**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 June 30, 2007





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.
                Employer
              Identification
                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  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes  ̈ No ý





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: As of August 13, , 2007, there were
      39,968,963 shares of common stock outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes  ̈ No ý .











**INDEX**





Page
              Number**PART
                I. FINANCIAL INFORMATION**Item
                1. Financial Statements
            3Condensed
                Consolidated Balance Sheet at June 30, 2007 (Unaudited)
            3Condensed
                Consolidated Statements of Operations - Three months and six months
                ended
                June 30, 2007 and 2006 (Unaudited)
            4Condensed
                Consolidated Statements of Cash Flows - Six months ended June 30,
                2007 and
                2006 (Unaudited)
            5Condensed
                Consolidated Statement of Deficiency in Assets at June 30, 2007
                (Unaudited)
            6Notes
                to Condensed Consolidated Financial Statements (Unaudited)
            7Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of  Operations
            18Item
                3. Controls and Procedures
            24**PART
                II. OTHER INFORMATION**
            25Item
                1. Legal Proceedings
            25Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            25Item
                3. Defaults Upon Senior Securities
            26Item
                5. Other Information
            26Item
                6. Exhibits
            27**SIGNATURE
                PAGE**
            28





**Introductory
      Comment**





Throughout
      this Quarterly Report on Form 10-QSB as amended, 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
      I.**  **FINANCIAL
      INFORMATION**





**Item
      1****.
      Financial Statements**




**Solomon
        Technologies, Inc.**
 Condensed
        Consolidated Balance Sheet
 June
        30,
        2007
 (Unaudited)
  **Assets**Current
                  assetsCash
              
              $
              735,959Accounts
                  receivable, net of allowance for doubtful accounts of
                  $2,200
              
              
              800,556Inventories,
                  net
              
              
              1,435,817Due
                  from related parties
              
              
              43,455Deferred
                  debt costs
              
              
              551,406Prepaid
                  expenses and other current assets
              
              
              103,645Total
                  current assets
              
              
              3,670,838Noncurrent
                  assetsProperty
                  and equipment, net
              
              
              163,812Goodwill
              
              
              2,873,576Intangible
                  assets
              
              
              1,725,287Other
                  assets
              
              
              215,3754,978,050$
              8,648,888**Liabilities
                  and Capital Deficiency**Current
                  liabilitiesRevolving
                  note payable to bank
              
              $
              1,000,000Accounts
                  payable
              
              
              1,201,337Accrued
                  compensation
              
              
              2,434,874Other
                  accrued expenses
              
              
              667,223Capital
                  lease obligations
              
              
              3,161Notes
                  payable
              
              
              187,000Notes
                  payable to related parties
              
              
              1,837,085Convertible
                  debentures payable, net of debt discount of $2,194,872
              
              
              2,620,128Total
                  current liabilities
              
              
              9,950,808Commitments
                  and Contingencies**Capital
                  Deficiency**Common
                  stock, par value $0.001 pershare;
                  authorized 100,000,000 shares;39,152,803
                  issued and outstanding
              
              
              39,152Additional
                  paid-in capital
              
              
              45,372,958Accumulated
                  deficit
              
              
              (46,714,030
              )(1,301,920
              )$
              8,648,888


See
        accompanying notes to condensed financial statements.
  3
  **Solomon
          Technologies, Inc.**
 Condensed
          Consolidated Statements of Operations
 (Unaudited)
  **2007**
                
                **2006**
                
                **2007**
                
                **2006****As
                    Restated**
                
                
                
                **As
                    Restated**Net
                    sales
                
                $
                1,638,413
                
                $
                7,547
                
                $
                3,070,010
                
                $
                12,912Cost
                    of goods sold
                
                
                836,658
                
                
                3,113
                
                
                1,615,945
                
                
                5,682Gross
                    profit
                
                
                801,755
                
                
                4,434
                
                
                1,454,065
                
                
                7,230Operating
                    expenses:Selling,
                    general and administrative
                
                
                1,294,800
                
                
                481,409
                
                
                2,546,738
                
                
                1,466,168Research
                    and development
                
                
                305,462
                
                
                -
                
                
                559,126
                
                
                -1,600,262
                
                
                481,409
                
                
                3,105,864
                
                
                1,466,168Operating
                    loss
                
                
                (798,507
                )
                
                (476,975
                )
                
                (1,651,799
                )
                
                (1,458,938
                )Other
                    expensesInterest
                    expense
                
                
                (2,682,060
                )
                
                (145,787
                )
                
                (4,876,000
                )
                
                (987,751
                )Other
                    expenses
                
                
                18,684
                
                
                -
                
                
                18,684
                
                
                -Loss
                    on extinguishment of redeemablepreferred
                    stock and other debt
                
                
                -
                
                
                15,165
                
                
                -
                
                
                (5,652,404
                )(2,663,376
                )
                
                (130,622
                )
                
                (4,857,316
                )
                
                (6,640,155
                )Net
                    loss
                
                
                (3,461,883
                )
                
                (607,597
                )
                
                (6,509,115
                )
                
                (8,099,093
                )Preferred
                    stock dividends
                
                
                -
                
                
                -
                
                
                (1,413,031
                )
                
                (60,000
                )Loss
                    applicable to commonstockholders
                
                $
                (3,461,883
                )
                $
                (607,597
                )
                $
                (7,922,146
                )
                $
                (8,159,093
                )Basic
                    and diluted net loss percommon
                    share
                
                $
                (0.09
                )
                $
                (0.02
                )
                $
                (0.22
                )
                $
                (0.36
                )Weighted
                    average common sharesoutstanding
                    - basic and diluted
                
                
                37,271,366
                
                
                27,682,292
                
                
                36,368,537
                
                
                22,711,383
  See
        accompanying notes to condensed financial statements.
  4
 **Solomon
          Technologies, Inc.**
 Condensed
          Consolidated Statement Of Shareholders Equity and Capital
          Deficiency
 (Unaudited)
  **Series
                    C****Convertible**
                
                
                
                
                
                **Additional****Preferred
                    Stock**
                
                **Common
                    Stock**
                
                **Paid-In**
                
                **Accumulated****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Deficit**
                
                **Total****Balance
                    at December 31, 2006**
                
                
                **4,615,381**
                
                **$**
                **3,111,164**
                
                
                **33,789,827**
                
                **$**
                **33,789**
                
                **$**
                **36,522,146**
                
                
                **($38,791,881**
                **)**
                **$**
                **875,218**Common
                    share adjustment for prior issuances
                
                
                
                
                
                
                
                
                98,384
                
                
                98
                
                
                (98
                )
                
                
                
                
                -Detachable
                    warrants issued with convertible debt
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,571,771
                
                
                
                
                
                2,571,771Beneficial
                    conversion feature associated with convertible debt
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,778,229
                
                
                
                
                
                2,778,229Common
                    shares issued for debt issuance costs
                
                
                
                
                
                
                
                
                290,000
                
                
                290
                
                
                791,410
                
                
                
                
                
                791,700Redemption
                    of Series C Preferred Stock
                
                
                (2,873,500
                )
                
                (1,936,986
                )
                
                
                
                
                
                
                
                
                
                
                (1,413,034
                )
                
                (3,350,020
                )Conversion
                    of Series C Preferred Stock
                
                
                (1,741,881
                )
                
                (1,174,178
                )
                
                1,741,881
                
                
                1,742
                
                
                1,172,436
                
                
                
                
                
                -Common
                    shares issued for fees and services
                
                
                
                
                
                
                
                
                59,441
                
                
                60
                
                
                157,055
                
                
                
                
                
                157,115Common
                    shares issued as payment for convertible debt and interest
                
                
                
                
                
                
                
                
                3,043,270
                
                
                3,043
                
                
                822,763
                
                
                
                
                
                825,806Restricted
                    common shares issued to employees
                
                
                
                
                
                
                
                
                130,000
                
                
                130
                
                
                65,030
                
                
                
                
                
                65,160Stock
                    option grants
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                459,266
                
                
                
                
                
                459,266Payment
                    related to Rule 16B
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                32,950
                
                
                
                
                
                32,950Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (6,509,115
                )
                
                (6,509,115
                )**Balance
                    at June 30, 2007**
                
                
                -
                
                $
                -
                
                
                39,152,803
                
                $
                39,152
                
                $
                45,372,958
                
                $
                (46,714,030
                )
                $
                (1,301,920
                )
 See
          accompanying notes to condensed financial statements.


5





**Solomon
        Technologies, Inc.**
 Condensed
        Consolidated Statement of Cash Flows
 (Unaudited)
  **Six
                  Months Ended June 30,****2007**
              
              **2006****As
                  Restated****Operating
                  activities**Net
                  loss
              
              $
              (6,509,115
              )
              $
              (8,099,093
              )Adjustments
                  to reconcile net loss to cash used by operationsLoss
                  on extinguishment of redeemable preferred stockand
                  other debt
              
              
              -
              
              
              5,652,404Stock
                  based compensation to employees and directors
              
              
              524,426
              
              
              -Common
                  stock and warrants issued for services
              
              
              157,115
              
              
              662,125Accretion
                  and amortization of debt costs included ininterest
                  expense
              
              
              4,341,143
              
              
              698,257Loss
                  on disposal of assets
              
              
              1,226
              
              
              -Depreciation
              
              
              21,177
              
              
              3,210Amortization
              
              
              197,164
              
              
              41,813Change
                  in operating assets and liabilitiesAccounts
                  receivable
              
              
              75,885
              
              
              -Inventories
              
              
              (6,568
              )
              
              (22,277
              )Prepaid
                  expenses and other current assets
              
              
              (80,869
              )
              
              (317,718
              )Accounts
                  payable and accrued expenses
              
              
              691,225
              
              
              836,137Customer
                  deposits
              
              
              -
              
              
              19,093Accrued
                  payroll and payroll taxes
              
              
              -
              
              
              (29,310
              )Net
                  cash used by operating activities
              
              
              (587,191
              )
              
              (555,359
              )**Investing
                  Activities**Purchase
                  of equipment
              
              
              (81,013
              )
              
              (1,962
              )Net
                  cash used by investing activities
              
              
              (81,013
              )
              
              (1,962
              )**Financing
                  Activities**Proceeds
                  from issuance of notes payable to related parties
              
              
              -
              
              
              562,000Proceeds
                  from revolving note payable
              
              
              250,000
              
              
              -Proceeds
                  from issuance of convertible debentures
              
              
              5,135,913
              
              
              -Repayments
                  of notes payable
              
              
              (566,150
              )
              
              -Redemption
                  of preferred stock
              
              
              (3,350,020
              )
              
              -Proceeds
                  from Rule 16B
              
              
              32,950
              
              
              -Repayments
                  from related parties
              
              
              31,860
              
              
              -Debt
                  issuance costs
              
              
              (220,621
              )
              
              -Repayment
                  of capital lease obligations
              
              
              (7,546
              )
              
              -Net
                  cash provided by financing activities
              
              
              1,306,386
              
              
              562,000**Increase
                  in cash**
              
              
              638,182
              
              
              4,679**Cash
                  at beginning of period**
              
              
              97,777
              
              
              3,693**Cash
                  at end of period**
              
              $
              735,959
              
              $
              8,372Supplemental
                  disclosure:Cash
                  paid for interest
              
              $
              136,072
              
              $
              15,414




See
        accompanying notes to condensed financial statements.


6





**Notes
        to Condensed Consolidated Financial Statements
        (unaudited)**
 
 **NOTE
        1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION**
 
 The
        historical business of Solomon Technologies, Inc. (“STI” or the “Company”) has
        been the development, engineering, manufacturing, licensing and sale of electric
        power drive systems in the marine, industrial and automotive markets. In
        August
        2006, the Company acquired Technipower LLC (See Note 6), a manufacturer of
        power
        supplies and related equipment for the defense, aerospace and commercial
        markets. As a result of this acquisition, the Company now operates in two
        segments, the Motive Power Division, which encompasses the historical business
        of STI, and the Power Electronics Division which encompasses the business
        of
        Technipower LLC.
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared assuming that the Company will continue as a going concern. The
        Company
        has incurred significant operating losses and has not generated cash from
        its
        operating activities for several years. For the six-months ended June 30,
        2007,
        the Company had a net loss of $6,509,115 and used cash of $587,191 in operating
        activities. As of June 30, 2007, the Company has a working capital deficiency
        of
        $6,279,970. Furthermore, as discussed in Note 19, as of July 1, 2007, the
        Company is in default of the Variable Rate Self-Liquidating Senior Secured
        Convertible Debentures agreement with an aggregate principal balance of
        $4,815,000 and related Registration Rights Agreement. In additional, the
        Company
        is delinquent for the payment of payroll taxes and balances to certain
        employees. These conditions raise substantial doubts about the Company’s ability
        to continue as a going concern.
 
