**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 September 30, 2006





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 November 10, 2006, there were
      33,755,987 shares of common stock outstanding.





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








**INDEX**





Page
              Number**PART
                I. FINANCIAL INFORMATION**
            3Item
                1. Financial Statements
            3Condensed
                Balance Sheet at September 30, 2006 (Unaudited)
            3Condensed
                Statements of Operations - Three months and nine months ended September
                30, 2006 and 2005 (Unaudited)
            4Condensed
                Statements of Cash Flows - Nine months ended September 30, 2006 and
                2005
                (Unaudited)
            5Condensed
                Statement of Deficiency in Assets at September 30, 2006
                (Unaudited)
            6Notes
                to Condensed Financial Statements (Unaudited)
            7Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of  Operations
            17Item
                3. Controls and Procedures
            26**PART
                II. OTHER INFORMATION**
            27Item
                1. Legal Proceedings
            27Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            27Item
                6. Exhibits
            29**SIGNATURE
                PAGE**
            30





**Introductory
      Comment**





Throughout
      this Quarterly Report on Form 10-QSB, the terms “we,” “us,” “our,” “Solomon” and
“our company” refer to Solomon Technologies, Inc., a Delaware corporation, and,
      unless the context indicates otherwise, includes our wholly-owned subsidiary,
      Town Creek Industries, Inc.





2


**PART
      1**




**ITEM
                1.**
              **FINANCIAL
                  INFORMATION**




**Solomon
      Technologies, Inc.**


Condensed
        Consolidated Balance Sheet


September
        30, 2006
 (Unaudited)
  **Assets**Current
                  assetsCash
              
              $
              306,643Accounts
                  receivable, net
              
              
              526,865Inventories,
                  net
              
              
              1,803,691Due
                  from related party
              
              
              41,979Prepaid
                  expenses and other current assets
              
              
              379,8343,059,012Noncurrent
                  assetsProperty
                  and equipment, net
              
              
              112,714Goodwill
              
              
              2,883,958Intangible
                  assets
              
              
              2,021,033Other
                  assets
              
              
              141,9995,159,704**Total Assets**
              
              $
              8,218,716**Liabilities
                  and Stockholders' Equity**Current
                  liabilitiesAccounts
                  payable
              
              $
              1,403,082Accrued
                  expenses
              
              
              636,792Capital
                  lease obligations
              
              
              14,366Revolving
                  note payable
              
              
              755,000Notes
                  payable to related parties
              
              
              1,849,0694,658,309**Stockholders'
                  Equity**Series
                  C Convertible Preferred Stock4,615,385
                  issued and outstanding (liquidation value $3,036,164)
              
              
              3,000,000Common
                  stock, par value $0.001 pershare;
                  authorized 100,000,000 shares;33,702,237
                  issued and outstanding
              
              
              33,702Additional
                  paid-in capital
              
              
              33,409,814Accumulated
                  deficit
              
              
              (32,883,409
              )3,560,407**Total Liabilities and
                  Stockholder's Equity**
              
              $
              8,218,716
  See
        accompanying notes.





3
 
  **Solomon
        Technologies, Inc.**
 Condensed
          Consolidated Statements of Operations
 (Unaudited)
  **Three
                    Months Ended**
                
                **Nine Months
                    Ended****September
                    30,**
                
                **September
                    30,**
                
                **September
                    30,**
                
                **September
                    30,****2006**
                
                **2005**
                
                **2006**
                
                **2005**Net
                    sales
                
                $
                823,531
                
                $
                3,674
                
                $
                836,443
                
                $
                66,747Cost
                    of goods sold
                
                
                632,913
                
                
                994
                
                
                652,533
                
                
                81,165Gross
                    margin
                
                
                190,617
                
                
                2,680
                
                
                183,910
                
                
                (14,418
                )Operating
                    expenses:Research
                    and development
                
                
                119,128
                
                
                -
                
                
                119,128
                
                
                -Selling,
                    general and administrative
                
                
                931,964
                
                
                482,154
                
                
                2,091,837
                
                
                1,730,250Noncash
                    compensation
                
                
                543,238
                
                
                78,464
                
                
                912,114
                
                
                651,5251,594,330
                
                
                560,618
                
                
                3,123,079
                
                
                2,381,775Operating
                    loss
                
                
                (1,403,713
                )
                
