine months  ended  September  30, 2005 the  Company  issued  150,000
shares  of  restricted  common  stock  to an  entity  in  conjunction  with  the
settlement of a law suit. (See note 10 to the financial statements).  The shares
were  valued at  $10,500,  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 September 30, 2005.



                                      F-12
<PAGE>
2004 Common Stock Issuances:

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

During the nine months ended September 30, 2004, 232,500 shares of the Company's
restricted common stock were sold through a private equity placement exempt from
registration  under Section 4(2) of the  Securities Act of 1933, and Rule 506 of
Regulation D, thereof.  The  placement was open to select  officers,  employees,
representatives  of the Company,  and  accredited  investors for the purchase of
restricted  common stock.  The Company received total proceeds from the offering
of $23,250 in 2003.  The $3,250 stock  subscription  receivable  at December 31,
2003 was from a 2003 private  placement  and it was paid in full as of September
30, 2004.

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

During the nine months ended  September  30, 2004,  the Company  issued  932,000
shares of free trading  common stock to  professional  research and  development
consultants  relating to the development of the Company's security and hotel/MDU
connectivity products. The common stock was valued based upon the closing market
price on the date of issuance, or $177,080.  $123,595 was recognized as Research
& Development  expense for the nine months ended  September 30, 2004,  while the
remaining $53,485 is being amortized over the lives of the various agreements.

During the nine months ended  September  30, 2004,  the Company  issued  250,000
shares of restricted  common stock to TSK Design Group,  LLC for development and
design services relating to the Company's  security  products.  The common stock
was valued  based upon the  closing  market  price on the date of  issuance,  or
$47,500.  $39,585 was recognized as Research & Development  expense for the nine
months ended September 30, 2004,  while the remaining  $7,915 is being amortized
over the remaining life of the six month project.

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

During the nine months ended  September  30, 2004,  the Company  issued  441,176
shares of restricted  common stock in conjunction  with the purchase of patents.
The  restricted  common  stock  issued was valued based upon the previous 20 day



                                      F-13
<PAGE>
average  closing  price prior to the date of the  purchase  agreement.  The fair
value of the patents was capitalized as intangible assets and is being amortized
over estimated useful lives of five years.

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

During the nine months ended  September  30, 2004,  the Company  issued  272,500
shares of  restricted  common stock for  financing  fees  relating to short-term
loans made to the Company in June of 2004.

During the nine months ended  September 30, 2004, the Company sold to accredited
investors  an aggregate  of  12,831,373  shares of common stock for an aggregate
purchase  price of  $1,636,000,  or $.1275 per share.  In addition,  warrants to
purchase  an  additional  1,924,707  shares  of  common  stock  were  issued  in
conjunction  with the offering.  The warrants have an exercise price of $.50 per
share and  expire on June 30,  2009.  This  offering  and sale was  deemed to be
exempt under Rule 506 of  Regulation D and Section 4(2) of the  Securities  Act.
The securities underlying the offering were subsequently registered on Form SB-2
with the Securities & Exchange Commission. The registration was filed on October
15, 2004 and became effective on October 29, 2004.

During the nine months ended  September  30, 2004,  the Company  issued  100,000
share of restricted  common stock to employees for employment  signing  bonuses.
The transaction was valued at the closing market price of the Company's stock on
the date of grant, or $15,500.

During the nine months ended  September  30, 2004,  the Company  issued  187,500
shares of restricted common stock to two Company  Director's as compensation for
raising  capital  for  the  Company  through  private  equity  placements.   The
transaction was valued at the closing market price of the Company's stock on the
date  of  grant,  or  $31,875.  The  securities  underlying  the  offering  were
subsequently  registered on Form SB-2 with the Securities & Exchange Commission.
The  registration  was filed on October 15, 2004 and became effective on October
29, 2004.

During the nine months ended  September  30,  2004,  the Company  issued  13,199
shares of restricted  common stock to investors for the  conversion of $1,795 of
accrued interest relating to the Company's convertible preferred stock offering.

During the nine months ended  September 30, 2004, the Company sold to accredited
investors  an  aggregate  of  6,312,037  shares of common stock for an aggregate
purchase  price of  $852,125,  or $.135 per  share.  In  addition,  warrants  to
purchase an additional 946,806 shares of common stock were issued in conjunction
with the  offering.  The warrants  have an exercise  price of $.50 per share and



                                      F-14
<PAGE>
expire on June 30,  2009.  This  offering and sale was deemed to be exempt under
Rule 506 of Regulation D and Section 4(2) of the Securities  Act. The securities
underlying  the  offering  were  subsequently  registered  on Form SB-2 with the
Securities & Exchange Commission. The registration was filed on October 15, 2004
and became effective on October 29, 2004.

During the nine months ended  September 30, 2004, the Company sold to accredited
investors  an  aggregate  of  4,300,000  shares of common stock for an aggregate
purchase  price of  $752,500,  or $.175 per  share.  In  addition,  warrants  to
purchase an additional 645,000 shares of common stock were issued in conjunction
with the  offering.  The warrants  have an exercise  price of $.50 per share and
expire on June 30,  2009.  This  offering and sale was deemed to be exempt under
Rule 506 of Regulation D and Section 4(2) of the Securities  Act. The securities
underlying  the  offering  were  subsequently  registered  on Form SB-2 with the
Securities & Exchange Commission. The registration was filed on October 15, 2004
and became effective on October 29, 2004.

