**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        DC
        20549
  **FORM
        10-QSB**
  **[X]
        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES**
 **EXCHANGE
        ACT OF 1934**
  For
        the
        quarterly period ended June 30, 2007
  **[
        ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES**
 **EXCHANGE
        ACT OF 1934**
  For
        the
        transition period from: ____________ to ____________
  *Commission
        file number: 33-55254-26*  POWERLINX,
          INC.
   
 NEVADA
                50-0006815(State
                    or other jurisdiction of
                (I.R.S.
                    Employerincorporation
                    or organization)
                Identification
                    No.)
 
 
 10901-A
                    Roosevelt Blvd., Suite 200, ST.PETERSBURG, FL
                33716(Address
                    of principal executive offices)
                (Zip
                    Code)
 
 (727)
          866-7440
 (Registrant's
          telephone number, including area code)
 
  Check
          whether the issuer (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
  Indicate
          by check mark whether registrant is a shell company (as defined in Rule
          12b-2 of
          the Exchange Act). Yes [ ] No [X]
  The
          total
          number of shares outstanding of the issuer’s common stock, $0.001 par value per
          share, as of August 13, 2007 was 5,952,915.
     
 **POWERLINX,
          INC.**
 
 **INDEX**
 
 
 **Part
          I – FINANCIAL INFORMATION**
  Item
                      1.Financial
                      StatementsCondensed
                      Financial Statements
                  Page
                      No.Condensed
                      Consolidated Balance SheetsAs
                      of
                      June 30, 2007 (unaudited) and December 31, 2006
                  F
                      - 1Condensed
                      Consolidated Statements of OperationsFor
                      the
                      six months ended June 30, 2007 and 2006 (unaudited)
                  F
                      - 2Condensed
                      Consolidated Statements of Cash FlowsFor
                      the
                      six months ended June 30, 2007 and 2006 (unaudited)
                  F
                      - 3Notes
                      to Condensed Consolidated Financial Statements
                  F
                      – 5Item
                      2.  Management’s
                      Discussion and Analysis or Plan of Operations
                  4Item
                        3.  Controls
                        and Procedures
                  10Item
                      3A (T).   Controls
                      and Procedures
                  10
 Part
            II – OTHER INFORMATION
  Item
                      1 .Legal
                      Proceedings
                  11Item
                      2. Unregistered
                      Sales of Equity Securities and Use of Proceeds
                  11Item
                      3. Defaults
                      Upon Senior Securities
                  12Item
                      4.Submission
                      of
                      Matters to a Vote of Security Holders
                  12Item
                      5.Other
                      Information
                  12Item
                      6. Exhibits
                  13Signatures
                  14
    2
 
 **PART
          I - FINANCIAL INFORMATION**
  
  **Item
          1. Financial Statements**
  The
          accompanying condensed consolidated financial statements have been prepared
          in
          accordance with the instructions to Form 10-QSB pursuant to the rules and
          regulations of the Securities and Exchange Commission and, therefore, do
          not
          include all information and footnotes necessary for a complete presentation
          of
          our consolidated financial position, results of operations, cash flows,
          and
          stockholders' deficit in conformity with generally accepted accounting
          principles. In the opinion of management, all adjustments considered necessary
          for a fair presentation of the results of operations and financial position
          have
          been included and all such adjustments are of a normal recurring nature.
          Operating results for the six months ended June 30, 2007 are not necessarily
          indicative of the results that can be expected for the year ending December
          31,
          2007.
  As
          used
          in this Quarterly Report on Form 10-QSB (the “Quarterly Report”), the terms
          "we", "us", "our", the “Company,” and “PowerLinx” mean PowerLinx, Inc., unless
          otherwise indicated.
   
 
 
   3
 **POWERLINX,
          INC.**
 **CONSENSED
          CONSOLIDATED BALANCE SHEETS**
    June
                      30,
                  
                  
                  December
                      31,2007
                  
                  
                  2006(Unaudited)ASSETSCurrent
                      assets:Cash
                      and cash equivalents
                  
                  $
                  3,824
                  
                  
                  $
                  100,679Accounts
                      receivable, net
                  
                  
                  189,400
                  
                  
                  
                  89,721Investments
                  
                  
                  17,571
                  
                  
                  
                  17,210Employee
                      advances
                  
                  
                  37,415
                  
                  
                  
                  40,485Inventories
                  
                  
                  526,682
                  
                  
                  
                  684,296Prepaid
                      interest
                  
                  
                  296,660
                  
                  
                  
                  -Prepaid
                      expenses and other current assets
                  
                  
                  74,054
                  
                  
                  
                  49,975Deferred
                      financing costs
                  
                  
                  36,375
                  
                  
                  
                  74,917Total
                      current assets
                  
                  
                  1,181,981
                  
                  
                  
                  1,057,283Intangible
                      assets, net
                  
                  
                  316,154
                  
                  
                  
                  377,290Deposits
                  
                  
                  18,976
                  
                  
                  
                  18,976Property
                      and equipment, net
                  
                  
                  98,712
                  
                  
                  
                  137,638Total
                      assets
                  
                  $
                  1,615,823
                  
                  
                  $
                  1,591,187LIABILIITIES
                      & STOCKHOLDERS' DEFICITCurrent
                      liabilities:Accounts
                      payable
                  
                  $
                  802,413
                  
                  
                  $
                  647,009Accrued
                      expenses
                  
                  
                  319,954
                  
                  
                  
                  164,703Accrued
                      severance payable
                  
                  
                  15,000
                  
                  
                  
                  34,500Notes
                      payable
                  
                  
                  905,720
                  
                  
                  
                  308,824Convertible
                      notes payable
                  
                  
                  106,395
                  
                  
                  
                  -Liabilities
                      of discontinued operations
                  
                  
                  46,902
                  
                  
                  
                  40,754Convertible
                      debentures
                  
                  
                  813,356
                  
                  
                  
                  271,292Derivative
                      liabilities
                  
                  
                  1,719,588
                  
                  
                  
                  3,206,121Total
                      current liabilities
                  
                  
                  4,729,328
                  
                  
                  
                  4,673,203Commitments
                      and contingencies (Note 10)
                  
                  
                  -
                  
                  
                  
                  -Stockholders'
                      deficit:Series
                      A convertible preferred stock, $1.00 par value;
                  
                  
                  -
                  
                  
                  
                  -authorized
                      30,000,000, none issued and outstandingCommon
                      stock, $.001 par value, authorized 50,000,000
                  
                  
                  5,843
                  
                  
                  
                  5,182shares;
                      issued (5,843,519 - 2007; 5,182,321 - 2006)outstanding
                      (5,834,047 - 2007; 5,172,849 -2006)Additional
                      paid-in capital
                  
                  
                  26,889,502
                  
                  
                  
                  26,004,958Treasury
                      stock, at cost, 9,472 shares
                  
                  
                  (287,757
                  )
                  
                  
                  (287,757
                  )Accumulated
                      deficit
                  
                  
                  (29,721,093
                  )
                  
                  
                  (28,804,399
                  )Total
                      stockholders' deficit
                  
                  
                  (3,113,505
                  )
                  
                  
                  (3,082,016
                  )Total
                      liabilities and stockholders' deficit
                  
                  $
                  1,615,823
                  
                  
                  $
                  1,591,187
   The
          accompanying notes are an integral part of these condensed consolidated
          financial statements.
  
 F-1
  **POWERLINX,
          INC.**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF OPERATIONS**
 (Unaudited)
  
 
 Three
                      Months Ended June  30,
                  Six
                      Months Ended June 30,2007
                  
                  
                  2006
                  
                  
                  2007
                  
                  
                  2006Net
                      revenue
                  
                  $
                  347,017
                  
                  
                  $
                  287,832
                  
                  
                  $
                  749,251
                  
                  
                  $
                  499,416Cost
                      of goods sold
                  
                  
                  190,380
                  
                  
                  
                  154,966
                  
                  
                  
                  405,094
                  
                  
                  
                  282,046Gross
                      Profit
                  
                  
                  156,637
                  
                  
                  
                  132,866
                  
                  
                  
                  344,157
                  
                  
                  
                  217,370Operating
                      expenses:Salaries
                      and wages
                  
                  
                  301,231
                  
                  
                  
                  424,903
                  
                  
                  
                  611,127
                  
                  
                  
                  714,221Professional
                      and consulting fees
                  
                  
                  307,185
                  
                  
                  
                  556,292
                  
                  
                  
                  441,337
                  
                  
                  
                  905,322Depreciation
                      and amortization
                  
                  
                  48,970
                  
                  
                  
                  52,838
                  
                  
                  
                  100,061
                  
                  
                  
                  161,636Research
                      and development
                  
                  
                  134,736
                  
                  
                  
                  222,528
                  
                  
                  
                  265,066
                  
                  
                  
                  354,735Advertising
                      and promotions
                  
                  
                  25,364
                  
                  
                  
                  30,004
                  
                  
                  
                  59,669
                  
                  
                  
                  84,400Rent
                      and utilities
                  
                  
                  45,432
                  
                  
                  
                  63,567
                  
                  
                  
                  90,372
                  
                  
                  
                  115,574Travel
                      and entertainment
                  
                  
                  22,598
                  
                  
                  
                  32,458
                  
                  
                  
                  67,181
                  
                  
                  
                  70,854Other
                      expenses
                  
                  
                  86,905
                  
                  
                  
                  72,413
                  
                  
                  
                  171,867
                  
                  
                  
                  198,953Total
                      operating expenses
                  
                  
                  972,421
                  
                  
                  
                  1,455,003
                  
                  
                  
                  1,806,680
                  
                  
                  
                  2,605,695Loss
                      from operations
                  
                  
                  (815,784
                  )
                  
                  
                  (1,322,137
                  )
                  
                  
                  (1,462,523
                  )
                  
                  
                  (2,388,325
                  )Interest
                      expense, net
                  
                  
                  (185,110
                  )
                  
                  
                  (40,658
                  )
                  
                  
                  (874,429
                  )
                  
                  
                  (110,121
                  )Other
                      income
                  
                  
                  10,000
                  
                  
                  
                  41,387
                  
                  
                  
                  9,637
                  
                  
                  
                  43,951Loss
                      on extinguishment of debt
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (75,913
                  )
                  
                  
                  (1,502,286
                  )Derivative
                      gain (loss)
                  
                  
                  (469,982
                  )
                  
                  
                  1,904,714
                  
                  
                  
                  1,486,534
                  
                  
                  
                  2,355,687Income
                      (loss) before discontinued operations
                  
                  
                  (1,460,876
                  )
                  
                  
                  583,306
                  
                  
                  
                  (916,694
                  )
                  
                  
                  (1,601,094
                  )(Loss)
                      from discontinued operations
                  
                  
                  -
                  
                  
                  
                  (16,588
                  )
                  
                  
                  -
                  
                  
                  
                  (16,588
                  )Net
                      income (loss)
                  
                  $
                  (1,460,876
                  )
                  
                  $
                  566,718
                  
                  
                  $
                  (916,694
                  )
                  
                  $
                  (1,617,682
                  )Net
                      income (loss) per common share, basic
                  
                  $
                  (0.26
                  )
                  
                  $
                  0.12
                  
                  
                  $
                  (0.17
                  )
                  
                  $
                  (0.35
                  )Weighted
                      average common sharesoutstanding,
                      basic:
                  
                  
                  5,568,291
                  
                  
                  
                  4,734,219
                  
                  
                  
                  5,416,842
                  
                  
                  
                  4,657,944Net
                      income (loss) per common share, diluted:
                  
                  $
                  (0.26
                  )
                  
                  $
                  0.10
                  
                  
                  $
                  (0.17
                  )
                  
                  $
                  (0.35
                  )Weighted
                      average common sharesoutstanding,
                      diluted:
                  
                  
                  5,568,291
                  
                  
                  
                  5,797,926
                  
                  
                  
                  5,416,842
                  
                  
                  
                  4,657,944
  The
          accompanying notes are an integral part of these condensed consolidated
          financial statements.
   F-2
  **POWERLINX,
          INC.**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **FOR
          THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006**
 (Unaudited)
  Six
                      Months EndedJune
                      30,2007
                  
                  
                  2006Cash
                      flows from operating activities:Net
                      loss
                  
                  $
                  (916,694
                  )
                  
