**UNITED
STATES**
 **SECURITIES
AND EXCHANGE COMMISSION**
 
 **Washington,
D.C. 20549**
 
 **FORM
10-QSB**
 
 (Mark
One)
 
 ý  Quarterly
Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 For the
quarterly period ended March 31, 2005
 
 or
 
  ̈  Transition
Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 For the
transition period from _______ to _______
  Commission
file number: 000-50532
 **S****OLOMON********T****ECHNOLOGIES,********I****NC
..**
 (Exact
name of small business issuer as specified in its charter)
  **Delaware**
    
    **52-1812208**(State
      or other jurisdiction of incorporation or organization)
    
    (I.R.S.
      EmployerIdentification No.)
 
 **1400
L&R Industrial Blvd.**
 **Tarpon
Springs, Florida 34689**
 (Address
of principal executive offices)
 
 **(727)
934-8778**
 **Issuer’s
Telephone Number**
 
 Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for
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. Yes ý No  ̈ .
 
 As of May
10, 2005, there were 5,326,288 shares of the issuer’s common stock outstanding.
 
 Transitional
Small Business Disclosure Format (check one): Yes  ̈ No ý .
  
  **INDEX**
 
 PageNumber**PART
      I. FINANCIAL INFORMATION**
    3Item
      1. Financial Statements
    3Balance
      Sheet at March 31, 2005 (Unaudited)
    3Statements
      of Operations - Three months ended March 31, 2005 and 2004
      (Unaudited)
    4Statements
      of Cash Flows - Three months ended March 31, 2005 and 2004 (Unaudited)
    5Notes
      to Financial Statements (Unaudited)
    6Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
    9Item
      3. Controls and Procedures
    12**PART
      II. OTHER INFORMATION**
    13Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
    13Item
      6. Exhibits
    13**SIGNATURE
      PAGE**
    15
 
 **Introductory
Comment**
 
 Throughout
this Quarterly Report on Form 10-QSB, the terms “we,” “us,” “our,” “Solomon” and
“our company” refer to Solomon Technologies, Inc., a Delaware corporation, and,
unless the context indicates otherwise, includes our wholly-owned subsidiary,
Town Creek Industries, Inc.
  2
  **PART
1**
 ****
**ITEM 1.FINANCIAL
INFORMATION**
 
 SOLOMON
TECHNOLOGIES, INC.
 
 BALANCE
SHEET
 
 MARCH
31, 2005
 
 (UNAUDITED)
 ASSETSCURRENT
      ASSETSCash
      and cash equivalents
    
    $
    23,012Accounts
      receivable
    
    
    995Inventory
    
    
    47,597Prepaid
      expenses
    
    
    15,575Total
      current assets
    
    
    87,179Intangible
      assets, net
    
    
    447,061Equipment,
      net
    
    
    26,876Total
      assets
    
    $
    561,116LIABILITIES
      AND DEFICIENCY IN ASSETSCURRENT
      LIABILITIES:Notes
      payable
    
    $
    54,985Notes
      payable to relates parties
    
    
    190,000Accounts
      payable
    
    
    555,861Accrued
      expenses
    
    
    148,272Customer
      deposits
    
    
    4,470Accrued
      payroll and payroll taxes
    
    
    660,556Current
      portion of long-term debt
    
    
    2,583Total current
      liabilities
    
    
    1,616,727Long-term
      debt, less current portion
    
    
    6,564REDEEMABLE
      SERIES A PREFERRED STOCK:Designated
      7,000,000 shares; 3,071,474 shares issued and outstanding;redemption
      value
      at April 29, 2007 of $19,134,430
    
    
    3,172,610Total
      liabilities
    
    
    4,795,901COMMITMENTS
      AND CONTINGENCIESDEFICIENCY
      IN ASSETS:Common
      stock: $.001 par value, 50,000,000 shares authorized,5,276,288 shares
      issued and outstanding
    
    
    5,276Additional
      paid-in capital
    
    
    12,904,967Accumulated
      deficit
    
    
    (17,145,028
    )Deficiency
      in assets
    
    
    (4,234,785
    )Total
      liabilities and deficiency in assets
    
    $
    561,116
 See
accompanying notes.
  3
  SOLOMON
TECHNOLOGIES, INC.
 