During the nine months ended  September  30, 2004,  the Company  issued  794,483
shares of restricted  common stock for the  conversion of 960,000 $.05 per share
warrants  issued  in  conjunction  with  the  Company's   convertible  debenture
financing in May, June, and July of 2003. The holder invoked a cashless exercise
provision  and   therefore  the  Company   received  no  cash  proceeds  in  the
transaction,  but  rather  reduced  the  number of shares  issued by  165,517 in
accordance with the cashless exercise provision.

During the nine months ended  September 30, 2004, the Company  issued  2,224,000
shares of  restricted  common stock in  conjunction  with the  acquisition  of a
software  license  agreement with On2  Technologies,  Inc. The  transaction  was
valued at $311,360.  The securities  underlying  the offering were  subsequently
registered  on  Form  SB-2  with  the  Securities  &  Exchange  Commission.  The
registration  was filed on October 15, 2004 and became  effective on October 29,
2004.

During the nine months ended  September 30, 2004, the Company  issued  2,458,016
shares of free trading  common stock for the conversion of 614,504 shares of the
Company's  preferred A stock, as a result of conversion  notices received by the
Company, from holders, on September 20, 2004. The conversion rate, in accordance
with the terms and provisions of the offering was $.25 per share.

Compensation  expense of $29,422 for the nine months ended  September  30, 2004,
was  recognized  in  relation  to  amortization  of  unearned  restricted  stock
compensation  relating to common shares issued to consultants as compensation in
previous 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



                                      F-15
<PAGE>
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:
<TABLE>
<CAPTION>



                                                                    Nine Months Ending

                                                            30-Sep                  30-Sep
                                                             2005                    2004
                                                         -----------              -----------
<S>                                                          <C>                      <C>
Net Revenues                                                 118,030                  235,958
Cost of Goods Sold                                           113,614                  155,564
                                                         -----------              -----------
     Gross Profit                                              4,416                   80,394

Operating Expenses                                           186,142                  125,349

Net Loss                                                    (181,726)                 (44,955)
                                                         ===========              ===========


                                                                      Nine Months Ending

                                                            Sep 30,                 December 31,
                                                             2005                      2004
                                                         ------------              -------------

Total asstes related to discontinued operations
        Accounts Receivable                                16,937                     91,616
        Inventory                                            -                        39,120
        Property Plant & Equipment                           -                         7,168
                                                          -------                   --------
                                                           16,937                    137,904
                                                          =======                   ========

Total liabilities related to discontinued operations
        Accounts Payable                                  159,126                     84,603
                                                          =======                   ========
</TABLE>

                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004



10. Commitments and contingencies:

Non-exclusive finder's agreements:



                                      F-16
<PAGE>
The Company entered into three  non-exclusive  finder's  agreements  whereby the
finders  introduce  potential  investors  to the  Company.  In return  for these
services the Company pays certain  percentages,  ranging from 2% to 10%, of loan
proceeds or gross offering proceeds received from introductions made that result
in loans made to the Company,  or investment in the Company. As of September 30,
2005,  the  finders had been paid cash  amounts  connected  with a 2005  private
equity and debt  offerings  totaling  $105,400.  In  addition,  according to the
agreements,  the finders are to receive  shares of common stock for a portion of
the fees not paid in cash.  The number of shares to be issued is  determined  by
the total unpaid fees  divided by 100% of the offering  price for which the fees
are attributed.  For the nine month period ended September 30, 2005, the Company
had  issued  392,549  shares of  restricted  common  stock  valued at $27,478 in
conjunction  with  the  fees  owed.  The  shares  include   registration  rights
consistent  with the  offering.  As of September  30,  2005,  the Company has no
outstanding finders fees payable.

Litigation, claims and assessment:

Satius, Inc License Agreement

On August  12th,  2005 we were  served  with a  complaint  filed in the Court of
Common Pleas, Montgomery County,  Pennsylvania.  The action was filed by Satius,
Inc. The suit alleges  breach of contract  involving a Licensing  Agreement with
Satius dated  December 18, 2003 that relates to certain of the Company's  analog
power products.  This same licensing  agreement was terminated by Satius on July
10, 2004. The company has yet to file a response to the  aforementioned  action,
having  been  granted and  extension.  However,  the Company and its  management
believe that they are not in violation of the terminated  license  agreement and
intend to defend the law suit  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.

Diversified Personnel

In  September  2005,  the  Company  became a  defendant  in a law suit  filed by
Diversified   Personnel  in  an  attempt  to  recover  approximately  $8,500  in
outstanding  invoices  related to the  Company's  use of temporary  labor in the
Company's research & development office in California prior to the restructuring
of the Company in March and April of 2005.  The  plaintiff has extended the date
for the Company to file an answer to the  complaint to November  30,  2005.  The
extension  was granted as an attempt to resolve the dispute  prior to the answer
date. After further review of the  documentation,  the Company has agreed to pay
the  outstanding  invoices and will make payment  prior to November 30, 2005; at
which time the complaint will be dismissed.  The amount was fully  accounted for
as a liability as of September 30, 2005.



                                      F-17
<PAGE>
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 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.

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

The Company's  transfer agent has received  instructions  from the plaintiff for
the  issuance  of the  shares,  and has  approved  their  issuance.  The Company
believes the shares will be issued in November of 2005.