                  $
                  (1,617,682
                  )Adjustments
                      to reconcile net loss to net cash flowsfrom
                      operating activities:Stock-based
                      compensation
                  
                  
                  73,750
                  
                  
                  
                  411,224Amortization
                  
                  
                  61,136
                  
                  
                  
                  116,985Accretion
                      of debt discount
                  
                  
                  843,116
                  
                  
                  
                  89,373Loss
                      on debt extinquishment
                  
                  
                  75,913
                  
                  
                  
                  1,502,286Derivative
                      (gain) loss
                  
                  
                  (1,486,533
                  )
                  
                  
                  (2,355,687
                  )Depreciation
                  
                  
                  38,926
                  
                  
                  
                  44,651Bad
                      debt expense
                  
                  
                  -
                  
                  
                  
                  31,921Changes
                      in:Operating
                      assets
                  
                  
                  37,817
                  
                  
                  
                  (495,310
                  )Operating
                      liabiliites
                  
                  
                  412,479
                  
                  
                  
                  (570,271
                  )Net
                      cash flows from operating activities
                  
                  
                  (860,090
                  )
                  
                  
                  (2,842,510
                  )Cash
                      flows from investing activities:Purchase
                      of property and equipment
                  
                  
                  -
                  
                  
                  
                  (10,530
                  )Net
                      cash flows from investing activities
                  
                  
                  -
                  
                  
                  
                  (10,530
                  )Cash
                      flows from financing activities:Proceeds
                      from sales of common stock, netcosts
                      of $24,923
                  
                  
                  -
                  
                  
                  
                  171,881Proceeds
                      from convertible debentures, netcosts
                      of $82,000
                  
                  
                  -
                  
                  
                  
                  3,018,000Repayment
                      of related party debt
                  
                  
                  -
                  
                  
                  
                  (31,000
                  )Proceeds
                      from notes payable
                  
                  
                  765,000
                  
                  
                  
                  75,000Repayment
                      of notes payable
                  
                  
                  (1,765
                  )
                  
                  
                  (8,824
                  )Net
                      cash flows from financing activities
                  
                  
                  763,235
                  
                  
                  
                  3,225,057Net
                      change in cash and cash equivalents
                  
                  
                  (96,855
                  )
                  
                  
                  372,017Cash
                      and cash equivalents at beginning of period
                  
                  
                  100,679
                  
                  
                  
                  255,293Cash
                      and cash equivalents at end of period
                  
                  $
                  3,824
                  
                  
                  $
                  627,310
 
  The
          accompanying notes are an integral part of these condensed consolidated
          financial statements.
  
 F-3
 
 
 
 **POWERLINX,
          INC.**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED**
 (Unaudited)
  
 NON-CASH
          INVESTING AND FINANCING ACTIVITIES
  
 For
                    the six months ended June 30,2007
                
                
                2006Issuance
                  of common stock for liabilities
                
                $
                66,516
                
                
                $
                150,069Issuance
                  of common stock for financing fees
                
                $
                -
                
                
                $
                11,855Conversion
                  of notes payable to convertible debentures
                
                $
                -
                
                
                $
                1,373,933Conversion
                  of convertible debentures to common stock
                
                $
                97,359
                
                
                $
                -Warrants
                  reclassified as derivatives (See Note 8)
                
                $
                -
                
                
                $
                (144,780
                )Issuance
                  of common stock for interest
                
                $
                431,329
                
                
                $
                -
 
 OTHER
          CASH FLOW INFORMATION
 
 Cash
                    paid for income taxes
                  
                  $
                  -
                  
                  
                  $
                  -Cash
                    paid for interest
                  
                  $
                  -
                  
                  
                  $
                  2,633
 
 
 The
          accompanying notes are an integral part of these condensed consolidated
          financial statements.
   F-4
 **POWERLINX,
          INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006**
 **(UNAUDITED)**
  1.
          Basis
          of presentation and significant accounting policies:
  The
          accompanying 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-QSB and Rule 10-01 of
          Regulation S-B. 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 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, 2007 and 2006. These condensed
          consolidated financial statements should be read in conjunction with the
          Company's audited 2006 consolidated financial statements, including the
          notes
          thereto, and the other information set forth in the Company's Annual Report
          on
          Form 10-K, for the year ended December 31, 2006. Operating results for
          the six
          month period ended June 30, 2007, are not necessarily indicative of the
          results
          that can be expected for a full fiscal year.
 
 Income
          (Loss) Per Share:
  Income
          (loss) per share (“EPS”) in is computed by dividing the net loss applicable to
          common stockholders by the weighted average common shares outstanding without
          including any potentially dilutive securities. Diluted EPS is computed
          by
          dividing the net loss applicable to common stockholders for the period
          by the
          weighted average common shares outstanding plus, when their effect is dilutive,
          common stock equivalents.
  Potentially
          dilutive securities, which have been excluded from the determination of
          diluted
          EPS because their effect would be anti-dilutive, are as follows:
     June30,
                      (unaudited)2007
                  
                  
                  2006Shares
                      underlying convertible debentures ( Note 7)
                  
                  
                  3,935,658
                  
                  
                  
                  4,347,141Shares
                      underlying convertible notes payable ( Note 8)
                  
                  
                  358,333Warrants
                  
                  
                  2,183,610
                  
                  
                  
                  2,027,745Options
                  
                  
                  120,682
                  
                  
                  
                  190,631Total
                      potentially dilutive shares excluded:
                  
                  
                  6,598,283
                  
                  
                  
                  6,565,517
  
 Financial
          instruments at June 30, 2007 and 2006 consist of cash and cash equivalents,
          accounts receivable, trade payables, accrued expenses, derivative liabilities,
          notes payable and convertible debentures. As of June 30, 2007 and 2006
          the fair
          values of cash and cash equivalents, accounts receivable, trade payables,
          accrued expenses approximated their respective carrying values, due to
          their
          relative current maturities. The estimated fair value of notes payable
          approximated $1,012,000 at June 30, 2007, based upon the present value
          of cash
          flows. The estimated fair value of convertible debentures approximated
          $3,800,000 at June 30, 2007, based upon the present value of cash
          flows.
 
 The
          Company generally does not use derivative financial instruments to hedge
          exposures to cash-flow risks or market-risks that may affect the fair values
          of
          its financial instruments. However, certain other financial instruments,
          such as
          warrants and embedded conversion features that are indexed to the Company’s
          common stock, are classified as liabilities when either (a) the holder
          possesses
          rights to net-cash settlement or (b) physical or net-share settlement is
          not
          within the control of the Company. In such instances, net-cash settlement
          is
          assumed for financial accounting and reporting, even when the terms of
          the
          underlying contracts do not provide for net-cash settlement. Such financial
          instruments are initially recorded at fair value and subsequently adjusted
          to
          fair value at the close of each reporting period.
 
 The
          caption Derivative Financial Instruments consists of (i) the fair values
          associated with derivative features embedded in the Convertible Debentures,
          (ii)
          the fair values of the detachable warrants issued in connection with the
          Convertible Debentures and (iii) the fair values of other warrants and
          convertible instruments where share-settlement is presumed not to be in
          the
          Company’s control. (See Note 8)
  F-5
 
 Concentrations:
  Accounts
          receivable are concentrated in the Security and DC Transportation products
          segments and credit losses have been within management's expectations.
          Although
          the Company serves a large and varied group of customers, three customers
          accounted for 35% of the Company’s total net revenue, and 47% of the DC
          Transportation products segment net revenue for the six months ended June
          30,
          2007. For the six months ended June 30, 2006, three customers accounted
          for 36%
          of the Company’s total net revenue, and 50% of the DC Transportation products
          segment net revenue.
 
 Unrecognized
          tax benefits:
 
 The
            Company adopted the provisions of FASB Interpretation No. 48, “Accounting for
            Uncertainty in Income Taxes, an Interpretation of FASB Statement No.109” (“FIN
            48”) on January 1, 2007.  As a result of the implementation of FIN 48, the
            Company has not recognized any liability for unrecognized tax
            benefits.  The Company’s review indicates that any unrecognized tax
            benefits would not create a material liability but would merely reduce
            the net
            operating loss deferred tax asset which has been fully reserved for with
            a 100%
            valuation allowance.Management believes there should be no significant
            change in
            the total unrecognized tax benefits over the next twelve-month
            period.  It is not anticipated that any of the total unrecognized tax
            benefits, if recognized, would materially affect the effective tax
            rate.  The Company recognizes interest and penalties related to
            uncertain tax positions in income tax expense.  As of June 30, 2007, the
            Company has not accrued any interest or penalties related to uncertain
            tax
            positions.
 
 2.
          Liquidity and management's plans:
  The
          accompanying condensed consolidated financial statements have been prepared
          assuming that the Company will continue as a going concern. However, the
          Company
          has incurred losses from operations of $916,694 and $1,617,682 during the
          six
          months ended June 30, 2007 and 2006, respectively. In addition, during
          those
          periods, the Company has used cash of $860,090 and $2,842,510 respectively,
          in
          its operating activities and has a stockholders' deficit at June 30, 2007.
          These
          conditions raise substantial doubt about the Company's ability to continue
          as a
          going concern.
 
 The
          Company has allocated significant resources to the development of new power
          line
          technologies and products that will be available for sale and/or licensing
          during the second or third quarters of fiscal year 2007. The Company’s ability
          to continue will be dependent upon achieving profitable operations through
          the
          licensing and sales of these new technologies and products.
  The
          Company’s ability to continue as a going concern is dependent upon (i) raising
          additional capital to fund operations (ii) the further development of the
          Security, DC Transportation, and new Audio products segments, and (iii)
          ultimately the achievement of profitable operations. During the six months
          ended
          June 30, 2007, the Company secured financing of $765,000 in the form of
          short-term notes payable from its primary financial partner.  While
          the proceeds of this financing did mitigate the Company’s liquidity difficulties
          for the six months ended June 30, 2007, additional funding will be required
          to
          fund the launch of the Company’s new power line products and technologies, which
          are not ready for release, and to fund operations through December 31,
          2007, or
          until it can achieve profitability. In addition to the continued effort
          to
          reduce overhead expenses through the streamlining of its operations, the
          Company
          plans to continue to borrow funds through the issuance of short-term convertible
          promissory notes (Note 7) and is currently negotiating a $300,000 bridge
          loan to
          fund operations while it evaluates its longer term financing options with
          its
          primary financing partner. The ability of the Company to sustain its operations
          for a reasonable period without further financing cannot be assured and
          the
          condensed consolidated 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 power line rear vision systems and sources a full line
          of
          accident avoidance products for all classes of vehicles in the transportation
          industry. The products are sold to fleets, bodybuilders, distributors and
          original equipment manufacturers throughout the United States. 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:
   Six
                      months ended June 30, 2007
                      (unaudited)Security
                  
                  
                  Marine
                  
                  
                  DC
                      TransProducts
                  
                  
                  Products
                  
                  
                  Products
                  
                  
                  TotalNet
                      revenue
                  
                  $
                  68,028
                  
                  
                  $
                  112,498
                  
                  
                  $
                  568,725
                  
                  
                  $
                  749,251Cost
                      of sales
                  
                  
                  52,972
                  
                  
                  
                  67,923
                  
                  
                  
                  284,199
                  
                  
                  
                  405,094Gross
                      profit
                  
                  
                  15,056
                  
                  
                  
                  44,575
                  
                  
                  
                  284,526
                  
                  
                  
                  344,157Total
                      Research & Development:
                  
                  $
                  250,229
                  
                  
                  $
                  6,517
                  
                  
                  $
                  8,320
                  
                  
                  $
                  265,066
   F-6
   Six
                      months ended June 30, 2006
                      (unaudited)Security
                  
                  
                  Marine
                  
                  
                  DC
                      TransProducts
                  
                  
                  Products
                  
                  
                  Products
                  
                  
                  TotalNet
                      revenue
                  
                  $
                  40,410
                  
                  
                  $
                  101,039
                  
                  
                  $
                  357,967
                  
                  
                  $
                  499,416Cost
                      of sales
                  
                  
                  34,408
                  
                  
                  
                  61,549
                  
                  
                  
                  186,089
                  
                  
                  
                  282,046Gross
                      profit
                  
                  
                  6,002
                  
                  
                  
                  39,490
                  
                  
                  
