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 June 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 August 10, 2005: 198,572,043

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 June 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................................................19

     Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.......20

     Item 3. Defaults Upon Senior Securities..................................21

     Item 4. Submission of Matters to a Vote of Security Holders..............21

     Item 5. Other Information................................................21

     Item 6. Exhibits.........................................................21

Signatures....................................................................22


                                       2
<PAGE>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                                 POWERLINX, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    AS OF JUNE 30, 2005 AND DECEMBER 31, 2004

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                      June 30,
                                                                                       2005             December 31,
                                                                                   (Unaudited)             2004
                                                                                ------------------  ------------------
<S>                                                                                     <C>                   <C>
Current assets:
   Cash and cash equivalents                                                    $         160,661   $         497,663
   Accounts receivable, net                                                               515,694             282,480
   Employee Advances                                                                       65,048              70,700
   Inventories                                                                            434,686             913,467
   Prepaid expenses and other current assets                                               83,165              85,493

   Assets of discontinued operations                                                       39,807             137,904
                                                                                ------------------  ------------------
     Total current assets                                                               1,299,061           1,932,434

Intangible assets, net                                                                    839,945           1,124,479
Deposits                                                                                   20,234              40,334
Property and equipment, net                                                               249,908             297,044
                                                                                ------------------  ------------------
     Total assets                                                               $       2,409,148   $       3,394,291
                                                                                ==================  ==================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                             $         620,906   $         528,961
   Accrued expenses                                                                       222,507             164,912
   Accrued severance payable, current portion                                              82,500                   -
   Deferred revenue                                                                             -             173,483
   Due to related parties                                                                   3,238              60,151
   Current maturities of notes payable                                                    201,765               1,765
   Litigation settlement                                                                  300,000             300,000
   Liabilities of discontinued operations                                                 200,555              84,603
                                                                                ------------------  ------------------
     Total current liabilities                                                          1,631,471           1,313,875

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

     Total Liabilities                                                                  1,803,706           1,342,110
                                                                                ------------------  ------------------

Commitments and contingencies (Note 10)                                                         -                   -

Stockholders' equity:
   Series A convertible preferred stock, $1.00 par value; authorized 10,000,000
     shares; issued 1,825,520 shares;
     outstanding (730,608 - 2005; 880,608 - 2004)                                         644,249              776,519
   Common stock, $.001 par value, authorized
     250,000,000 shares; issued (199,213,730 - 2005;
     173,119,705 - 2004) outstanding (198,740,155 -
     2005; 172,646,130 - 2004)                                                            198,740              172,646
   Additional paid-in capital                                                          23,194,574           21,335,484
   Treasury stock, at cost, 473,575 shares                                               (287,757)            (287,757)
   Accumulated deficit                                                                (23,144,364)         (19,944,711)
                                                                                ------------------  ------------------
   Total stockholders' equity                                                             605,442            2,052,181
                                                                                ------------------  ------------------
     Total liabilities and stockholders' equity                                 $       2,409,148   $        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 SIX MONTHS ENDED JUNE 30, 2005 AND 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         Three Months Ended                     Six Months Ended
                                                               June 30,                              June 30,
                                               -------------------------------------  -----------------------------------
                                                      2005               2004               2005              2004
                                               -----------------  ------------------  ---------------   -----------------
<S>                                                   <C>                 <C>               <C>               <C>
Net revenue                                    $        504,194   $         434,342   $      931,628    $        785,541
Cost of goods sold                                      352,389             261,833          667,571             476,199
                                               -----------------  ------------------  ---------------   -----------------

           Gross profit                                 151,805             172,509          264,057             309,342
                                               -----------------  ------------------  ---------------   -----------------

Operating expenses:
   Salaries and wages                                   547,358             297,017          960,283             555,753
   Professional and consulting fees                     140,727             220,899          529,173             465,391
   Depreciation and amortization                        168,725             150,580          335,615             298,512
   Research and development                             149,040             133,572          320,159             152,245
   Advertising and promotions                            51,587              27,143          119,039              52,032
   Rent and utilities                                    59,041              35,729          107,186              58,784
   Provision for doubtful accounts                       13,166              10,000           13,166
   Travel and entertainment                              58,859              37,198          110,120              93,317
   Royality expenses                                          -              75,000                -             150,000
   Other expenses                                        78,055              98,846          185,497             180,278
   Restructuring Expense                                 15,603                   -          598,286                   -
                                               -----------------  ------------------  ---------------   -----------------

   Total operating expenses                          1,282,,161           1,085,984        3,278,524           2,016,312
                                               -----------------  ------------------  ---------------   -----------------

Loss from operations                                 (1,130,356)           (913,475)      (3,014,467)         (1,706,970)

Interest expense, net                                   (13,041)            (29,318)         (14,099)            (29,187)
                                               -----------------  ------------------  ---------------   -----------------

Loss before discontinued operations                  (1,143,397)           (942,793)      (3,028,566)         (1,736,157)