 Management
        is continuing to implement a plan to broaden its market and product base
        and
        exploit its intellectual property that it expects will generate cash flow
        from
        operations. As part of this plan, management intends to grow its business
        through licensing of its proprietary and patented technologies and through
        the
        acquisition of businesses that fit its strategy. Management is identifying
        licensing opportunities that leverage its existing or acquired knowledge
        and
        provide substantial positive current financial impact while it also aggressively
        pursues infringers of its existing patents. Management is also identifying
        acquisition targets that augment its existing intellectual property, marketing
        channels and human resources and provide strong cash flow. 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 condensed consolidated 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.
 
 The
        accompanying unaudited condensed consolidated 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”). Accordingly, they do not include all
        information and disclosures required by accounting principles generally accepted
        in the United States of America for complete financial statements. In the
        opinion of management, all adjustments (consisting of normal recurring
        adjustments) considered necessary for a fair presentation have been included.
        These financial statements should be read in conjunction with the financial
        statements and related footnotes for the year ended December 31, 2006 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.
  The
        preparation of the Company’s condensed consolidated financial statements in
        conformity with accounting principles generally accepted in the United States
        of
        America requires management to make estimates and assumptions that affect
        the
        reported amount of assets and liabilities at the date of the financial
        statements and the reported amount of net revenue and expenses during the
        reporting period. The Company bases estimates on historical experience and
        on
        various assumptions about the future that are believed to be reasonable based
        on
        available information. The Company’s reported financial position or results of
        operations may be materially different under different conditions or when
        using
        different estimates or assumptions, particularly with respect to significant
        accounting policies. In the event that estimates or assumptions prove to
        differ
        from actual results, adjustments are made in subsequent periods to reflect
        more
        current information.
  Estimates
        are primarily used in determining the valuation of goodwill and other intangible
        assets, provisions for losses on accounts receivable, allowances for inventory
        obsolescence, accounting for depreciation, accounting for stock-based
        transactions and certain accrued liabilities.
  **NOTE
        2 - PRINCIPLES OF CONSOLIDATION AND RESTATEMENT**
 
 The
        condensed consolidated financial statements include the accounts of the Company
        and its wholly-owned subsidiary, Technipower LLC (“Technipower”), from the date
        of acquisition. All material intercompany accounts and transactions have
        been
        eliminated in consolidation.
 
 In
        connection with the preparation and filing of Amendment No. 1 to the Company’s
        Form 10-QSB for the quarter ended September 30, 2006, the Company
        noted certain errors related to the interim financial statements for the
        three
        and six months ended June 30, 2006 which were included in the Company’s Form
        10-QSB for the period ended June 30, 2006. The errors principally related
        to the
        failure to recognize of a liability associated with a compensation plan for
        two
        senior executives. To correct these errors the Company recorded a $141,910
        accrual for compensation due to two senior executives related to an agreement
        and a $60,000 distribution paid to a Series B preferred stock holder
        in March 2006 related to common stock issued to induce the holder to convert
        the
        Series B preferred stock to common stock, and reclassified the amortization
        of deferred debt costs to interest expense of $218,428 for the six months
        ended
        June 30, 2006.
  7
 The
        effects of the corrections on the Company’s statement of operations for the
        three months ended June 30, 2006 follow:
  As
                  PreviouslyLine
                  Item Description
              
              Reported
              
              RestatedOperating
                  expenses
              
              $
              573,050
              
              $
              481,409Operating
                  loss
              
              
              568,616
              
              
              481,409Interest
                  expense
              
              
              41,359
              
              
              145,787Net
                  loss
              
              
              594,810
              
              
              607,597Loss
                  attributable to common stockholders
              
              
              594,810
              
              
              607,597Basic
                  and diluted net loss per common share
              
              
              0.02
              
              
              0.02
  The
        effects of the corrections on the Company’s statement of operations for the six
        months ended June 30, 2006 follow:
 
 As
                  PreviouslyLine
                  Item Description
              
              Reported
              
              RestatedOperating
                  expenses
              
              $
              1,542,686
              
              $
              1,466,168Operating
                  loss
              
              
              1,535,456
              
              
              1,458,938Interest
                  expense
              
              
              769,323
              
              
              987,751Net
                  loss
              
              
              7,957,183
              
              
              8,099,093Preferred
                  stock dividends
              
              
              -
              
              
              60,000Loss
                  attributable to common stockholders
              
              
              7,957,183
              
              
              8,159,093Basic
                  and diluted net loss per common share
              
              
              0.35
              
              
              0.36
 
 The
        effects of the corrections on the Company’s statement of cash flows for the six
        months ended June 30, 2006 follow:
 
 As
                  PreviouslyLine
                  Item Description
              
              Reported
              
              RestatedNet
                  loss
              
              $
              7,957,183
              
              $
              8,099,093Accounts
                  payable and accrued expenses
              
              
              694,227
              
              
              836,137
  **NOTE
        3 - LOSS PER SHARE**
  Loss
        per
        share is computed by dividing the loss available to common shareholders by
        the
        weighted average number of common shares outstanding. For the three and six
        months ended June 30, 2007 and 2006, diluted loss per share does not include
        the
        dilutive effect, if any, from the potential exercise of stock options, warrants
        and the January 2007 Debenture using the treasury stock method, because the
        effect would have been anti-dilutive and which amounted to 6,605,000 and
        948,000
        shares, respectively.
  **NOTE
        4 - INCOME TAXES**
 
 Deferred
        tax assets and liabilities are recognized for the expected future tax
        consequences attributed to differences between the financial statement carrying
        amounts of existing asset and liabilities and their respective tax basis.
        Deferred tax assets and liabilities are measured using the enacted tax rates
        expected to be applied to taxable income in the years in which those temporary
        differences are expected to reverse. Valuation allowances are recorded to
        reduce
        deferred tax assets when it is more likely than not that a tax benefit will
        not
        be realized. The Company  adopted the  provisions  of
        Financial  Standards  Accounting  Board Interpretation  No.
        48 "Accounting  for Uncertainty in Income Taxes" ("FIN 48"), an
        interpretation of FASB Statement No. 109 ("SFAS 109"), effective January
        1,
        2007. The Company has not completed its evaluation of net operating loss
        carryforward and the related full valuation allowance. Additionally the Company
        may be subject to Section 382 limitations of the Internal Revenue Code in
        connection with a change in ownership. The management of the Company believes
        these factors will not have a significant impact on the financial position
        of
        the Company. As the Federal income tax returns remain subject to normal review
        and adjustment for up to three years, the Company's 2003, 2004, 2005 and
        2006
        returns remain open and available to the Internal Revenue Service for the
        purpose of review and possible adjustment. Management believes that an
        audit or review of the prior years, would result in no material tax liability
        and therefore no income tax penalties or interest accruals have been
        recognized.
  8
 
 **NOTE
        5 - STOCK BASED COMPENSATION**
 
 **Stock
        Options**
 
 Effective
        January 1, 2006, the Company adopted Statement of Financial Accounting Standards
        No. 123(R), “Share-Based Payment” (SFAS No. 123(R)), using the modified
        prospective method. Under this method, compensation cost is recognized for
        all
        share-based payments granted, modified, or settled after January 1, 2006,
        as
        well as for any unvested awards that were granted prior thereto. Compensation
        cost for unvested awards granted prior to January 1, 2006 is recognized using
        the same estimate of the grant-date fair value and the same attribution method
        used to determine the pro forma disclosures under SFAS No. 123 “Accounting for
        Stock-Based Compensation.” Compensation costs for awards granted after January
        1, 2006 are valued based on the estimated fair value of the awards on their
        grant date and are generally recognized over the required services
        period.
 
 Prior
        to
        January 1, 2006, the Company accounted for its stock options under the
        recognition and measurement principles of Accounting Principles Board (APB)
        Opinion No. 25 “Accounting for Stock Issued to Employees” and related
        interpretations. Accordingly, no stock-based compensation expense was recognized
        in operations as all options granted had an exercise price equal to the market
        value of the underlying common stock on the date of grant. All stock options
        outstanding at December 31, 2005 and 2004 were fully vested.
  Total
        stock-based compensation was $524,426 for the six month period ended June
        30,
        2007. There was no expense in the six month period ended June 30, 2006. In
        calculating compensation expense related to stock option grants, the fair
        value
        of each stock option is estimated on the date of grant using the Black-Scholes
        option-pricing model and the following weighted average
        assumptions:
 
 **Six-Months
                  Ended**
                **June
                  30, 2007**Expected
                  term
              
              
              3
                  YearsExpected
                  volatility
              
              
              172
              %Dividend
                  yield
              
              
              0.0
              %Risk-free
                  interest rate
              
              
              4.80
              %Forfeiture
                  rate
              
              
              0
              %
  The
        computation of expected volatility used in the Black-Scholes pricing model
        is
        based on the historical volatility of the Company’s share price. The expected
        term is based on a review of historical employee exercise behavior with respect
        to option grants.
 
 A
        summary
        of the changes in stock options outstanding for the six-months ended June
        30,
        2007 follows:
 
 WeightedAverageShares
              
              Exercise
                  PriceOutstanding
                  at January 1, 2007
              
              
              870,335
              
              $
              1.39Granted
              
              
              935,000
              
              
              1.64Outstanding
                  at June 30, 2007
              
              
              1,805,335
              
              $
              1.50
  The
        intrinsic value of outstanding and exercisable options was $0 at June 30,
        2006.
        Total compensation expense related to non-vested awards not yet recognized
        is
        $1,485,000 and the weighted average period over which it is expected to be
        recognized is 2.33 years. Management expects that all non-vested awards will
        vest.
 
 The
        following table summarizes the Company's stock options at June 30,
        2007:
 
 Options
                  Outstanding
              
              Options
                  ExercisableWeighted
              
              Weighted
              
              
              
              WeightedAverage
              
              Average
              
              
              
              AverageRange
                  of
                Exercise
                  Prices
              
              Number
              
              Remaining
                  Life
              
              Exercise
                  Price
              
              Number
              
              Exercise
                  Price$.22
                  to $1.00
              
              
              790,335
              
              
              5.31
              
              $
              .51
              
              
              455,335
              
              $
              0.73$1.45
                  to $2.09
              
              
              515,000
              
              
              4.07
              
              $
              1.75
              
              
              213,333
              
              $
              1.82$2.80
                  to $3.00
              
              
              500,000
              
              
              9.58
              
              $
              2.80
              
              
              0
              
              $
              2.801,805,335
              
              
              
              
              
              
              
              
              668,668
  9
 The
        employment contracts of two executives contain provisions for additional
        performance based options to purchase an aggregate of 325,000 common shares.
        The
        performance based options will only vest if certain 2007 performance goals
        are
        achieved. The performance goals are annualized sales of $25,000,000 by the
        end
        of 2007 based on the cumulative monthly sales for the fourth quarter of 2007
        multiplied by four and breakeven cash flow by the end of 2007 based on the
        sum
        of the monthly cash flows for the last two months of the year. Because the
        achievement of performance goals was not probable as of June 30, 2007, the
        Company has not recognized any compensation expense related to these performance
        based options. The Company will have to record an additional charge related
        to
        these options, when it is probable that the performance criteria have been
        met
        at the then fair value of the options.
 
 Agreements
        with certain employees provide that options granted to purchase an aggregate
        160,000 common shares (at an exercise price of $0.22) will be subject to
        accelerated vesting if certain financial and non-financial performance goals
        are
        achieved. The Company has recognized compensation expense for these options
        based on the stated vesting period for the options without giving effect
        to
        accelerated vesting based on achieving the performance goals because at June
        30,
        2007, it was not probable that the Company will meet the performance goals.
        The
        Company will have to record additional charge, which is the difference in
        fair
        value of the options before the achievement of performance goals becomes
        probable and after.
 
 In
        additions to the above options, certain employees of the Company are entitled
        to
        cash bonuses totaling $290,000 if 2007 performance goals are
        achieved.
 