                  171,878
                  
                  
                  
                  217,370Total
                      Research & Development:
                  
                  $
                  276,693
                  
                  
                  $
                  3,547
                  
                  
                  $
                  74,495
                  
                  
                  $
                  354,735
 4.
          Inventories:
  Inventories
          consisted of the following: June
                      30,
                  
                  
                  December
                      31,2007
                  
                  
                  2006(unaudited)Component
                      Parts
                  
                  $
                  197,284
                  
                  
                  $
                  236,481Finished
                      Goods
                  
                  
                  329,398
                  
                  
                  
                  447,815$
                  526,682
                  
                  
                  $
                  684,296
 
  5.
          Intangible assets:
  Intangible
          assets consist of the following:
 
  June
                      30,2007
                  
                  
                  December
                      31,(unaudited)
                  
                  
                  2006Patents
                  
                  $
                  2,318,961
                  
                  
                  $
                  2,318,961Software
                      license agreement
                  
                  
                  461,360
                  
                  
                  
                  461,360Trademark
                  
                  
                  93,925
                  
                  
                  
                  93,924Acumulated
                      amortization
                  
                  
                  (2,558,092
                  )
                  
                  
                  (2,496,955
                  )$
                  316,154
                  
                  
                  $
                  377,290
 6.
          Notes
          Payable:
 
 The
          Company executed a promissory note on January 29, 2007 in the amount of
          $300,000. The note was due on February 28, 2007, and bears an 8% interest
          rate.
          On March 21, 2007, we executed a second promissory note in the amount of
          $200,000. The note was due on May 5, 2007, and bears an 8% interest rate.
          Interest on each of these notes was due and payable upon the maturity dates.
          On
          May 14, 2007, the Company received an additional $50,000 in cash from its
          primary finance partner, the proceeds of which are included in a note payable
          that consolidates all outstanding notes payable with this finance
          partner.  The Company issued a new consolidated unsecured note payable
          in the amount of $898,661 which includes the following; the retirement
          of the
          September 14, 2006 note payable in the principal amount of $300,000, the
          retirement of the January 29, 2007 note payable in the principal amount
          of
          $300,000, the retirement of the March 21, 2007 note payable in the amount
          of
          $200,000, accrued interest in the amount of $48,662 (including default
          rate
          interest of 18%) on the three aforementioned notes, and $50,000 in new
          proceeds
          received on May 14, 2007. The note is due on July 13, 2007, with principal
          and
          interest due and payable upon maturity.  The note bears an 8% interest
          rate and an 18% default interest rate for all principal amounts outstanding
          beyond the maturity date.  The Company is currently engaged in
          negotiating with the holder of this note in order to extend the term of
          this
          note and provide for the terms of the repayment.
 
 The
          Company has an unsecured non-interest bearing note with payments in the
          amount
          of $1,765 due and payable through October 2007.
  F-7
 
 7.
          Convertible Debentures
 
 On
          March
          16, 2006, the Company entered into a Securities Purchase Agreement (the
          "Purchase Agreement"), with several accredited investors (collectively
          the
          "Purchasers"), under which the Company agreed to issue and sell to the
          Purchasers in a private placement up to $4,473,933 aggregate principal
          amount of
          8% Convertible Debentures, due March 22, 2008 (the "Convertible Debentures")
          and
          detachable warrants to purchase 1,841,335 shares of common stock (the
          "Warrants") for proceeds of $3,100,000 and $1,373,933 of pre-existing notes
          and
          accrued interest (the "Proceeds"). Financing costs amounted to $82,000.
          On March
          23, 2006 the Company issued $4,073,933 face value of the Convertible Debentures
          for cash of $2,700,000 and the pre-existing notes. On March 27, 2006 and
          March
          29, 2006, the Company issued $250,000 and $150,000, respectively, of Convertible
          Debentures for cash.
 
 The
          Purchasers received registration rights related to the common shares underlying
          the conversion feature of the Convertible Debentures and the Warrants.
          The
          Registration Rights include requirements for filing, effectiveness, continued
          effectiveness and continued listing over the term of the outstanding
          instruments. The Registration Rights Agreement provides for monthly liquidating
          damages of up to 2.0% for failure to achieve or maintain effectiveness
          and
          listing. In addition, the Convertible Debentures provide for a mandatory
          redemption of 120% of outstanding face value for defaults under the Debenture
          and Registration Rights Agreements.
 
 8.0%
          Convertible Debentures, Warrants and Other Derivatives:
 
 The
          carrying value of the Company’s 8.0%, Face Value $4,473,933 Convertible
          Debentures amounted to $869,010 at June 30, 2007. Amortization of the debt
          discount, included in interest expense, amounted to approximately $700,000
          for
          the six months ended June 30, 2007.
 
 The
          Convertible Debenture Financings included registration rights and certain
          other
          terms and conditions related to share settlement of the embedded conversion
          features and the warrants that the Company has determined are not within
          its
          control. In addition, certain features associated with the financings,
          such as
          variable redemption rates afforded the Purchasers render the number of
          shares
          issuable to be indeterminate. These instruments and derivative elements
          are
          carried at their fair values in the accompanying condensed consolidated
          balance
          sheets.
 
 Derivative
          liabilities consist of the following at June 30, 2007:
 
 Embedded
                    derivative instruments
                
                $
                444,768Freestanding
                    derivatives (warrants)
                
                
                1,259,483Other
                    derivative financial instruments (1)
                
                
                15,337$
                1,719,588
 
 (1)
                Other
                    derivative financial instruments represent the fair values of
                    warrants and
                    other convertible instruments that were reclassified from stockholders’
                    equity when, in connection with the Convertible Debenture Financings,
                    the
                    Company determined that it no longer had sufficient authorized
                    and
                    unissued shares to settle all of its instruments. The balance
                    in the table
                    above represents the fair value at June 30,
                    2007.
 
 The
          following tabular presentation reflects the number of common shares into
          which
          the aforementioned derivatives are indexed at June 30, 2007:
 
 Common
                    shares indexed:Embedded
                    derivative instruments
                
                
                3,935,658Freestanding
                    derivatives (warrants)
                
                
                1,883,761Other
                    derivative financial instruments
                
                
                120,6825,940,101
 
 Income
          for the six months ended June 30, 2007 associated with adjustments recorded
          to
          reflect the aforementioned derivatives at fair value amounted to $1,486,533
          derivative gain.
 
 Fair
          value considerations for derivative financial instruments as of June 30,
          2007:
 
 Freestanding
          derivative instruments, consisting of the Warrants and reclassified derivative
          instruments that arose from the Convertible Debenture Financing are valued
          using
          the Black-Scholes-Merton valuation methodology because that model embodies
          all
          of the relevant assumptions that address the features underlying these
          instruments. Significant assumptions included in this model as of June
          30, 2007
          are as follows:
 
 OtherInstrument
                Warrants
                DerivativesExercise
                    prices
                $2.375
                $5.00--$25.00Term
                    (years)
                3.75
                .92—8.50Volatility
                136.98%
                105.43%--151.53%Risk-free
                    rate
                4.87%
                4.87%
  
 F-8
 Embedded
          derivative instruments consist of multiple individual features (conversion
          features, redemption features, and registration rights) that were embedded
          in
          the Convertible Debentures. The Company evaluated all significant features
          of
          the hybrid instruments and, where required under current accounting standards,
          bifurcated features for separate report classification. These features
          were, as
          attributable to each Debenture, aggregated into one compound derivative
          financial instrument for financial reporting purposes. These compound embedded
          derivative instruments are valued using the Flexible Monte Carlo methodology
          because that model embodies certain relevant assumptions (including, but
          not
          limited to, interest rate risk, credit risk, and Company-controlled/mandatory
          redemption features) that are necessary to value these complex
          derivatives.
 
 Significant
          terms and assumptions included in this model as of June 30, 2007 are as
          follows:
 
 Conversion
                    price
                $
                    1.235Actual
                    term (years)
                2.0Equivalent
                    term (years)
                .75Equivalent
                    volatility
                151.53%Equivalent
                    risk-adjusted interest rate
                18.00%Equivalent
                    risk-adjusted yield rate
                92.62%-107.24%
  In
            May
            2007, the Company converted accrued interest of approximately $428,000
            to
            346,331 shares of the Company's common stock. The accrued interest consisted
            of
            approximately $340,000 of interest based on the 8% stated interest rate
            of the
            convertible debentures and additional interest of approximately $88,000
            due to
            the holders of the debenture upon conversion to equity, pursuant to the
            Purchase
            Agreement. The Company recorded approximately, $300,000 to prepaid interest
            for
            the difference between interest earned and converted to common stock
            and the
            amount charged to the statement of operation based on the accretion of
            the
            discount (including accrued interest) using the effective interest
            method.
  Equivalent
          amounts reflect the net results of multiple modeling simulations that the
          Monte
          Carlo Simulation methodology applies to underlying assumptions.
 
 As
          of
          June 30, 2007 and December 31, 2006, the Company was in default under the
          terms
          of the Purchase Agreement and the Debentures issued on March 22, 2006.
          The terms
          of the Purchase Agreement and the Debenture required that the Company generate
          gross profit in excess of $300,000 per month on average during the period
          from
          October 1, 2006 to December 31, 2006. Under the default provisions; upon
          the
          Company delivering an Event of Default Notice to Purchasers (Debenture
          holders)
          or the Purchasers becoming aware of an Event of Default, the Purchasers
          may
          require the Company to redeem all or any portion of their Debenture by
          delivering an “Event of Default Redemption Notice” to the Company. At that time
          the Company would be required to redeem the requested portion of the debenture
          at a redemption value calculated in accordance with the default provisions
          in
          the March 22, 2006 Securities Purchase Agreement, to be no less than 120%
          of the
          principal amount requested to be redeemed. At June 30, 2007, the Company
          had not
          negotiated a form of a Waiver Agreement with the Purchasers covering the
          Company’s inability to meet this covenant. The Company has not received an
“Event of Default Redemption Notice” from any Purchaser and is currently engaged
          in negotiating with the Purchasers in order to enter into a waiver agreement
          covering the aforementioned default.
  Because
          the Company was in default as of June 30, 2007 and December 31, 2006, and
          while
          under default, may receive an “Event of Default Redemption Notice” at any time;
          the liabilities associated with the Debentures on the accompanying condensed
          consolidated balance sheets, as presented, have been reclassified from
          long-term
          to current liabilities.
 
 8.
          Convertible notes payable:
 
 In
          May
          and June of 2007, the Company borrowed $215,000 from six accredited investors
          and related parties through issuance of short-term convertible promissory
          notes.  These notes are all unsecured, bear interest at 8% annually,
          and mature in July 2007.  As of August 14, 2007, these notes have not
          been repaid, and the term has been extended by each lender for an additional
          30
          days.
 
 The
          convertible notes payable are convertible at the option of the lender into
          the
          Company’s common stock at $.60 per share and 3-year warrants to purchase an
          additional 50% of the converted shares at an exercise price of $1.25 per
          share.
 