                (557,938
                )
                
                (2,939,169
                )
                
                (2,396,193
                )Other
                    expensesInterest
                    expense
                
                
                (63,012
                )
                
                (986,225
                )
                
                (832,333
                )
                
                (2,441,810
                )Other
                    expenses
                
                
                (1,000
                )
                
                -
                
                
                (1,000
                )
                
                -Loss
                    on extinguishment of redeemablepreferred
                    stock and other debt
                
                
                -
                
                
                -
                
                
                (5,652,404
                )
                
                (39,924
                )(64,012
                )
                
                (986,225
                )
                
                (6,485,737
                )
                
                (2,481,734
                )Net
                    loss
                
                
                (1,467,725
                )
                
                (1,544,163
                )
                
                (9,424,906
                )
                
                (4,877,927
                )Series
                    C Preferred Stock beneficial conversion feature
                
                
                (1,100,000
                )
                
                -
                
                
                (1,100,000
                )
                
                -Loss
                    applicable to commonstockholders
                
                $
                (2,567,725
                )
                $
                (1,544,163
                )
                $
                (10,524,906
                )
                $
                (4,767,927
                )Basic
                    and diluted net loss percommon
                    share
                
                $
                (0.09
                )
                $
                (0.21
                )
                $
                (0.42
                )
                $
                (0.79
                )Weighted
                    average common sharesoutstanding
                    - basic and diluted
                
                
                30,200,548
                
                
                7,396,745
                
                
                25,207,772
                
                
                6,203,034
  See
          accompanying notes.
  4
  **Solomon
          Technologies, Inc.**
 Condensed
          Consolidated Statements of Cash Flows
 (Unaudited)
 **For
                    the Nine Months Ended****September
                    30,****2006**
                
                **2005****Operating
                    activities**Net
                    loss
                
                $
                (9,424,906
                )
                $
                (4,877,927
                )Adjustments
                    to reconcile net loss to cash used by operationsCommon
                    stock, warrants and options issued for services, feesand
                    compensation
                
                
                1,110,801
                
                
                888,861Loss
                    on extinguishment of redeemable preferred stockand
                    other debt
                
                
                5,652,404
                
                
                39,924Accretion
                    and dividends
                
                
                698,257
                
                
                2,413,703Amortization
                    and depreciation
                
                
                397,578
                
                
                71,797Loss
                    on sale of equipment
                
                
                -
                
                
                371Change
                    in operating assets and liabilitiesAccounts
                    receivable
                
                
                (57,800
                )
                
                433Inventories
                
                
                231,484
                
                
                7,033Prepaid
                    expenses and other current assets
                
                
                25,117
                
                
                37,474Accounts
                    payable and accrued expenses
                
                
                574,663
                
                
                453,641Net
                    cash used by operating activities
                
                
                (792,402
                )
                
                (964,690
                )**Investing
                    Activities**Cash
                    received from Technipower LLC acquisition
                
                
                123,137
                
                
                -Purchase
                    of equipment
                
                
                (12,021
                )
                
                (685
                )Proceeds
                    from sale of equipment
                
                
                -
                
                
                10,500Net
                    cash (used) provided by inventing activities
                
                
                111,116
                
                
                9,815**Financing
                    Activities**Proceeds
                    from issuance of notes payable to related parties
                
                
                899,249
                
                
                750,000Repayments
                    of notes and loans payable
                
                
                -
                
                
                (9,507
                )Proceeds
                    from revolving note payable
                
                
                50,000
                
                
                -Proceeds
                    from Rule 16B
                
                
                36,702
                
                
                -Repayments
                    of capital lease obligations
                
                
                (1,715
                )
                
                -Net
                    cash provided by financing activities
                
                
                984,236
                
                
                740,493**Change
                    in cash**
                
                
                302,950
                
                
                (214,382
                )**Cash
                    at beginning of period**
                
                
                3,693
                
                
                249,024**Cash
                    at end of period**
                
                $
                306,643
                
                $
                34,642
  See
          accompanying notes.
  5
  **Solomon
        Technologies, Inc.**
 Condensed
          Consolidated Statement of Deficiency in Assets
 (Unaudited)
 **Series
                    B**
                
                **Series
                    C****Convertible**
                
                **Convertible**
                
                
                
                
                