 **Stock
        Warrants**
 
 A
        summary
        of the changes in warrants outstanding for the six-months ended June 30,
        2007
        follows:
 
 **Weighted****Average****Number
                  of**
              
              **Exercise****Warrants**
              
              **Price**Outstanding
                  and exercisable at December 31, 2006
              
              
              453,174
              
              $
              2.23Issued
              
              
              2,006,250
              
              
              2.00Expired
              
              
              (67,174
              )
              
              3.31Outstanding
                  and exercisable at June 30, 2007
              
              
              2,392,250
              
              $
              1.95
 
 As
        further discussed above and in Note 10, on January 17, 2007 the Company issued
        2,006,250 common stock warrants with an exercise price of $2.00 per share
        as
        part of the sale of the Company's January 2007 Debentures
 
 **NOTE
        6 - BUSINESS ACQUISITION**
 
 On
        August
        17, 2006, the Company completed the acquisition of Technipower LLC
        (Technipower), a privately-held company based in Danbury, Connecticut. The
        purchase price of $9,655,607, which includes acquisition related costs of
        approximately $420,000 consisted of the issuance 4,615,381 shares of the
        Company’s Series C preferred stock with a fair value of $3,000,000 and
        4,461,537 shares of common stock with a fair value of $6,242,000. The fair
        value
        of the Series C preferred stock was based upon the expected cash redemption
        amount of $3,000,000. The fair value of the common stock was based upon the
        closing market price of $1.40 on August 17, 2006, the date the acquisition
        was
        completed.
  This
        acquisition was recorded under the purchase method of accounting with the
        total
        consideration allocated to the assets acquired and liabilities assumed based
        on
        estimates of fair value. The allocation process requires an analysis of acquired
        tangible assets, customer relationships, trade-names and non-compete agreements
        to identify and record the fair value of all assets acquired and liabilities
        assumed. Management considered various factors in determining fair value,
        including but not limited to future expected discounted cash flows, third-party
        valuations, and appropriate discount rates. The excess of the purchase price
        over the fair value of the net assets acquired was allocated to
        goodwill.
  10
 
 The
        Company must issue additional shares to the sellers at the one year anniversary
        if the 30-day average trading price is more than 5% less than $0.65 per share.
        Such amounts, if any, will not affect the purchase amount recorded.
  The
        results of operations of Technipower have been included in the Company’s
        consolidated financial statements subsequent to the date of acquisition.
        The
        financial information in the table below summarizes the unaudited combined
        results of operations of the Company and Technipower, on a pro forma basis,
        as
        though the companies had been combined as of the beginning of the period
        presented:
 
 Three
                  Months
                Ended
                June
                  30,
                2006
              
              Six
                  Months Ended
                June
                  30,
                2006Net
                  sales
              
              $
              1,303,661
              
              $
              2,524,086Net
                  loss
              
              $
              (781,801
              )
              $
              (8,435,779
              )Net
                  loss applicable to common stockholders
              
              $
              (856,801
              )
              $
              (8,645,779
              )Basic
                  and diluted net loss per share
              
              $
              (0.03
              )
              $
              (0.32
              )
 
 The
        pro
        forma financial information is presented for informational purposes only
        and is
        not indicative of the results of operations that would have been achieved
        if the
        acquisition had taken place at the beginning of each of the periods
        presented.
 
 **NOTE
        7 - INTANGIBLE ASSETS**
 
 The
        following table presents the details of the Company’s intangible assets at June
        30, 2007:
 
 Cost
              
              Accumulated
                Amortization
              
              Net
                  Book
                ValueAmortizable:Customer
                  relationship
              
              $
              1,210,000
              
              $
              (210,774
              )
              $
              999,226Trade
                  name
              
              
              367,000
              
              
              (31,965
              )
              
              335,035Non-compete
                  agreement
              
              
              160,000
              
              
              (27,871
              )
              
              132,129Patents
              
              
              814,162
              
              
              (555,265
              )
              
              258,897$
              2,551,162
              
              $
              (825,875
              )
              $
              1,725,287
  Total
        amortization expense was $197,164 and $41,813 for the six month periods ended
        June 30, 2007 and 2006, respectively.
  **NOTE
        8 - INVENTORIES**
 
 Inventories
        at June 30, 2007 consist of the following:
 
 Raw
                  materials
              
              $
              777,504Work-in-process
              
              
              613,360Finished
                  goods
              
              
              44,953$
              1,435,817
  **NOTE
        9 - STOCK ISSUANCES AND OTHER EQUITY EVENTS**
 
 As
        discussed in Note 10, on January 17, 2007 the Company sold an aggregate of
        $5,350,000 principal amount of Variable Rate Self-Liquidating Senior Secured
        Convertible Debentures (the January 2007 Debentures) . As further described
        in
        Note 10, the intrinsic value of the beneficial conversion feature associated
        with the Debentures, which was determined to be approximately $2,778,229,
        was
        recorded as additional debt discount with a corresponding increase to additional
        paid in capital. As part of the sale of the Debentures, the Company issued
        common stock purchase warrants to the purchasers of the Debentures giving
        them
        the right to purchase up to an aggregate of 2,006,250 shares of common stock
        at
        an exercise price of $2.00 per share. The relative fair value of the warrants,
        which was determined to be approximately $2,571,771, was recorded as a discount
        to the underlying debt and a corresponding increase to additional paid in
        capital. In connection with the sale of the Debentures, the Company also
        issued
        290,000 shares of common stock with a fair value on the date of issuance
        of
        $791,700 to its financial advisor for the transaction.
 
 11
 On
        January 22, 2007, approximately $3,350,000 of the proceeds from the sale
        of the
        Debentures was used to redeem approximately 2,873,500 shares of the Company’s
        Series C convertible preferred stock. The liquidation preference amount at
        the
        time of the redemption was 175% of the stated value of the redeemed shares
        and
        was recorded as a preferred stock dividend of approximately $1,413,000. Also
        on
        January 22, 2007, the remaining 1,741,881 shares of Series C preferred stock
        were converted into 1,741,881 shares of common stock.
 
 During
        the six months ended June 30, 2007, the Company issued 59,441 share of commons
        stock, with a fair value of $157,115 at the time of issuance, for fees and
        services.
 
 In
        February 2007, the Company awarded and issued 110,000 shares of restricted
        common stock to its CEO, Gary Brandt, pursuant to Mr. Brandt’s employment
        agreement. The shares vest over a three year period according to a schedule
        in
        the agreement. The fair value of the shares at the time of issuance was
        approximately $306,000. This amount will be recorded as compensation expense
        over the vesting period . Compensation
        expense recognized related to these shares was approximately $61,000 for
        the six
        months ended June 30, 2007.
 
 In
        May
        2007, the Company issued 20,000 shares of common stock with an estimated
        fair
        value of $4,000 to its President Peter DeVecchis pursuant to Mr. DeVecchis’
employment agreement.
 
 In
        May
        and June 2007 the Company issued an aggregate of 3,043,270 shares of common
        stock with an estimated fair value of $825,806 to the January 2007 Debenture
        holders (Note 10) as a first redemption of January 2007 Debentures and related
        accrued interest of $535,000 and $71,333, respectively. The Company recorded
        additional interest expense of approximately $219,000 for the difference
        between
        the principal and accrued interest redeemed and the fair market value of
        the
        common stock issued.
 
 **NOTE
        10 - DEBT**
 
 **Notes
        Payable to Related Parties**
 
 On
        July
        28, 2006, the Company borrowed $125,000 from an affiliate of Michael D’Amelio, a
        director of the Company and issued a promissory note in the principal amount
        of
        $125,000. The note bears interest at a rate of 15% per annum and matured
        on
        August 28, 2006. The note is currently in default and carries a default interest
        rate of 18% per annum.
 
 On
        December 31, 2006, the Company entered into an agreement with holders of
        notes
        payable with a principal amount of $1,712,085 to extend the maturity dates
        of
        the notes to September 30, 2007. To induce the noteholders to extend the
        notes,
        the Company agreed to issue at the noteholders’ option either shares of common
        stock at a rate of 10,000 shares for each $100,000 of principal or cash equal
        to
        five percent of the principal amounts of the notes. Noteholders with notes
        aggregating $790,085 of principal agreed to receive a total of 79,009 shares
        of
        common stock with a fair value of $179,363 at December 31, 2006. This amount
        has
        been included in deferred debt costs and is being amortized to interest expense
        through September 30, 2007. The shares were issued in March 2007. During
        the
        first quarter of 2007, the Company has recorded additional deferred costs of
        $46,100 for the noteholders that selected cash payments.
 The
        Company’s board of directors has authorized additional borrowings of up to
        $287,915 from the current noteholders and others on the same terms as the
        notes
        issued to the noteholders.
 
 **Revolving
        Note Payable to Bank**
 
 Pursuant
        to Technipower LLC’s revolving note payable (the “Note”) with a bank,
        Technipower LLC can borrow up to $1,500,000 based on a collateral formula
        inclusive of accounts receivable and certain classes of inventory. The Note
        bears interest at the prime rate (8.25% at June 30, 2007), requires no principal
        amortization, and has a maturity date of June 1, 2008. Amounts outstanding
        under
        the Note were $1,000,000 at June 30, 2007 with an additional availability
        of
        $2,434.
 
 Substantially
        all of Technipower LLC’s assets have been pledged as collateral for the
        Note.
  **Notes
        Payable to Davis & Gilbert LLP**
 
 On
        November 17, 2006, the Company converted $526,149 of trade accounts payable
        to
        Davis & Gilbert LLP (“D&G”), the Company’s general counsel, to a
        promissory note payable (the “Promissory Note”) with an original principal of
        $529,149. The Promissory Note and accrued and unpaid interest at 12% was
        payable
        the earlier of the Company’s receipt of any proceeds from litigation, or
        receipts from an equity financing of at least $5 million, or March 31, 2007.
        To
        induce D&G to enter into this agreement, the Company issued a warrant to
        purchase 200,000 shares of the Company’s common stock at $1.73 a share. The
        exercise price was adjusted on May 14, 2007 to $1.00, when the underlying
        shares
        were registered for resale in accordance with the provisions of the warrants.
        The fair value of the warrant of $320,000 was initially recorded as deferred
        debt costs and was amortized over the Promissory Note’s term. The Company repaid
        substantially all of the Promissory Note in 2007 with proceeds from the January
        22, 2007 debenture transaction described below.
 
 12
 On
        January 19, 2007, the Company converted approximately $163,000 of trade accounts
        payable and the remaining balance and unpaid interest on the Promissory Note
        to
        D & G to a new promissory note payable (the “New Promissory Note”) with an
        original principal of $182,000. The New Promissory Note and accrued and unpaid
        interest at 12% is payable the earlier of the Company’s receipt of any proceeds
        from litigation, or receipts from an equity financing of at least $3 million,
        or
        September 30, 2007.
 
 **Issuance
        of Variable Rate Self-Liquidating Senior Secured Convertible Debentures and
        Common Stock Purchase Warrants**
 
 On
        January 17, 2007, the Company sold an aggregate of $5,350,000 principal amount
        of Variable Rate Self-Liquidating Senior Secured Convertible Debentures (the
        “January 2007 Debentures”) due March 17, 2008. The Company used approximately
        $3,350,000 of the net proceeds of the Debentures to redeem 2,873,500 shares
        of
        Series C preferred stock, approximately $768,250 of the net proceeds to pay
        down
        a promissory note and other obligations and retained approximately $1,018,000
        of
        the net proceeds as working capital.
 
 The
        Debentures are convertible at any time at the option of the holder into shares
        of common stock at $2.00 per share, subject to adjustment for stock splits,
        stock dividends, and the like. In the event that the Company issues or grants
        any rights to purchase any of its common stock, or other securities convertible
        into its common stock, for an effective per share price less than the conversion
        price then in effect, the conversion price of all unconverted Debentures
        will be
        decreased to equal such lower price. The conversion price adjustment will
        not
        apply to certain exempt issuances, including stock issuances to officers,
        directors and employees, stock issuances pursuant to acquisitions or strategic
        transactions, and stock issuances of up to an aggregate of $200,000 of common
        stock that may be issued in any six-month period. In accordance with EITF
        98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features
        or
        Contingently Adjustable Conversion Ratios” the intrinsic value of the imbedded
        conversion feature within the Debentures, which was determined by the Company
        to
        be approximately $2,778,229, was recorded as an additional discount to the
        debt.
        In accordance with EITF 00-27, “Application of Issue No. 98-5 to Certain
        Convertible Instruments”, the debt discount will be amortized over the term of
        the Debentures.
 
 Prior
        to
        maturity, the January 2007 Debentures will bear interest at the higher of
        (i) 8%
        per annum or (ii) the six-month London Interbank Offered Rate plus 2%, payable
        quarterly in arrears in cash, or, at the Company’s option, in shares of common
        stock. The Company’s ability to pay interest with shares of common stock will be
        subject to specified conditions, including the existence of an effective
        registration statement covering the resale of the shares issued in payment
        of
        interest and certain minimum trading volumes in the common stock. All overdue
        and accrued interest will accrue a late fee equal to the lesser of 15% per
        annum
        or the maximum rate permitted by applicable law. From and after an event
        of
        default under the Debentures and for so long as the event of default is
        continuing, the Debentures will bear default interest at a rate of the lesser
        of
        15% per annum or the maximum rate permitted by applicable law. Accrued interest,
        related to the January 2007 Debentures, which is included in accrued expenses,
        amounted to $32,100 as of June 30, 2007.
 
 Beginning
        on the earlier of the first day of the first month immediately following
        the
        effectiveness of a registration statement covering the resale of the shares
        of
        common stock issuable upon conversion of the January 2007 Debentures and
        May 17,
        2007, and on the first day of each month thereafter, the Company will be
        required to redeem 1/10th of the face value of the January 2007 Debentures
        in
        cash or, at the Company’s election, with shares of common stock. The Company’s
        ability to pay the redemption price in shares of common stock will be subject
        to
        specified conditions, including the existence of an effective registration
        statement covering the resale of the shares issued in payment of the redemption
        amount and certain minimum trading volumes in common stock. Any common stock
        delivered in satisfaction of an amortization payment will be valued at 82.5%
        of
        the average of the daily volume weighted average price of the applicable
        shares
        for the 10 trading days prior to the amortization payment. As of June 30,
        2007,
        January 2007 Debentures and related accrued interest in the amount of $535,000
        and $71,333, respectively have been redeemed with registered common stock.
        Upon
        redemption, the Company recorded additional interest expense in the amount
        of
        approximately $219,000 for the difference between the principal and accrued
        interest redeemed and the fair market value of the common stock issued. Any
        unconverted January 2007 Debentures will become due at
        maturity.
 