 STATEMENTS
OF OPERATIONS
 
 (UNAUDITED)
 
 
 **Three Months Ended March 31,****2005**
    
    **2004**NET
      SALES
    
    $
    25,165
    
    $
    56,068COST
      OF GOODS SOLD
    
    
    53,275
    
    
    27,375GROSS
      MARGIN
    
    
    (28,110
    )
    
    28,693OPERATING
      EXPENSES:Salaries
      and benefits
    
    
    175,623
    
    
    126,309Noncash
      compensation
    
    
    —
    
    
    42,000Professional
      fees
    
    
    209,512
    
    
    40,380Advertising
    
    
    10,340
    
    
    27,488Travel
      and entertainment
    
    
    61,145
    
    
    11,838Rent
    
    
    8,119
    
    
    16,136Other
      general and administrative
    
    
    233,974
    
    
    65,251TOTAL
      OPERATING EXPENSES
    
    
    698,713
    
    
    329,402OPERATING
      LOSS
    
    
    (726,823
    )
    
    (300,709
    )OTHERInterest
      expense
    
    
    (653,038
    )
    
    (164,043
    )Loss
      on extinguishment of debt
    
    
    (39,924
    )
    
    —NET
      LOSS
    
    
    (1,419,785
    )
    
    (464,752
    )Preferred
      stock dividend
    
    
    —
    
    
    1,400NET
      LOSS APPLICABLE TO COMMON STOCKHOLDERS
    
    $
    (1,419,785
    )
    $
    (466,152
    )NET
      LOSS PER SHARE APPLICABLE TO COMMON STOCKHOLDERS
    
    $
    (0.27
    )
    $
    (0.10
    )WEIGHTED
      AVERAGE SHARES OUTSTANDING
    
    
    5,176,796
    
    
    4,870,928
 
 See
accompanying notes.
 
  4
 
 SOLOMON
TECHNOLOGIES, INC.
  
 STATEMENTS
OF CASH FLOWS
 
 (UNAUDITED)
 
 **Three
      Months**
      **Ended
      March 31,****2005**
    
    **2004**OPERATING
      ACTIVITIES:Net
      loss
    
    $
    (1,419,785
    )
    $
    (464,752
    )Adjustments
      to reconcile net loss to net cash used by operating activities:Common
      stock issued in lieu of salaries or services
    
    
    90,000
    
    
    42,000Extinguishment
      loss on conversion of redeemable Series A preferred stock
    
    
    39,924
    
    
    —Depreciation
      and amortization
    
    
    24,872
    
    
    37,515Amortization
      of note discount
    
    
    —
    
    
    25,080Accretion
    
    
    651,667
    
    
    —Interest
      recorded in connection with conversion of debt
    
    
    —
    
    
    135,315Changes
      in operating assets and liabilities:Accounts
      receivable
    
    
    (562
    )
    
    (5,544
    )Inventory
    
    
    12,520
    
    
    —Other
      assets
    
    
    24,445
    
    
    —Accounts
      payable and accrued expenses
    
    
    183,771
    
    
    (13,097
    )Customer
      deposits
    
    
    4,470
    
    
    (3,781
    )Accrued
      payroll and payroll taxes
    
    
    (24,976
    )
    
    93,974NET
      CASH USED BY OPERATING ACTIVITIES
    
    
    (413,654
    )
    
    (153,290
    )INVESTING
      ACTIVITIES:Purchase
      of equipment
    
    
    (1,998
    )
    
    —NET
      CASH USED BY INVESTING ACTIVITIES
    
    
    (1,998
    )
    
    —FINANCING
      ACTIVITIES:Proceeds
      from the issuance of Series A convertible preferred stock
    
    
    —
    
    
    134,000Proceeds
      from the issuance of notes payable to related parties
    
    
    190,000
    
    
    —Repayments
      of notes and loans payable
    
    
    (360
    )
    
    (1,959
    )NET
      CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    189,640
    
    
    132,000CHANGE
      IN CASH AND CASH EQUIVALENTS
    
    
    (226,012
    )
    
    (21,249
    )CASH
      AND CASH EQUIVALENTS, beginning of period
    
    
    249,024
    
    
    50,670CASH
      AND CASH EQUIVALENTS, end of period
    
    $
    23,012
    
    $
    29,421Supplemental
      Disclosure of Cash Flow Information:Noncash
      investing and financing activities:Conversion
      of bridge financing and accrued interest into common stock
    
    $
    —
    
    $
    134,829Conversion
      of accrued payroll and expenses into common stock
    
    $
    —
    
    $
    6,000
 
 See
accompanying notes
  5
  **Notes
to Financial Statements (unaudited)**
 
 **NOTE
1 - BASIS OF PRESENTATION**
 
 Solomon
Technologies, Inc. (“STI” or the “Company”) develops and markets electric
propulsion systems for marine applications. Management believes that the
Company’s systems will have additional applications in the transportation,
industrial and commercial sectors.
 