 In
          conjunction with the issuance of the convertible notes, each holder received
          restricted common stock in amounts ranging from 5% to 25% of the principal
          note
          proceeds.  The Company issued 53,750 shares of the common stock with a
          fair value of $50,888 for these notes.  The convertible notes were
          recorded net of a $215,000 discount resulting from the original allocation
          of
          the fair values of the loans and the common stock issued ($20,956) and
          the
          remaining $194,044 discount resulting from a beneficial conversion feature
          of
          these notes.  Convertible notes payable consist of the following at
          June 30, 2007:
   Principal
                      Balance
                  
                  $
                  215,000Less
                      reductions for:Fair
                      value of common stock
                  
                  
                  (20,956
                  )Fair
                      value of beneficial conversion feature
                  
                  
                  (194,044
                  )Accretion
                      of discount (interest expense)through
                      June 30, 2007
                  
                  
                  106,395Carrying
                      value at June 30, 2007:
                  
                  $
                  106,395
  F-9
 9.
          Stockholders' deficit:
  2007
          Common Stock Issuances:
  During
          the six months ended June 30, 2007, the Company issued 6,667 shares of
          common
          stock to a consultant for marketing services rendered during the
          period.  The shares were valued at $5,000 based on the closing market
          price of the Company's common stock on the date of issuance.  The
          shares were registered on Form S-8 filed with the Securities and Exchange
          Commission on September 29, 2006.
  During
          the six months ended June 30, 2007, the Company issued 2,923 shares of
          common
          stock to a debenture holder as payment for interest.  The shares were
          valued at $3,609 in accordance with the March 22, 2006 Convertible Debenture
          and
          Securities Purchase Agreement.  The shares were registered on Form
          SB-2 as filed with the Securities and Exchange Commission, effective October
          4,
          2006.
  During
          the six months ended June 30, 2007, the Company issued 95,444 shares of
          common
          stock to debenture holders for conversion of debentures.  The shares
          were valued at $97,358 in accordance with the March 22, 2006 Convertible
          Debenture and Securities Purchase Agreement.  The shares were
          registered on Form SB-2 as filed with the Securities and Exchange Commission,
          effective October 4, 2006.
  During
          the six months ended June 30, 2007, the Company issued 346,333 shares of
          common
          stock to debenture holders as payment for annual interest due on the March
          2006
          convertible debentures.  The shares were valued at $427,722 in
          accordance with the March 22, 2006 Convertible Debenture and Securities
          Purchase
          Agreement.  The shares were registered on Form SB-2 as filed with the
          Securities and Exchange Commission, effective October 4, 2006.
  During
          the six months ended June 30, 2007, the Company issued 4,300 shares of
          common
          stock in settlement of accounts payable relating to consulting costs for
          marketing services rendered during the period.  The shares issued
          converted, $4,300 of accounts payable liability owed to the consultant
          and were
          valued based on the closing market price of the Company's common stock
          on the
          date of conversion.  The shares were registered on Form S-8 filed with
          the Securities and Exchange Commission on May 7, 2007.
  During
          the six months ended June 30, 2007, the Company issued 15,094 shares of
          common
          stock in settlement of accounts payable related to consulting costs for
          marketing services rendered during the period.  The shares issued
          converted $15,094 of accounts payable liability owed to the consultant
          and were
          valued based on the closing market price of the Company's common stock
          on the
          date of conversion.  The shares were registered on Form S-8 filed with
          the Securities and Exchange Commission on May 7, 2007.
  During
          the six months ended June 30, 2007, the Company issued 50,000 shares of
          common
          stock to a consultant for business development and financial advisory services
          rendered during the period.  The shares were valued at $52,500 based
          on the closing market price of the Company's common stock on the date of
          the
          contract. These shares were recorded by the Company as a $26,250 charge
          to
          professional and consulting fees and the remaining balance is included
          in
          prepaid expenses in the accompanying 2007 balance sheet. The shares were
          registered on Form S-8 filed with the Securities and Exchange Commission
          on May
          7, 2007.
  During
          the six months ended June 30, 2007, the Company issued 18,852 shares of
          common
          stock, with a fair value of $17,500 to a consultant for sales and licensing
          services rendered during the period.  The shares were registered on
          Form S-8 filed with the Securities and Exchange Commission on May 7,
          2007.
  During
          the six months ended June 30, 2007, the Company issued 40,345 shares of
          common
          stock to a consultant for legal services rendered during the
          period.  The shares were valued at $40,345 based on the closing market
          price of the Company's common stock on the date of issuance.  The
          shares were registered on Form S-8 filed with the Securities and Exchange
          Commission on May 7, 2007.
  During
          the six months ended June 30, 2007, the Company issued 20,412 shares of
          common
          stock to a consultant for legal services rendered during the
          period.  The shares were valued at $15,717 based on a three day
          average of the closing market price of the Company's common stock, discounted
          by
          30%,  as outlined in the consulting agreement.  The shares
          were registered on Form S-8 filed with the Securities and Exchange Commission
          on
          May 7, 2007.
  F-10
  10.
          Commitments and contingencies:
 
 Material
          Commitments:
 
 On
          March
          15, 2007, the Company signed a two year Consulting Agreement (the “Agreement”)
          with a consulting company (the “Consultant”) hired to assist the Company in
          areas of strategic business planning, financial advisory, and investor
          and
          public relations services; and specifically to design and implement an
          investor
          and public relations program designed to make the investing public knowledgeable
          about the benefits of stock ownership in the Company. Under the Agreement,
          the
          Company agreed to pay the Consultant three thousand dollars ($3,000.00)
          per
          month, payable on the 15th of each month, commencing on the date of the
          agreement, and 440,000 shares of the Company’s common stock restricted for a
          year under Rule-144 of the Act (the “Shares”); as total and complete
          consideration for the services to be provided by the Consultant to the
          Company.  Under the Agreement, as amended, the Consultant will
          commence earning Shares on May 1, 2007, earning one-twelfth (1/12) of the
          total
          Shares to be issued under the Agreement each month, for twelve consecutive
          months. The issuance of Shares shall occur in four equal periodic installments
          over the course of twelve (12) months, on the last day of each three month
          earning period as follows; 110,000 Shares on July 31, 2007, 110,000 Shares
          on
          October 31, 2007, 110,000 on January 31, 2008, and 110,000 on April 30,
          2008.
          Either party may terminate the agreement upon a sixty (60) day written
          notice.  In the event of termination, the “Termination Date” will be
          the 60th day
          after the written termination notice is properly delivered in accordance
          with
          the terms of the Agreement.  Any cash or Shares earned by the
          Consultant up to the Terminate Date will be pro-rated to the day, based
          on a 360
          day calendar year.  During the three month period ending June 30,
          2007, the Consultant earned 73,333 shares in accordance with the
          agreement.  The shares were valued at based on the closing market
          price of the Company’s common stock on the last day of each
          month.  The amount is included in accrued expenses in the accompanying
          June 30, 2007 condensed consolidated balance sheet.
 
 On
          April
          30, 2007, the Company executed an amendment to the original April 2, 2004
          lease
          agreement for office space it leases in Concord, California where its research
          and development operation resides.  The amendment extends the lease
          for an additional year, commencing May 1, 2007 through April 30,
          2008.  The total commitment due under the amendment equals $24,203,
          payable in equal monthly installments of $2,017.
 
 The
          Company leases its office and warehouse facilities under non-cancellable
          leases.
          Minimum lease payments under the non-cancellable operating leases as of
          June 30,
          2007 are as follows:
 R
                      & D Office
                  
                  
                  CorporateLease
                  
                  
                  Office
                      LeaseConcord,
                      CA
                  
                  
                  St.
                      Petersburg, FL
                  
                  
                  TotalYears
                      ending June 30,2008
                  
                  $
                  24,203
                  
                  
                  $
                  86,557
                  
                  
                  $
                  110,7602009
                  
                  
                  2,017
                  
                  
                  
                  89,985
                  
                  
                  
                  92,0022010
                  
                  
                  -
                  
                  
                  
                  93,413
                  
                  
                  
                  93,4132011
                  
                  
                  -
                  
                  
                  
                  96,841
                  
                  
                  
                  96,8412012
                  
                  
                  -
                  
                  
                  
                  49,706
                  
                  
                  
                  49,706$
                  26,220
                  
                  
                  $
                  416,502
                  
                  
                  $
                  442,722
  The
          Company recorded rent expense of $57,510 and $79,617 under non-cancellable
          leases for the six months ended June 30, 2007 and 2006,
          respectively.
 
 Litigation,
          claims and assessment:
  *Reed
          Elsevier, Inc.*
 
 On
          April
          26, 2007 the Company learned that a default judgment had been entered against
          it
          on August 1, 2006 in the Circuit Court of the 6th Judicial
          Circuit
          of Pinellas County, Florida, in the amount of $20,192; to the plaintiff
          Reed
          Elsevier, Inc.  The obligation is associated with a commitment made in
          December of 2004, by a former officer of the Company, for floor space at
          a trade
          show in March of 2005, at which the Company did not attend.  The
          Company has retained counsel to negotiate a resolution to the matter, and
          is
          awaiting a response from the plaintiff for a meeting date.  The
          Company recorded a liability in the amount of $22,203, including post judgment
          interest, which is included in accrued expenses in the accompanying June
          30,
          2007 condensed consolidated balance sheet.
  
 
 F-11
 *Guestlinx,
          LLC*
  On
          May
          19, 2006 the Company learned that a default judgment had been entered against
          it
          on May 3, 2006 in the Superior Court of California, Orange County, in the
          amount
          of $90,561, to the plaintiff Guestlinx, LLC. The obligation is associated
          with
          the Hotel/MDU product segment, the operations of which were discontinued
          in
          April of 2005. The judgment was granted based on an action filed by Guestlinx,
          LLC on November 2, 2005. We had no prior knowledge of the action and believe
          it
          was never properly served. We retained counsel in California, and on August
          4,
          2006 were successful in having the judgment set aside for improper service.
          We
          had previously recorded a liability associated with this dispute in the
          amount
          of $46,352. On December 8, 2006, we negotiated a settlement and release
          agreement at a mandatory settlement conference, in the amount of $52,500.
          We
          remitted $16,250 toward the settlement amount on December 15, 2006, and
          the
          remaining balance of $36,250 was recorded as an accrued liability at December
          31, 2006. Under the agreement, we were required to pay the remaining
          balance by February 15, 2007, but were unable to do so. The agreement provides
          for the plaintiff to receive a stipulated judgment in the amount of $60,000
          (less amounts remitted) if we are in default of the agreement. On April
          18 2007,
          the plaintiff filed for and received the default judgment and the Company’s
          counsel is currently working with the plaintiff on a revised payment
          schedule.  The Company increased the aforementioned liability in the
          amount of $7,500 to account for the additional obligation incurred under
          the
          stipulated judgment.  The amounts are included in accrued expenses in
          the accompanying June 30, 2007 and December 31, 2006 condensed consolidated
          balance sheets.
   
 On
        June
        11, 2007, Acu-cast Technologies, LLC filed a complaint against the Company
        in
        the amount of $4,437 in the County Court of Lawrence, Tennessee.  The
        liability relates to proto-types made by the plaintiff on behalf of the
        Company.  The Company has hired counsel in Tennessee who represented
        the Company at a July 11, 2007 hearing.  The Company is currently
        negotiating a payment schedule while it waits for the court to set a trial
        date.
        The amount is included in accounts payable in the accompanying June 30, 2007
        and
        December 31, 2006 condensed consolidated balance sheets.
  F-12
 
 **Item
        2. Management's Discussion and Analysis of Financial Condition and Results
        of
        Operations.**
  **Cautionary
        Statement Regarding Forward-Looking Statements**
  You
        should read the following discussion and analysis in conjunction with the
        Financial Statements and related Notes contained elsewhere in this Quarterly
        Report on Form 10-QSB (the "Report"). The information in this Report is not
        a
        complete description of our business or the risks associated with an investment
        in our common stock. We urge you to carefully review and consider the various
        disclosures made by us in this Report and in our other reports filed with
        the
        SEC, including our Annual Report on Form 10-K for the year ended December
        31,
        2006.
  **The
        section entitled "Risk Factors" set forth in our Annual Report on Form 10-K
        for
        the year ended December 31, 2006 and similar types of discussions in other
        SEC
        filings discuss some of the important risks that may affect our business,
        results of operations and financial condition.**  Some of those
        risks are as follows:
  ·
              Our
                  business depends on the protection of our intellectual property
                  and may
                  suffer if we are unable to adequately protect our intellectual
                  property.
  ·
              Our
                  stock price can be extremely
                  volatile.
  You
        should carefully consider those risks, in addition to the other information
        in
        this Report and in our other filings with the SEC, before deciding to invest
        in
        our Company or to maintain or decrease your investment.
  This
        Quarterly Report may contain forward-looking @ statements within the meaning
        of
        Section 17A of the Securities Exchange Act of 1933, as amended, and Section
        21E
        of the Securities Exchange Act, as amended. Examples of forward-looking
        statements include, but are not limited to: (a) projections of our revenues,
        capital expenditures, growth, prospects, dividends, capital structure and
        other
        financial matters; (b) statements of our plans and objectives; (c) statements
        of
        our future economic performance; (d) statements of assumptions underlying
        other
        statements and statements about us and our business relating to the future;
        and
        (e) any statements using the words "believes," "budget," "target," "goal,"
        “anticipate," “expect," "plan," "outlook," "objective," “may," “project,"
“intend," "estimate," or similar expressions. These statements are only
        predictions. These statements are not guarantees of future performance and
        are
        subject to certain risks, uncertainties and assumptions that are difficult
        to
        predict.
  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**
  Our
        current products, and products and technologies under development, are based
        on
        our proprietary analog and digital power line communication technology
        (PLC).  Our PLC technology has been developed to transmit voice,
        video, audio and data either individually, or in combination. PLC transmission
        can take place over power lines, twisted pair wires and coaxial cables in
        AC and
        DC power environments, through any power grid.  We also develop,
        manufacture and market underwater video cameras, lights and accessories for
        the
        marine, commercial and consumer retail markets.
 