 Loss from discontinued
       operations                                       (32,206)            (15,653)        (171,088)            (15,653)
                                               -----------------  ------------------  ---------------   -----------------

Net loss                                       $     (1,175,603)  $        (958,446)  $   (3,199,654)   $     (1,751,810)
                                               =================  ==================  ===============   =================

Net loss per common share                                  (.01)               (.01)            (.02)               (.01)

 Weighted average common shares
   Outstanding, basic and diluted                   176,063,307         138,460,754      174,608,259         137,343,268

</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 SIX MONTHS ENDED JUNE 30, 2005 AND 2004
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                         Six Months Ended
                                                                                             June 30,
                                                                             --------------------------------------
                                                                                    2005                2004
                                                                             ------------------  ------------------
<S>                                                                                  <C>                <C>
Cash flows from operating activities:
   Net loss                                                                  $      (3,199,654)  $      (1,874,306)
   Adjustments to reconcile net loss to net cash flows
     from operating activities:
       Depreciation                                                                     51,081              43,868
       Amortization                                                                    284,534             254,644
       Stock based compensation                                                        614,111             587,749
       Changes in operating assets and liabilities:
         Accounts receivable                                                          (233,214)           (250,940)
         Due from related parties                                                      (13,118)            (77,534)
         Inventories                                                                   478,781              69,260
         Prepaid expenses and other current assets                                      23,575            (269,618)
         Assets of discontinued operations                                              96,947              41,021
         Deposits                                                                       20,100                   -
         Accounts payable                                                               91,945             (77,585)
         Accrued liabilities                                                            57,595              42,927
         Accrued severance                                                             226,500                   -
         Due to related parties                                                        (56,913)                  -
         Deferred revenue                                                             (173,483)            (67,508)
         Liabilities of discontinued operations                                        115,952              58,814
                                                                             ------------------  ------------------

Net cash flows from operating activities                                            (1,615,261)         (1,519,208)
                                                                             ------------------  ------------------

Cash flows from investing activities:
   Purchases of property and equipment                                                  (2,795)            (17,341)
                                                                             -------------------  ------------------

Net cash flows from investing activities                                                (2,795)            (17,341)
                                                                             -------------------  ------------------

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                                                1,081,054
   Proceeds from notes payable -related parties                                                            150,000
   Proceeds from notes payable                                                         400,000                   -
   Repayment of notes payable                                                         (200,000)                  -
                                                                              -----------------  ------------------

Net cash flows from financing activities                                             1,281,054           1,468,250
                                                                             ------------------  ------------------

Net change in cash and cash equivalents                                               (337,002)            (68,299)
Cash and cash equivalents at beginning of period                                       497,663             160,157
                                                                             ------------------  ------------------

Cash and cash equivalents at end of period                                   $         160,661   $          91,858
                                                                             ==================  ==================

</TABLE>
                                             F-3



<PAGE>


                                 POWERLINX, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
                   NONCASH INVESTING AND FINANCING ACTIVITIES
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                       Three Months Ended
                                                                                            June 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                                                           $          132,270  $               -
                                                                             ==================  ==================

</TABLE>

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

                                       F-5

<PAGE>
                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 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 six months ended
     June 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 six month period ended
     June 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

                                      F-6

<PAGE>

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


     volatility.   Because   the   Company's   employee   stock   options   have
     characteristics  significantly  different from those of traded options, and
     because changes in the subjective input  assumptions can materially  affect
     the fair value estimate,  in management's  opinion,  the existing models do
     not necessarily  provide a reliable single measure of the fair value of its
     employee stock options.  The Company accounts for unregistered common stock
     issued for services or asset  acquisitions  at the estimated  fair value of
     the stock  issued.  Fair value is  determined  based  substantially  on the
     average cash price of recent  sales of the  Company's  unregistered  common
     stock.

     The following table reflects supplemental  financial information related to
     stock-based  employee  compensation,  as required by Statement of Financial
     Accounting  Standards No. 148,  Accounting for  Stock-Based  Compensation -
     Transition and Disclosure:

<TABLE>
<CAPTION>
                                                                                          Six Months Ended
                                                                                     June 30,            June 30,
                                                                                       2005                 2004
                                                                                -----------------  ------------------
<S>                                                                                    <C>                <C>
       Net loss, as reported                                                    $     (3,199,654)  $      (1,874,306)
                                                                                =================  ==================
       Stock-based compensation, as reported                                    $       (264,000)  $
                                                                                =================  ==================
       Stock-based compensation under fair value method                         $       (264,000)  $
                                                                                =================  ==================
       Pro-forma net loss under fair value method                               $     (3,199,654)  $      (1,874,306)
                                                                                =================  ==================

       Net loss per share, as reported                                          $           (.02)  $            (.01)
                                                                                =================  ==================
       Pro-forma net loss per share under fair value method                     $           (.02)  $            (.01)
                                                                                =================  ==================
</TABLE>

     Concentrations:

     Accounts  receivable are concentrated in the Security and DC Transportation
     products   industry  and  credit  losses  have  been  within   management's
     expectations.  Although  the  Company  serves a large and  varied  group of
     customers,  two  customers  accounted  for 52% of total revenue for the six
     months ended June 30, 2005 while three customers accounted for 44% of total
     revenue for the three months ended June 30, 2004.