                **Additional****Preferred
                    Stock**
                
                **Preferred
                    Stock**
                
                **Common
                    Stock**
                
                **Paid-In**
                
                **Accumulated****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Deficit**
                
                **Total**Balance
                    at December 31, 2005
                
                
                120,000
                
                $
                120,000
                
                
                
                
                $
                -
                
                
                8,487,330
                
                $
                8,487
                
                $
                14,876,095
                
                $
                (22,358,203
                )
                $
                (7,353,621
                )Issuance
                      of Redeemable Series C Preferred Stockin
                      connection with acquisition of Technipower
                
                
                
                
                
                
                
                
                4,615,385
                
                
                3,000,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                3,000,000Beneficial
                    conversion feature of Series C Preferred Stock
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,100,000
                
                
                (1,100,000
                )
                
                -Issuance
                      of common stock in connection withacquisition
                      of Technipower
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                4,461,537
                
                
                4,462
                
                
                2,895,538
                
                
                
                
                
                2,900,000Shares
                      issued to extinguish Redeemable Series APreferred
                      Stock
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                15,357,370
                
                
                15,357
                
                
                12,424,113
                
                
                
                
                
                12,439,470Conversion
                
                
                (120,000
                )
                
                (120,000
                )
                
                
                
                
                
                
                
                175,439
                
                
                175
                
                
                119,825
                
                
                
                
                
                -Shares
                      and warrants issued at fair value forfees
                      and services
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,426,150
                
                
                1,427
                
                
                1,185,848
                
                
                
                
                
                1,187,275Exchange
                    of warrants for shares
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,777,567
                
                
                2,777
                
                
                (2,777
                )
                
                
                
                
                -Shares
                    issued to extinguish debt
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                266,844
                
                
                267
                
                
                177,033
                
                
                
                
                
                177,300Stock
                    option grants
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                78,238
                
                
                
                
                
                78,238Payment
                    received related to Section 16(b)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                36,702
                
                
                
                
                
                36,702Shares
                    issued for directors' fees
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                750,000
                
                
                750
                
                
                389,250
                
                
                
                
                
                390,000Expenses
                    paid on Company's behalf
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                129,949
                
                
                
                
                
                129,949Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (9,424,906
                )
                
                (9,424,906
                )Balance
                    at September 30, 2006
                
                
                -
                
                $
                -
                
                
                4,615,385
                
                $
                3,000,000
                
                
                33,702,237
                
                $
                33,702
                
                $
                33,409,814
                
                $
                (32,883,409
                )
                $
                3,560,407
  See
        accompanying notes.
  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 August 2006, the Company acquired Technipower LLC (See
      Note 4), 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
      Company is presently pursuing direct sales opportunities for its products and
      technologies in the marine, industrial and automotive markets. The Company
      is
      identifying licensing opportunities that it anticipates will leverage its
      existing or acquired knowledge and provide substantial positive current
      financial impact while it also aggressively pursues infringers of its existing
      patents. The Company is also identifying acquisition targets that it expects
      will augment its existing intellectual property, marketing channels and human
      resources and provide strong cash flow.





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 used cash in its operating
      activities for several years. For the first nine-months ended September 30,
      2006, the Company had a net loss of $9,424,906 and used cash of $792,402 in
      operating activities. As of September 30, 2006, the Company has a working
      capital deficiency of $1,599,297. 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 substantial
      profits and cash flow. 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”). The accompanying financial
      statements for the interim periods are unaudited. They reflect all adjustments
      (consisting only of normal recurring adjustments) which are, in the opinion
      of
      management, necessary for a fair presentation. These financial statements should
      be read in conjunction with the financial statements and related footnotes
      for
      the year ended December 31, 2005 contained in the annual report on Form 10-KSB
      as filed with the SEC. Operating results for interim periods are not necessarily
      indicative of the results for the full year.





**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiary, Technipower LLC, from the date of acquisition. All
      material intercompany accounts and transactions have been eliminated in
      consolidation.


7


**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**





**Use
      of Estimates**





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 and 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, intangible assets,
      provision for losses in accounts receivable, allowances for inventory
      obsolescence, accounting for depreciation and certain accrued
      liabilities.