 The
accompanying unaudited financial statements have been prepared in accordance
with U.S. generally accepted accounting principles for interim financial
information and pursuant to the rules and regulations of the Securities and
Exchange Commission (“SEC”). The accompanying financial statements for the
interim periods are unaudited. They reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation. These financial statements should be read in
conjunction with the financial statements and related footnotes for the year
ended December 31, 2004 contained in the annual report on Form 10-KSB as filed
with the SEC. Operating results for interim periods are not necessarily
indicative of the results for the full year.
 
 **NOTE
2 - ACCRUED PAYROLL AND PAYROLL TAXES**
 
 As of
March 31, 2005, the Company had accrued payroll and unpaid payroll taxes of
approximately $65,000 and accrued interest and penalties of $180,000 with
respect to such taxes. The Company has received notice of delinquency from the
U.S. Internal Revenue Service and believes that such notice could severely
impact its operations or cause the Company to cease operations.
 
 **NOTE
3 - NOTES PAYABLE**
 
 On March
5, 2005, the Company borrowed $40,000 from Woodlaken, LLC. The note bears
interest at 12% per annum, matures on July 15, 2005 and is secured by a lien on
all of the Company’s assets. Woodlaken is managed by Gary Laskowski, the
Company’s Chairman of the Board, and Jonathan Betts, a director. Woodlaken holds
150,000 shares of redeemable Series A preferred stock and warrants to acquire
300,000 shares of common stock. Woodlaken also holds an irrevocable proxy to
vote all of the outstanding shares of redeemable Series A preferred
stock.
 
 On March
16, 2005, the Company borrowed $100,000 from Jezebel Management Corporation. The
note bears interest at 12% per annum, matures on July 15, 2005 and is secured by
a lien on all of the Company’s assets. The president of Jezebel is Michael
D’Amelio, a director of the Company. Jezebel holds 250,000 shares of redeemable
Series A preferred stock and warrants to acquire 500,000 shares of common
stock.
 
 On March
31, 2005, the Company borrowed $50,000 from Pinetree (Barbados) Inc. The note,
which is dated April 1, 2005, bears interest at 12% and matures on July 15,
2005. Pinetree (Barbados) Inc. holds 1,171,474 of shares of redeemable Series A
preferred stock and holds warrants to acquire 1,171,474 shares of common
stock.
 
 **NOTE
4 - STOCK OPTIONS AND WARRANTS**
 
 The
Company has a stock option plan for key employees, directors and consultants.
All option grants are approved by the Board of Directors, which determines the
number of options, the exercise price and the vesting period. Options granted
under the plan have exercise prices of not less than the fair market value of
the common stock on the grant date. The Company accounts for stock option grants
in accordance with APB Opinion No. 25, *Accounting
for Stock Issued to Employees* , and,
accordingly, recognizes no compensation expense for the stock option grants.
Therefore, the Company has elected the disclosure provisions only of FASB
Statement No. 123, " *Accounting
for Stock-Based Compensation* ".
 
 For the
purpose of pro forma disclosures, the estimated fair value of the stock options
is expensed ratably over the vesting period. As of December 31, 2004 and 2003,
all outstanding options and warrants were fully vested and exercisable. No
options or warrants were issued for the periods ended March 31, 2005 and 2004.
As such, there would have been no additional compensation expense had the
Company applied the fair value recognition provisions of SFAS No. 123 for the
three month periods ended March 31, 2005 and 2004.
 