     The Company's  product  assembly is dependent  upon the operations of three
     primary labor  suppliers,  two of which are outside the United  States.  At
     June 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-7
<PAGE>

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


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 $3,199,654, and $1,751,810 during the six months ended June 30, 2005 and
     2004, respectively.  In addition,  during that period, the Company has used
     cash of  $1,621,261  and  $1,519,208  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 six months
     ended June 30,  2005,  the Company  raised  $400,000  from  issuance of two
     separate notes payable (See Note 6), and $1,081,100 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-8
<PAGE>


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

                                                      2005

                               Security      Marine      DC Trans
                               Products     Products     Products      Total

Net revenue                  $  528,638    $  81,956    $ 321,034    $ 931,628
Cost of sales                $  430,901    $  45,766    $ 190,904    $ 667,571
Gross profit                 $   97,737    $  36,190    $ 130,130    $ 264,057
Research and development
         Stock based         $    7,681                                $ 7,681
         Other               $  242,400    $   5,726    $  64,352    $ 312,478




                                                      2004

                              Security        Marine     DC Trans
                              Products       Products    Products    Total

Net revenue                  $  408,545    $ 139,703    $ 237,293    $ 785,541
Cost of sales                $  299,179    $  70,074    $ 106,946    $ 476,199
Gross profit                 $  109,366    $  69,629    $ 130,347    $ 309,342
Research and development:
         Stock based         $   49,084    $       -    $       -    $  49,084
         Other               $   95,661    $       -    $   7,500    $ 103,161


4.   Inventories:

     Inventories consisted of the following:

                                          March 31,         December 31,
                                            2005                 2004
                                     -----------------   -----------------
           Raw materials             $         362,212   $         428,512
           Finished goods                       72,474             484,955
                                     -----------------   -----------------
                                     $         434,686   $         913,467
                                     =================   =================



5.   Intangible assets:

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

                                      F-9
<PAGE>
                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004


<TABLE>
<CAPTION>

                                                                                DC
                                           Security          Marine       Transportation       Total

<S>                                         <C>                <C>                <C>           <C>
Patents                                 $ 1,577,813      $   741,148      $         -      $ 2,318,961
Licensing rights                             37,500                -                -           37,500
Software license agreement                  461,360                -                -          461,360
Trademark                                    46,962                -           46,963           93,925
Acumulated amortization                  (1,426,075)        (645,726)               -       (2,071,801)
                                        ------------     ------------     ------------     ------------
                                          $ 697,560         $ 95,422      $    46,963      $   839,945


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

                                                                                DC
                                           Security          Marine       Transportation       Total

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

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.  The  institution  subsequently
     extended  the due  date of the  note to  September  30,  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.


                                      F-10
<PAGE>
                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004


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.

     During the three months ended June 30, 2005,  the  liability was reduced by
     $324,500;  consisting  of the issuance of the 2.5 million  shares of common
     stock, valued at $275,000, and cash payments of $49,500.

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.  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

                                      F-11
<PAGE>
                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004


     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 six months  ended June 30,  2005,  the  Company  issued  480,000
     shares of free trading common stock for the conversion of 120,000 shares of
     the Company's preferred A stock, as a result of conversion notices received
     by the Company,  from  preferred  stockholders.  The  conversion  rate,  in
     accordance  with the  terms and  provisions  of the  offering  was $.25 per
     share.

     During the six months  ended June 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 six months  ended June 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 six months  ended June 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 six  months  ended  June 30,  2005,  the  Company  received  net
     proceeds  of  $1,081,054  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 18,796,293  shares of common
     stock.  In addition,  investors  received  warrants to purchase  additional
     3,759,259 shares of common stock,  exercisable at $.25 per share, with five
     year   expiration.   The  securities   underlying  the  offering   included
     registration rights.

     During the six months ended June 30,  2005,  the Company  issued  2,600,000
     shares of restricted common stock, valued at $211,500, to employees as part

                                      F-12
<PAGE>
                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004

     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 June 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 six months ended June 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  June  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 six months  ended June 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 six months  ended June 30,  2005,  the  Company  issued  120,000
     shares of common stock in  connection  with the equity unit  issuance  (see
     "Equity Unit Issuance" above).