Pro-Marketing of Texas

The Company was a defendant in a lawsuit filed by Pro-Marketing  of Texas,  Inc.
in the Circuit Court of Pinellas  County,  Florida.  The suit alleged  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  contested  the claim from the outset,  however,  in and effort to limit
legal fees associated with the action, on August 18, 2005, the Company agreed to
a  settlement.  The  settlement  consisted of the issuance of 150,000  shares of
restricted  common stock, and cash payments  totaling $60,000 to be disbursed in
an amount of $2,500  per month for a period of two years,  commencing  on August
18, 2005.

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.



                                      F-18
<PAGE>
On February 12, 2004, the SEC's Staff advised the Company,  through its counsel,
that they  intend to  recommend  that the SEC  bring a civil  injunctive  action
against  the Company  and  certain of its  current  and former  officers  and/or
directors. As it relates to the Company, the Staff alleges that:

The Company  violated  Section 17(a) of the Securities Act of 1933  ("Securities
Act") and Sections 10(b), 13(a), 13(b)(2)(A),  and 13(b)(2)(B) of the Securities
Exchange Act of 1934 ("Exchange Act") and Rules 10b-5,  13a-1,  13a-11,  13a-13,
and 12b-20  thereunder,  and is liable for civil  penalties  pursuant to Section
20(d) of the  Securities  Act and Section  21(d)(3)(A)  of the Exchange Act. The
SEC's Staff, in accordance with Rule 5(c) of the Commission's  Rules of Informal
and  Other  Procedures,  17  C.F.R.   ss.202.5(c),   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.

Before  any  final  determination  was made with  regard  to the  aforementioned
investigation,  the  Staff  notified  the  Company  that  it  wanted  to  review
additional  documentation.  This request  pertained  to a purchase  contract the
Company entered with Universal General Corporation,  LLC (UGC), on September 17,
2004 and the  subsequent  shipment of products to UGC on November 15, 2004.  The
Company has, through its counsel, fully cooperated with this additional request,
and has provided the documents and financial  information  sought.  In addition,
certain current and former officers and employees have provided testimony and/or
interviews  to the Staff with regard to UGC. The Company  anticipates  that this
secondary  inquiry will be  concluded  in the near term,  although it is unclear
whether  the   results   will  cause  the  Staff  to   reconsider   its  initial
recommendations.



                                      F-19
<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.
`
PowerLinx   develops,   licenses,   manufactures,   and  markets   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 $223,900 for the three months ended September 30, 2005 increased
161% compared to net revenues for the same period ended  September 30, 2004. The
results for the three month period ended  September 30, 2005 was  highlighted by
record revenues of $198,600 in the Company's growing DC  Transportation  product
segment.  This resulted in a 905% increase in net revenues  compared to the same
period  ended  September  30,  2004.  Overall  for the nine month  period  ended
September 30, 2005, net revenues for the DC Transportation products segment have
increased 102% compared to the same period ended September 30, 2004.

As previously reported in our Form 10-KSB filed on April 14, 2005, we decided to
discontinue  the  Hotel/MDU  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 $10,638 for the three months ended  September 30, 2005,  and $181,726 for the
nine months ended September 30, 2005. (See Note 9 to the financial  statements).
Accordingly,  all  revenue  and  expense  comparisons  reported  above have been
modified to reflect this accounting.



                                       3
<PAGE>
During  the three  month  period  ended  September  30,  2005,  we made  several
advancements  in our DC  Transportation  product  segment  relating  to  product
additions and customer acquisitions.  We adopted "Zone Defense" as the Company's
rear vision  product  line brand name.  In addition,  we expanded our  marketing
approach to position our DC  Transportation  products segment as a complete rear
vision and accident  avoidance  business  rather than a power line  business.  A
major component of this positioning was the addition to our product line a suite
of six new "hard wired"  systems to compliment our PLC  technology.  Some of our
customer fleets have a wide variety of vehicle types.  The customers wish to use
both power line and hard wired  technologies.  Some had  offered  the hard wired
portion of their  business  to  PowerLinx.  These new rear vision  systems  were
evaluated and tested during the quarter ended September 30, 2005. The hard wired
systems are available for sale to customers  beginning in the fourth  quarter of
2005.  100% of the revenue and growth in the  transportation  division came from
the power line product in the three month period ended  September  30, 2005.  We
believe  that the hard wired  systems  will  further  accelerate  growth in this
division.

Also during the three month period ended September 30, 2005, we acquired several
new fleet customers  including Mercer,  Wallis Oil, and American Tire.  American
Tire will be installing our systems on all new vehicles they place into service.
We  have  also  added a sales  representative  in  Canada  to  begin  exploiting
additional sales opportunities.  In the recreational vehicle market, New Horizon
has chosen to install our system in their upcoming 2006 model year RV line.

As previously reported, we have reengineered the Research & Development process.
We have created  project plans and timelines for each  technology and product in
the pipeline. We have also reprioritized the projects based on revenue potential
and time to market.  As a result of this effort we recently were able to make an
announcement  regarding  the Company's  emerging new products for  communicating
audio,  video,  voice,  and data over the power lines of existing homes or small
offices.

Final  engineering  is  estimated  to be  complete by mid  December  2005 on new
technologies  and products in three  categories.  A new power line audio product
will be targeted to home entertainment OEMs and resellers.  The  next-generation
version of  SecureView(TM)  will incorporate  multiple-camera  control in "light
bulb" form factors, and will also feature new form factors for wider use in home
and  business.  The Company will also  introduce its first digital PLC products,
beginning with a new digital power-line Network Camera.