 Through
        fiscal year ended December 31, 2006 and the six months ended June 30, 2007,
        our
        power line products have been sold successfully into primarily two markets;
        security and transportation.  Our single analog camera, “SecureView”,
        is currently being sold to Home Shopping Network and Sam’s Club and has been the
        primary source of revenue in this segment.  The Company will expand
        its product line in the security / video surveillance market segment in 2007
        with the introduction of a multi-camera analog security system and a digital
        IP
        Netcam.
 
 We
        believe our new IP Netcam is a perfect way to remotely monitor either a home
        or
        small business from a different location using a PC.  The IP Netcam
        uses your home’s electrical wiring as a “digital pipeline” to deliver streaming
        video from up to 8 individual cameras around your home or
        business.  Each camera is actually a sophisticated “video server” that
        configures itself automatically within your PC. Simply plug the camera into
        any
        electrical wall outlet, plug the companion receiver into any electrical outlet,
        and connect the base to your network or cable modem. Once connected, your
        cameras are available in a secure network available only to authorized users.
        Market statistics show that The IP Camera market is expected to grow by 20%
        annually, with projected segment sales of $649 million by 2009.  We
        have found in this marketplace that internet users want to monitor their
        homes
        and businesses remotely.  In fact, 56% want remote monitoring of home
        and business webcams, 45% want to manage home security via a PC, and 47%
        want
        network cameras for home security.
 
 In
        our
        transportation products segment, in addition to power-line rear vision systems,
        we have continued to upgrade and expand our product offerings and now carry
        a
        full line of accident avoidance products including hard wired vision systems,
        DVRs, and GPS for tracking and directions.
  4
 
 For
        the
        six months ended June 30, 2007, we were able to improve our operating results
        significantly compared to the same period ended June 30, 2006. Net revenues
        of
        $749,259 for the six months ended June 30, 2007 increased 50% compared to
        net
        revenues for the same period ended June 30, 2006. Operating expenses of
        $1,806,680 for the six months ended June 30, 2007 decreased 31% compared
        to
        operating expenses for the same period ended June 30, 2006.  Loss from
        operations of $1,462,523 for the six months ended June 30, 2007 decreased
        39%
        compared to the same period ended June 30, 2006.
 
 The
        primary reason for the increase in net revenues was the increased sales volume
        from our transportation division.  Net revenues in the transportation
        division increased 50%, to $568,700 for the six months ended June 30, 2007,
        from
        $358,000 for the same period ended June 30, 2006.  The growth in this
        segment was driven primarily by two factors.  First, the industry has
        an extremely lengthy sales cycle, and the efforts made by our sale personnel
        during 2006 fiscal year, and targeted trade show participation during the
        same
        year, has resulted in the acquisition of new customers and distributors that
        have been in our sales “pipeline”.  Second, we have continued to
        expand and upgrade our product line allowing us to gain incremental revenues
        from existing customers who may have in the past purchased certain systems
        and
        components from competing suppliers.
 
 As
        previously announced, we will launch a new product segment in 2007; the Audio
        Segment, with the introduction of three products which transmit audio over
        the
        power line.  In the Audio Segment, our business plan is focused on
        leveraging our proprietary technologies, and to deliver the next generation
        of
        power line communication products aimed at the wireless audio market. Our
        target
        market will be the home-based user and small office user. Our research has
        concluded that some of the fastest growing areas of the consumer market can
        benefit from our technology.  The home audio sales market will be
        approximately $6 billion in 2007, largely driven by the portable audio market.
        The portable audio market includes Apple Computer Inc.'s iPod player and
        Microsoft Corp.'s recently launched Zune player, as well as other MP3-format
        audio players. Sales of portable audio players will account for 90 percent
        of
        all audio sales in 2007, with an estimated 41 million portable audio players
        being shipped, compared to the 34 million players shipped in
        2006.  The research conclusively shows that the popularity of digital
        music stored on PC's, Mac's, Apple’s iPod®, and MP3 players has led to an
        increased demand by consumers to play stored music anywhere in their home
        or
        office.
 
 In
        the
        multi-billion dollar home theatre market, we have found that a large number
        of
        consumers have cited two main reasons of dissatisfaction with their home
        theatre
        systems: 1) there were too many wires that had to be connected to make the
        system work as advertised; and 2) many of the wires were exposed due to the
        distance of the system components from the system base.  Because of
        these two reasons, a large number of home theatre systems do not have the
        rear
        speakers hooked up at all, resulting in less than expected performance of
        the
        system. This lack of overall performance is a problem not only for consumers,
        but for manufacturers as well.
 
 **1)****Tune
        Dog****TM**:
        This is an iPod/MP3/iPhone accessory, complete with audio speakers, which
        will
        allow the user to send music wirelessly to any room in their home from an
        iPod®,
        MP3 player, or PC, using only existing electrical wiring.
 
 **2)
        Audio Everywhere****TM**:
        This
        accessory is targeted at existing home entertainment systems and component
        stereo systems, and it will allow a stereo tuner to send audio through a
        home’s
        existing electrical wiring. Speakers can then be connected to the receiver
        for
        digital-quality music anywhere in the home with no additional wires, cables,
        antennas, or radio frequency (RF) equipment.
 
 **3)
        Rear Speakers DIY Install Kit****TM**:
        This accessory is targeted at new and existing home entertainment systems,
        with
        surround sound.  Potential licensing partners have told us that 75 to
        80% of rear surround sound speakers are either never connected or located
        on the
        front wall with the audio source because users find it to difficult hide
        the
        wires to the rear speakers.  Our Rear Speakers DIY Install KitTM enables
        the user
        to use the existing electrical wires in their home to transmit to the rear
        speakers as part of the overall home theatre experience.
 
 The
        2007
        launch of our new audio and video products is the culmination of almost two
        years of intensive and focused research and development efforts and we believe
        these products are well branded, and well positioned for success in the markets
        we have targeted.  During February 2007, the complete product
        specifications for the audio products were sent to several potential
        manufacturers in Asia for quoting and we intend to begin the manufacturing
        of an
        initial production run after a manufacturer is chosen.
 
 We
        were
        able to raise some additional capital during the three months ended June
        30,
        2007 through the issuance of a series of short-term promissory notes (See
        Liquidity and Capital Resources and Note 7); however, additional funding
        will be
        required to fund the launch of our new power line products and technologies,
        and
        to fund operations through December 31, 2007, or until we achieve
        profitability.  We are currently evaluating various funding
        alternatives available (See Subsequent events).
 
 **RESULTS
        OF OPERATIONS**
  See
        Note
        3 to the condensed consolidated financial statements for additional segment
        reporting.
  5
  **SIX
        MONTHS ENDED JUNE 30, 2007 AND JUNE 30, 2006**
  NET
        REVENUE: Net revenue increased 50% from $499,416 for the six months ended
        June
        30, 2006 to $749,251 for the six months ended June 30, 2007. Marine product
        segment sales were $112,498 or 15% of total revenues for the six months ended
        June 30, 2007 compared to $101,039, or 20% of total revenues, for the six
        months
        ended June 30, 2006. Overall, marine product sales increased $11,459, or
        11%.
        Security product segment sales were $68,028 or 9% of total revenues for the
        six
        months ended June 30, 2007 compared to $40,410, or 8% of total revenues,
        for the
        six months ended June 30, 2006. Overall, security product sales increased
        $27,618, or 68%. DC Transportation product segment sales were $568,725, or
        76%
        of total revenues for the six months ended June 30, 2007 compared to $357,967,
        or 72% of total revenues for the six months ended June 30, 2006. Overall,
        DC
        Transportation product sales increased $210,758, or 59%. The increase in
        net
        revenues for the marine product segment was due to a concentrated effort
        on
        internet marketing. The increase in net revenues for the security product
        segment was due primarily to a re-focusing on catalog distributors. The increase
        in net revenues for the DC transportation product segment was due to a continual
        expansion and upgrading of the product line, and the acquisition of new
        customers from leads developed by sales personnel and trade show attendances
        in
        prior periods.
  COST
        OF
        GOODS SOLD: Cost of goods sold increased 44% from $282,046 for the six months
        ended June 30, 2006 to $405,094 for the six months ended June 30, 2007. As
        a
        percentage of net revenue, cost of goods sold decreased to 54% for the six
        months ended June 30, 2007 from 56% for the six months ended June 30, 2006.
        Cost
        of goods sold for the marine products segment increased $6,374 or 10%, from
        $61,549 for the six months ended June 30, 2006 to $67,923 for the same period
        ended in 2007. As a percentage of net revenue, cost of goods sold for the
        marine
        product segment decreased from 61% for the six months ended June 30, 2006
        to 60%
        for same period ended in 2007. Cost of goods sold for the security products
        segment increased $18,564 or 54%, from $34,408 for the six months ended June
        30,
        2006 to $52,972 for the same period ended in 2007. As a percentage of revenue,
        cost of goods sold for the security product segment decreased from 85% for
        the
        six months ended June 30, 2006 to 78% for same period ended in 2007. Cost
        of
        goods sold for the DC Transportation product segment increased $98,110 or
        53%
        from $186,089 for the six months ended June 30, 2006 to $284,199 for the
        same
        period ended in 2007. As a percentage of net revenue, cost of goods sold
        for the
        DC Transportation product segment decreased from 52% for the six months ended
        June 30, 2006 to 50% for same period ended in 2007.
  The
        decrease in the cost of goods sold as a percentage of net revenues for the
        marine products segment was driven primarily by direct to consumer internet
        sales where pricing approximates full retail. The decrease in the cost of
        goods
        sold as a percentage of net revenues for the security products segment was
        due
        to an increase in the average sales prices during the period. The decrease
        in
        the cost of goods sold as a percentage of net revenues for the DC Transportation
        product segment was due to improved component pricing on both existing and
        new
        product offerings.
 
 GROSS
        PROFIT MARGIN: Gross profits on sales for the six months ended June 30, 2007
        amounted to $344,157 or 46% of net revenues, compared to $217,370, or 44%
        of net
        revenues, for the six months ended June 30, 2006. The marine products segment
        contributed $44,575 and $34,490 of the total gross profit for the six months
        ended June 30, 2007 and 2006, respectively. The security products segment
        contributed $15,056 and $6,002 of the total gross profit for the six months
        ended June 30, 2007 and 2006, respectively. The DC Transportation products
        segment contributed $284,526 and $171,878 of the total gross profit for the
        six
        months ended June 30, 2007 and 2006, respectively. The gross profit percentage
        for the marine products segment increased from 39% for the six months ended
        June
        30, 2006 to 40% for the six months ended June 30, 2007. The gross profit
        percentage for the security products segment increased from 15% for the six
        months ended June 30, 2006 to 22% for the six months ended June 30, 2007.
        The
        gross profit percentage for the DC Transportation products segment increased
        from 48% for the six months ended June 30, 2006 to 50% for the six months
        ended
        June 30, 2007.
 
 The
        increase in the gross profit as a percentage of net revenues for the marine
        products segment was driven primarily by direct to consumer internet sales
        where
        pricing approximates full retail. The increase in the gross profit as a
        percentage of net revenues for the security products segment was due to an
        increase in the average sales prices during the period. The increase in the
        gross profit as a percentage of net revenues for the DC Transportation product
        segment was due to improved component pricing on both existing and new product
        offerings.
 
 SALARIES
        AND WAGES: Salaries and Wages decreased 14% from $714,221 for the six months
        ended June 30, 2006 to $611,127 for the six months ended June 30, 2007. The
        decrease was due to a general downsizing implemented by management.. Salary
        and
        Wages is comprised of employee wages, benefits, taxes, and stock compensation.
        During the six months ended June 30, 2007, there was $7,857 in stock-based
        compensation issued to employees.
 