     2004 Common Stock Issuances:

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

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

                                      F-13
<PAGE>
                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004


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

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

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

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

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

                                      F-14
<PAGE>
                                 POWERLINX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004


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

     Compensation expense of $29,422 for the six months ended June 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 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>

                                                                    Six Months Ending

                                                              June 30,                June 30,
                                                                2005                    2004
                                                          -----------------       ------------------

<S>                                                                <C>                      <C>
Net Revenues                                                       360,534                  125,371
Cost of Goods Sold                                                 342,052                   82,332
                                                                  --------                  -------
     Gross Profit                                                   18,482                   43,039

Operating Expenses                                                 189,569                   58,692

Loss from discontinued operations                                 (171,088)                 (15,653)




                                                              June 30,               December, 31
                                                                2005                     2004
                                                          -----------------       ------------------
Total assets related to discontinued operations:
     Accounts Receivable                                            39,807                   91,616
     Inventory                                                           -                   39,120
     Property Plant & Equipment                                          -                    7,168
                                                          -----------------       ------------------
                                                                    39,807                  137,905

Total liabilities related to discontinued operations:
     Accounts Payable                                              200,555                   84,603
                                                          -----------------       ------------------
</TABLE>


                                      F-15
<PAGE>

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


10.  Commitments and contingencies:

     Non-exclusive finder's agreements:

     The Company entered into three  non-exclusive  finder's  agreements whereby
     the finders  introduce  potential  investors to the Company.  In return for
     these  services the Company pays  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 June 30, 2005, the finders had been paid cash amounts
     connected  with  a  2005  private  equity  offering  totaling  $83,095.  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.  As of June 30,
     2005,  the Company  had  accrued  $20,718 for unpaid fees that will be paid
     through the issuance of 328,905  shares of  restricted  common  stock.  The
     shares include registration rights consistent with the offering.

     Litigation, claims and assessment:

     Satius, Inc License Agreement

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

     Class Action Lawsuit

     Commencing in May 2001, the Company was a defendant in a consolidated class
     action lawsuit that was pending in the United States District Court for the
     Middle  District of Florida  against the Company and Richard  McBride,  the
     Company's former chief executive  officer.  On December 17, 2002, the Joint
     Motion for Preliminary  Approval of Settlement and the Amended  Stipulation
     of Settlement  was filed with the United States  District Court of Florida,
     and approved by the residing justice.  In the settlement,  the Company will

                                      F-16
<PAGE>

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


     issue  6,000,000  shares of common stock to the class  participants.  There
     were no significant  amendments to the nature or terms of the  Stipulation.
     The actual liability, based on the value of the Company's stock as December
     17, 2002, was $300,000 plus an estimated $125,000 in legal fees.

     On May 2, 2003,  the  United  States  District  Court of  Florida,  through
     issuance of its Order and Final  Judgment,  approved  the  settlement.  The
     Company is awaiting instructions from the plaintiff for the issuance of the
     shares.


     Pro-Marketing of Texas

     The Company is a defendant in a lawsuit  filed by  Pro-Marketing  of Texas,
     Inc. in the Circuit  Court of Pinellas  County,  Florida.  The suit alleges
     breach of contract relating to a payment of a convertible debenture, with a
     maximum  potential  exposure of $100,000 plus interests costs and attorneys
     fees. The Company has contested the claim from the outset. In and effort to
     limit legal fees  associated  with the action,  in early August  2005,  the
     Company forwarded a settlement offer to the plaintiffs.  The Company has no
     knowledge  whether or not the offer will be  accepted,  and  therefore,  no
     liability  that may  result  from the  resolution  of this  matter has been
     recorded in the financial statements.

     SEC Investigation

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

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

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

                                      F-17
<PAGE>

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


     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.

<PAGE>


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

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

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

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


OVERVIEW

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 $504,100 for the three months ended June 30, 2005  increased 16%
compared to net revenues for the same period ended June 30, 2004. A highlight to
the  quarterly  results  was a 47%  increase  in net  revenues  in the  Security
products  segment.  This  produced a new record for  quarterly  revenues  in the
Security products segment,  our largest business segment. Net revenues increased
to $303,259 for the three months ended June 30, 2005, from $205,970 for the same
period ended June 30 2004.

Net revenues for the three months ended June 30, 2005 including the discontinued
Hotel/MDU  products  segment would have been  $622,100,  however,  as previously
reported in our Form 10-KSB filed on April 14, 2005,  we decided to  discontinue
this product  segment and operating  results for the  discontinued  segment have
been  reported  separately  as  discontinued   operations  in  the  consolidated
statements of operations for all periods  presented in accordance with Statement
of  Financial  Accounting  Standards  ("SFAS")  No.  144,  "Accounting  for  the
Impairment or Disposal of Long-Lived Assets." The discontinuance of this segment
resulted in a loss from discontinued  operations of $32,200 for the three months
ended June 30, 2005,  and $171,088 for the six months ended June 30, 2005.  (See
Note 9 to the financial statements).

                                       3
<PAGE>
The business segment  restructuring was done to eliminate peripheral  businesses
and focus  resources on our core  business.  Three business units fell into this
category,  and as previously  reported,  they have been closed and the employees
released from the Company.