Based on the initial timelines, we are projecting product releases during Second
Quarter  of  2006.  There  has been  significant  interest  from  our  investors
regarding these new products and we are extremely  excited about the prospect of
presenting  these  products to the market  place  after an extended  engineering
phase.  The estimated  release  dates are based on the most recent  project plan
timelines. Risks associated with engineering new technology and certain external
influences,  such as regulatory approvals or component  availability,  have been
factored in but may shorten or lengthen time to market by several weeks.

Also during the three month period ended  September 30, 2005, we believe we made
significant  progress on the implementation of our strategy to license a portion
of our technologies rather than manufacturing all products. We continue to be in
discussions  with several  potential  licensees  that have targeted uses for our
developed  technology.  In addition, we believe licensing will allow the Company
to employ  its  technology,  and  products  utilizing  its  technology,  without
incurring the associated costs in building the infrastructure to manufacture and
market products.

Management  remains  optimistic about the long term prospects of PowerLinx.  Our
optimism  is based  on the  growing  acceptance  of power  line  technology  and



                                       4
<PAGE>
increasing  demand for the  products in the market and in  development.  We have
focused  the  attention  and  resources  of the company to  capitalize  on these
opportunities.


RESULTS OF OPERATIONS

Reclassifications:

Certain  reclassifications  have been made to prior year  balances to conform to
the current year  presentation,  including  reclassifications  for  discontinued
operations (See Note 9 to the financial statements).

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

NINE MONTHS ENDED SEPTEMBER 30, 2005 AND SEPTEMBER 30, 2004

NET REVENUE.  Net revenue  increased 33% from $871,492 for the nine months ended
September 30, 2004 to $1,155,573  for the nine months ended  September 30, 2005.
Marine  product  segment sales were $97,190 or 8% of total revenues for the nine
months ended September 30, 2005 compared to $161,249,  or 19% of total revenues,
for the nine months ended  September  30, 2004.  Overall,  marine  product sales
decreased  $64,059,  or 40%. Security product segment sales were $538,721 or 47%
of total  revenues  for the nine months  ended  September  30, 2005  compared to
$453,185,  or 52% of total  revenues,  for the nine months ended  September  30,
2004.   Overall,   security  product  sales  increased   $85,536,   or  19%.  DC
Transportation product segment sales were $519,662, or 45% of total revenues for
the nine months ended  September 30, 2005 compared to $257,058,  or 29% of total
revenues  for  the  nine  months  ended   September   30,  2004.   Overall,   DC
Transportation  product sales increased  $262,604,  or 102%. 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 period ended September 30, 2005. The growth in the security
products  segment is due  primarily  to the increase in sales volume from on air
sales  on  Home  Shopping   Network.   The  increase  in  revenues  for  the  DC
transportation  product  segment was due primarily  from the products  increased
exposure  generated  from the length of time the product has been in the market,
and a  limited  amount of  advertising.  The  sales  cycle  for our rear  vision
products  appears  to be 6  months  to one year  due to the  capital  investment
required by customers  to equip entire  fleets,  and the  requirement  for field
testing.


COST OF GOODS SOLD.  Cost of Goods sold increased 51% from $532,880 for the nine
months ended  September 30, 2004 to $804,100 for the nine months ended September
30, 2005.  As a percentage of net revenue,  cost of goods sold  increased to 70%
for the nine months ended  September 30, 2005 from 61% for the nine months ended
September 30, 2004. Cost of goods sold for the marine products segment decreased
$26,557 or 33%,  from  $81,277 for the nine months ended  September  30, 2004 to
$54,720 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 nine
months ended  September  30, 2004 to 56% for same period ended in 2005.  Cost of
goods sold for the security  products  segment  increased  $104,726 or 31%, from
$335,169 for the nine months ended  September  30, 2004 to $439,895 for the same
period ended in 2005. As a percentage of net revenue, cost of goods sold for the
security product segment  increased from 74% for the nine months ended September
30,  2004 to 82% for same  period  ended in 2005.  Cost of goods sold for the DC
Transportation  product segment increased $193,051 or 166% from $116,434 for the
nine months  ended  September  30, 2004 to $309,485 for the same period ended in
2005. As a percentage of net revenue, cost of goods sold for the DC



                                       5
<PAGE>
Transportation  product  segment  increased  from 45% for the nine months  ended
September 30, 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 product mix. 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 nine months ended September
30, 2005 amounted to $351,473 or 30% of net revenues,  compared to $338,612,  or
39% of net revenues,  for the nine months ended  September 30, 2004.  The marine
products segment  contributed  $42,470 and $79,972 of the total gross profit for
the nine months ended  September 30, 2005 and 2004,  respectively.  The security
products segment  contributed $98,826 and $118,016 of the total gross profit for
the nine  months  ended  September  30,  2005  and  2004,  respectively.  The DC
Transportation  products segment contributed  $210,177 and $140,624 of the total
gross  profit  for  the  nine  months  ended   September   30,  2005  and  2004,
respectively.  The gross  profit  percentage  for the  marine  products  segment
decreased  from 50% for the nine months ended  September 30, 2004 to 44% for the
nine months ended  September  30,  2005.  The gross  profit  percentage  for the
security products segment decreased from 26% for the nine months ended September
30, 2004 to 18% for the nine months ended  September 30, 2005.  The gross profit
percentage for the DC Transportation products segment decreased from 55% for the
nine months ended  September 30, 2004 to 40% for the nine months ended September
30, 2005.