 PROFESSIONAL
        AND CONSULTING FEES: Professional and consulting fees decreased 51% from
        $905,322 for the six months ended June 30, 2006 to $441,337 for the six months
        ended June 30, 2007. The decrease was primarily due to a reduction in legal
        fees
        offset by an accrual for Board of Director compensation and investor relations
        consulting. Professional and consulting fees include fees paid to attorneys,
        accountants, Directors, and business consultants.  During the six
        months ended June 30, 2007, stock based compensation expense for consultants
        and
        service providers amounted to $73,750.  In addition, a charge of
        $48,925 was recorded as an estimate of expected Board of Director compensation
        earned during the period, until the final compensation details are
        finalized.
 
 DEPRECIATION
        AND AMORTIZATION EXPENSE: Depreciation and amortization decreased 38% from
        $161,636 for the six months ended June 30, 2006 to $100,061 for the six months
        ended June 30, 2007. The decrease was attributable to a reduction in
        amortization expense as certain intangible assets were fully amortized as
        of
        June 30, 2007.
 
 RESEARCH
        AND DEVELOPMENT: Research and development expense decreased 25% from $354,735
        for the six months ended June 30, 2006, to $265,066 for the six months ended
        June 30, 2007. The decrease was due to a reduction in engineering resources
        as
        the Company’s new power line products neared completion. Research and
        development costs consist of all expenditures related to the improvement
        and
        development of the Company's current product line, new product development,
        and
        engineering consulting fees associated with licensed technology. Currently,
        substantially all of our research and development costs and efforts are
        dedicated to the development of our Security (both analog and digital), and
        product segments. For the six months ended June 30, 2007, of the total Research
        and Development expenditures, $250,229 or 94% was related to the security
        and
        audio products segment, $6,517 or 2% was related to the Marine products segment,
        and $8,320 or 4% was related to the DC Transportation products segment. The
        cost
        of our research and development activities is borne directly by the Company;
        no
        amounts are borne by our customers, nor are any contracts for customer funded
        research and development currently anticipated. The Company plans to continue
        funding the security, audio and DC transportation product segments for the
        next
        several years.
  6
 
 ADVERTISING
        AND PROMOTIONS: Advertising and promotions decreased 29% from $84,400 for
        the
        six months ended June 30, 2006 to $59,669 for the six months ended June 30,
        2007. The decrease was due directly to a reduction in overall advertising
        and a
        focus on trade show attendance. The amount also includes portions of postage,
        printing, and travel that are attributable to advertising and
        promotions.
 
 RENT
        AND
        UTILITIES: Rent and utilities decreased 22% from $115,574 for the six months
        ended, June 30, 2006 to $90,372 for the six months ended, June 30, 2007.
        The
        decrease is due to the consolidation of the Company’s office and warehouse
        facilities to new office and warehouse space effective July 1,
        2006.  The Company leases approximately 6,850 square feet of combined
        office and warehouse space in St. Petersburg, Florida, under a non-cancellable
        lease through September of 2011. The Company also leases approximately 2400
        square feet of office space in California, under a one year lease, which
        houses
        its research and development operations.  Rent and utilities includes
        office rent, warehouse rent, storage, telephone, and utilities.
 
 TRAVEL
        AND ENTERTAINMENT EXPENSE: Travel and entertainment expense decreased 5%
        from
        $70,854 for the six months ended June 30, 2006 to $67,181 for the six months
        ended June 30, 2007. The decrease was attributed to decreased travel by
        employees of the DC Transportation product segment. Travel and entertainment
        expenses include normal expenses associated with traveling including, but
        not
        limited to; airfare, auto rental, parking and tolls, hotels and lodging,
        taxis,
        meals, and entertainment.
 
 OTHER
        EXPENSES: Other expenses decreased 14% from $198,953 for the six months ended
        June 30, 2006 to $171,867 for the six months ended June 30, 2007. The decrease
        was due to a decrease in the Company’s Director and Officers insurance premiums
        and a reduction telemarketing services that were previously outsourced. Other
        expenses include travel, supplies, property taxes, insurance, financing fees,
        bank charges, provision for doubtful accounts, postage and delivery, and
        various
        other expenses that are classified as miscellaneous.
 
 NON-OPERATING
        INCOME (EXPENSE) ITEMS: Non-operating income (expense) decreased 31% from
        $787,231 for the six months ended June 30, 2006 to $545,829 for the six months
        ended June 30, 2007. Components of non-operating expenses are as
        follows:
  ·
              Interest
                  expense increased 694% to $(874,429) for the six months ended June
                  30,
                  2007 from $(110,121) for the six months ended June 30, 2006. The
                  current
                  period interest expense includes ($716,967) of amortization of
                  debt
                  discount on the Convertible Debentures, $(106,395) of amortization
                  of debt
                  discount on the short-term promissory notes payable, and $(51,067)
                  of
                  interest associated with notes payable outstanding during the period.
                  The
                  Company records amortization using the effective interest method
                  and,
                  accordingly, interest expense associated with these debentures
                  will
                  increase as the carrying value
                  increases.
  ·
              Other
                  income decreased 78% to $9,637 for the six months ended June 30,
                  2007,
                  from $43,951 for the six months ended June 30, 2006. Current period
                  income
                  of $25,783 is related primarily to proceeds received in conjunction
                  with
                  the settlement of a lawsuit in 2006, offset by derivative expense
                  of
                  $15,363 associated with the conversion of debentures (See Note
                  7).   Amounts also include interest earned on cash balances
                  held by the Company throughout the
                  period.
  ·
              Loss
                  of extinguishment of debt decreased 95% to $(75,913) for the six
                  months
                  ended June 30, 2007, from $(1,502,286) for the six months ended
                  June 30,
                  2006. The amounts are recorded in connection with our debenture
                  financing
                  where we allocated the fair value of instruments issued in connection
                  with
                  the financing to the proceeds and the debt relieved on a relative
                  fair
                  value basis. This calculation resulted in a loss on extinguishment
                  associated with the relieved
                  indebtedness.
  ·
              Derivative
                  gain decreased 37% to $1,486,534 for the six months ended June
                  30, 2007,
                  from $2,355,687 for the six months ended June 30, 2006. Derivative
                  gain
                  arises from fair value adjustments to our derivative financial
                  instruments. These instruments consist of freestanding warrants
                  and
                  embedded conversion features associated with the Debenture offering.
                  We
                  will continue to incur fair value adjustments to these instruments
                  until
                  such instruments are converted, exercised or reclassified to stockholders'
                  equity. Future fair value adjustments require the use of subjective
                  estimates. However, the principal drive of our valuation model
                  is the
                  Company's trading common stock. Accordingly, future volatility
                  in the
                  trading market price may result in significant changes in fair
                  value that
                  are required to be recorded as adjustments in
                  income.
 
  **THREE
        MONTHS ENDED JUNE 30, 2007 AND JUNE 30, 2006**
  NET
        REVENUE: Net revenue increased 21% from $287,832 for the three months ended
        June
        30, 2006 to $347,017 for the three months ended June 30, 2007. Marine product
        segment sales were $54,762 or 16% of total revenues for the three months
        ended
        June 30, 2007 compared to $41,654, or 14% of total revenues, for the three
        months ended June 30, 2006. Overall, marine product sales increased $13,108,
        or
        31%. Security product segment sales were $31,266 or 9% of total revenues
        for the
        three months ended June 30, 2007 compared to $30,858, or 11% of total revenues,
        for the three months ended June 30, 2006. Overall, security product sales
        increased $408, or 1%. DC Transportation product segment sales were $260,989,
        or
        75% of total revenues for the three months ended June 30, 2007 compared to
        $215,320, or 75% of total revenues for the three months ended June 30, 2006.
        Overall, DC Transportation product sales increased $45,669, or 21%. The increase
        in net revenue for the marine product segment was due to a concentrated effort
        on internet marketing. Net revenue for the security product segment was flat
        for
        the period ended. The increase in net revenues for the DC transportation
        product
        segment was due to a continual expansion and upgrading of the product line,
        and
        the acquisition of new customers from leads developed by sales personnel
        and
        trade show attendances in prior periods.
  7
  COST
        OF
        GOODS SOLD: Cost of goods sold increased 23% from $154,966 for the three
        months
        ended June 30, 2006 to $190,380 for the three months ended June 30, 2007.
        As a
        percentage of net revenue, cost of goods sold decreased to 53% for the three
        months ended June 30, 2007 from 60% for the three months ended June 30, 2006.
        Cost of goods sold for the marine products segment increased $9,024 or 36%,
        from
        $25,323 for the three months ended June 30, 2006 to $34,347 for the same
        period
        ended in 2007. As a percentage of net revenue, cost of goods sold for the
        marine
        product segment increased from 61% for the three months ended June 30, 2006
        to
        63% for same period ended in 2007. Cost of goods sold for the security products
        segment decreased $586 or 2%, from $26,289 for the three months ended June
        30,
        2006 to $25,703 for the same period ended in 2007. As a percentage of net
        revenue, cost of goods sold for the security product segment decreased from
        85%
        for the three months ended June 30, 2006 to 82% for same period ended in
        2007.
        Cost of goods sold for the DC Transportation product segment increased $26,976
        or 26% from $103,354 for the three months ended June 30, 2006 to $130,330
        for
        the same period ended in 2007. As a percentage of net revenue, cost of goods
        sold for the DC Transportation product segment increased from 48% for the
        three
        months ended June 30, 2006 to 50% for same period ended in 2007.
  The
        increase in the cost of goods sold as a percentage of net revenues for the
        marine products segment was driven primarily by price reductions to a new
        wholesale customer. The decrease in the cost of goods sold as a percentage
        of
        net revenues for the security products segment was due to an increase in
        the
        average sales prices during the period. The increase in the cost of goods
        sold
        as a percentage of net revenues for the DC Transportation product segment
        was
        due to changes in product mix during the period ended.
 
 GROSS
        PROFIT MARGIN: Gross profits on sales for the three months ended June 30,
        2007
        amounted to $156,637 or 45% of net revenues, compared to $132,866, or 46%
        of net
        revenues, for the three months ended June 30, 2006. The marine products segment
        contributed $20,415 and $16,331 of the total gross profit for the three months
        ended June 30, 2007 and 2006, respectively. The security products segment
        contributed $5,563 and $4,569 of the total gross profit for the three months
        ended June 30, 2007 and 2006, respectively. The DC Transportation products
        segment contributed $130,659 and $111,966 of the total gross profit for the
        three months ended June 30, 2007 and 2006, respectively. The gross profit
        percentage for the marine products segment decreased from 39% for the three
        months ended June 30, 2006 to 37% for the three months ended June 30, 2007.
        The
        gross profit percentage for the security products segment increased from
        15% for
        the three months ended June 30, 2006 to 18% for the three months ended June
        30,
        2007. The gross profit percentage for the DC Transportation products segment
        decreased from 52% for the three months ended June 30, 2006 to 50% for the
        three
        months ended June 30, 2007.
 
 The
        decrease in the gross profit as a percentage of net revenues for the marine
        products segment was driven primarily by price reductions to a new wholesale
        customer. The increase in the gross profit as a percentage of net revenues
        for
        the security products segment was due to an increase in the average sales
        prices
        during the period. The decrease in the gross profit as a percentage of net
        revenues for the DC Transportation product segment was due changes in the
        product mix during the period.
 
 SALARIES
        AND WAGES: Salaries and Wages decreased 29% from $424,903 for the three months
        ended June 30, 2006 to $301,231 for the three months ended June 30, 2007.
        The
        decrease was due to a general downsizing implemented by management. Salary
        and
        Wages is comprised of employee wages, benefits, taxes, and stock compensation.
        During the three months ended June 30, 2007, there was $5,946 in stock-based
        compensation issued to employees.
 
 PROFESSIONAL
        AND CONSULTING FEES: Professional and consulting fees decreased 45% from
        $556,292 for the three months ended June 30, 2006 to $307,185 for the three
        months ended June 30, 2007. The decrease was primarily due to a reduction
        in
        legal fees offset by an accrual for Board of Director compensation, investor
        relations consulting, and audit fees. Professional and consulting fees include
        fees paid to attorneys, accountants, Directors, and business consultants.
        During
        the three months ended June 30, 2007, stock based compensation expense for
        consultants and service providers amounted to $68,500.  In addition, a
        charge of $48,925 was recorded as an estimate of expected Board of Director
        compensation earned during the period, until the final compensation details
        are
        finalized.
 