 In
December 2004, the FASB issued a revised standard, SFAS No. 123R, "Share-Based
Payment". SFAS No. 123R requires that a public entity measure the cost of equity
based service awards based on the grant-date fair value of the award. That cost
will be recognized over the period during which an employee is required to
provide service in exchange for the award or the vesting period. No compensation
cost is recognized for equity instruments for which employees do not render the
requisite service. A public entity will initially measure the cost of liability
based service awards based on current fair value. The fair value of those awards
will be re-measured subsequently at each reporting date through the settlement
date. Changes in fair value during the requisite period will be recognized as
compensation cost over that period. Under a rule adopted by the SEC on April 14,
2005, the Company is allowed to implement SFAS No. 123R for its fiscal year
beginning January 1, 2006. The Company has not yet attempted to evaluate the
likely effects on its financial statements.
 
 6
 During
the three month period ended March 31, 2005, holders exercised 350,000 warrants
in cashless transactions. In connection therewith, the Company issued 220,911
shares of common stock. Also in 2005, the Company completed a prior year
transaction by exchanging 80,000 shares of common stock for 80,000 stock
options.
 
 There
were 567,835 outstanding options with a weighted average exercise price of $1.29
per share and 6,114,387 outstanding warrants with a weighed average exercise
price of $1.10 per share as of March 31, 2005.
 
 **NOTE
5 - REDEEMABLE PREFERRED STOCK**
 
 In
January 2005, a preferred stock shareholder converted 50,000 shares of
redeemable Series A preferred stock to 50,000 shares of common stock. In
connection with this transaction, the Company recorded a $39,924 loss on
extinguishment of debt which represented the difference between the carrying
value of the preferred stock and the fair value of the common stock issued on
the date of the transaction.
 
 **NOTE
6 - CONTINGENCIES**
 
 In March
2004, Ann Poyas, the Company’s former chief operating officer and a former
director, her husband, Donald Poyas, the Company’s former vice president of
procurement, and their son, Michael Poyas, a former consultant to the Company,
brought a lawsuit in the Circuit Court for Charles County, Maryland, alleging
that they are owed in the aggregate approximately $3,000,000. The Company
believes that it has good and meritorious defenses against the complaint and is
defending it vigorously.
 
 In July
2004, Charles Shannon, the Company’s former vice president of sales and a former
director, brought a lawsuit against the Company in the Circuit Court for Charles
County, Maryland, alleging that he is owed approximately $2,000,000. The Company
believes that it has good and meritorious defense against the complaint and is
defending it vigorously.
 
 The
Company has accrued amounts that, in the opinion of management, fully reflect
any liability the Company may have with respect to these lawsuits.
 
 In May
2004, Donald James, the Company’s former president, submitted a claim alleging
that he is owed unpaid wages. The Company believes that it has good and
meritorious defenses against the complaint and is defending it vigorously.
 The
Company disagrees with the claim, no additional action has been brought by Mr.
James.
 
 **NOTE
7 - CONCENTRATION OF RISK**
 
 Customers:
 
 Two
customers accounted for 67% and 29%, respectively, of sales for the three months
ended March 31, 2005.
 
 Supplier:
 
 Presently
the Company has one manufacturer for a principal component of its marine
propulsion systems. If the supplier were to become unwilling or unable to
continue fulfilling the Company’s orders, it could have a materially adverse
effect on the Company’s financial position.
 
 **NOTE
8 - SUBSEQUENT EVENTS**
 
 On April
1, 2005, the Company borrowed $10,000 from Woodlaken, LLC. The note bears
interest at 12% per annum, matures on July 15, 2005 and is secured by a
lien on all of the Company’s assets. Woodlaken is managed by Gary Laskowski, the
Company’s Chairman of the Board, and Jonathan Betts, a director. Woodlaken holds
150,000 shares of redeemable Series A preferred stock and warrants to acquire
300,000 shares of common stock. Woodlaken also holds an irrevocable proxy to
vote all of the outstanding shares of redeemable Series A preferred stock.
 
 7
 On April
18, 2005, the Company borrowed $75,000 from Jezebel Management Corporation. The
note bears interest at 12% per annum, matures on July 15, 2005 and is secured by
a lien on all of the Company’s assets. The president of Jezebel is Michael D’
Amelio, a director of the Company. Jezebel holds 250,000 shares of redeemable
Series A preferred stock and warrants to acquire 500,000 shares of common
stock.
 