 At
        any
        time after the effectiveness of a registration statement covering the resale
        of
        the shares of common stock issuable upon conversion of the January 2007
        Debentures, the Company may redeem, subject to specified conditions and upon
        12
        trading days’ written notice, any or all of the outstanding January 2007
        Debentures for a redemption price of cash in the amount of 120% of the principal
        amount plus accrued and unpaid interest on the January 2007 Debentures to
        be
        redeemed.
 
 The
        Company’s obligations under the January 2007 Debentures are secured by a
        security interest in substantially all of the Company’s assets pursuant to a
        Security Agreement dated as of January 17, 2007 between the Company and the
        purchasers of the January 2007 Debentures. The Company has agreed that in
        the
        event that it forms any new subsidiaries and moves assets to those subsidiaries,
        those subsidiaries will become guarantors of the January 2007 Debentures.
 
 As
        a part
        of the sale of the January 2007 Debentures, the Company issued common stock
        purchase warrants (the January 2007 Warrants) to the purchasers of the January
        2007 Debentures giving them the right to purchase up to an aggregate of
        2,006,250 shares of common stock at an exercise price of $2.00 per share.
        The
        January 2007 Warrant exercise price is subject to adjustment for stock splits,
        stock dividends, and the like. In the event that the Company issues or grants
        any rights to purchase any common stock, or other security convertible into
        common stock, for a per share price less than the exercise price then in
        effect,
        the exercise price of the January 2007 Warrants with respect to shares of
        common
        stock will be reduced to equal such lower price and the number of shares
        of
        common stock for which the warrants may be exercised will be increased so
        that
        the total aggregate exercise price remains constant. The foregoing adjustment
        to
        the exercise price for common stock will not apply to certain exempt issuances,
        including issuances to officers, directors and employees and in strategic
        transactions and up to an aggregate of $200,000 of common stock that may
        be
        issued in any six month period. All of the January 2007 Warrants will expire
        on
        January 17, 2012, unless sooner exercised. As of June 30, 2007, none of the
        warrants issued in connection with the January 2007 Debentures have been
        exercised.
  13
 In
        accordance with APB 14, “Accounting for Convertible Debt and Debt Issued with
        Stock Purchase Warrants”, the relative fair value of these January 2007 Warrants
        on their date of grant, which was determined to be approximately $2,571,771
        was
        recorded as a discount to the underlying debt and as an addition to additional
        paid-in capital. The discount is being amortized to interest expense over
        the
        term of the underlying debt. The fair value of the January 2007 Warrants
        was
        computed using the Black-Scholes option pricing model. The Company assumed
        a
        risk-free interest rate of 4.78%, no dividends, expected volatility of
        approximately 179% and an expected warrant life of approximately 3 years.
        As of
        June 30, 2007, the unamortized discount on the January 2007 Debentures amounted
        to approximately $2,194,000.
 
 In
        connection with the sale of the January 2007 Debentures and January 2007
        Warrants, the Company entered into a Registration Rights Agreement with the
        purchasers of the January 2007 Debentures and January 2007 warrants under
        which
        the Company is required, on or before February 16, 2007, to file a registration
        statement with the Securities and Exchange Commission covering the resale
        of the
        shares of common stock issuable pursuant to the January 2007 Debentures and
        January 2007 Warrants and to use the Company’s best efforts to have the
        registration statement declared effective as promptly as possible thereafter
        but
        in any event, by May 17, 2007. The Company filed the registration statement
        on
        February 12, 2007 and was declared effective on May 14, 2007.
 
 In
        accordance with FASB Staff Position No. EITF 00-19-2, “Accounting for
        Registration Payment Arrangements”, the Company measured their contingent
        obligation under the Registration Rights Agreement in accordance with FASB
        Statement No. 5, “Accounting for Contingencies”. As of June 30, 2007 the Company
        was not in compliance with their obligations under the Registration Rights
        Agreements. Additionally, the Company was not in compliance as to redemption
        due
        on July 1 and August 1, 2007. The Company is in process of amending January
        2007
        Debentures (see Note 19) as well as obtaining compliance waivers from the
        January 2007 Debenture holders.
 
 As
        of
        June 30, 2007, the Company has estimated liquidated damages under the
        Registration Rights Agreement for failure to timely file a registration
        statement by the defined date in the amount of $160,500, which has been included
        in accrued expenses in the accompanying consolidated financial
        statements.
 
 **NOTE
        11 - PATENT INFRINGEMENT**
 
 The
        Company is involved in litigation against Toyota Motor Corporation and certain
        of its affiliates (collectively, “Toyota”) for infringement of its Electric
        Wheel patent. On January 10, 2006, the Company filed a complaint with the
        United
        States International Trade Commission (“ITC”) in Washington D.C. seeking an
        exclusion order prohibiting the importation of infringing
        technology.
 
 On
        April
        30, 2007, the ITC terminated the investigation with a finding of no violation
        of
        Section 337 of the Tariff Act of 1930. On June 1, 2007, the Company announced
        that it will appeal the determination of the ITC to the Court of Appeals
        for the
        Federal Circuit in Washington, DC (CAFC). The Company believes that the ITC’s
        findings are not binding on other courts and that the CAFC is the appropriate
        forum by which to establish the proper interpretation of its patent claims
        and
        to provide future options to pursue full and fair remedies.
 
 The
        Company has an agreement with Oliver Street Finance LLC (“Oliver Street”). Under
        this agreement Oliver Street provides funding to the Company to prosecute
        the
        Company’s initial patent infringement action against Toyota Motor Corporation,
        Toyota Motor Sales U.S.A., Inc. and Toyota Manufacturing North America
        (collectively, “Toyota”). Oliver Street pays all legal fees and out of pocket
        expenses billed by the Company’s special patent counsel in connection with the
        litigation against Toyota and approved by the Company in exchange for a portion
        of any recovery that the Company may receive from the litigation equal to
        the
        greater of 40% of the recovery or the actual amount of legal fees and expenses
        Oliver Street pays on the Company’s behalf. Michael A. D’Amelio, a director and
        shareholder of the Company, is a principal of Oliver Street. Through February
        15, 2006, Mr. D’Amelio was the beneficial owner of more than 10% of the
        Company’s common stock. During this period, expenses paid on behalf of the
        Company by Oliver Street totaling $236,620 in 2005 and $129,949 in 2006 were
        recorded as professional fee expense as well as an increase to additional
        paid-in capital. In connection with the extinguishment of the Redeemable
        Series
        A preferred stock for common stock on February 15, 2006, Mr. D’Amelio’s
        beneficial ownership of the Company's common stock decreased to below 10%.
        As
        such, expenses paid by Oliver Street on behalf of the Company since February
        15,
        2006 are no longer reflected in the financial statements.
 
 On
        June
        7, 2007 the Company announced the engagement of new patent counsel, as
        additional litigation counsel in this matter. The Company has no present
        agreement to provide funding to prosecute the appeal litigation.
 
 14
 
 **NOTE
        12 - ACCRUED AND UNPAID PAYROLL TAXES**
 
 At
        June
        30, 2007, the Company has accrued interest and penalties of $222,000 related
        to
        payroll and payroll related taxes. This amount includes additional interest
        of
        approximately $95,000 charged to operations in the first six months of 2007.
        The
        interest and penalties were the subject of a delinquency proceeding with
        the
        U.S. Internal Revenue Service. During the first quarter of 2007, the Company
        signed an agreement with the IRS to settle the outstanding interest and
        penalties. The agreement provides for the Company’s payment of the accrued
        interest and penalties in monthly installments of $10,000.
  **NOTE
        13 - POTENTIAL ACQUISITIONS**
  On
        June
        1, 2007, the Company entered into an Asset Purchase Agreement (the “Purchase
        Agreement”) with Del-Inc Acquisition LLC, Deltron, Inc., Corporacion Delinc S.A.
        de CV, Aaron Anton and certain other persons to acquire substantially all
        the
        assets of Deltron, Inc., a North Wales, Pennsylvania based manufacturer of
        power
        supplies and related equipment with manufacturing operations in Reynosa,
        Mexico,
        for an aggregate purchase price of approximately $3.4 million, subject to
        adjustment. By amendment dated July 9, 2007, the parties to the Purchase
        Agreement extended the Closing Date to July 26, 2007 and extended the date
        upon
        which the Purchase Agreement may be terminated from May 31, 2007 to August
        2,
        2007. By a second amendment dated August 2, 2007, the parties further extended
        the Closing Date to August 6, 2007 and extended the date upon which the Purchase
        Agreement may be terminated to August 10, 2007. The acquisition is subject
        to
        customary closing conditions, and there can be no assurance that all of those
        closing conditions will be satisfied.
  On
        July
        2, 2007, the Company entered into a letter of intent to acquire Unipower
        Corporation, a Coral Springs, Florida based manufacturer of power supplies
        and
        related equipment for telecom, datacom, network equipment and industrial
        applications. Unipower provides high-density, low profile and hot swap power
        system solutions and has overseas operations in the United Kingdom. The letter
        of intent contemplates that, through an acquisition subsidiary, the Company
        will
        purchase all of the capital stock of Unipower for cash in an amount to be
        determined with the purchase price subject to changes in Unipower's net assets
        through the closing date. The transaction is subject to the negotiation and
        execution of a definitive purchase agreement and the satisfaction of various
        closing conditions, including a due diligence investigation. Management
        currently anticipates that it will complete the transaction during
        the second half of 2007.
 
 **NOTE
        14 - CREDIT FACILITY**
 
 In
        December 2006 the Company signed a financing term sheet for a credit facility
        to
        be used exclusively for acquisitions. The term sheet contemplates a facility
        of
        up to $10 million on a standby basis secured by the acquired assets and
        guaranteed by the Company. The Company and the lender have agreed in principle
        to increase the facility to $15 million. The Company intends to use the facility
        to strike more quickly at unique smaller acquisition opportunities that are
        consistent with its growth plans. The credit facility will have a one
        year term that will be renewable at the option of the lender. The
        standby credit facility will carry an interest rate of 12% per annum plus
        monitoring fees of 1% per quarter of the amounts outstanding under the credit
        facility and investment fees of 5% of the amounts outstanding under the
        facility. The Company will also pay a commitment fee of 2% of the full amount
        of
        the facility upon execution of definitive documents. The investment fees
        and the
        commitment fees will be payable in shares of common stock. Any lending under
        the
        facility will be conditioned on the approval of the proposed acquisition
        by the
        lender’s investment committee and will be subject to the lender’s normal due
        diligence. The facility is subject to normal documentation requirements.
        The
        Company anticipates that the required documentation will be completed in
        the
        third quarter of 2007. The lender, JMC Venture Partners, LLC, is an affiliate
        of
        Michael D’Amelio, a director and executive officer of the Company.
 
 **NOTE
        15 - TRANSACTIONS WITH RELATED PARTIES**
 
 During
        the quarter ended December 31, 2006 the Company issued a total of 79,009
        shares
        of common stock to certain note holders to extend the terms of payment to
        September 30, 2007. The estimated fair market value was $179,363. During
        the
        quarter ended March 31, 2007 the Company accrued $46,100 in cash incentives
        to
        certain note holders to extend the terms of payment to September 30, 2007.
        Interest expense on notes to related parties was approximately $253,000 for
        the
        six months ended June 30, 2007.
 
 In
        February 2007, the Company awarded and issued 110,000 shares of restricted
        common stock to its CEO, Gary Brandt, pursuant to Mr. Brandt’s employment
        agreement. The shares vest over a three-year period according to a schedule
        in
        the agreement. The fair value of the shares at the time of issuance was
        approximately $306,000. This amount will be recorded as compensation expense
        over the vesting period . Compensation
        expense recognized related to these shares was approximately $61,000 for
        the six
        months ended June 30, 2007.
 
 In
        2007
        and 2006, Bril Corporation provided bookkeeping services for $5,000 a month.
        Two
        principals of Bril Corporation are also directors and stockholders of
        the Company. Total expense for the six months ended June 30, 2007 and 2006
        was
        $30,000 for each six-month period.
 