In addition  to the  business  segment  restructuring,  we also  reported in our
10-KSB that we were actively engaged in a plan to restructure our management and
our  research  and  development  initiatives  in an effort to allow for the most
efficient  allocation of resources and management  focus. The  implementation of
this plan was completed  during the quarter ended June 30, 2005.  Mike Tomlinson
was  appointed  President and CEO on May 17, 2005.  Mike has a successful  track
record in  Marketing,  Sales and  General  Management  at  Proctor  and  Gamble,
PepsiCo,  Lenox  Brands  and other  fine  companies.  Roger Roy was hired to the
management  team as Vice President  Consumer  Sales and  Marketing.  Roger has a
successful career in marketing  consumer products to companies such as Wal-Mart,
Sam's  Club and many other  leading  retailers  where we seek to sell  PowerLinx
products.  Another significant change is that Research & Development now reports
directly to the CEO. We have reengineered this department creating 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.  This
effort has resulted in the  acceleration of moving work through the pipeline and
provided  confidence that PowerLinx will have new technology and products to the
market as quickly as possible.

To further accelerate this process,  we have shifted the Company's strategy from
manufacturing,  to licensing, for certain new technologies, and we are currently
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.

Sales of our  SecureView  product on Home Shopping  Network  (HSN)  continued to
accelerate  as a result of  improvements  made in the  marketing  of the product
producing  record  results at this  account.  The  quarter  ended June 30,  2005
included  our  largest  shipments  to HSN since  acquiring  them as a  customer,
setting a second consecutive quarterly record.

While total sales of our Rear Vision  systems in the DC  Transportation  product
segment  declined  slightly for the quarter  ended June 30, 2005 compared to the
same  quarter  ended 2004;  overall  revenues in the DC  Transportation  product
segment for the six months  ended June 30, 2005,  increased  35% compared to the
same period ended 2004. The sales cycle in this product segment is about 6 to 12
months and is driven by the substantial  capital investment  required to equip a
fleet  and the  prospect's  desire  to  perform  in field  testing.  It was very
encouraging  to see  sales to FedEx  Custom  Critical  for  testing  and  Mercer
Transport for distribution to their owner operators. Both of these customers had
been in the sales  pipeline  for 6 months.  Sales were made to Mercer  following
months of field  testing.  The  field  testing  validated  the  performance  and
benefits of the PowerLinx Rear Vision system and lead to the purchase  decision.
We anticipate a favorable test at FedEx custom Critical and subsequent  purchase
orders.  We are currently in  discussions  with several other  distributors  and
fleet  prospects  which we are attempting to convert into a solid revenue stream
moving forward.

Of concern for the quarter  ended June 30, 2005 was the 10%  increase in cost of
goods sold as a percentage of net revenues  compared to the same period ended in
2004. Management believes that the recently signed manufacturing and procurement
contract with IC Intracom will lead to product and component cost  reductions in
future reporting periods.

                                       4
<PAGE>
Management  remains  optimistic about the long term prospects of PowerLinx.  Our
optimism  is based  on the  growing  acceptance  of power  line  technology  and
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.

SIX MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2004

NET REVENUE.  Net revenue  increased  19% from $785,541 for the six months ended
June 30, 2004 to $931,628 for the six months ended June 30, 2005. Marine product
segment sales were $81,956 or 9% of total revenues for the six months ended June
30, 2005  compared to  $139,703,  or 18% of total  revenues,  for the six months
ended June 30, 2004.  Overall,  marine product sales decreased $57,747,  or 41%.
Security  product  segment sales were $528,638 or 57% of total  revenues for the
six months ended June 30, 2005 compared to $408,545,  or 52% of total  revenues,
for the six  months  ended  June  30,  2004.  Overall,  security  product  sales
increased  $120,093,  or 29%.  DC  Transportation  product  segment  sales  were
$321,034,  or 34% of total  revenues  for the six  months  ended  June 30,  2005
compared to $237,293, or 30% of total revenues for the six months ended June 30,
2004.  Overall,  DC Transportation  product sales increased $83,741, or 35%. 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 June 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 40% from $476,199 for the six
months  ended June 30, 2004 to $667,571  for the six months ended June 30, 2005.
As a percentage of net revenue,  cost of goods sold increased to 72% for the six
months ended June 30, 2005 from 61% for the six months ended June 30, 2004. Cost
of goods sold for the marine  products  segment  decreased  $24,308 or 35%, from
$70,074  for the six months  ended June 30,  2004 to $45,766 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 six months ended June 30, 2004 to 56%
for same  period  ended in 2005.  Cost of goods sold for the  security  products
segment  increased  $131,722 or 44%, from $299,179 for the six months ended June
30, 2004 to $430,901 for the same period ended in 2005.  As a percentage  of net
revenue,  cost of goods sold for the security product segment increased from 73%
for the six months  ended June 30,  2004 to 82% for same  period  ended in 2005.
Cost of goods sold for the DC  Transportation  product segment increased $83,958
or 79% from  $106,949 for the six months ended June 30, 2004 to $190,904 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 45% for the six months
ended June 30, 2004 to 59% for same period ended in 2005.