The decrease in the gross profit as a percentage  of net revenues for the marine
products  segment was driven primarily by product mix. 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 49% from $833,912 for the nine
months  ended  September  30,  2004 to  $1,246,092  for the  nine  months  ended
September  30, 2005.  The increase  was due to two factors.  First,  the Company
implemented a  restructuring  plan during the first quarter ended March 31, 2005
that resulted in a significant  decrease in the number of employees who had been
hired  prior  to the  end of the  fiscal  year  ended  December  31,  2004.  The
restructuring   plan  was  not  completed  until  May  of  2005,   resulting  in
significantly higher salary and wage costs during the first four months of 2005.
Second,  during the nine months ended  September 30, 2005,  non-cash stock based
compensation  of $279,000  was  recorded  for the  issuance  of common  stock to
employees in conjunction  with previous and restructured  employment  contracts.
Salary and Wages is comprised of employee wages and stock compensation.

PROFESSIONAL & CONSULTING  FEES.  Professional  and consulting fees decreased 1%
from  $739,651 for the nine months ended  September 30, 2004 to $730,215 for the
nine months  ended  September  30,  2005.  The decrease was due to a decrease in
legal fees from attorneys  handling the Company's  matters with the Securities &
Exchange Commission and the Company's management  restructuring.  However,  this
decrease  was offset by  accounting  fees  incurred for the  preparation  of the
Company's tax returns.  Professional  and  consulting  fees include fees paid to
attorneys,  accountants,  and  business  consultants.  During the  period  ended
September 30, 2005, non-cash stock based compensation of $57,750 was recognized



                                       6
<PAGE>
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
9% from  $461,621 for the nine months ended  September  30, 2004 to $500,941 for
the nine months ended  September 30, 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.

RESEARCH &  DEVELOPMENT.  Research  and  development  expense  increased 9% from
$456,860 for the nine months ended  September 30, 2004, to $498,288 for the nine
months ended  September  30, 2005.  The increase was  attributable  to increased
funding for the  development  of the Company's  new analog and digital  consumer
security  systems.  Research and development  costs consist of all  expenditures
related to the improvement and development of the Company's current product line
and new product  development.  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 nine
months  ended   September  30,  2005,  of  the  total   Research  &  Development
expenditures,  $421,775 or 85% was  related to the  security  products  segment,
$70,787 or 14% was related to the DC Transportation products segment, and $5,726
or 1% 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  25% from
$119,992 for the nine months ended  September  30, 2004 to $149,914 for the nine
months ended September 30, 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 49% from $96,912 for the nine
months  ended,  September  30,  2004 to  $144,150  for the  nine  months  ended,
September  30,  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 increased 6% from
$148,809 for the nine months ended  September  30, 2004 to $158,004 for the nine
months ended  September 30, 2005.  The increase was  attributed to the Company's
attendance  at the CES trade show in January of 2005,  and an increase in travel
related to sales and installation of the DC  Transportation  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 $225,000 for the nine
months ended  September 30, 2004 to $-0- for the nine months ended September 30,
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 21% from $317,763 for the nine months
ended  September  30, 2004 to $251,110 for the nine months ended  September  30,
2005.  The  decrease  was due  primarily  to  reductions  in  telemarketing  and
temporary  labor  expenses.  Other expenses  include  tele-marketing,  supplies,
property taxes,  insurance,  financing  fees, bank charges,  temporary labor and



                                       7
<PAGE>
various other expenses that are classified as miscellaneous.

RESTRUCTURING  CHARGES.  Restructuring charges amounted to $598,286. 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
$37,073 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 September
30, 2005 (See Note 7 to the financial statements).


THREE MONTHS ENDED SEPTEMBER 30, 2005 AND SEPTEMBER 30, 2004

NET REVENUE.  Net revenue increased 161% from $85,951 for the three months ended
September  30, 2004 to $223,945 for the three months ended  September  30, 2005.
Marine product  segment sales were $15,234 or 7% of total revenues for the three
months ended  September 30, 2005 compared to $21,546,  or 25% of total revenues,
for the three months ended  September 30, 2004.  Overall,  marine  product sales
decreased  $6,312,  or 29%. Security product segment sales were $10,083 or 4% of
total  revenues  for the three  months  ended  September  30,  2005  compared to
$44,640,  or 52% of total  revenues,  for the three months ended  September  30,
2004.   Overall,   security  product  sales  decreased   $34,558,   or  77%.  DC
Transportation product segment sales were $198,628, or 89% of total revenues for
the three months ended  September 30, 2005 compared to $19,765,  or 23% of total
revenues  for  the  three  months  ended   September  30,  2004.   Overall,   DC
Transportation  product sales increased  $178,863,  or 905%. 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  September  30,  2005.  The  decrease in the
security products segment sales was due primarily to the cancellation of several
airings on Home  Shopping  Network,  and their  decision  not to  restock  their
inventory prior to the end of the quarter ended September 30, 2005. The increase
in revenues for the DC transportation product segment was due primarily from the
products  increased  exposure  generated from the length of time the product has
been in the market, and a limited amount of advertising. The sales cycle for our
rear  vision  products  appears  to be 6 months  to one year due to the  capital
investment required by customers to equip entire fleets, and the requirement for
field testing.