 15
  **NOTE
        16 - SEGMENTS**
 
 The
        major
        segments the Company serves are the Motive Power Division which encompasses
        the
        electric power drive technologies and the Power Electronics Division which
        represents the business of Technipower and specializes in the design,
        development and production of customer power systems, chassis and power supply
        products for defense related markets.
  Segment
        financial information follows:
 
 THREE
                  MONTHS ENDED
              
              SIX
                  MONTHS ENDEDJune
                  30,
                2007
              
              June
                  30,
                2006
              
              June
                  30,
                2007
              
              June
                  30,
                2006Revenues:Sales
                  to unaffiliated customers:Power
                  Electronics
              
              $
              1,638,413
              
              $
              0
              
              $
              3,038,332
              
              $
              0Motive
                  Power
              
              
              0
              
              
              7,547
              
              
              31,678
              
              
              12,912$
              1,638,413
              
              $
              7,547
              
              $
              3,070,010
              
              $
              12,912Net
                  Profit (Loss):Power
                  Electronics
              
              $
              199,521
              
              $
              0
              
              $
              248,321
              
              $
              0Motive
                  Power
              
              
              (998,028
              )
              
              (476,975
              )
              
              (1,900,120
              )
              
              (1,458,938
              )Operating
                  Loss
              
              
              (798,507
              )
              
              (476,975
              )
              
              (1,651,799
              )
              
              (1,458,938
              )Interest
                  expense
              
              
              (2,682,060
              )
              
              (145,787
              )
              
              (4,876,000
              )
              
              (987,751
              )Other
                  expense
              
              
              18,684
              
              
              0
              
              
              18,684
              
              
              0Loss
                  on extinguishments of redeemable preferred stock and other
                  debt
              
              
              0
              
              
              15,165
              
              
              (0
              )
              
              (5,652,404
              )Net
                  Loss
              
              
              (3,461,883
              )
              
              (607,597
              )
              
              (6,509,115
              )
              
              (8,099,093
              )Preferred
                  stock dividends
              
              
              0
              
              
              0
              
              
              (1,413,031
              )
              
              (60,000
              )Loss
                  applicable to common stockholders
              
              $
              (3,461,883
              )
              $
              (607,597
              )
              $
              (7,922,146
              )
              $
              (8,159,093
              )
  **NOTE
        17 - NEW ACCOUNTING STANDARDS**
 
 In
        February 2007, the Financial Accounting Standards Board (FASB) issued Statement
        of Financial Accounting Standards (SFAS) No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities, Including an Amendment of FASB
        Statement No. 115,” which will become effective in 2008. SFAS No. 159 permits
        entities to measure eligible financial assets, financial liabilities and
        firm
        commitments at fair value, on an instrument-by-instrument basis, that are
        otherwise not permitted to be accounted for at fair value under other generally
        accepted accounting principles. The fair value measurement election is
        irrevocable and subsequent changes in fair value must be recorded in
        earnings.  The Company will adopt this Statement in fiscal year 2008 and is
        currently evaluating if it will elect the fair value option for any of its
        eligible financial instruments and other items.
  In
        September 2006, the FASB issued Financial Accounting Standard No. 157, ‘‘Fair
        Value Measurements’’ (‘‘SFAS 157’’). SFAS 157 is effective for financial
        statements issued for fiscal years beginning after November 15, 2007 as well
        as
        interim periods within such fiscal years. SFAS 157 provides a common fair
        value
        hierarchy for companies to follow in determining fair value measurements
        in the
        preparation of financial statements and expands disclosure requirements relating
        to how such fair value measurements were developed. SFAS 157 clarifies the
        principle that fair value should be based on the assumptions that the
        marketplace would use when pricing an asset or liability, rather than company
        specific data. The Company is currently assessing the impact that SFAS 157
        will
        have on its results of operations and financial position.
 
 **NOTE
        18 - COMMITMENTS AND CONTINGENCIES**
 
 **Business
        Acquisition**
 
 In
        connection with the Company’s acquisition of Technipower LLC in August 2006, the
        Company must issue additional shares to the sellers at the one year anniversary
        if the 30-day average trading price is more than 5% less than $0.65 per share.
        Such amounts, if any, will not affect purchase consideration. Using an average
        share price based upon the 30-day trading period ending August 14, 2007,
        management estimates that the Company will be required to issue approximately
        1,970,000 additional common shares to the Technipower sellers. The additional
        shares to be issued to the seller should be registered by the Company pursuant
        to the terms of Registration Rights Agreement, executed in connection with
        the
        Purchase Agreement, and the Company shall make its reasonable best efforts
        to
        cause the registration of the additional shares to be effective until August
        17,
        2008 at the latest.  The failure to register the additional shares pursuant
        to the terms of the Registration Rights Agreement will result in a breach
        of
        contract and will subject the Company to liabilities attendant to breach
        of
        contract claims, which may include damages and/or equitable relief.
  16
 **NOTE
        19- SUBSEQUENT EVENTS**
 
 **Default
        on Variable Rate Self-Liquidating Senior Secured Convertible Debentures and
        Common Stock Purchase Warrants**
  On
        July
        1, 2007 the Company failed to make the redemption payment due the January
        2007
        Debenture holders in cash. Although the Company has the option to settle
        the
        redemption price in shares of its common stock, its ability to do so is subject
        to specified conditions, including the existence of an effective registration
        statement covering the resale of the shares issued in payment of the redemption
        amount and certain minimum trading volumes in the common stock. Any common
        stock
        delivered in satisfaction of an amortization payment valued at 82.5% of the
        average of the daily volume weighted average price of the applicable shares
        for
        the 10 trading days prior to the amortization payment. The Company filed
        a
        registration statement for shares to be issued upon conversion or redemption
        of
        the January 2007 Debentures in February 2007 and the registration statement
        was
        declared effective on May 14, 2007. The Company made the initial redemption
        payment, due June 1, 2007, in shares of common stock. However, there were
        an
        insufficient number of shares of common stock remaining available under the
        registration statement to issue shares in payment of the redemption payments
        that were due on July 1, 2007 and August 1, 2007, in a timely manner.
  The
        Company's failure to make the redemption payments when due is a default under
        the terms of the January 2007 Debentures. Additionally, under the Registration
        Rights Agreement, the Company agreed to file a new registration statement
        within
        30 days after determining that the shares covered by any existing registration
        statements are insufficient to permit the sale of all shares that may be
        issued
        upon redemption or conversion of the Debentures and exercise of the warrants
        issued to the purchasers of the Debentures. The Company is required to cause
        such new registration statement to be declared effective within 60 days after
        making such determination. The Company will be subject to certain monetary
        penalties if the registration statement is not filed or does not become
        effective on a timely basis. The penalties are generally equal to 2% of the
        aggregate purchase price paid for the January 2007 Debentures then held by
        the
        purchasers. If the penalties are not paid in full within 10 days after the
        date
        payable, the Company will be liable for interest on the unpaid penalties
        at a
        rate of 15% per annum, accruing daily. The penalties may not exceed 2% of
        the
        aggregate Subscription Amount of the purchasers in any 30-day period and
        the
        maximum aggregate liquidated damages payable to a purchaser is 24% of the
        aggregate subscription amount paid by such holder.
  The
        unpaid portion of that redemption amount will begin to accrue interest at
        an
        annual rate of 15% (or the maximum permitted by law, if lower) beginning
        5 days
        after date that the redemption amount became due and continuing through the
        date
        of repayment of the redemption amount (but only if the holders ultimately
        elect
        to accelerate the Debentures). Further, at the election of the holders to
        accelerate the Debenture, the outstanding principal amount and accrued interest
        will become due at the Mandatory Default Amount (generally, the sum of (i)
        the
        greater of (A) 130% of the outstanding principal amount of the Debentures,
        plus
        all accrued and unpaid interest thereon, or (B) the outstanding principal
        amount
        of the Debentures, plus all accrued and unpaid interest thereon, divided
        by the
        conversion price of the Debentures multiplied by the volume weighted average
        price of Solomon's common stock on the date the Mandatory Default Amount
        is
        either (x) demanded or otherwise due or (y) paid in full, whichever has a
        higher
        volume weighted average price, and (ii) all other amounts, costs, expenses
        and
        liquidated damages due in respect of the Debentures).
  **Director
        Compensation**
 
 On
        July
        13, 2007 the Company’s Board of Directors adopted a 2007 Non-Employee Director
        Compensation Plan pursuant to which all non-employee directors of the Company
        received a one-time grant of 150,000 restricted shares of common stock subject
        to a 60 day holding period; and all non-employee directors serving on committees
        of the Board of Directors will receive compensation equal to $10,000 per
        year,
        payable in cash.




17





**ITEM
      2.**  **Management’s
      Discussion And Analysis Of Financial Condition And Results Of
      Operations**


*The
      following discussion and analysis of our consolidated financial condition and
      results of operations for the quarters ended June 30 , 2007 and 2006 should
      be
      read in conjunction with our consolidated financial statements included
      elsewhere in this Quarterly Report.*





**Overview**




Our
      historical business has been the development, engineering, manufacturing,
      licensing and sale of electric power drive systems. We intend to expand the
      licensing, manufacturing, and sale of electric power drive systems, including
      those incorporating hybrid and regenerative technologies, and the licensing
      and
      manufacture of our Electric Wheel ® and
      Electric Transaxle TM for
      automotive, hybrid and all-electric vehicle applications. Our goal is to become
      a leader in the manufacture, licensing and sale of electric power drive systems
      for specialized high value original equipment manufacturers.





We
      have
      historically generated limited operating revenues. In order for us to market
      our
      existing products successfully on a national and international level, we will
      likely be required to close public or private offerings of our equity securities
      successfully. If we are unable to obtain necessary financing, we will expand
      our
      operations only as cash flow from operations allows.





We
      are
      presently pursuing direct sales opportunities for our products and technologies
      in the marine, industrial and automotive markets. We are also implementing
      a
      plan to broaden our market and product base and exploit our intellectual
      property that we expect will generate substantial profits and cash flow. As
      part
      of this plan, we intend to grow our business through licensing of our
      proprietary and patented technologies and through the acquisition of businesses
      that fit our strategy. We are identifying licensing opportunities that we
      anticipate will leverage our existing or acquired knowledge and provide
      substantial positive current financial impact while we also aggressively pursue
      infringers of our existing patents. We are also identifying acquisition targets
      that we expect will augment our existing intellectual property, marketing
      channels and human resources and provide positive cash flow. We cannot assure
      you, however, that we will be able to identify licensing opportunities and
      acquisition targets that meet these goals, or if we identify such opportunities
      or targets that we will be able to take full advantage of them.





On
      August
      17, 2006, we entered into a Securities Purchase Agreement with Integrated Power
      Systems LLC, Power Designs Inc., The Vantage Partners LLC, certain other persons
      and Technipower LLC, a Danbury, Connecticut based manufacturer of power supplies
      and related equipment for the defense, aerospace and commercial sectors, and
      simultaneously closed on the acquisition of all of the outstanding membership
      units and warrants to purchase membership units of Technipower. We purchased
      Technipower for 4,615,381 shares of Series C convertible redeemable preferred
      stock, 4,461,537 shares of common stock and the assumption of certain
      liabilities totaling approximately $850,000, including approximately $700,000
      outstanding under Technipower’s $1.5 million revolving credit facility.
      Twenty-five percent of the common stock was deposited in escrow to support
      the
      sellers’ indemnity obligations under the purchase agreement. The escrowed shares
      will also fund any required working capital adjustment in our favor. The share
      amounts were calculated using an agreed $.65 per share price, which was based
      on
      the average of the average closing bid prices of the common stock over two
      30-day periods, one ending three days before the closing and one ending two
      days
      before the closing. We must issue additional shares to the sellers at the one
      year anniversary of the closing if the 30-day average trading price at that
      time
      is more than 5% less than $.65 per share. At our option, we may instead pay
      the
      adjustment in cash. We agreed to register the shares of common stock we issued
      to the sellers and the shares of common stock issuable upon conversion of the
      Series C preferred stock we issued to the sellers. The common share value in
      our
      financial statements was calculated based on the closing market price on the
      date of the closing of the transaction, August 17, 2006, of $1.40 per
      share.




Under
      the
      Certificate of Designations for our Series C preferred stock, the holders of
      the
      Series C preferred stock were entitled to dividends at the rate of 10% of the
      stated value of the Series C preferred stock and a liquidation preference that
      was initially equal to the stated value of the Series C preferred stock plus
      accrued dividends but rose to 175% of the stated value of the Series C preferred
      stock plus accrued dividends after December 15, 2006. The “stated value” per
      share of Series C Preferred Stock was $0.65. The holders of Series C preferred
      stock also had redemption rights. On January 22, 2007, we redeemed approximately
      2,873,500 shares of the Series C preferred stock for an aggregate of
      approximately $3,350,000. We recorded the liquidation preference on the shares
      redeemed as a preferred stock dividend of approximately $1,400,000. Also on
      January 22, 2007, we converted the remaining 1,741,881 shares of Series C
      preferred stock into 1,741,881 shares of common stock and fractional shares
      were
      converted into cash based on the market price of our common stock on the date
      of
      the transaction. There are presently no shares of Series C preferred stock
      outstanding and we have filed a certificate of elimination removing the Series
      C
      preferred stock from our certificate of incorporation.





After
      the
      acquisition of Technipower, we divided our operations into two divisions: a
      Motive Power Division, which encompasses our electric power drive technologies,
      and a Power Electronics Division, which encompasses the business of Technipower.
      With this new structure, we intend to exploit opportunities for market
      consolidation, cross marketing and core business growth in separate but
      compatible niche markets for specialized high value original equipment
      manufacturer (“OEM”) power applications and electric power drive systems.
      Although our operating assets have been segregated into two divisions, we expect
      and encourage a formal exchange of engineering and sales talent across the
      business units.