 
 DEPRECIATION
        AND AMORTIZATION EXPENSE: Depreciation and amortization decreased 7% from
        $52,838 for the three months ended June 30, 2006 to $48,970 for the three
        months
        ended June 30, 2007. The decrease was attributable to a reduction in
        amortization expense as certain intangible assets were fully amortized as
        of
        June 30, 2007.
 
 RESEARCH
        AND DEVELOPMENT: Research and development expense decreased 39% from $222,528
        for the three months ended June 30, 2006, to $134,736 for the three months
        ended
        June 30, 2007. The decrease was due to a reduction in engineering resources
        as
        the Company’s new power line products neared completion. Research and
        development costs consist of all expenditures related to the improvement
        and
        development of the Company's current product line, new product development,
        and
        engineering consulting fees associated with licensed technology. Currently,
        substantially all of our research and development costs and efforts are
        dedicated to the development of our Security (both analog and digital), and
        product segments. For the three months ended June 30, 2007, of the total
        Research and Development expenditures, $126,416 or 94% was related to the
        security and audio products segment, and $8,320, or 6% was related to the
        DC
        Transportation products segment. The cost of our research and development
        activities is borne directly by the Company; no amounts are borne by our
        customers, nor are any contracts for customer funded research and development
        currently anticipated. The Company plans to continue funding the security,
        audio
        and DC transportation product segments for the next several years.
  8
 
 ADVERTISING
        AND PROMOTIONS: Advertising and promotions decreased 15% from $30,004 for
        the
        three months ended June 30, 2006 to $25,364 for the three months ended June
        30,
        2007. The decrease was due directly to a reduction in overall advertising
        and a
        focus on trade show attendance. The amount also includes portions of postage,
        printing, and travel that are attributable to advertising and
        promotions.
 
 RENT
        AND
        UTILITIES: Rent and utilities decreased 29% from $63,567 for the three months
        ended, June 30, 2006 to $45,432 for the three months ended, June 30, 2007.
        The
        decrease is due to the consolidation of the Company’s office and warehouse
        facilities to new office and warehouse space effective July 1,
        2006.  The Company leases approximately 6,850 square feet of combined
        office and warehouse space in St. Petersburg, Florida, under a non-cancellable
        lease through September of 2011. The Company also leases approximately 2400
        square feet of office space in California, under a one year lease, which
        houses
        its research and development operations.  Rent and utilities includes
        office rent, warehouse rent, storage, telephone, and utilities.
 
 TRAVEL
        AND ENTERTAINMENT EXPENSE: Travel and entertainment expense decreased 30%
        from
        $32,458 for the three months ended June 30, 2006 to $22,598 for the three
        months
        ended June 30, 2007. The decrease was attributed to decreased travel by officers
        and employees related to industry trade shows for the DC Transportation product
        segment. Travel and entertainment expenses include normal expenses associated
        with traveling including, but not limited to; airfare, auto rental, parking
        and
        tolls, hotels and lodging, taxis, meals, and entertainment.
 
 OTHER
        EXPENSES: Other expenses increased 20% from $72,413 for the three months
        ended
        June 30, 2006 to $86,905 for the three months ended June 30, 2007. The increase
        was due to an increase in warranty expense and temporary labor. Other expenses
        include travel, supplies, property taxes, insurance, financing fees, bank
        charges, provision for doubtful accounts, postage and delivery, and various
        other expenses that are classified as miscellaneous.
 
 NON-OPERATING
        INCOME (EXPENSE) ITEMS: Non-operating income (expense) decreased 134% from
        $1,905,443 for the three months ended June 30, 2006 to ($645,092) for the
        three
        months ended June 30, 2007. Components of non-operating expenses are as
        follows:
  ·
              Interest
                  expense increased 355% to $(185,110) for the three months ended
                  June 30,
                  2007 from $(40,658) for the three months ended June 30, 2006. The
                  current
                  period interest expense includes ($52,397) of amortization of debt
                  discount on the Convertible Debenture, $(106,395) of amortization
                  of debt
                  discount on the short term promissory notes and $(26,318) of interest
                  associated with notes payable outstanding during the period. The
                  Company
                  records amortization using the effective interest method and, accordingly,
                  interest expense associated with these debentures will increase
                  as the
                  carrying value increases.
  ·
              Other
                  income decreased 76% to $10,000 for the three months ended June
                  30, 2007,
                  from $41,387 for the three months ended June 30, 2006. Current
                  period
                  income of $10,282 is related primarily to proceeds received in
                  conjunction
                  with the settlement of a lawsuit in 2006.  Amounts also include
                  interest earned on cash balances held by the Company throughout
                  the
                  period.
  **·**
              Derivative
                  loss decreased 125% to ($469,982) for the three months ended June
                  30,
                  2007, from a gain of $1,904,714 for the three months ended June
                  30, 2006.
                  Derivative gains and losses arise from fair value adjustments to
                  our
                  derivative financial instruments. These instruments consist of
                  freestanding warrants and embedded conversion features associated
                  with the
                  Debenture offering. We will continue to incur fair value adjustments
                  to
                  these instruments until such instruments are converted, exercised
                  or
                  reclassified to stockholders' equity. Future fair value adjustments
                  require the use of subjective estimates. However, the principal
                  drive of
                  our valuation model is the Company's trading common stock. Accordingly,
                  future volatility in the trading market price may result in significant
                  changes in fair value that are required to be recorded as adjustments
                  in
                  income.
  **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 The
        accompanying condensed consolidated financial statements have been prepared
        assuming that the Company will continue as a going concern. However, the
        Company
        has incurred losses from operations of $916,694 and $1,617,682 during the
        six
        months ended June 30, 2007 and 2006, respectively. In addition, during those
        periods, the Company has used cash of $860,090 and $2,842,510 respectively,
        in
        its operating activities and has a stockholders' deficit at June 30, 2007.
        These
        conditions raise substantial doubt about the Company's ability to continue
        as a
        going concern.
 
 The
        Company has allocated significant resources to the development of new power
        line
        technologies and products that will be available for sale and/or licensing
        during the second or third quarters of fiscal year 2007. The Company’s ability
        to continue will be dependent upon achieving profitable operations through
        the
        licensing and sales of these new technologies and products.
  The
        Company’s ability to continue as a going concern is dependent upon (i) raising
        additional capital to fund operations (ii) the further development of the
        Security, DC Transportation, and new Audio products segments, and (iii)
        ultimately the achievement of profitable operations. During the six months
        ended
        June 30, 2007, the Company secured financing of $765,000 in the form of
        short-term notes payable from its primary financial partner.  While
        the proceeds of this financing did mitigate the Company’s liquidity difficulties
        for the six months ended June 30, 2007, additional funding will be required
        to
        fund the launch of the Company’s new power line products and technologies, which
        are now ready for release, and to fund operations through December 31, 2007,
        or
        until it can achieve profitability. In addition to the continued effort to
        reduce overhead expenses through the streamlining of its operations, the
        Company
        plans to continue to borrow funds through the issuance of short-term convertible
        promissory notes, and is currently negotiating a $300,000 bridge loan to
        fund
        operations while it evaluates its longer term financing options with its
        primary
        financing partner (Subsequent events below). The ability of the Company to
        sustain its operations for a reasonable period without further financing
        cannot
        be assured and the condensed consolidated financial statements do not include
        any adjustments that might arise as a result of this uncertainty. See
“Subsequent Events” below for further discussion of liquidity.
  9
 
 During
        the six months ended June 30, 2007 the Company funded its losses from operations
        through the following vehicles:
 
 We
        borrowed $500,000 from our primary financial partner through the issuance
        of two
        separate unsecured promissory notes. We executed a promissory note on January
        29, 2007 in the amount of $300,000. The note was due on February 28, 2007,
        and
        bears an 8% interest rate. On March 21, 2007, we executed a second promissory
        note in the amount of $200,000. The note was due on May 5, 2007, and bears
        an 8%
        interest rate. Interest on each of these notes was due and payable upon the
        maturity dates. On May 14, 2007, the Company received an additional $50,000
        in
        cash from its primary finance partner, the proceeds of which are included
        in a
        note payable that consolidates all outstanding notes payable with this finance
        partner.  The Company issued a new consolidated note payable in the
        amount of $898,661 which includes the following: the retirement of the September
        14, 2006 note payable in the principal amount of $300,000, the retirement
        of the
        January 29, 2007 note payable in the principal amount of $300,000, the
        retirement of the March 21, 2007 note payable in the amount of $200,000,
        accrued
        interest in the amount of $48,661 (including default rate interest of 18%)
        on
        the three aforementioned notes, and $50,000 in new proceeds received on May
        14,
        2007. The note bears an 8% interest rate and an 18% default interest rate
        for
        all principal amounts outstanding beyond the maturity date. The note was
        due on
        July 13, 2007, with principal and interest due and payable upon maturity.
        The
        Company is currently engaged in negotiating with the holder of this note
        in
        order to extend the term of this note and provide for the terms of the
        repayment.
 
 We
        borrowed $215,000 from accredited investors and related parties through the
        issuance of a series of short-term 30 day promissory notes, all which bear
        an
        annual interest rate of 8%, and the maturity dates for which may be extended
        for
        an additional 30 days at the option of the lender.  The notes were
        issued during the months of May and June and all remained outstanding at
        June
        30, 2007.  Each note included a loan origination fee for the lender to
        be paid in restricted common stock in share amounts ranging from 5% to 25%
        of
        the principal amount loaned.  The shares carry piggyback registration
        rights.  Each of the notes are convertible, at the option of the
        lender, into restricted common stock at $.60 per share, and  three
        year warrants to purchase an additional 50% of the converted shares at an
        exercise price of $1.25 per share.  At June 30, 2007, no principal had
        been converted to common stock, and all lenders with notes due prior to June
        30,
        2007 extended their notes for the additional 30 day period (Note
        8).
 
 **Material
        Commitments:**
 
 See
        Note
        10 in the accompanying condensed consolidated financial statements.
 
 **Subsequent
        Events:**
 
 In
        addition to continuing to borrow funds through the issuance of short-term
        convertible promissory notes as discussed above; on July 17, 2007 the Company
        executed a term sheet with a lender for a $300,000 bridge loan.  The
        note will bear an annual interest rate of 12% with a six month
        term.  The loan will be collateralized with common shares held by the
        primary financing partner.  The lender will be paid an equity fee in
        shares of common stock with a value of $70,000 for the first ninety days
        the
        loan remains outstanding.  In the event the loan is not repaid on or
        before the 90th
        day, additional common shares with a value of $70,000 is required to be issued
        to these lenders.  In addition, the Company will issue to the lender,
        on the closing date, five-year warrants to purchase 150,000 shares of common
        stock at an exercise price of 125% of the average closing price of the Company’s
        common stock for the ten trading days immediately preceding the closing date
        of
        the loan.
  At
        the
        time of filing, the Company had not completed this transaction and had not
        received any proceeds associated therewith.
  **Item
        3. Controls
        and
        Procedures**
 
 (a)
        Evaluation of Disclosure Controls and Procedures
  Based
        on
        an evaluation of our disclosure controls and procedures (as defined in Rules
        13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended)
        required by paragraph (b) of Rule 13a-15 or Rule 15d-15, as of June 30, 2007,
        our Chief Executive Officer and Chief Financial Officer, have concluded that
        our
        disclosure controls and procedures were effective in ensuring that information
        required to be disclosed by us in the reports that we file or submit under
        the
        Exchange Act is recorded, processed, summarized and reported within the time
        periods specified in the Commission's rules and forms. Our Chief Executive
        Officer and Chief Financial Officer, also concluded that, as of June 30,
        2007,
        our disclosure controls and procedures were effective in ensuring that
        information required to be disclosed by us in the reports that we file or
        submit
        under the Exchange Act is accumulated and communicated to our management,
        including our Chief Executive Officer and Chief Financial Officer, to allow
        timely decisions regarding required disclosure.
  *Limitations
        on the Effective of Controls*
 