                                       5
<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 six months ended June 30,
2005 amounted to $264,057 or 28% of net revenues,  compared to $309,342,  or 39%
of net  revenues,  for the six months ended June 30, 2004.  The marine  products
segment  contributed  $36,190 and $69,629 of the total gross  profit for the six
months ended June 30, 2005 and 2004, respectively. The security products segment
contributed  $97,737 and  $109,366 of the total gross  profit for the six months
ended  June 30,  2005 and 2004,  respectively.  The DC  Transportation  products
segment contributed  $130,130 and $130,347 of the total gross profit for the six
months ended June 30, 2005 and 2004,  respectively.  The gross profit percentage
for the marine products segment decreased from 50% for the six months ended June
30,  2004 to 44% for the six  months  ended  June 30,  2005.  The  gross  profit
percentage  for the security  products  segment  decreased  from 27% for the six
months ended June 30, 2004 to 18% for the six months  ended June 30,  2005.  The
gross profit  percentage for the DC  Transportation  products segment  decreased
from 55% for the six months  ended June 30, 2004 to 41% for the six months ended
June 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 73% from $555,753 for the six
months  ended June 30, 2004 to $960,283  for the six months ended June 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 six months
ended June 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 increased 14%
from  $465,391  for the six months  ended June 30, 2004 to $529,173  for the six
months  ended June 30,  2005.  The increase was due to an increase in legal fees
from  attorneys  handling the Company's  matters with the  Securities & Exchange
Commission  and  the  Company's  management   restructuring.   Professional  and
consulting  fees  include  fees paid to  attorneys,  accountants,  and  business
consultants.  During  the period  ended  June 30,  2005,  non-cash  stock  based
compensation of $38,500 was recognized 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
12% from $298,512 for the six months ended June 30, 2004 to $335,615 for the six
months ended June 30, 2005.  The  increase was  attributable  to the purchase of
patents in January 2004 and the signing of two software license  agreements,  on

                                       6
<PAGE>
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 110% from
$152,245 for the six months ended June 30, 2004,  to $320,159 for the six months
ended June 30, 2005. The increase was attributable to increased  funding for the
development  of the Company's  new PLVS+  consumer  security  system and digital
security  system.  Research and  development  costs consist of all  expenditures
related to the improvement and development of the Company's current product line
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 six
months ended June 30, 2005, of the total  Research &  Development  expenditures,
$250,081 or 78% was related to the security products segment, $64,352 or 20% was
related to the DC Transportation  products segment, and $5,726 or 2% was related
to the  marine  products  segment.  The  cost of our  research  and  development
activities  is borne  directly  by the  Company;  no  amounts  are  borne by our
customers,  nor are any contracts for customer  funded  research and development
currently anticipated. The Company plans to continue funding the security and DC
transportation product segments for the next several years.

ADVERTISING  AND  PROMOTIONS.  Advertising  and  promotions  increased 129% from
$52,032 for the six months  ended June 30,  2004 to $119,039  for the six months
ended June 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 82% from $58,784 for the six
months ended, June 30, 2004 to $107,186 for the six months ended, June 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 18%
from  $93,317 for the six months  ended June 30,  2004 to  $110,120  for the six
months  ended June 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 $150,000 for the six
months ended June 30, 2004 to $-0- for the six months  ended June 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  increased 3% from $180,278 for the six months
ended June 30,  2004 to $185,497  for the six months  ended June 30,  2005.  The
increase was due primarily to increases in insurance  premiums.  Other  expenses
include tele-marketing,  travel, supplies, property taxes, insurance,  financing
fees,  bank  charges,  temporary  labor  and  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

                                       7
<PAGE>
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 June 30,
2005 (See Note 7 to the financial statements).


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

NET REVENUE.  Net revenue increased 16% from $434,342 for the three months ended
June 30, 2004 to  $504,194  for the three  months  ended June 30,  2005.  Marine
product  segment sales were $32,727 or 6% of total revenues for the three months
ended June 30, 2005 compared to $52,104, or 12% of total revenues, for the three
months ended June 30, 2004. Overall,  marine product sales decreased $19,377, or
37%.  Security  product segment sales were $303,259 or 60% of total revenues for
the three  months  ended June 30,  2005  compared to  $205,970,  or 47% of total
revenues,  for the three months ended June 30, 2004.  Overall,  security product
sales increased  $97,289,  or 47%. DC Transportation  product segment sales were
$168,208,  or 33% of total  revenues  for the three  months  ended June 30, 2005
compared to $176,268,  or 41% of total  revenues for the three months ended June
30, 2004. Overall, DC Transportation  product sales decreased $8,060, or 5%. 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 June 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  decrease in  revenues  for the DC
transportation  product segment was due to a large  distributor sale made in the
prior  comparative  quarter.  The sales  cycle  for the  Company's  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 35% from $261,833 for the three
months ended June 30, 2004 to $352,389 for the three months ended June 30, 2005.
As a  percentage  of net  revenue,  cost of goods sold  increased to 70% for the
three  months  ended June 30, 2005 from 60% for the three  months ended June 30,
2004. Cost of goods sold for the marine products  segment  decreased  $12,135 or
46%,  from  $26,284 for the three  months ended June 30, 2004 to $14,149 for the
same period ended in 2005.  As a percentage  of net revenue,  cost of goods sold
for the marine  product  segment  decreased  from 50% for the three months ended
June 30, 2004 to 43% for same period  ended in 2005.  Cost of goods sold for the
security  products segment increased $83,114 or 54%, from $155,351 for the three
months ended June 30, 2004 to $238,465  for the same period ended in 2005.  As a
percentage  of  revenue,  cost of goods sold for the  security  product  segment
increased  from 75% for the three  months  ended  June 30,  2004 to 79% for same
period  ended in  2005.  Cost of goods  sold for the DC  Transportation  product
segment  increased  $19,577 or 24% from  $80,198 for the three months ended June
30, 2004 to $99,775 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 45% for the three  months  ended June 30, 2004 to 59% for same period ended
in 2005.