COST OF GOODS SOLD. Cost of Goods sold increased 141% from $56,680 for the three
months ended September 30, 2004 to $136,529 for the three months ended September
30, 2005.  As a percentage of net revenue,  cost of goods sold  decreased to 61%
for the three  months  ended  September  30, 2005 from 66% for the three  months
ended  September 30, 2004.  Cost of goods sold for the marine  products  segment
decreased  $2,249 or 20%, from $11,203 for the three months ended  September 30,
2004 to  $8,954  for the  same  period  ended in 2005.  As a  percentage  of net
revenue,  cost of goods sold for the marine product  segment  increased from 52%
for the three  months ended  September  30, 2004 to 59% for same period ended in
2005. Cost of goods sold for the security  products segment decreased $26,996 or
75%,  from $35,990 for the three months ended  September  30, 2004 to $8,994 for
the same period ended in 2005.  As a percentage  of revenue,  cost of goods sold
for the security  product segment  increased from 81% for the three months ended
September 30, 2004 to 89% for same period ended in 2005.  Cost of goods sold for
the DC Transportation  product segment  increased  $109,094 or 1150% from $9,487
for the three  months ended  September  30, 2004 to $118,581 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 48% for the three months ended
September 30, 2004 to 60% for same period ended in 2005.



                                       8
<PAGE>
The increase in the cost of goods sold as a  percentage  of net revenues for the
marine products segment was driven primarily by product mix. 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 September
30, 2005 amounted to $87,416 or 39% of net revenues, compared to $29,271, or 34%
of net  revenues,  for the three months  ended  September  30, 2004.  The marine
products  segment  contributed  $6,280 and $10,343 of the total gross profit for
the three months ended September 30, 2005 and 2004,  respectively.  The security
products segment contributed $1,089 and $8,650 of the total gross profit for the
three  months  ended  September  30,  2005  and  2004,   respectively.   The  DC
Transportation  products  segment  contributed  $80,047 and $10,278 of the total
gross  profit  for  the  three  months  ended   September  30,  2005  and  2004,
respectively.  The gross  profit  percentage  for the  marine  products  segment
decreased from 48% for the three months ended  September 30, 2004 to 41% for the
three  months ended  September  30, 2005.  The gross profit  percentage  for the
security  products  segment  decreased  from  19% for  the  three  months  ended
September  30, 2004 to 11% for the three months ended  September  30, 2005.  The
gross profit  percentage for the DC  Transportation  products segment  decreased
from 52% for the three  months  ended  September  30,  2004 to 40% for the three
months ended September 30, 2005.

The decrease in the gross profit as a percentage  of net revenues for the marine
products  segment was driven primarily by product mix. 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 decreased 7% from $308,392 for the three
months ended September 30, 2004 to $285,809 for the three months ended September
30,  2005.  The  decrease  was a direct  result of a reduction  in the number of
employees  working for the Company.  During the three months ended September 30,
2005 there was no stock based  compensation  to  employees.  Salary and Wages is
comprised of employee wages and stock compensation.

PROFESSIONAL & CONSULTING  FEES.  Professional and consulting fees decreased 27%
from $274,260 for the three months ended  September 30, 2004 to $201,042 for the
three months ended  September  30, 2005.  The decrease was due to a reduction in
legal fees and the  elimination  of consulting  contracts  incurred prior to the
restructuring  process.  Professional  and consulting  fees include fees paid to
attorneys,  accountants,  and  business  consultants.  During the  period  ended
September 30, 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
1% from  $163,109 for the three months ended  September 30, 2004 to $165,326 for
the three months ended  September  30, 2005.  The increase was  attributable  to
depreciation on new computer equipment put into service during the quarter.

RESEARCH &  DEVELOPMENT.  Research and  development  expense  decreased 42% from
$304,615  for the three  months ended  September  30, 2004,  to $178,129 for the



                                       9
<PAGE>
three months ended  September 30, 2005.  The decrease  occurred for two reasons.
First, during the same period ended in 2004,  substantial  software  development
fees were incurred,  a project that was completed prior to the same period ended
in 2005.  Second,  during the same period ended 2004, the Company incurred stock
based  compensation  expenses  associated  with product  develop,  where as, the
Company incurred no stock based  compensation  expense for the same period ended
2005. Research and development costs consist of all expenditures  related to the
improvement  and  development  of the  Company's  current  product  line and new
product   development.   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   September  30,  2005,  of  the  total   Research  &  Development
expenditures,  $171,694 or 96% was related to the security  products segment and
$6,435 or 4% was related to the DC Transportation  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  decreased  18% from
$37,726 for the three months ended  September  30, 2004 to $30,875 for the three
months ended  September 30, 2005. The decrease was due directly to a decrease 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  decreased 3% from $38,128 for the three
months  ended,  September  30,  2004 to  $36,965  for the  three  months  ended,
September 30, 2005. The decrease is due to the  consolidation and elimination of
outside  storage  unit rental fees.  Rent and  utilities  includes  office rent,
warehouse rent, storage, telephone, and utilities.

TRAVEL & ENTERTAINMENT  EXPENSE.  Travel & entertainment  expense  decreased 14%
from $55,492 for the three months  ended  September  30, 2004 to $47,885 for the
three months ended  September 30, 2005. The decrease is due to new  managements'
implementation  of  budgets  and  efficiency   guidelines  pertaining  to  these
expenses.  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 September 30, 2004 to $-0- for the three months ended September 30,
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 53% from $139,472 for the three months
ended  September  30, 2004 to $65,614 for the three months ended  September  30,
2005. The decrease was due to a reduction in temporary labor and  tele-marketing
costs.  Other  expenses  include  tele-marketing,   supplies,   property  taxes,
insurance,  financing  fees,  bank  charges,  temporary  labor and various other
expenses that are classified as miscellaneous.