18


Our
      Power
      Electronics Division focuses its efforts in engineered power systems while
      also
      providing both technical and sales augmentation to our Motive Power Division.
      Our Power Electronics Division specializes in the design, development and
      production of custom power ready systems, chassis and power supply products
      for
      defense related markets. The Division also provides advanced legacy support
      and
      specialized defense-related build-to-print capabilities.




On
      June
      1, 2007, we entered into an Asset Purchase Agreement (the “Purchase Agreement”)
      with Del-Inc Acquisition LLC, Deltron, Inc., Corporacion Delinc S.A. de CV,
      Aaron Anton and certain other persons to acquire substantially all the assets
      of
      Deltron, Inc., a North Wales, Pennsylvania based manufacturer of power supplies
      and related equipment with manufacturing operations in Reynosa, Mexico, for
      an
      aggregate purchase price of approximately $3.4 million, subject to adjustment.
      By amendment dated July 9, 2007, the parties to the Purchase Agreement extended
      the Closing Date to July 26, 2007 and extended the date upon which the Purchase
      Agreement may be terminated from May 31, 2007 to August 2, 2007. By a second
      amendment dated August 2, 2007, the parties further extended the Closing Date
      to
      August 6, 2007 and extended the date upon which the Purchase Agreement may
      be
      terminated to August 10, 2007. The acquisition is subject to customary closing
      conditions, and there can be no assurance that all of those closing conditions
      will be satisfied.




On
      July
      2, 2007, we announced that we had signed a letter of intent to acquire Unipower
      Corporation, a Coral Springs, Florida based manufacturer of power supplies
      and
      related equipment for telecom, datacom, network equipment and industrial
      applications. Unipower is a leader in high-density, low profile and hot swap
      power system solutions and has overseas operations in the United Kingdom. The
      letter of intent contemplates that, through an acquisition subsidiary, we will
      purchase all of the capital stock of Unipower for cash in an amount to be
      determined with the purchase price subject to increase or decrease based on
      changes in Unipower's net assets through closing. The transaction is subject
      to
      the negotiation and execution of a definitive purchase agreement and the
      satisfaction of various closing conditions, including a due diligence
      investigation. While no assurances can be given as to when the acquisition
      may
      close, we currently anticipate that the acquisition will close in the latter
      half of 2007.





In
      order
      to fund future acquisitions we may effect one or more private sales of equity
      or
      debt securities. We have not yet determined the terms or amount of the
      securities to be sold. However, any such securities will be offered and sold
      without registration under the Securities Act of 1933, as amended, and may
      not
      be reoffered or resold by the purchasers in the United States absent
      registration or an applicable exemption from the registration requirements
      of
      the Securities Act.





In
      December 2006 we signed a financing term sheet for a credit facility to be
      used
      exclusively for acquisitions. The term sheet contemplates a facility of up
      to
      $10 million on a standby basis secured by the acquired assets and guaranteed
      by
      Solomon. The Company and the lender have agreed in principle to increase the
      facility to $15 million. While no assurance can be given as to when the facility
      will be put in place, we anticipate that the required documentation will be
      completed in the third quarter of 2007. The lender, JMC Venture Partners, LLC,
      is an affiliate of Michael D’Amelio, a director and executive officer of our
      company.  We
      provide more information about this credit facility in “Liquidity and Capital
      Resources” below .





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. In that event, 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.




Since
      March 2005, we have entered into various loan transactions with third parties
      as
      well as affiliates pursuant to which we raised capital to refinance debt, redeem
      preferred stock and provide working capital.




In
      January 2007, we sold an aggregate of $5,350,000 principal amount of Variable
      Rate Self-Liquidating Senior Secured Convertible Debentures due March 18, 2008.
      In July 2007, we defaulted on this obligation.. We provide more information
      about these loan transactions in “Liquidity and Capital Resources” and in Part
      II, Item 3 "Default Upon Senior Securities", below.




**Results
      of Operations**





The
      following discussion should be read in conjunction with our financial statements
      and the related notes thereto included elsewhere herein.





*Three
      months ended June 30, 2007 compared with three months ended June 30,
      2006.*





For
      the
      three months ended June 30, 2007 we generated revenues of $1,638,413 as compared
      to $7,547 for the three months ended June 30, 2006, an increase of $1,630,866.
      Cost of products sold for the three months ended June 30, 2007 was $836,658,
      generating a gross margin of $801,755. Cost of products sold for the three
      months ended June 30, 2006 was $3,113, generating a gross margin of $4,434.
      The
      increase in our revenues was due to the results of our Power Electronics
      Division,. We believe that with this addition, revenue levels will continue
      to
      equal or exceed those of previous quarters.





19


Research
      and Development costs were $305,462 for the three months ended June 30, 2007
      as
      compared to $0 for the three months ended June 30, 2006. The increase was the
      result of continued R&D expenditures in our Power Electronics Division as
      the Company continues to target the design and production of custom power-ready
      systems, chassis and power supply products for industrial and defense-related
      markets..





Selling,
      general and administrative expenses were $1,294,800 for the three months ended
      June 30, 2007 as compared to $481,409 for the three months ended June 30, 2006,
      an increase of $813,391 or 169%. This increase was partially due to the
      additional expense of our Power Electronics Division as well as the additional
      compensation expense related to the retention of a Chief Executive Officer
      in
      February 2007.





We
      incurred interest expense of $2,682,060 for the three months ended June 30,
      2007. Interest expense incurred for the three months ended June 30, 2006 was
      $145,787. The increase of $2,536,273 in interest expense was primarily due
      to an
      increase in accrued cash and non-cash interest charges related to the variable
      rate self-liquidating senior secured convertible debentures sold in January
      2007.





The
      elements of interest expense for the quarters ended June 30, 2007 and 2006
      were
      as follows:





Three
                Months Ended June 30,2007
            
            2006Accretion
                and dividends, Series A preferred stock
            
            $
            -
            
            $
            -Interest
                on notes payable
            
            
            131,214
            
            
            145,787Interest
                on bank debt
            
            
            16,426
            
            
            -Interest
                on unpaid payroll taxes and penalties
            
            
            14,166
            
            
            -Interest
                and accretion on variable rate self-liquidating senior secured convertible
                debentures
            
            
            2,520,254
            
            
            -**Total
                interest expense**
            
            $
            2,682,060
            
            $
            145,787





We
      reported a net loss and loss applicable to common stockholders for the three
      months ended June 30, 2007 of $3,461,883. Our net loss and loss applicable
      to
      common stockholders for the three months ended June 30, 2006 was
      $607,597.




*Six
      months ended June 30, 2007 compared with six months ended June 30,
      2006.*





For
      the
      six months ended June 30, 2007 we generated revenues of $3,070,010 as compared
      to $12,912 for the six months ended June 30, 2006, an increase of $3,057,098.
      Cost of products sold for the six months ended June 30, 2007 was $1,615,945,
      generating a gross margin of $1,454,065. Cost of products sold for the six
      months ended June 30, 2006 was $5,682, generating a gross margin of $7,230.
      The
      increase in our revenues was due to the results of our Power Electronics
      Division.





Research
      and Development costs were $559,126 for the six months ended June 30, 2007
      as
      compared to $0 for the six months ended June 30, 2006. The increase was the
      result of continued R&D expenditures in our Power Electronics
      Division.





Selling,
      general and administrative expenses were $2,546,738 for the six months ended
      June 30, 2007 as compared to $1,466,168 for the six months ended June 30, 2006,
      an increase of $1,080,570 or 74%. This increase was primarily due to the
      additional expense of our Power Electronics Division as well as the additional
      compensation expense related to the retention of a Chief Executive Officer
      in
      February 2007.





We
      incurred interest expense of $4,876,000 for the six months ended June 30, 2007.
      Interest expense incurred for the six months ended June 30, 2006 was $987,751.
      The increase of $3,888,249 in interest expense was primarily due to an increase
      in accrued cash and non-cash interest charges related to the variable rate
      self-liquidating senior secured convertible debentures sold in January
      2007.





20


The
      elements of interest expense for the six months ended June 30, 2007 and 2006
      were as follows:





Six
                Months Ended June 30,2007
            
            2006Accretion
                and dividends, Series A preferred stock
            
            $
            -
            
            $
            698,080Interest
                on notes payable
            
            
            496,753
            
            
            289,671Interest
                on bank debt
            
            
            37,369
            
            
            -Interest
                on unpaid payroll taxes and penalties
            
            
            94,856
            
            
            -Interest
                and accretion on variable rate self-liquidating senior secured convertible
                debentures
            
            
            4,247,022
            
            
            -**Total
                interest expense**
            
            $
            4,876,000
            
            $
            987,751





We
      reported a net loss for the six months ended June 30, 2007 of $6,509,115. Our
      net loss for the six months ended June 30, 2006 was $8,099,093. We recorded
      a
      $5,652,404 loss related to the extinguishment of redeemable preferred stock
      and
      other debt in the six months ended June 30, 2006. Loss applicable to common
      stockholders for the six months ended June 30, 2007 was $7,922,146, reflecting
      dividends of $1,413,031 relating to the redemption of the Series C
      preferred stock issued in August 2006. Loss applicable to common stockholders
      for the six months ended June 30, 2006 was $8,159,093, reflecting dividends
      of
      $60,000 relating to Series B preferred stock recorded in March
      2006.





**Liquidity
      and Capital Resources**




Our
      available cash balance at June 30, 2007 was $735,959. We borrowed $1,877,085
      in
      short-term debt financing from certain of our principal stockholders and other
      investors from March 2005 through December 2006. These notes are secured by
      liens on all of our tangible and intangible assets.





During
      the six months ended June 30, 2007, we used net cash of $587,191 from
      operations. This consisted of a net loss of $6,509,115 augmented by net non-cash
      charges of $5,242,251. Additionally, financing activities provided net cash
      in
      the amount of $1,306,386 consisting primarily of proceeds from convertible
      promissory notes payable. The Power Electronics Division experienced positive
      cash flow from operating activities of $686,451.





On
      November 22, 2005, we entered into an agreement with Oliver Street Finance
      LLC
      in which Oliver Street agreed to provide funding to us to prosecute our
      litigation against Toyota Motor Corporation, Toyota Motor Sales U.S.A., Inc.
      and
      Toyota Motor Manufacturing North America. Oliver Street agreed to pay all legal
      fees and out-of pocket expenses billed by our special patent counsel, Mintz,
      Levin, Cohn, Ferris, Glovsky and Popeo, P.C., in connection with the litigation
      and approved by us in exchange for a portion of any recovery that we receive
      in
      the litigation equal to the greater of 40% of the recovery or the actual amount
      of legal fees and expenses Oliver Street pays on our behalf. Michael D’Amelio, a
      vice president, director and principal stockholder of our company, is also
      a
      principal owner of Oliver Street. We are paying, however, all of the legal
      fees
      incurred by us in connection with our appeal of the ITC’s adverse decision to
      the Court of Appeals for the Federal Circuit.





We
      have
      incurred significant operating losses and used cash in our operating activities
      for several consecutive years. As of June 30, 2007, we have negative working
      capital and a capital deficiency. 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. We expect to seek additional capital
      through the sale of debt and/or equity in 2007 in order to fund our operating
      and capital needs, although there can be no assurance that we will be
      successful. 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. With the
      acquisition of Technipower, we believe our ability to achieve profitability
      has
      been enhanced.





In
      order
      to fund future acquisitions, we intend to effect one or more private sales
      of equity or debt securities. We have not yet determined the terms or amount
      of
      the securities to be sold. However, any such securities will be offered and
      sold
      without registration under the Securities Act of 1933, as amended, and may
      not
      be reoffered or resold by the purchasers in the United States absent
      registration or an applicable exemption from the registration requirements
      of
      the Securities Act.





In
      December 2006 we signed a financing term sheet for a credit facility to be
      used
      exclusively for acquisitions. The term sheet contemplates a facility of up
      to
      $10 million on a standby basis secured by the acquired assets and guaranteed
      by
      Solomon. The Company and the lender have agreed in principle to increase the
      facility to $15 million. We intend to use the facility to strike more quickly
      at
      unique smaller acquisition opportunities that are consistent with our growth
      plans. The credit facility will have a one year term that will be renewable
      at
      the option of the lender. The standby credit facility will carry an interest
      rate of 12% per annum plus monitoring fees of 1% per quarter of the amounts
      outstanding under the credit facility and investment fees of 5% of the amounts
      outstanding under the facility. We will also pay a commitment fee of 2% of
      the
      full amount of the facility upon execution of definitive documents. The
      investment fees and the commitment fees will be payable in shares of our common
      stock. Any lending under the facility will be conditioned on the approval of
      the
      proposed acquisition by the lender’s investment committee and will be subject to
      the lender’s normal due diligence. The facility is subject to normal
      documentation requirements. While no assurance can be given as to when the
      facility will be put in place, we anticipate that the required documentation
      will be completed in the third quarter of 2007. The lender, JMC Venture
      Partners, LLC, is an affiliate of Michael D’Amelio, a director and executive
      officer of our company.