**Revenue
      Recognition and Accounts Receivable**





The
      Company recognizes revenue from product sales when it is realized or realizable
      and earned. The Company considers revenue realized and realizable when it has
      persuasive evidence of an arrangement, the product has been delivered and is
      fully functional, the sales price is fixed or determinable and collectibility
      is
      reasonably assured. In general, these conditions are met when the product is
      shipped. Revenues from services are recognized when the services have been
      completed. Credit is extended based on an evaluation of each customer’s
      financial condition; collateral is not required. The Company provides an
      allowance for uncollectible trade receivables, when appropriate, based on aging
      analysis, specific known troubled accounts and historical collection
      experience.





**Inventories**





Inventories,
      which consists of raw materials, completed sub-assemblies and electronic
      components, is stated at the lower of cost or market on a first-in first-out
      basis. The Company provides estimated inventory allowances for slow moving
      and
      obsolete inventory as well as inventory whose carrying value is in excess of
      net
      realizable value.





**Property
      and Equipment**





Property
      and equipment is carried at cost. Depreciation is charged to expense over the
      estimated useful lives of the equipment using the straight-line method. In
      general, the useful life of the Company’s equipment is between 3 and 7 years.
      When assets are retired or disposed of, the cost and related accumulated
      depreciation are removed from the accounts and any gain or loss is recognized
      for the period.





At
      September 30, 2006, the Company had equipment with a
      net
      carrying value of $26,144 that was under capital lease agreements. Amortization
      expense for this equipment is included in depreciation expense.





**Goodwill**





Goodwill
      represents the excess of the purchase price of an acquired enterprise or assets
      over the fair values of the identifiable assets acquired and liabilities
      assumed. Goodwill is tested for impairment annually in its fourth quarter,
      or
      whenever events or circumstances occur indicating that goodwill might be
      impaired. If the carrying amount of the reporting unit goodwill exceeds the
      implied fair value of that goodwill, an impairment loss is recognized.





8





**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**





**Intangible
      Assets**





The
      Company's intangible assets, excluding goodwill, consist of amortizing
      intangible assets of a customer list, trade name, patents and a non-compete
      agreement. These assets are being amortized over their estimated useful lives
      and are subject to impairment tests on an annual or periodic basis.





**Business
      Acquisition Expenses**





Direct
      costs incurred in business acquisition efforts are capitalized for transactions
      that are likely to occur. Such costs are evaluated at the end of each reporting
      period. Costs associated with a potential acquisition that is deemed unlikely
      to
      occur are expensed upon such determination. Capitalized acquisition costs at
      September 30, 2006, which are included in “other assets”, are
      $141,999.





**Research
      and Development Costs**





Research
      and development costs are expensed as incurred.





**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.





**Loss
      Per Share**





Basic
      and
      diluted loss per share amounts are computed by dividing the net loss by the
      weighted average number of common shares outstanding during the period. Common
      stock equivalents are anti-dilutive.





**NOTE
      3 - STOCK BASED COMPENSATION**





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 is based on the estimated fair value of the awards on their grant date
      and is 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. 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. The effect of
      adopting FAS 123(R) was to increase compensation cost and increase reported
      net
      loss by $78,238 for the three and nine-months ended September 30, 2006 for
      stock
      options issued in 2006. All stock options outstanding at December 31, 2005
      and
      2004 were fully vested.





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:


9


**NOTE
      3 - STOCK BASED COMPENSATION (Continued)**




**Nine-Months
                Ended September 30, 2006**Expected
                term
            
            
            **3
                Years**Expected
                volatility
            
            
            **156**
            **%**Dividend
                yield
            
            
            **0.0**
            **%**Risk-free
                interest rate
            
            
            **4.85**
            **%**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 nine-months ended September
      30, 2006 follows:





Shares
            
            Weighted
              Average
              Exercise
                PriceOutstanding
                at January 1, 2006
            
            
            847,835
            
            $
            1.71Granted
            
            
            195,000
            
            
            2.25Exercised
            
            
            -
            
            
            -Forfeited/Expired
            
            
            (280,000
            )
            
            0.96Outstanding
                at September 30, 2006
            
            
            762,835
            
            $
            1.54





The
      following table summarizes the Company's stock options at September 30,
      2006:





Options
                Outstanding
            
            Options
                ExercisableRange
                of Exercise Prices
            
            Number
            
            Weighted
                Average Remaining Life
            
            Weighted
                Average Exercise Price
            
            Number
            
            Weighted
                Average Exercise Price$.055
                to $1.00
            
            
            355,335
            
            
            3.81
            
            $
            0.87
            
            
            355,335
            
            $
            0.87$2.00
                to $2.25
            
            
            407,500
            
            
            2.56
            
            $
            2.51
            
            
            328,548
            
            $
            2.03762,835
            
            
            
            
            
            
            
            
            683,884





**NOTE
      4 - BUSINESS ACQUISITION**





On
      August
      19, 2006, the Company completed the acquisition of Technipower LLC
      (Technipower), a privately-held manufacturer of power supplies and related
      equipment for the defense, aerospace and commercial sectors based in Danbury,
      Connecticut. The Company believes this acquisition creates opportunities for
      synergies that will come from offering more products and services of their
      power
      applications and electric drive systems. Certain shareholders of Solomon are
      holders of warrants and capital appreciation units of Technipower. The
      preliminary purchase price of $6,320,000, which includes acquisition related
      costs of approximately $420,000, consisted of the issuance 4,615,385 shares
      of
      Solomon Series C Preferred Stock valued at $3,000,000 and 4,461,538 shares
      of
      common stock valued at $2,900,000. The valuation of the equity
      securities issued is preliminary and may be adjusted upon completion of the
      appraisal. Any adjustment would result in an adjustment to goodwill. The
      acquisition costs have not been paid as of September 30, 2006. The Company
      may
      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 be recorded as additional purchase consideration.




10


**NOTE
      4 - BUSINESS ACQUISITION (Continued)**





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 fair value of the customer list, trade name and
      non-compete agreements were determined by an independent appraisal firm based
      on
      estimates of future cash flows associated with those assets. The excess of
      the
      purchase price over the fair value of the net assets acquired has been allocated
      to goodwill. The purchase accounting for this acquisition, which is preliminary
      and is expected to be finalized during 2007, is summarized as
      follows:




**Amount**
            
            **Estimated
                Useful Life**Net
                tangible assets, including $123,137 of cash
            
            $
            1,699,042Identifiable
                intangible assets:Customer
                relationship
            
            
            1,210,000
            
            
            5
                yearsTrade
                name
            
            
            367,000
            
            
            10
                yearsNon-compete
            
            
            160,000
            
            
            5
                yearsGoodwill
            
            
            2,883,958Total
                preliminary purchase price
            
            $
            6,320,000





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 each of the
      periods presented:





Three
                Months Ended
            
            Nine
                Months EndedSeptember
                30, 2006
            
            September
                30, 2005
            
            September
                30, 2006
            
            September
                30, 2005Net
                revenues
            
            $
            1,349,295
            
            $
            1,245,174
            
            $
            3,873,351
            
            $
            3,768,289Net
                loss
            
            $
            (1,536,562
            )
            $
            (1,831,578
            )
            $
            (9,786,981
            )
            $
            (5,713,105
            )Net
                loss per share:Basic
                and diluted
            
            $
            (0.04
            )
            $
            (0.15
            )
            $
            (0.37
            )
            $
            (0.54
            )





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
      merger had taken place at the beginning of each of the periods presented.





**NOTE
      5 - INTANGIBLE ASSETS**





The
      following table presents the details of the Company’s intangible assets at
      September 30, 2006:





Cost
            
            Accumulated
              Amortization
            
            Net
                Book
              ValueAmortizable:Customer
                relationship
            
            $
            1,210,000
            
            $
            (29,274
            )
            $
            1,180,726Trade
                name
            
            
            367,000
            
            
            (4,440
            )
            
            362,560Non-compete
                agreement
            
            
            160,000
            
            
            (3,871
            )
            
            156,129Patents
            
            
            814,162
            
            
            (492,554
            )
            
            321,618$
            2,551,162
            
            $
            (530,129
            )
            $
            2,021,033





Based
      on
      the carrying amount of the intangible assets and assuming no future impairment
      of the underlying assets, the estimated future amortization is as follows for
      the years ended December 31:


11


**NOTE
      5 - INTANGIBLE ASSETS (Continued)**





2006(October 1 through December 31)
            
            $
            98,5822007
            
            
            394,3292008
            
            
            394,3292009
            
            
            388,9002010
            
            
            317,654Thereafter
            
            
            427,239$
            2,021,033





**NOTE
      6 - INVENTORIES**





Inventories
      at September 30, 2006 consist of the following:





Raw
                materials
            
            $
            944,146Work-in-process
            
            
            787,373Finished
                goods
            
            
            72,172$
            1,803,691





**NOTE
      7 - STOCK ISSUANCES AND OTHER EQUITY EVENTS**





On
      February 15, 2006, the Company issued 15,357,370 shares of common stock with
      an
      estimated fair value of $12,439,470 to extinguish its obligations under its
      Redeemable Series A Preferred Stock. In February 2006, the Company also issued
      256,844 shares of its common stock with an estimated fair value of $170,200
      to
      extinguish its obligations under notes payable, including accrued interest.
      In
      connection with these transactions an extinguishment loss of $5,667,569 was
      recognized.





During
      the quarter ended March 31, 2006 the Company issued 100,000 warrants and 477,500
      common shares with an estimated aggregate fair value of $264,450 to directors,
      certain note holders, and an officer for services and fees. Operating results
      include a related charge for $264,450. The warrants may be exercised to purchase
      100,000 shares of the Company’s common stock at $.40 a share.





On
      April
      4, 2006, the Company filed a certificate of elimination for its Series A
      preferred stock and its Series B preferred stock with the Secretary of State
      of
      Delaware, the Company’s state of incorporation. The Company filed the
      certificate of elimination because no shares of either class of preferred stock
      are outstanding and the Company has no plans to issue such stock.





On
      May 3,
      2006, the Company issued an aggregate of 124,700 shares of common stock to
      the
      holders of certain promissory notes as an inducement to each noteholder agreeing
      to extend the promissory notes.  The issuance was recorded at fair value
      and the Company recorded $62,350 of non-cash compensation.





On
      May 8,
      2006, in connection with the execution of a letter of intent to acquire Power
      Solutions, Inc., the Company issued 100,000 shares of common stock to each
      of
      Myron Koslow and the Norman S. and Marian B. Berkowitz Revocable Trust. The
      issuance was recorded at fair value and the Company recorded $142,000 of
      capitalized business acquisition costs.





On
      May 8,
      2006, the Company issued 10,000 shares of common stock with an estimated
      fair value of $7,100 to Floyd E. Johnson in settlement of $22,265 of
      indebtedness arising from services rendered to us by FEJ Consulting. In
      connection with this transaction, the Company recorded a gain of $15,165 on
      the
      settlement of debt.





On
      May
      31, 2006, the Company issued 20,000 shares of common stock with an estimated
      fair value of $14,200 to its President, Peter W. DeVecchis pursuant to Mr.
      DeVecchis’ employment agreement.




12




**NOTE
      7 - STOCK ISSUANCES AND OTHER EQUITY EVENTS (Continued)**





On
      June
      5, 2006, the Company issued an aggregate of 63,750 shares of common stock to
      the
      holders of certain promissory notes as an inducement to each noteholder agreeing
      to purchase the notes. The issuance was recorded at fair value and the Company
      recorded $42,075 of non-cash compensation.





On
      August
      4, 2006 the Company granted 150,000 of common shares to each of the five
      directors of the Company for services performed over the last year. The
      aggregate of 750,000 shares issued to the five directors is estimated to have
      a
      fair market value of $375,000.





On
      August
      17, 2006 and in connection with the acquisition of Technipower, the Company
      issued 4,615,385 shares of Series C convertible redeemable preferred stock
      (the
“Series C Preferred Stock”), at an estimated fair value of $3,000,000. The
      holders of the Series C Preferred Stock are entitled to dividends at the rate
      of
      10% of the stated value ($0.65 per share) and a liquidation preference equal
      to
      the stated value plus accrued dividends. The holders of the Series C Preferred
      Stock also have redemption rights. Pursuant to the terms of the Series C
      Preferred Stock and in the event the Company does not redeem these shares by
      October 15, 2006, the Company is required to make a payment of $250,000 to
      the
      holders of the Series C Preferred Stock. If the Series C Preferred Stock is
      not
      redeemed and such $250,000 payment is not made by December 15, 2006, the
      redemption price increases to 175% of the stated value of the Series C Preferred
      Stock, plus accrued interest. The Company did not make the October 15, 2006
      payment of $250,000. A beneficial conversion feature was
      attributable to the Series C Preferred Stock since the fair value of the common
      stock on the date of commitment was in excess of the value attributed to the
      Series C Preferred Stock. The beneficial conversion feature was limited to
      the
      $3 million value of the Series C Preferred Stock and is being recorded through
      December 15, 2006, the date that the Series C Preferred Stock holders can
      convert their shares to common stock.