                                       10
<PAGE>
LIQUIDITY & CAPITAL RESOURCES

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, including discontinued operations, of $4,140,677, and
$3,170,699   during  the  nine  months  ended   September  30,  2005  and  2004,
respectively.  In  addition,  during that  period,  the Company has used cash of
$2,244,114 and $2,812,856 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 nine months
ended  September 30, 2005,  the Company  raised  $800,000 from issuance of three
separate  notes  payable  (See Note 6), and  $1,161,298  from the sale of common
stock  (See Note 8).  Management  is  currently  addressing  several  additional
financing  sources  to fund  operations  until  profitability  can be  achieved.
However,  there can be no assurance that additional financing can be obtained on
conditions considered by management to be reasonable and appropriate, if at all.
The financial  statements do not include any  adjustments  that might arise as a
result of this uncertainty.

The Company is uncertain  whether  current  financing  commitments  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 nine months ended  September  30, 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
          received 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 during April
          2005 (See note 6 to the financial statements).

     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 was due on June 5,  2005.  Subsequently,  the
          lender has extended the due date of the note to December 31, 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 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. (See note 6 to the financial
          statements).

     o    During the three month period ended  September  30, 2005,  the Company
          received  net  proceeds of  $1,161,289  from the sale of common  stock
          through a private equity offering exempt from registration  under 4(2)
          of the  Securities Act of 1933, and Rule 506 of Regulation D, thereof.



                                       11
<PAGE>
          The offering was priced at $.063 per share,  resulting in the issuance
          of 20,542,325 shares of common stock. In addition,  investors received
          warrants  to purchase  additional  4,108,465  shares of common  stock,
          exercisable  at  $.25  per  share,  with  five  year  expiration.  The
          securities  underlying the offering included registration rights. (See
          note 8 to the financial statements).

     o    On August 16, 2005, the Company executed a 90 day note payable with an
          institution  in the  amount  of  $400,000.  The note  bears an  annual
          interest  rate of 8% and was due on November 14,  2005.  Subsequently,
          the lender extended the due date of the note to December 31, 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 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. (See note 6 to the financial
          statements).

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


Item 3.     CONTROLS AND PROCEDURES

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

An evaluation was carried out under the supervision  and with the  participation
of our  management,  including our Chief  Executive  Officer and Chief Financial
Officer,  of the  effectiveness  of the design and  operation of our  disclosure
controls  and  procedures  (as defined in Rule  13a-14(c)  under the  Securities
Exchange Act of 1934) as of September 30, 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.


PART II.    OTHER INFORMATION

Item 1.     Legal Proceedings

Litigation, claims and assessment:

Satius, Inc License Agreement
On August  12th,  2005 we were  served  with a  complaint  filed in the Court of
Common Pleas, Montgomery County,  Pennsylvania.  The action was filed by Satius,
Inc. The suit alleges  breach of contract  involving a Licensing  Agreement with
Satius dated  December 18, 2003 that relates to certain of the Company's  analog
power products.  This same licensing  agreement was terminated by Satius on July
10, 2004. The company has yet to file a response to the  aforementioned  action,
having  been  granted and  extension.  However,  the Company and its  management



                                       12
<PAGE>
believe that they are not in violation of the terminated  license  agreement and
intend to defend the law suit  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 was a defendant in a lawsuit filed by Pro-Marketing  of Texas,  Inc.
in the Circuit Court of Pinellas  County,  Florida.  The suit alleged  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  contested  the claim from the outset,  however,  in and effort to limit
legal fees associated with the action, on August 18, 2005, the Company agreed to
a  settlement.  The  settlement  consisted of the issuance of 150,000  shares of
restricted  common stock, and cash payments  totaling $60,000 to be disbursed in
an amount of $2,500  per month for a period of two years,  commencing  on August
18, 2005.

Diversified Personnel
In  September  2005,  the  Company  became a  defendant  in a law suit  filed by
Diversified   Personnel  in  an  attempt  to  recover  approximately  $8,500  in
outstanding  invoices  related to the  Company's  use of temporary  labor in the
Company's research & development office in California prior to the restructuring
of the Company in March and April of 2005.  The  plaintiff has extended the date
for the Company to file an answer to the  complaint to November  30,  2005.  The
extension  was granted as an attempt to resolve the dispute  prior to the answer
date. After further review of the  documentation,  the Company has agreed to pay
the  outstanding  invoices and will make payment  prior to November 30, 2005; at
which time the complaint will be dismissed.  The amount was fully  accounted for
as a liability as of September 30, 2005.

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
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



                                       13
<PAGE>
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.

Before  any  final  determination  was made with  regard  to the  aforementioned
investigation,  the  Staff  notified  the  Company  that  it  wanted  to  review
additional  documentation.  This request  pertained  to a purchase  contract the
Company entered with Universal General Corporation,  LLC (UGC), on September 17,
2004 and the  subsequent  shipment of products to UGC on November 15, 2004.  The
Company has, through its counsel, fully cooperated with this additional request,
and has provided the documents and financial  information  sought.  In addition,
certain current and former officers and employees have provided testimony and/or
interviews  to the Staff with regard to UGC. The Company  anticipates  that this
secondary  inquiry will be  concluded  in the near term,  although it is unclear
whether  the   results   will  cause  the  Staff  to   reconsider   its  initial
recommendations.