 **NOTE
9 - GOING CONCERN**
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has incurred significant operating
losses and used cash in its operating activities for several years. For the
first three months of 2005, the Company had a net loss of $1,419,785 and used
cash of $413,654 in operating activities. As of March 31, 2005, the Company has
a working capital deficiency of $1,529,548 and a deficiency in assets of
$4,234,785. These conditions raise substantial doubts about the Company’s
ability to continue as a going concern.
 
 Management
is continuing to implement its business plan and has begun to sell the Company’s
marine propulsion systems. Additionally, management is actively seeking
additional sources of capital. There can be no assurance that management can
successfully implement its business plan or raise sufficient capital. Without
sufficient additional capital or long term debt and ultimately profitable
operating results the Company will not be able to continue as a going concern.
The accompanying financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
  8
  **ITEM 2.**
    **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF**
      **OPERATIONS**
 
 ***The
following discussion and analysis of our financial condition and results of
operations for the quarters ended March 31, 2005 and 2004 should be read in
conjunction with our financial statements included elsewhere in this Quarterly
Report.***
 
 **Overview**
 
 We
develop and sell electric propulsion systems primarily for the marine industry.
These systems utilize our proprietary technology, including our patented
Electric Wheel. In addition, we believe that our technology will have additional
applications in the transportation, industrial and commercial sectors. We will
continue to target areas for strategic growth.
 
 We have
historically generated limited operating revenues. We intend to expand
operations through the continued development of OEM accounts, our dealer network
and the addition of new products. In order for us to market our existing
products successfully on a national and international level, we will likely be
required to successfully complete public or private offerings of our equity
securities. If we are unable to obtain necessary financing, we will expand our
operations only as cash flow allows.
 
 Our goal
is to increase revenue significantly, generate enough cash to finance our
operations and growth and, eventually, become profitable. We currently do not
generate enough cash from operations to continue operations indefinitely. Our
ability to continue is dependent on either raising significant capital or
increasing revenue, or both. If we are unable to raise such capital and unable
to increase revenue significantly, we will likely not be able to generate enough
cash to continue operations. As a result, we would have to seek alternative
opportunities, such as selling our assets or seeking a merger partner or other
business combination; otherwise we may default on our debt obligations and lose
our assets to our creditors.
 
 In
February 2004, we issued 35,000 shares of preferred stock and warrants to
purchase 35,000 shares of common stock to five investors for $140,000. On April
15, 2004, the five investors from the February 2004 private placement
unanimously consented to an amendment to the existing Series A convertible
preferred stock designation and, in return, exchanged their investment in the
February 2004 private placement for an aggregate of 140,000 shares of redeemable
Series A preferred stock and 280,000 warrants. In May 2004, we completed a
private placement of our redeemable Series A preferred stock, a mandatorily
redeemable, convertible preferred stock, and warrants to purchase common stock,
raising gross proceeds from the offering of $1,745,000, before deducting
placement agent fees and costs. On November 5, 2004, we sold an aggregate of
390,000 shares of redeemable Series A preferred stock and warrants to purchase
an aggregate of 780,000 shares of common stock to five investors for $1.00 per
unit in the initial closing of a second private placement of our redeemable
Series A preferred stock and warrants. We sold an aggregate of an additional
225,000 shares of redeemable Series A preferred stock and warrants to purchase
an additional 450,000 shares of common stock to two investors in a second
closing of the private placement on December 23, 2004.
 
 We used a
portion of the net proceeds of the November and December 2004 private placement
to expand our marketing program and to meet our inventory needs. We believe that
we can increase our revenue over the next two years by establishing a stronger
sales presence to OEMs and by increasing substantially the number of retrofit
sales, which we intend to accomplish primarily through distributors.
 
 We
borrowed $275,000 in short-term debt financing from three of our principal
stockholders in March and April 2005. These notes are secured by a lien on all
of our tangible and intangible assets. We have been authorized by the board to
obtain an additional $225,000 of short-term debt financing. We expect to seek
additional capital through the sale of debt and/or equity securities in the
second quarter of 2005 in order to fund our operating capital
needs.
 