**NOTE
      8 - NOTES PAYABLE**





On
      April
      7, 2006, the Company borrowed $50,000 from Peter and Barbara Carpenter (the
      “Carpenters”) and Woodlaken LLC assigned $50,000 of its promissory note issued
      by the Company on March, 2006 in the aggregate principal amount of $172,000
      (the
“Woodlaken Note”) to the Carpenters. On April 10, 2006, the Company borrowed
      $50,000 from Pascal Partners, LLC and Woodlaken assigned $50,000 of the
      Woodlaken Note to Pascal. The Company issued promissory notes in the principal
      amount of $100,000 to the
      Carpenters and Pascal. The Company also issued a promissory note in the
      principal amount of $72,000 to Woodlaken representing the balance of the
      principal amount under the Woodlaken Note. The new notes bear interest at a rate
      of 12% per annum and were due to mature on April 30, 2006.





On
      April
      28, 2006, the Company entered into an agreement with all related and affiliated
      party promissory note holders to extend the terms of each note to June 30,
      2006.
      As an inducement to the extension, the Company issued each investor 10,000
      shares of common stock for each $100,000 in principal amount of Notes held
      for
      an aggregate of 124,700 shares.





On
      May
      23, 2006, the Company borrowed $200,000 from Coady Family LLC (“Coady”) and
      issued a promissory note in the principal amount of $200,000 to Coady. The
      new
      note bears interest at a rate of 12% per annum and was due to mature on June
      30,
      2006.





On
      June
      13, 2006, the Company borrowed $25,000 from Steven Kilponen (“Kilponen”) and
      issued a promissory note in the principal amount of $25,000 to Kilponen. The
      new
      note bears interest at a rate of 12% per annum and was due to mature on June
      30,
      2006.





On
      July
      3, 2006, the Company borrowed $100,000 from Meriden Cooper and issued a
      promissory note in the principal amount of $100,000 to Meriden Cooper. The
      new
      note bears interest at a rate of 12% per annum and is due to mature on January
      15, 2007. As an incentive to Meriden Cooper purchasing the note, the Company
      has
      agreed to issue to Meriden Cooper 50,000 shares of common stock.





On
      July
      28, 2006 the Company borrowed $125,000 from Jezebel and issued a promissory
      note
      in the principal amount of $125,000 to Jezebel. The new note bears interest
      at a
      rate of 15% per annum and matures on August 28, 2006. As an incentive to
      purchase the note the Company has agreed to issue 25,000 shares of common stock
      to Jezebel.




13




**NOTE
      8 - NOTES PAYABLE (Continued)**





On
      August
      11, 2006 the Company entered into an agreement dated as of June 30, 2006 with
      all of its noteholders to extend the maturity date for all promissory notes
      held
      to January 15, 2007. As an incentive to the noteholders, the Company has agreed
      to issue to each of the noteholders shares of common stock of the Company in
      an
      amount equal to 35,000 shares for each $100,000, in principal amount of notes,
      or fraction thereof, held by such noteholder. Total shares approved were 548,950
      of which 461,450 were issued and outstanding at September 30, 2006. The shares
      had a fair value of $614,824 which was recorded as deferred debt costs and
      is
      being amortized over the debt extension period. Amortization expense for the
      three months ended September 30, 2006 was approximately $240,000.





The
      board
      of directors of the Company has authorized the Company to borrow up to an
      additional $28,000 from the initial investors and others on the same terms
      as
      the notes and the new note issued to Meriden Cooper.





Pursuant
      to the Company’s revolving note payable (the “Note”) with a bank, the Company
      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 September 30, 2006), requires no principal amortization,
      and has a maturity date of June 1, 2007. The Company had $92,167 of additional
      availability at September 30, 2006.





**NOTE
      9 - CONCENTRATION OF RISK**





Customers:





Five
      customers accounted for 85% of sales for the nine months ended September 30,
      2006, of which $439,254 is included in accounts receivable at September 30,
      2006. Two customers accounted for 48% and 23 % respectively of sales for the
      nine months ended September 30, 2005.