Item 2.     Sales of Unregistered Equity 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
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



                                       14
<PAGE>
the employment agreement.

During the three month period ended September 30, 2005, the Company received net
proceeds of $1,161,289  from the sale of common stock  through a private  equity
offering exempt from registration  under 4(2) of the Securities Act of 1933, and
Rule 506 of Regulation  D, thereof.  The offering was priced at $.063 per share,
resulting in the issuance of  20,542,325  shares of common  stock.  In addition,
investors  received warrants to purchase  additional  4,108,465 shares of common
stock, exercisable at $.25 per share, with five year expiration.  The securities
underlying  the  offering  included  registration  rights.  (See  note  8 to the
financial statements).

On May 17, 2005, the Company issued 2,600,000 shares of restricted common stock,
valued at $211,500,  to employees as part of the restructuring of management and
employee employment  contracts.  The shares for each issuance were valued at the
closing  market price of the  Company's  common stock on the day the shares were
earned or the day the  issuance  was  granted.  The entire  amount was  expensed
during the quarter ended  September  30, 2005. Of the total,  50,000 shares were
valued at $.22 per share;  200,000  shares  were  valued at $.18 per share;  and
2,350,000 were valued at $.07 per share.

On May 17, 2005, the Company issued 2,748,268 shares of restricted common stock,
valued at $293,861, in conjunction with severance agreements for former officers
and  employees  of the  Company.  2,500,000  shares  were  issued to two  former
officers in accordance  with  negotiated  severance  agreements  approved by the
Company's  Board of Directors.  The shares were valued at $275,000,  or $.11 per
share,  based on the closing market price of the Company's stock on the date the
agreements  were approved.  An accrual for the entire amount was recorded during
the quarter ended March 31, 2005 and was fully  expensed  during the same period
and classified as restructuring expense. The remaining 248,268 shares, valued at
$18,861,  were issued to former  employees in accordance  with their  separation
agreements. The former employees were assigned to operational segments that were
discontinued  by the Company  during the 1st quarter  ended March 31, 2005,  and
therefore, the total expense was recorded during the 2nd quarter ended September
30, 2005, in the Discontinued  Operations  classification in accordance with the
Statement of Financial  Accounting  Standards ("SFAS") No. 144,  "Accounting for
the Impairment or Disposal of Long-Lived Assets."

On May 17, 2005, the Company  issued 100,000 shares of restricted  common stock,
valued at $8,000,  or $.08 per share,  as  payment  of  interest  owed on a note
payable issued on February 18, 2005, in accordance  with the terms of the note (
see note 6 to the financial  statements).  The shares were valued at the closing
market price of the Company's common stock on the date the note was repaid.

On August 3, 2005, the Company issued 100,000 shares of restricted common stock,
valued at $7,000,  or $.07 per share,  to the  Company's  former  interim  Chief
Executive  Officer,   Mark  Meagher.   Mr.  Meagher  received  these  shares  as
compensation  for extending his consulting  agreement for an additional 45 days.
The shares were valued at the closing market price of the Company's common stock
on the date they were granted.

On August 17, 2005, the Company issued 150,000 shares of restricted common stock
to an entity in conjunction  with the settlement of a law suit.  (See note 10 to
the  financial  statements).  The shares were  valued at  $10,500,  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 September 30, 2005.



                                       15
<PAGE>
Item 3.     Defaults Upon Senior Securities.

            Not Applicable.

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

On June 20, 2005, at a meeting of the Board of Directors,  of which a quorum was
present, proposed the following resolutions for requiring shareholder approval:

                                 POWERLINX, INC.
                       WRITTEN CONSENT IN LIEU OF MEETING
                                      OF A
                          MAJORITY OF THE SHAREHOLDERS


The undersigned, constituting a majority of the shareholders of Powerlinx, Inc.,
a Nevada corporation (the "Company"),  hereby consent to and adopt the following
resolutions  pursuant  to  sections  78.320  and  78.390 of the  Nevada  General
Corporation Law:


RESOLVED that the Board of Directors deems it advisable and in the best interest
of  the  Company,  for  such  purposes  of  equity  financing  and  stock  based
acquisitions,  to amend the Company's  certificate of  incorporation to increase
the authorized  amount of capital stock from  260,000,000  shares to 430,000,000
shares;  of which  400,000,000 shall be common stock (increased from 250,000,000
shares),  and  30,000,000  shares  shall  be  preferred  stock  (increased  from
10,000,000 shares); in accordance with the attached  certificate of amendment to
the Company's Articles of Incorporation

RESOLVED that the Board of Directors deems it advisable and in the best interest
of the Company to elect  Myles  Gould and Brad Gould to the Board of  Directors,
under Class I and for a term expiring at the annual meeting of shareholders held
in the third (3rd) year following the year of their election; in accordance with
the Company's bylaws.

     The action taken by this consent shall have the same force and effect as if
taken at a meeting of shareholders of the Company, duly called.

     IN WITNESS WHEREOF, the undersigned being a majority of the shareholders of
the Company has executed this consent as of this _____ day of ____________ 2005.


Signature:________________________________


Name:  __________________________________

Number of shares voted: _____________________


Item 5.     Other Information

None.

Item 6.     Exhibits

            Exhibits:

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



                                       16
<PAGE>
          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



                                   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 November 15, 2005.


         POWERLINX, INC.


         By: /s/ MICHAEL TOMLINSON
             ----------------------------
             MICHAEL TOMLINSON
             Chief Executive Officer

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



                                       17