21


We
      borrowed $1,877,085 in short-term debt financing from certain of our principal
      stockholders and other investors from March 2005 through December 2006. These
      notes are secured by a lien on all of our tangible and intangible assets. On
      March 15, 2006, we issued and sold an aggregate of 235,856 shares of common
      stock to the noteholders. Of these shares, 93,356 shares of common stock were
      issued upon conversion of accrued and unpaid interest on the promissory notes
      through February 28, 2006 at a price per share equal to a 20% discount from
      the
      market price per share of our common stock as of March 14, 2006. The remaining
      142,500 shares were issued to certain of the noteholders as an inducement to
      each noteholder agreeing to extend the maturity date of the notes from March
      15,
      2006 to April 30, 2006. On May 3, 2006, we issued and sold an additional
      aggregate of 124,700 shares of common stock to certain of the noteholders as
      an
      inducement to such noteholders agreeing to extend the maturity date of their
      notes from April 30, 2006 to June 30, 2006. On June 5, 2006, we issued and
      sold
      an aggregate of 63,750 shares of common stock to the holders of certain of
      the
      promissory notes. These shares were issued as an inducement to each noteholder
      agreeing to purchase the notes. On August 11, 2006, we entered into an agreement
      dated as of June 30, 2006 with certain of our noteholders pursuant to which
      the
      maturity date of their notes was extended from June 30, 2006 to January 15,
      2007. As an inducement to such noteholders agreeing to extend their notes,
      we
      issued to each of the noteholders 35,000 shares for each $100,000 of principal
      amount of notes, or fraction thereof, held by each holder.





We
      entered into an agreement effective December 31, 2006 with certain of our
      noteholders pursuant to which the maturity date of their notes was extended
      from
      January 15, 2007 to September 30, 2007. As an inducement to such noteholders
      agreeing to extend their notes, at the noteholder's option, we agreed to either
      (i) issue shares of common stock in an amount equal to 10,000 shares for each
      $100,000 of principal amount of notes, or fraction thereof, held by such
      noteholder or (ii) pay such noteholder an amount in cash equal to 5% of the
      principal amount of the notes, or fraction thereof, held by such noteholder
      in
      lieu of shares. In connection with this extension agreement, on March 8, 2007,
      we issued 79,009 shares of common stock to those noteholders who elected to
      receive shares as consideration for the extension agreement.





On
      July
      28, 2006 we borrowed $125,000 from Jezebel Management Corporation and issued
      a
      promissory note in the principal amount of $125,000 to Jezebel. The note bore
      interest at a rate of 15% per annum and matured on August 28, 2006. As an
      incentive to purchase the note we issued 25,000 shares of common stock to
      Jezebel. This note is now past due and is accruing interest at the rate of
      18%
      per annum. In January 2007 we paid the interest that had accrued though the
      date
      of payment. Jezebel is an affiliate of Michael D’Amelio, a director and
      executive officer of our company.





On
      January 22, 2007, we sold an aggregate of $5,350,000 principal amount of
      Variable Rate Self-Liquidating Senior Secured Convertible Debentures due March
      18, 2008. We used approximately $3,350,000 of the net proceeds of the Debentures
      to redeem approximately 2,873,492 shares of our Series C preferred stock,
      approximately $768,250 of the net proceeds to pay down a promissory note and
      other obligations and retained approximately $1,128,000 of the net proceeds
      as
      working capital.





Beginning
      on the first day of the first month immediately following the earlier of the
      effectiveness of a registration statement covering the resale of the shares
      of
      common stock issuable upon conversion of the Debentures or May 17, 2007, and
      on
      the first day of each month thereafter, we will be required to redeem one tenth
      of the face value of the Debentures in cash or, at our election, with shares
      of
      our common stock. Our ability to pay the redemption price in shares of common
      stock will be subject to specified conditions, including the existence of an
      effective registration statement covering the resale of the shares issued in
      payment of the redemption amount and certain minimum trading volumes in our
      common stock. Any common stock delivered in satisfaction of an amortization
      payment will be valued at 82.5% of the average of the daily volume weighted
      average price of the applicable shares for the 10 trading days prior to the
      amortization payment. Any unconverted Debentures will become due on March 18,
      2008.




At
      any
      time after the effectiveness of a registration statement covering the resale
      of
      the shares of common stock issuable upon conversion of the Debentures, we may
      redeem, subject to specified conditions and upon 12 trading days’ written
      notice, any or all of the outstanding Debentures for a redemption price of
      cash
      in the amount of 120% of the principal amount plus accrued and unpaid interest
      on the Debentures to be redeemed.





Our
      obligations under the Debentures are secured by a security interest in
      substantially all of our assets pursuant to a Security Agreement dated as of
      January 17, 2007 between us and the purchasers of the Debentures. We have agreed
      that in the event that we form any new subsidiaries and move assets to those
      subsidiaries, those subsidiaries will become guarantors of the
      Debentures.




As
      a part
      of the sale of the Debentures, we issued common stock purchase warrants to
      the
      purchasers of the Debentures giving them the right to purchase up to an
      aggregate of 2,006,250 shares of our common stock at an exercise price of $2.00
      per share. The warrant exercise price is subject to adjustment for stock splits,
      stock dividends, and the like. In the event that we issue or grant any rights
      to
      purchase any of our common stock, or other security convertible into our common
      stock, for a per share price less than the exercise price then in effect, the
      exercise price of the warrants with respect to shares of our common stock will
      be reduced to equal such lower price and the number of shares of our common
      stock for which the warrants may be exercised will be increased so that the
      total aggregate exercise price remains constant. The foregoing adjustment to
      the
      exercise price for common stock will not apply to certain exempt issuances,
      including issuances to officers, directors and employees and in strategic
      transactions and up to an aggregate of $200,000 of common stock that may be
      issued in any six month period. All of the warrants will expire on January
      18,
      2012 unless sooner exercised.




22


In
      connection with the sale of the Debentures and warrants, we entered into a
      Registration Rights Agreement with the purchasers of the Debentures and warrants
      under which we are required, on or before February 16, 2007, to file a
      registration statement with the Securities and Exchange Commission covering
      the
      resale of the shares of common stock issuable pursuant to the Debentures and
      warrants and to use our best efforts to have the registration statement declared
      effective as promptly as possible thereafter but in any event, by May 17, 2007.
      We filed the registration statement on February 12, 2007, and it was declared
      effective by the Commission on May 14, 2007.





On
      July
      1, 2007, we failed to make the redemption payment due with respect to the
      Debentures, and that such failure is a default under the terms of the
      Debentures. We also announced that certain penalties may already have begun
      to
      accrue under the Registration Rights Agreement.





We
      expect
      to seek additional capital through the sale of debt and/or equity securities
      in
      2007 in order to fund our operating capital needs.





**Critical
      Accounting Policies and Estimates**





The
      preparation of our consolidated financial statements in conformity with
      accounting principles generally accepted in the United States requires us to
      make estimates and judgments that affect the reported amounts of assets and
      liabilities, net revenue and expenses, and the related disclosures. We base
      our
      estimates on historical experience, our knowledge of economic and market factors
      and various other assumptions that we believe to be reasonable under the
      circumstances. Estimates and judgments used in the preparation of our financial
      statements are, by their nature, uncertain and unpredictable, and depend upon,
      among other things, many factors outside of our control, such as demand for
      our
      products and economic conditions. Accordingly, our estimates and judgments
      may
      prove to be incorrect and actual results may differ, perhaps significantly,
      from
      these estimates under different estimates, assumptions or conditions. We believe
      the following critical accounting policies are affected by significant
      estimates, assumptions and judgments used in the preparation of our consolidated
      financial statements.





***Revenue
      Recognition***





We
      recognize revenue when there is persuasive evidence of an arrangement, delivery
      has occurred, the sales price is fixed or determinable, and collectibility
      is
      reasonably assured. Generally, delivery does not occur until products have
      been
      shipped or services have been provided to the client, risk of loss has
      transferred to the client and client acceptance has been obtained, client
      acceptance provisions have lapsed, or we have objective evidence that the
      criteria specified in the client acceptance provisions have been satisfied.
      In
      situations where a formal acceptance is required but the acceptance only relates
      to whether the product meets its published specifications, revenue is generally
      recognized upon shipment provided all other revenue recognition criteria are
      met. The sales price is not considered to be fixed or determinable until all
      contingencies related to the sale have been resolved.





Revenue
      from service sales is recognized at the contractual rates as labor hours are
      delivered and direct expenses are incurred.





***Inventory
      Valuation***





We
      assess
      the value of our inventory on a quarterly basis and provide for those
      inventories that are obsolete or in excess of our forecasted usage to their
      estimated realizable value. Our estimates of realizable value are based upon
      our
      analysis and assumptions including, but not limited to, forecasted sales levels
      by product, expected product lifecycle, product development plans and future
      demand requirements. Our marketing department plays a key role in our excess
      review process by providing updated sales forecasts, managing product rollovers
      and working with manufacturing to maximize recovery of excess inventory. If
      actual market conditions are less favorable than our forecasts or actual demand
      from our customers is lower than our estimates, we may be required to record
      additional inventory write downs. If actual market conditions are more favorable
      than anticipated, inventory previously written down may be sold, resulting
      in
      lower cost of sales and higher income from operations than expected in that
      period.





***Patents
      and Trademarks***





Our
      patents and trademarks are stated at cost. The recoverability of patents and
      trademarks is re-evaluated each year based upon management’s expectations
      relating to the life of the technology and current competitive market
      conditions. We are amortizing these costs over the life of the respective patent
      or trademark.





***Financial
      Instruments***





Financial
      instruments are initially recorded at their fair values at the time of issuance.
      Multiple financial instruments issued in a transaction are recorded at their
      relative fair values using Black Scholes and other valuation techniques. Those
      recorded as liabilities are remeasured at each reporting period with changes
      in
      fair value reported in operations. Financial instruments issued to settle
      obligations are valued at their fair value on the day of issuance. Differences
      between fair value and carrying value are recognized in operations.





23


**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.





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,
                2006.





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**





We
      performed an evaluation under the supervision and with the participation of
      our
      management, including our chief executive officer and chief financial officer,
      of the effectiveness of our disclosure controls and procedures (as defined
      in
      Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
      amended) as of June 30, 2007. A control system, no matter how well designed
      and
      operated, can provide only reasonable, not absolute, assurance that it will
      detect or uncover failures within our company to disclose material information
      otherwise required to be set forth in our periodic reports. Following the
      evaluation described above, our management, including our chief executive
      officer and chief financial officer, concluded that based on the evaluation
      our
      disclosure controls and procedures were effective at that time.





There
      has
      been no change in our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
      amended) that occurred in the quarter ended June 30, 2007, that has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.





24




**PART
      II. OTHER INFORMATION**




**Item
      1. Legal Proceedings**





On
      September 12, 2005, we filed a lawsuit against Toyota Motor Corporation, Toyota
      Motor Sales U.S.A., Inc. and Toyota Motor Manufacturing North America in the
      United States District Court for the Middle District of Florida, Tampa Division,
      Tampa, Florida for infringement of our Electric Wheel patent. In the lawsuit
      we
      allege that the hybrid transmission drive in the Toyota Prius and Highlander
      infringes a number of claims contained in our U.S. Patent No. 5,067,932 and
      we
      are asking for an injunction barring further infringement as well as damages
      for
      the unauthorized use of our patent by Toyota and its affiliates.





On
      January 10, 2006, we filed a complaint with the ITC in Washington D.C. seeking
      an exclusion order prohibiting the importation of infringing technology. On
      or
      about February 8, 2006, the ITC instituted an investigation based on our
      complaint. The ITC acts as an administrative investigative body to determine,
      among other things, whether or not goods imported into the United States
      infringe U.S. patents. If we are successful in our ITC action, Toyota could
      be
      prohibited from importing into the United States infringing combination motor
      and transmission systems and those products containing such systems, including
      the Toyota Prius and Highlander models. On September 19, 2006, we expanded
      this
      claim to include the Toyota Camry and Lexus hybrid models.





The
      ITC
      held a hearing on our complaint from October 30 through November 3, 2006. On
      February 13, 2007, the ITC Administrative Law Judge who conducted the hearing
      issued a final initial determination in favor of Toyota. In the order, the
      Administrative Law Judge decided that the hybrid transmission drive in the
      Toyota Prius and Highlander vehicles did not infringe Claim 7 in our U.S. Patent
      No. 5,067,932 and that we had not satisfied certain other legal requirements
      that would support an exclusion order against Toyota. On review of the final
      initial determination, the full ITC decided to take no position on the
      Administrative Law Judge’s findings concerning the economic prong of the
      domestic industry requirement. The remainder of the initial determination became
      the ITC final determination. On April 30, 2007 the ITC terminated the
      investigation with a finding of no violation of Section 337 of the Tariff Act
      of
      1930. We are entitled to appeal the decision to the Court of Appeals for the
      Federal Circuit..