The decrease 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.

                                       8
<PAGE>
GROSS PROFIT MARGIN.  Gross profits on sales for the three months ended June 30,
2005 amounted to $151,805 or 30% of net revenues,  compared to $172,509,  or 40%
of net revenues,  for the three months ended June 30, 2004. The marine  products
segment  contributed $18,578 and $25,820 of the total gross profit for the three
months ended June 30, 2005 and 2004, respectively. The security products segment
contributed  $64,794 and $50,619 of the total gross  profit for the three months
ended  June 30,  2005 and 2004,  respectively.  The DC  Transportation  products
segment  contributed $68,433 and $96,070 of the total gross profit for the three
months ended June 30, 2005 and 2004,  respectively.  The gross profit percentage
for the marine  products  segment  increased from 50% for the three months ended
June 30, 2004 to 57% for the three months ended June 30, 2005.  The gross profit
percentage for the security  products  segment  decreased from 25% for the three
months ended June 30, 2004 to 21% for the three months ended June 30, 2005.  The
gross profit  percentage for the DC  Transportation  products segment  decreased
from 55% for the three  months  ended June 30, 2004 to 41% for the three  months
ended June 30, 2005.

The increase 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 84% from $297,017 for the three
months ended June 30, 2004 to $547,358 for the three months ended June 30, 2005.
The increase was due to the issuance of common stock to employees in conjunction
with previous and  restructured  employment  contracts.  During the three months
ended June 30, 2005,  $234,000 of non-cash stock based compensation was recorded
in  conjunction  with  common  stock  issued to  employees.  Salary and Wages is
comprised of employee wages and stock compensation.

PROFESSIONAL & CONSULTING  FEES.  Professional and consulting fees decreased 36%
from $220,899 for the three months ended June 30, 2004 to $140,727 for the three
months  ended June 30,  2005.  The decrease was due to a reduction in legal fees
and the elimination of consulting  contracts during the  restructuring  process.
Professional  and consulting  fees include fees paid to attorneys,  accountants,
and business consultants.  During the period ended June 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
12% from  $150,580  for the three months ended June 30, 2004 to $168,725 for the
three months ended June 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 12% from
$133,572 for the three  months  ended June 30,  2004,  to $149,040 for the three
months ended June 30, 2005. The increase was  attributable to increased  funding
for the  development  of the Company's new PLVS+  consumer  security  system and
digital  security  system.   Research  and  development  costs  consist  of  all
expenditures related to the improvement and development of the Company's current
product line 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.

                                       9
<PAGE>
For the three months ended June 30, 2005,  of the total  Research &  Development
expenditures,  $114,917 or 77% was  related to the  security  products  segment,
$31,665 or 21% was related to the DC Transportation products segment, and $2,458
or 2% was related to the marine products  segment.  The cost of our research and
development activities is borne directly by the Company; no amounts are borne by
our  customers,   nor  are  any  contracts  for  customer  funded  research  and
development  currently  anticipated.  The Company plans to continue  funding the
security and DC transportation product segments for the next several years.

ADVERTISING  AND  PROMOTIONS.  Advertising  and  promotions  increased  90% from
$27,143 for the three months ended June 30, 2004 to $51,587 for the three months
ended June 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 65% from $35,729 for the three
months  ended,  June 30, 2004 to $59,041 for the three  months  ended,  June 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 58%
from  $37,198 for the three  months ended June 30, 2004 to $58,859 for the three
months ended June 30, 2005. The increase was attributed to 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 $75,000 for the three
months ended June 30, 2004 to $-0- for the three months ended June 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 $98,846 for the three months
ended June 30, 2004 to $78,055 for the three  months  ended June 30,  2005.  The
decrease  was due to a reduction in temporary  labor and  tele-marketing  costs.
Other  expenses  include  tele-marketing,   travel,  supplies,  property  taxes,
insurance,  financing  fees,  bank  charges,  temporary  labor and various other
expenses that are classified as miscellaneous.

RESTRUCTURING  CHARGES.  Restructuring  charges amounted to $15,603. The charges
were for legal fees attributable to severance  agreement  preparation related to
the  departure of two officers of the Company  during the quarter ended June 30,
2005 (See "restructuring charges" for the period six months ended June 30, 2005,
and Note 7 to the financial statements).