 **Results
of Operations**
 
 ***Three
Months Ended March 31, 2005 Compared With Three Months Ended March 31,
2004***
 
 The
following should be read in conjunction with our financial statements and the
related notes thereto included elsewhere herein. The following table sets forth,
as a percentage of sales, certain items appearing in our statements of
operations.
  For the
three months ended March 31, 2005 we generated revenues of $25,165 as compared
to $56,068 for the comparable period ended in 2004. Cost of products sold for
the three months ended March 31, 2005 was $53,275 generating a loss of $28,110,
or 53% of revenues. Cost of products sold for the three months ended March 31,
2004 was $27,375 generating a gross profit of $28,693, or 51% of revenues. The
marked decrease in our margin was due a significant drop in sales, our inability
to achieve efficiencies with our primary manufacturer and other suppliers and
additional warranty costs not associated with current revenue in the quarter. We
believe we will improve margins and, with an increase in sales, achieve
economies of scale.
 
 9
 Salaries
and benefits for the three months ended March 31, 2005 were $175,623 compared to
$126,309 for the three months ended March 31, 2004, an increase of $49,314, or
39%. This increase was due primarily to the increase in additional staff during
the last two quarters of 2004. A contributing factor was the payment of employee
compensation in cash in the first quarter of 2005 rather than in stock as in the
first quarter of 2004. We reduced our payroll substantially during the first
quarter of 2005 and expect salaries and benefits to decrease in the second
quarter of 2005.
 
 There was
no non-cash compensation for the three months ended March 31, 2005 compared to
$42,000 for the three months ended March 31, 2004. Non-cash compensation paid in
2004 consisted of common stock issued to consultants and employees for services
rendered.
 
 Professional
fees for the three months ended March 31, 2005 were $209,512 as compared to
$40,380 for the three months ended March 31, 2004, an increase of $169,132, or
419%. This increase is due primarily to costs associated with reporting to the
SEC and our efforts to resolve disputes with several former
employees.
 
 Advertising
expense for the three months ended March 31, 2005 was $10,340 as compared to
$27,488 for the three months ended March 31, 2004, a decrease of $17,148, or
62%. The decrease in advertising expense was due to a change in our marketing
focus to emphasize trade shows.
 
 Travel
and entertainment costs for the three months ended March 31, 2005 were $61,145
as compared to $11,838 for the three months ended March 31, 2004, an increase of
$49,307, or 417%. The increase in travel and entertainment costs was due
primarily to an expanded presence at trade shows and travel by a full time sales
manager who worked to expand our distribution. Travel to perform warranty repair
service was also a contributing factor.
 
 Rent for
the three months ended March 31, 2004 was $8,119 as compared to $16,136 for the
three months ended March 31, 2004 a decrease of $8,017, or 50%. The decrease
resulted primarily from the closing of our Benedict, Maryland sales office in
February 2004. In the fourth quarter of 2004, we issued warrants to purchase
10,000 shares of our common stock at a price of $4.00 per share to Charles
County EDC, the owner of the leased premises, in connection with the termination
of the lease.
 
 Other
general and administrative costs for the three months ended March 31, 2005 were
$233,974 as compared to $65,251 for the three months ended March 31, 2004, an
increase of $168,723, or 259%. These costs primarily consisted of depreciation,
amortization of intangibles, insurance, office supplies and equipment, and
printing. The increase reflected the purchase of materials required to attend
trade shows, a write down of certain intellectual property, and staffing levels
that were higher than in the first quarter of 2004. We substantially reduced
staffing levels by the end of the first quarter of 2005. We also agreed to issue
50,000 shares of common stock in 2005 to certain individuals for past services.
Such shares were valued at $90,000. We expect our general and administrative
costs to decrease in the second quarter of 2005.
 
 We
incurred interest expense of $653,038 for the first three months of 2005.
Interest expense incurred for the three months ended March 31, 2004 was
$164,043. The increase of $488,995 in interest expense was due primarily to
interest accretion of $651,667 recorded on our redeemable Series A preferred
stock.
 
 We recognized a loss of $39,924 in connection with the
conversion of 50,000 shares of redeemable Series A preferred stock for 50,000
shares of common stock.
 
 We
reported a net loss for the three months ended March 31, 2005 of $1,419,785. Our
net loss for the three months ended March 31, 2004 was $464,752.
 
 Our
overall per-share loss for the three months ended March 31, 2005 was $0.27 per
share. Our overall per-share loss for the three months ended March 31, 2004 was
$0.10.
 