 Our
        management does not expect that our disclosure controls or our internal controls
        over financial reporting will prevent all error and fraud. A control system,
        no
        matter how well conceived and operated, can provide only reasonable, but
        no
        absolute, assurance that the objectives of a control system are met.
 Further, any control system reflects limitations on resources, and the
        benefits of a control system must be considered relative to its costs.
 These limitations also include the realities that judgments in
        decision-making can be faulty and that breakdowns can occur because of simple
        error or mistake. Additionally, controls can be circumvented by the individual
        acts of some persons, by collusion of two or more people or by management
        override of a control. A design of a control system is also based upon certain
        assumptions about potential future conditions; over time, controls may become
        inadequate because of changes in conditions, or the degree of compliance
        with
        the policies or procedures may deteriorate.  Because of the inherent
        limitations in a cost-effective control system, misstatements due to error
        or
        fraud may occur and may not be detected.
 (b)
          Changes in Internal Controls
  There
          were no changes in our internal controls over financial reporting that
          could
          significantly, or are reasonably likely to materially affect, our affect
          internal controls over financial reporting that occurred during the our
          fiscal
          quarter ended June 30, 2007.
   10
   **PART
        II OTHER INFORMATION**
  **Item
        1. Legal Proceedings**
 
 Litigation,
        claims and assessment:
  *Reed
        Elsevier, Inc.*
 
 On
        April
        26, 2007 the Company learned that a default judgment had been entered against
        it
        on August 1, 2006 in the Circuit Court of the 6th Judicial
        Circuit
        of Pinellas County, Florida, in the amount of $20,192, to the plaintiff Reed
        Elsevier, Inc.  The obligation is associated with a commitment made in
        December of 2004, by a former officer of the Company, for floor space at
        a trade
        show in March of 2005, which the Company did not attend.  The Company
        has retained counsel to negotiate a resolution to the matter, and is awaiting
        a
        response from the plaintiff for a meeting date.  The Company has
        recorded a liability in the amount of $22,203, including post judgment interest,
        which is included in accrued expenses in the accompanying June 30, 2007
        condensed consolidated balance sheet.
 
 *Guestlinx,
        LLC*
  On
        May
        19, 2006 we learned that a default judgment had been entered against us on
        May
        3, 2006 in the Superior Court of California, Orange County, in the amount
        of
        $90,561, to the plaintiff Guestlinx, LLC. The obligation is associated with
        the
        Hotel/MDU product segment, the operations of which were discontinued in April
        of
        2005. The judgment was granted based on an action filed by Guestlinx, LLC
        on
        November 2, 2005. We had no prior knowledge of the action and believe it
        was
        never properly served. We retained counsel in California, and on August 4,
        2006
        were successful in having the judgment set aside for improper service. We
        had
        previously recorded a liability associated with this dispute in the amount
        of
        $46,352. On December 8, 2006, we negotiated a settlement and release agreement
        at a mandatory settlement conference, in the amount of $52,500. We remitted
        $16,250 toward the settlement amount on December 15, 2006, and the remaining
        balance of $36,250 was recorded as an accrued liability at December 31,
        2006. Under the agreement, we were required to pay the remaining balance by
        February 15, 2007, but were unable to do so. The agreement provides for the
        plaintiff to receive a stipulated judgment in the amount of $60,000 (less
        amounts remitted) if we are in default of the agreement.  On April 18,
        2007, the plaintiff filed for and received the default judgment and the
        Company’s counsel is currently working with the plaintiff on a revised payment
        schedule.  The Company increased the aforementioned liability in the
        amount of $7,500 to account for the additional obligation incurred under
        the
        stipulated judgment.  The amounts are included in accrued expenses in
        the accompanying June 30, 2007 and December 31, 2006 condensed consolidated
        balance sheets.
 
 Acu-cast
        Technologies, LLC
 
 On
        June
        11, 2007, Acu-cast Technologies, LLC filed a complaint against the Company
        in
        the amount of $4,437 in the County Court of Lawrence, Tennessee.  The
        liability relates to proto-types made by the plaintiff on behalf of the
        Company.  The Company has hired counsel in Tennessee who represented
        the Company at a July 11, 2007 hearing.  The Company is currently
        negotiating a payment schedule while it waits for the court to set a trial
        date.
        The amount is included in accounts payable in the accompanying June 30, 2007
        and
        December 31, 2006 condensed consolidated balance sheets.
  **Item
        2.
        Unregistered Sales of Equity Securities and Use of
        Proceeds.**
  During
        the three months ended June 30, 2007, the Company issued 346,333 shares of
        common stock to debenture holders as payment for annual interest due on the
        March 2006 convertible debentures.  The shares were valued at $427,722
        in accordance with the March 22, 2006 Convertible Debenture and Securities
        Purchase Agreement. The shares were registered on Form SB-2 as filed with
        the
        Securities and Exchange Commission, effective October 4, 2006.
  During
        the three months ended June 30, 2007, the Company issued 4,300 shares of
        common
        stock in settlement of accounts payable relating to consulting costs for
        marketing services rendered during the period.  The shares issued
        converted, $4,300 of accounts payable liability owed to the consultant and
        were
        valued based on the closing market price of the Company's common stock on
        the
        date of conversion.  The shares were registered on Form S-8 filed with
        the Securities and Exchange Commission on May 7, 2007.
  11
  During
        the three months ended June 30, 2007, the Company issued 15,094 shares of
        common
        stock in settlement of accounts payable related to consulting costs for
        marketing services rendered during the period.  The shares issued
        converted $15,094 of accounts payable liability owed to the consultant and
        were
        valued based on the closing market price of the Company's common stock on
        the
        date of conversion.  The shares were registered on Form S-8 filed with
        the Securities and Exchange Commission on May 7, 2007.
  During
        the three months ended June 30, 2007, the Company issued 50,000 shares of
        common
        stock to a consultant for business development and financial advisory services
        rendered during the period.  The shares were valued at $52,500 based
        on the closing market price of the Company's common stock on the date of
        the
        contract. These shares were recorded by the Company as a $26,250 charge to
        professional and consulting fees and the remaining balance is included in
        prepaid expenses in the accompanying 2007 balance sheet. The shares were
        registered on Form S-8 filed with the Securities and Exchange Commission
        on May
        7, 2007.
  During
        the three months ended June 30, 2007, the Company issued 18,852 shares of
        common
        stock, with a fair value of $17,500 to a consultant for sales and licensing
        services rendered during the period.  The shares were registered on
        Form S-8 filed with the Securities and Exchange Commission on May 7,
        2007.
  During
        the three months ended June 30, 2007, the Company issued 40,345 shares of
        common
        stock to a consultant for legal services rendered during the
        period.  The shares were valued at $40,345 based on the closing market
        price of the Company's common stock on the date of issuance.  The
        shares were registered on Form S-8 filed with the Securities and Exchange
        Commission on May 7, 2007.
  During
        the three months ended June 30, 2007, the Company issued 20,412 shares of
        common
        stock to a consultant for legal services rendered during the
        period.  The shares were valued at $15,717 based on a three day
        average of the closing market price of the Company's common stock, discounted
        by
        30%,  as outlined in the consulting agreement.  The shares
        were registered on Form S-8 filed with the Securities and Exchange Commission
        on
        May 7, 2007.
 
 **Item
        3. Defaults Upon Senior Securities.**
 
 As
        of June 30, 2007 and December 31,
        2006, the Company was in default under the terms of the Purchase Agreement
        dated
        March 7, 2006, and the Debentures issued on March 22, 2006 in connection
        therewithin an aggregate
        principal amount of $4,473,933. The terms of the Purchase Agreement and the
        Debenture required that the Company generate gross profit in excess of $300,000
        per month on average during the period from October 1, 2006 to December 31,
        2006. Under the default provisions, upon the Company delivering an Event
        of
        Default Notice to Purchasers (Debenture holders) or the Purchasers becoming
        aware of an Event of Default, the Purchasers may require the Company to redeem
        all or any portion of their Debentures by delivering an “Event of Default
        Redemption Notice” to the Company. At that time the Company would be required to
        redeem the requested portion of the debenture at a redemption value calculated
        in accordance with the default provisions in the March 7, 2006 Securities
        Purchase Agreement, to be no less than 120% of the principal amount requested
        to
        be redeemed. At June 30, 2007, the Company had not negotiated a form of a
        waiver
        agreement with the Purchasers covering the Company’s inability to meet this
        covenant. The Company has not received an “Event of Default Redemption Notice”
from any Purchaser and is currently engaged in negotiating with the Purchasers
        in order to enter into a such a waiver agreement covering the aforementioned
        default.
  Because
        the Company was in default as of June 30, 2007 and December 31, 2006, and
        while
        under default, may receive an “Event of Default Redemption Notice” at any time,
        the liabilities associated with the Debentures on the accompanying condensed
        consolidated balance sheets, as presented, have been reclassified from long-term
        to current liabilities.
  **Item
        4. Submission of Matters to a Vote of Security Holders.**
  None.
  **Item
        5. Other Information.**
  (a)           None.
 
 (b)           No
        material changes to the procedures by which security holders may recommend
        nominees to our board of directors occurred or have been implemented since
        our
        last periodic filing, our Annual Report filed on Form 10-K for the fiscal
        year
        ended December 31, 2006.
  12
  **Item
        6. Exhibits**
 
 **Exhibit
                  No.**
              **Description**3(i).1
              Articles
                  of Restatement of the Articles of Incorporation of PowerLinx, Inc.,
                  dated
                  February 25, 2003. (Incorporated by reference to Annual Report
                  for the
                  fiscal year ended December 31, 2001, filed with the SEC on Form
                  10KSB/A.
                  on January 16, 2003)3(i).2
              Amendment
                  to the Articles of Incorporation increasing authorized Common Stock
                  from
                  250,000,000 to shares. (Incorporated by reference to the Current
                  Report
                  filed on Form 8-K with the Securities and Exchange Commission on
                  400,000,000, March 22, 2006).3(i).3
              Amendment
                  to the Articles of Incorporation changing the Company's name from
                  Seaview
                  Video Technology, Inc. to PowerLinx, Inc. (Incorporated by reference
                  to
                  the Current Report filed on Form 8-K with the Securities and Exchange
                  Commission on March 16, 2004).3(i).4
              Certificate
                  of Amendment filed with the Secretary of State of Nevada on August
                  9,
                  2006, amending the Company’s Articles of Incorporation to increase the
                  Company’s authorized common stock from 8,000,000 50,000,000 shares.
                  (Incorporated by reference to the Company’s Registration Statement filed
                  on Form SB-2 with the Securities and Exchange Commission on September
                  9,
                  2006).3(ii).1
              Bylaws
                  of the Company. (Incorporated by reference to the Annual Report
                  filed on
                  Form 10-KSB with the Securities and Exchange
                Commission
                  on April 15, 2005).4.1
              Certificate
                  of designation of Series A Preferred Stock (Incorporated by reference
                  to
                  the Company’s Current Report filed on Form
                10-KSB
                  with the Securities and Exchange Commission on March 16,
                  2004).31.1
              Certification
                  of Michael Tomlinson, Chief Executive Officer, dated August 14,
                  2007,
                  pursuant to Rule 13a-14(a) of the
                Securities
                  Exchange Act of 1934, as amended. (Filed herewith).31.2
              Certification
                  of Douglas Bauer, Chief Financial Officer, dated August 14, 2007,
                  pursuant
                  to Rule 13a-14(a) of the Securities
                Exchange
                  Act of 1934, as amended. (Filed herewith).32.1
              Statement
                  of Michael Tomlinson, Chief Executive Officer, dated August 14,
                  2007,
                  pursuant to Rule 13(a)-14(b) of the Securities Exchange Act of
                  1934, as
                  amended. (Filed herewith).32.2
              Statement
                  of Douglas Bauer, Chief Financial Officer, dated August 14, 2007,
                  pursuant
                  to Rule 13(a)-14(b) of the Securities Exchange Act of 1934, as
                  amended.
                  (Filed herewith).
    13
   **SIGNATURES**
  Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, the Registrant has duly caused this report to be signed on its behalf
        by
        the undersigned, thereunto duly authorized.
 
 **POWERLINX
                  INC.**Date:
              August
                  20, 2007
              By:
              */s/
                  Michael Tomlinson*Michael
                  TomlinsonChief
                  Executive OfficerBy:
              */s/
                  Douglas Bauer*Douglas
                  BauerChief
                  Financial Officer (and Acting Principal Accounting
                  Officer)
 
    14