We
      are
      appealing the determination of the ITC to the Court of Appeals for the Federal
      Circuit in Washington, DC and have retained Jenner & Block LLP as additional
      patent litigation counsel in this matter. Until the ITC case is completed,
      the
      patent infringement action brought in the United States District Court for
      the
      Middle District of Florida, Tampa Division, is stayed.





Although
      the cost of litigation in these matters is often large, we arranged financing
      from sources outside our company to fund the litigation through the ITC’s
      determination. We provide more information about the arrangements we have made
      to fund this litigation in “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations - Liquidity and Capital
      Resources”, above. We are paying all of the legal fees incurred by us in
      connection with our appeal of the ITC’s adverse decision.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**





**(a)
      Recent Sales of Unregistered Securities**





In
      accordance with the terms of the Company’s Variable Rate Self-Liquidating Senior
      Secured Convertible Debentures due March 18, 2008 (the “Debentures”), on May 24,
      2007, the Company issued 1,953,583 shares of its common stock, $.001 par value
      per share (the “Shares”), to the holders of the Debentures as an advance against
      the first monthly partial redemption of the Debentures, due June 1, 2007. On
      June 1, 2007, the Company issued 1,089,687 additional Shares to the holders
      of
      the Debentures. These Shares were issued as payment of the balance of the first
      monthly redemption of the Debentures, due June 1, 2007. The offer and sale
      of
      securities were made pursuant to the exemption from registration provided by
      Section 4(2) of the Securities Act of 1933, as amended, including pursuant
      to
      Rule 506 and/or Rule 144A thereunder. Such offers and sales were made solely
      to
“accredited investors” under Rule 506 and/or “qualified institutional buyers”
under Rule 144A.





On
      May
      31, 2007, the Company issued 20,000 Shares to the Company’s President, Peter W.
      DeVecchis, Jr. The Shares were issued pursuant to Mr. DeVecchis’s employment
      agreement with the Company. Under Mr. DeVecchis’s employment agreement, he was
      granted a restricted stock award of 100,000 Shares, which Shares are issued
      over
      five (5) years in equal annual vested installments of 20,000 shares beginning
      May 31, 2005. The sale of these securities was determined to be exempt from
      registration under Section 4(2) of the Securities Act as transactions by an
      issuer not involving a public offering.





On
      July
      24, 2007, the Company issued 20,000 Shares to David Long in payment of a $20,000
      finders fee. The sale of these securities was determined to be exempt from
      registration under Section 4(2) of the Securities Act as transactions by an
      issuer not involving a public offering.





On
      July
      25, 2007, the Company issued 750,000 Shares to five non-employee directors.
      Each
      of Duane Crisco, Kenneth Przysiecki, Shannon LeRoy, Thomas Kell and Jonathan
      Betts received 150,000 Shares in consideration of his service as a director
      of
      the Company. Also on July 25, 2007, the Company issued 50,000 Shares to Glen
      Wegner in consideration of his agreement to serve on the Company’s Advisory
      Board. The sale of these securities was determined to be exempt from
      registration under Section 4(2) of the Securities Act as transactions by an
      issuer not involving a public offering.





25





In
      connection with the Company’s acquisition of Technipower LLC in August 2006, the
      Company is required to issue additional shares to the sellers at the one year
      anniversary if the 30-day average trading price is more than 5% less than $0.65
      per share. Such amounts, if any, will not affect purchase consideration. Using
      an average share price based upon the 30-day trading period ending August 14,
      2007, management estimates that the Company will be required to issue
      approximately 1,970,000 additional common shares to the Technipower sellers.





**(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
      2007.





**Item
      3. Defaults Upon Senior Securities**




On
      July
      6, 2007, the Company announced that it failed to make the redemption payment
      on
      July 1 with respect to the Debentures and that such failure is a default under
      the terms of the Debentures. The Company also announced that certain penalties
      may already have begun to accrue under the Registration Rights Agreement. 
In August 2007, the Company failed to make the monthly redemption payment due
      on
      August 1.




The
      Company made the initial redemption payment, due June 1, 2007, in shares of
      common stock.  However, there were an insufficient number of shares of
      common stock remaining available under the registration statement to issue
      shares in payment of each of the redemption payments that were due on July
      1,
      2007 and August 1, 2007, in a timely manner, and the Company has insufficient
      capital resources to make each of the redemption payments in cash.




The
      Company’s failure to make each of each of the redemption payments when due is a
      default under the terms of the Debentures. The unpaid portion of each of the
      redemption amounts began to accrue interest at an annual rate of 15% (or the
      maximum permitted by law, if lower) beginning 5 days after date that each of
      the
      redemption amounts became due and continuing through the date of repayment
      of
      the redemption amounts (but only if the holders ultimately elect to accelerate
      the Debentures which, as of the date hereof, they have not).  Further, at
      the election of the holders to accelerate the Debentures, the outstanding
      principal amount and accrued interest will become due at the Mandatory Default
      Amount (generally, the sum of (i) the greater of (A) 130% of the outstanding
      principal amount of the Debentures, plus all accrued and unpaid interest
      thereon, or (B) the outstanding principal amount of the Debentures, plus all
      accrued and unpaid interest thereon, divided by the conversion price of the
      Debentures multiplied by the volume weighted average price of our common stock
      on the date the Mandatory Default Amount is either (x) demanded or otherwise
      due
      or (y) paid in full, whichever has a higher volume weighted average price,
      and
      (ii) all other amounts, costs, expenses and liquidated damages due in respect
      of
      the Debentures).




In
      connection with the sale of the Debentures, the Company and the purchasers
      of
      the Debentures entered into a Registration Rights Agreement under which, among
      other things, we agreed to file a new registration statement within 30 days
      after determining that the shares covered by any existing registration
      statements are insufficient to permit the sale of all shares that may be issued
      upon redemption or conversion of the Debentures and exercise of the warrants
      issued to the purchasers of the Debentures.  The Company is required to
      cause such new registration statement to be declared effective within 60 days
      after making such determination.  The Company will be subject to certain
      monetary penalties if the registration statement is not filed or does not become
      effective on a timely basis.  The penalties are generally equal to 2% of
      the aggregate purchase price paid for the Debentures then held by the
      purchasers.  If the penalties are not paid in full within 10 days after the
      date payable, we will be liable for interest on the unpaid penalties at a rate
      of 15% per annum, accruing daily.  The penalties may not exceed 2% of the
      aggregate Subscription Amount of the purchasers in any 30-day period and the
      maximum aggregate liquidated damages payable to a purchaser is 24% of the
      aggregate subscription amount paid by such holder.  These penalties may
      already have begun to accrue.




**Item
      5. Other Information**





On
      May
      31, 2007, UHY LLP (“UHY”) and the audit committee of the Company agreed that
      both would be best served if the Company identified new auditors. The parties
      agreed that UHY would resign as the Company’s auditors, effective immediately.
      The reports of UHY on the Company’s financial statements for the past two fiscal
      years contained no adverse opinion or disclaimer of opinion and were not
      qualified or modified as to uncertainty, audit scope, or accounting principles,
      except that in its report for the past two fiscal years, UHY has included an
      explanatory paragraph emphasizing that the financial statements are prepared
      assuming that the Company will continue as a going concern but that the Company
      has recurring operating losses, negative cash flows from its operating
      activities and a working capital deficiency and that those matters raise
      substantial doubt about the Company’s ability to continue as a going concern.
      The audit committee of the Company’s board of directors participated in and
      approved the decision to change independent accountants. In connection with
      its
      audits for the two most recent fiscal years and through May 31, 2007, there
      were
      no disagreements with UHY on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope or procedure, which
      disagreements, if not resolved to the satisfaction of UHY, would have caused
      them to make reference thereto in their reports on the financial statements
      for
      such years. At the Company’s request, UHY furnished it with a letter addressed
      to the Securities and Exchange Commission stating whether or not it agreed
      with
      the above statements.




The
      Company engaged Eisner LLP, of New York, New York, as its new independent
      accountants as of May 31, 2007. During the two most recent fiscal years and
      through May 31, 2007, the Company had not consulted with Eisner LLP regarding
      any of the following: the application of accounting principles to a specified
      transaction, either completed or contemplated; the type of audit opinion that
      might be rendered on the Company’s consolidated financial statements, and none
      of the following was provided to the Company: (a) a written report, or (b)
      oral
      advice that was an important factor considered by the Company in reaching a
      decision as to an accounting, auditing or financial reporting issue; any matter
      that was the subject of a disagreement, as that term is used in Item
      304(a)(1)(iv) of Regulation S-B and the related instructions to Item 304 of
      Regulation S-B; or an event of a type identified in Item 304(a)(1)(iv) of
      Regulation S-B.




26





**Item
                6.**
            **Exhibits****Exhibit
                No.**
            
            **Description**3.10
            
            Certificate
                of Elimination of Series C Preferred Stock. (1)10.1
            
            Securities
                Purchase Agreement dated as of January 17, 2007 among Solomon
                Technologies, Inc. and each purchaser identified on the signature
                pages
                thereto. (2)10.2
            
            Form
                of Variable Rate Self-Liquidating Senior Secured Convertible Debentures.
                (2)10.3
            
            Registration
                Rights Agreement, dated as of January 17, 2007, among Solomon
                Technologies, Inc. and each purchaser identified on the signature
                pages
                thereto. (2)10.4
            
            Form
                of Common Stock Warrant. (2)10.5
            
            Security
                Agreement dated as of January 17, 2007 among Solomon Technologies,
                Inc.
                and each purchaser identified on the signature pages thereto.
                (2)10.6
            
            Redemption
                and Conversion Agreement dated as of January 17, 2007 among Solomon
                Technologies, Inc. and the holders of Series C preferred stock.
                (2)10.7
            
            Employment
                Agreement, dated as of January 27, 2007, by and between Solomon
                Technologies, Inc. and Gary G. Brandt. (1)10.8
            
            Option
                Agreements, dated as of February 5, 2007, by and between Solomon
                Technologies, Inc. and Gary G. Brandt.(3)10.9
            
            Stock
                Restriction Agreement, dated as of February 5, 2007, by and between
                Solomon Technologies, Inc. and Gary G. Brandt. (3)10.10
            
            Incentive
                Compensation Agreement dated May 1, 2007 by and between Solomon
                Technologies, Inc. and Peter W. DeVecchis, Jr.(4)10.11
            
            Employment
                Agreement, dated as of May 31, 2007, by and between Solomon Technologies,
                Inc. and Jack Worthen. (4)10.12
            
            Asset Purchase
              Agreement, dated as of June 1, 2007 by and among Solomon Technologies,
              Inc. and DEL-INC Acquisition LLC and Deltron, Inc. and its subsidiaries
              and shareholders, and related amendments.(4)10.13
            
            Option
                Agreements, dated as of June 4, 2007, by and between Solomon Technologies,
                Inc. and Jack Worthen.(4)16.1
            
            Letter
                from UHY LLP to the Securities and Exchange Commission dated May
                31,
                2007(5).31.1
            
            Certification
                by Chief Executive Officer 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 Chief Executive Officer 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.





(1)
            Incorporated
                by reference from Amendment No. 2 to the Registration Statement on
                Form
                SB-2, File No. 333-13820, filed on February 12, 2007.(2)
            Incorporated
                by reference from the Current Report on Form 8-K filed on January
                18,
                2007.(3)
            Incorporated
                by reference from Amendment No. 4 to the Registration Statement on
                Form
                SB-2, File No. 333-13820, filed on May 9, 2007.(4)
            Filed
                herewith.(5)
            Incorporated
                by reference from the Current Report on Form 8-K filed May 31,
                2007.







27





**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:
      August 20, 2007





**SOLOMON
      TECHNOLOGIES, INC.**











By:
            /s/
                Gary G. Brandt


Gary
      G.
      Brandt


Chief
      Executive Officer


(principal
      executive officer)











By:
            /s/
                Samuel F. Occhipinti


Samuel
      F.
      Occhipinti


Chief
      Financial Officer


(principal
      financial and accounting officer)










28




**Exhibit
      Index**




**Exhibit
                No.**
            
            **Description**10.10
            
            Incentive
                Compensation Agreement dated May 1, 2007 by and between Solomon
                Technologies, Inc. and Peter W. DeVecchis, Jr.10.11
            
            Employment
                Agreement, dated as of May 31, 2007, by and between Solomon Technologies,
                Inc. and Jack Worthen.10.12
            
            Asset Purchase
              Agreement, dated as of June 1, 2007 by and among Solomon Technologies,
              Inc. and DEL-INC Acquisition LLC and Deltron, Inc. and its subsidiaries
              and shareholders, and related amendments.10.13
            
            Option
                Agreements, dated as of June 4, 2007, by and between Solomon Technologies,
                Inc. and Jack Worthen.31.1
            
            Certification
                by Chief Executive Officer 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 Chief Executive Officer 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.





29