 **Liquidity
and Capital Resources**
 
 Our
available cash balance at March 31, 2005 was approximately $23,012, and is
approximately $10,335 at May 5, 2005. From January 1, 2003 through December 31,
2004, we raised an aggregate of approximately $2,069,250 in capital, net of
transaction costs, through the sale of our securities in private placements made
in accordance with Rule 506 under the Securities Act of 1933. In addition, we
borrowed $275,000 in short-term debt financing from three of our principal
stockholders in March and April 2005. These notes are secured by a lien on all
of our tangible and intangible assets. We have been authorized by the board to
obtain an additional $225,000 of short-term debt financing. We expect to seek
additional capital through the sale of debt and/or equity securities in the
second quarter of 2005 in order to fund our operating capital needs, although we
cannot assure you that we will be able to obtain any of such additional
capital.
 
 10
 During
the three months ended March 31, 2005, we used net cash of $413,654 for
operations. This consisted of a net loss of $1,419,785 offset by a net decrease
in our operating assets of $36,403, amortization, depreciation and other
non-cash expenses of $154,796, accretion on mandatorily redeemable preferred
stock of $651,667, increases in our liabilities consisting of accounts payable
and accrued expenses of $183,771 and $4,470 in customer deposits received offset
by a decrease of 24,976 in accrued payroll and payroll taxes. Additionally, we
had net cash flows from financing activities of $189,640 consisting primarily of
proceeds from notes payable.
 
 We
presently do not have any plans to purchase a new facility or significant new
equipment, except that we are negotiating with a customer to lease the
customer’s boat for use as a demonstration platform.
 
 We have
incurred significant operating losses and used cash in our operating activities
for several consecutive years. As of March 31, 2005 we have deficiencies in both
working capital and net assets. These conditions raise substantial doubt about
our ability to continue as a going concern. In the past we have been able to
obtain financing to fund our losses. Our ability to continue is dependent on
obtaining additional long-term financing and ultimately achieving profitable
operating results. To date we have not been able to establish acceptable sales
levels. We are currently seeking additional financing to fund operations to
achieve acceptable sales levels.
 
 **Off-Balance
Sheet Arrangements**
 
 Under an
agreement with Homewood Products Corporation, the supplier of our electric
motors, that expired on December 31, 2004, we were required to purchase at least
100 electric motors during 2004. As we purchased only 25 electric motors in
2004, we were obligated to pay Homewood on or before January 1, 2005 an amount
equal to the average purchase price for all motors actually purchased by us
multiplied by the motors not purchased by us up to 100, or an aggregate of
$466,200 for the 75 motors we did not purchase. We have not yet paid this amount
to Homewood. We are currently negotiating with Homewood to reduce or eliminate
this obligation. If we are required to purchase the additional motors we believe
we could recover all our cost.
 
 Except as
set forth above, we have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future material effect on us.
 
 **Special
Note Regarding Forward-Looking Statements**
 
 This
Quarterly Report contains “forward-looking statements,” which include
information relating to future events, future financial performance, strategies,
expectations, competitive environment, regulation and availability of resources.
These forward-looking statements include, without limitation, statements
regarding
 
 Special
Note Regarding Forward-Looking Statements
 
 This
Quarterly Report contains “forward-looking statements,” which include
information relating to future events, future financial performance, strategies,
expectations, competitive environment, regulation and availability of resources.
These forward-looking statements include, without limitation, statements
regarding
 
 •
    expectations
      as to market acceptance of our products,•
    expectations
      as to revenue growth and earnings,•
    the
      time by which certain objectives will be achieved,•
    proposed
      new products,•
    our
      ability to protect our proprietary and intellectual property
      rights,•
    statements
      concerning projections, predictions, expectations, estimates or forecasts
      as to our business, financial and operational results and future economic
      performance, and•
    statements
      of management’s goals and objectives and other similar expressions
      concerning matters that are not historical
facts.
 
 11
 Words
such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,”
“expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates”
and similar expressions, as well as statements in future tense, identify
forward-looking statements.
 