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 $3,199,654, and
$1,751,810 during the six months ended June 30, 2005 and 2004, respectively.  In
addition,  during those  quarters,  the Company has used cash of $1,621,261  and
$1,519,208 in its operating activities. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.

                                       10
<PAGE>
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 six months ended
June 30, 2005, the Company  raised  $400,000 from issuance of two separate notes
payable,  and $1,081,100 from the sale of common stock.  Management is currently
addressing  several  additional  financing  sources  to  fund  operations  until
profitability can be achieved.

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 six months  ended June 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  extended the due date of the note to September  30, 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  June 30,  2005,  the  Company
          received  net  proceeds of  $1,081,054  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 18,796,293 shares of common stock. In addition,  investors received
          warrants  to purchase  additional  3,759,259  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).

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.

                                       11
<PAGE>
Item 3.   CONTROLS AND PROCEDURES

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

An evaluation was carried out under the supervision  and with the  participation
of our  management,  including our Chief  Executive  Officer and Chief Financial
Officer,  of the  effectiveness  of the design and  operation of our  disclosure
controls  and  procedures  (as defined in Rule  13a-14(c)  under the  Securities
Exchange Act of 1934) as of June 30, 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
In July 2004,  Satius,  Inc.  and its  principal  Charles  Abraham  attempted to
terminate a license  agreement  between  Satius and the Company based on alleged
breaches of contract by the  Company.  We dispute the claims of breach that have
been alleged  against us.  Satius  further  asserts  that,  without a license to
Satius'  patents,  a  substantial  amount  of the  Company's  products  are  now
infringing Satius' patents. We dispute the infringement allegation.  Satius also
claims that it owns certain  technologies that were  independently  developed by
the Company. We dispute this claim as well. To our knowledge as of May 13, 2005,
Satius and Charles  Abraham have not brought suit against the Company.  Should a
suit be brought, we intend to defend the matter vigorously.  However,  there can
be no  assurance  that the  Company  will  prevail  on the  merits  of the case.
Litigation  of this matter will be expensive  and will divert time and financial
resources away from the Company's business.  In addition, an unfavorable outcome
in this matter would result in  substantial  harm and possibly  severe damage to
the Company.


Pro-Marketing of Texas
The Company is a defendant in a lawsuit filed by Pro-Marketing of Texas, Inc. in
the Circuit  Court of  Pinellas  County,  Florida.  The suit  alleges  breach of
contract  relating  to a  payment  of a  convertible  debenture,  with a maximum
potential  exposure of $100,000 plus  interests  costs and attorneys  fees.  The
Company has  contested  the claim from the outset.  In and effort to limit legal
fees associated with the action,  in early August 2005, the Company  forwarded a
settlement offer to the plaintiffs.  The Company has no knowledge whether or not
the offer will be accepted, and therefore, no liability that may result from the
resolution of this matter has been recorded in the financial statements.

                                       12
<PAGE>
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
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.

                                       13
<PAGE>
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
the employment agreement.

During the three month period ended June 30, 2005, the Company received proceeds
of $1,081,054  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  18,796,293  shares of common stock.  In addition,  investors
received  warrants  to purchase  additional  3,759,259  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 June 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 June 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."

                                       14
<PAGE>
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.


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: ___________________


                                       15
<PAGE>
Item 5.     Other Information

The Company's Board of Directors  appointed Michael Tomlinson as Chief Executive
Officer of the Company effective May 17, 2005.

     MICHAEL  TOMLINSON (57) CEO - Mr.  Tomlinson  joined  PowerLinx in February
2004. He received a BBA in both Marketing and Management  from the University of
Memphis in 1975. Mike has extensive sales, marketing,  product development,  and
general management experience, having served over 25 years with HavaTampa Cigar,
Lenox Brands,  Pepsi Cola (18 yrs.) and Proctor and Gamble. Mike held the office
of  Vice-President or Senior  Vice-President  with these companies for 13 years.
From 1985 through  1988,  he was a Vice  President  or Senior Vice  President in
charge of managing area  franchises  with profit and loss  responsibilities.  He
re-engineered  product  lines  and  sales  departments,  managed  marketing  and
customer service efforts, and restructured  operations to increase profitability
and market focus. For the years immediately prior to joining PowerLinx, in 2004,
he capitalized on his career experiences as a Business Reengineering  Consultant
with Benchmark Associates.


Item 6.     Exhibits

Exhibits
Number                             Description
------- ------------------------------------------------------------------------
31.1    Certification  by Chief  Financial  Officer  pursuant to Sarbanes -Oxley
        Section 302.
31.2    Certification  by Chief  Executive  Officer  pursuant to Sarbanes -Oxley
        Section 302.
32.1    Certification by Chief Financial  Officer pursuant to 18 U.S. C. Section
        1350
32.2    Certification by Chief Executive  Officer pursuant to 18 U.S. C. Section
        1350



                                       16
<PAGE>
                                  SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934,  the  Company has duly caused this Report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  in the City of St.
Petersburg, State of Florida on August 12, 2005.


                  POWERLINX, INC.


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

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