 Forward-looking
statements should not be read as a guarantee of future performance or results,
and will not necessarily be accurate indications of the times at, or by which,
such performance or results will be achieved. Forward-looking information is
based on information available at the time and/or management’s good faith belief
with respect to future events, and is subject to risks and uncertainties that
could cause actual performance or results to differ materially from those
expressed in the statements. Important factors that could cause such differences
include, but are not limited to
 
 •
    industry
      competition, conditions, performance and consolidation,•
    legislative
      and/or regulatory developments,•
    the
      effects of adverse general economic conditions, both within the United
      States and globally,•
    any
      adverse economic or operational repercussions from recent terrorist
      activities, any government response thereto and any future terrorist
      activities, war or other armed conflicts, and•
    other
      factors described in the “Risk Factors” contained in Exhibit 99.1 to our
      Annual Report on Form 10-KSB for the year ended December 31,
      2004.
 
 Forward-looking
statements speak only as of the date the statements are made. We assume no
obligation to update forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting forward-looking
information except to the extent required by applicable securities laws. If we
update one or more forward-looking statements, no inference should be drawn that
we will make additional updates with respect thereto or with respect to other
forward-looking statements.
  **ITEM 3.**
    **Controls
      and Procedures**
 
 As of the
end of the period covered by this report, our company conducted an evaluation,
under the supervision and with the participation of our president and chief
financial officer, of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based
on this evaluation, our president and chief financial officer concluded that our
company’s disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms.
 
 There was
no change in our internal controls, which are included within disclosure
controls and procedures, during our most recently completed fiscal quarter that
has materially affected, or is reasonably likely to materially affect, our
internal controls.
 
 12
 **PART
II. OTHER INFORMATION**
 
 **ITEM 2.**
    **Unregistered
      Sales of Equity Securities and Use of Proceeds**
 
 **(a)
Recent Sales of Unregistered Securities**
 
 On
January 14, 2005, we issued 106,078 shares of common stock upon exercise of
options to purchase 125,000 shares of our common stock on a cashless basis to
the placement agent for our April-May 2004 private placement. On
January 28, 2005, we issued 51,526 shares of our common stock upon exercise of a
warrant to purchase 100,000 shares of our common stock on a cashless basis to an
investor from our April-May 2004 private placement. On January 26, 2005, we
issued 100,690 shares of our common stock to a second investor in our April-May
2004 private placement who (i) converted 50,000 shares of our Series A Preferred
Stock and (ii) exercised a warrant to purchase 100,000 shares of our common
stock on a cashless basis. On March 14, 2005, we issued 12,617 shares of our
common stock upon exercise of a warrant to purchase 25,000 shares of our common
stock on a cashless basis to a third investor from our April-May 2004 private
placement.
 
 On April
8, 2005, we issued 50,000 shares to two investors in consideration for past
services.
 
 The
recipients of securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to
the share certificates and other instruments issued in such transactions. The
sales of these securities were made without general solicitation or advertising.
All of the foregoing securities are deemed restricted securities for the
purposes of the Securities Act.
 
 **(b)
Use of Proceeds**
 
 Not
applicable.
 
 **(c)
Repurchase of Securities**
 
 We did
not repurchase any shares of our common stock during the first quarter of 2005.
  **ITEM 6.**
    **Exhibits**
  **Exhibit No.**
    
    **Description**10.1
    
    Senior
      Secured Promissory Note issued to Pinetree (Barbados), Inc. dated April 1,
      2005.10.2
    
    Senior
      Secured Promissory Note issued to Woodlaken, LLC dated April 1,
      2005.10.3
    
    Senior
      Secured Promissory Note issued to Jezebel Management Corporation dated
      April 18, 200510.4
    
    Note
      Extension Agreement dated April 5, 2005, among the Registrant, Woodlaken,
      LLC, Jezebel Management Corporation and Pinetree (Barbados),
      Inc.31.1
    
    Certification
      by President pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
    
    Certification
      by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1
    
    Certification
      by President pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
    
    Certification
      by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.
  13
  **SIGNATURES**
 
 In
accordance with Section 13 or 15(d) of the Securities and Exchange Act of 1934,
as amended, Solomon Technologies, Inc. has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
 
 Dated May
16, 2005
  
 **SOLOMON
TECHNOLOGIES, INC.**
  
 By:  /s/
Peter W. DeVecchis, Jr
 Peter W.
DeVecchis, Jr.
 President
 (principal
executive officer)
  
 By:  /s/
Samuel F. Occhipinti
 Samuel F.
Occhipinti
 Chief
Financial Officer
 (principal
financial and accounting officer)
  14