Supplier:





Presently,
      the Company has one manufacturer for a principal component of its marine
      propulsion systems. If the supplier were to become unwilling or unable to
      continue fulfilling the Company’s orders, it could have a materially adverse
      effect on the Company’s financial position.





**NOTE
      10 - COMMITMENT AND CONTINGENCIES**





**Patent
      Infringement**





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 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 $129,949 were recorded as professional fee expense as well
      as an
      increase t o
      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.





The
      Company has filed a lawsuit against Toyota alleging claims for patent
      infringement and damages from the unauthorized use of the Company’s patents. In
      connection therewith the Company filed a complaint with the United States
      International Trade Commission (ITC) seeking an exclusion order prohibiting
      the
      importation of infringing technology.
      The ITC held a hearing from October 30, 2006 through November 3, 2006. The
      Company anticipates that the ITC Administrative Law Judge will issue an initial
      determination on or before January 18, 2007.




14




**NOTE
      10 - COMMITMENT AND CONTINGENCIES (Continued)**





The
      Company is not involved in any other litigation.





**Accrued
      and Unpaid Payroll Taxes**





At
      September 30, 2006, the Company has accrued interest and penalties of $185,000
      related to unpaid payroll and payroll related taxes of approximately $79,000.
      On
      July 28, 2006, the Company paid $62,758 for unpaid payroll taxes, which is
      expected to resolve the trust portion of the IRS liability. The penalty and
      interest portion of this obligation remains outstanding and continues to subject
      the Company to delinquency proceedings from the U.S. Internal Revenue Service.





**Leases** ****





Technipower
      leases certain equipment under capital leases with third parties, which include
      a security interest in the property maintained by the lessors. **** In
      addition, Technipower leases its premises in Danbury, Connecticut under an
      operating lease, which expires in July 2012. The lease requires the lessor
      to
      furnish certain improvements to the demised premises and provides for
      escalations for real estate taxes and operating expenses. Future minimum lease
      payments at September 30, 2006 follow:





Operating
                Lease
            
            CapitalLeases2006
            
            $
            24,375
            
            $
            3,9742007
            
            
            97,500
            
            
            11,1982008
            
            
            97,500
            
            
            --2009
            
            
            97,500
            
            
            --2010
            
            
            97,500
            
            
            --Thereafter
            
            
            150,313
            
            
            --15,172$
            564,688Interest
            
            
            
            
            
            (806
            )$
            14,366





Rent
      expense for the nine months ended September 30, 2006 was
      $37,781.





**NOTE
      11 - FINANCING AND EQUITY TRANSACTIONS WITH RELATED PARTIES**





During
      the quarter ended June 30, 2006 the Company issued 188,450 common shares with
      an
      estimated aggregate fair market value of $104,426 to certain note holders.
      Operating results include a related charge for $104,426 for the quarter ended
      June 30, 2006. The Company also issued 20,000 shares of common stock with an
      estimated fair value of $14,200 to its President pursuant to his employment
      agreement.




**NOTE
      12 - 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. Net revenues and operating income related
      to the Power Electronics Division for the three months periods ended September
      30, 2006 were $799,312 and $89,109, respectively.





15





**NOTE
      13 - NEW ACCOUNTING STANDARDS**





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.





In
      June
      2006, the FASB issued FASB Interpretation No. 48, ‘‘Accounting for Uncertainty
      in Income Taxes (an interpretation of FASB Statement No. 109)’’ (‘‘FIN 48’’).
      The provisions of FIN 48 are effective for fiscal years beginning after December
      15, 2006. This statement was issued to clarify the accounting for the
      uncertainty related to income taxes. FIN 48 requires the evaluation of whether
      a
      tax position is more likely than not to be sustained upon examination with
      the
      assumption that the position will be examined by the relevant tax authorities.
      FIN 48 also requires such tax positions to be measured at the largest amount
      of
      the respective benefit that is greater than 50% likely of being realized upon
      ultimate settlement. The Company is currently assessing the impact that the
      adoption of FIN 48 will have on its results of operations and financial
      position.





In
      September 2006, the U.S. Securities and Exchange Commission staff issued Staff
      Accounting Bulletin No. 108 ("SAB 108"), "Considering the Effects of Prior
      Year
      Misstatements when Quantifying Misstatements in Current Year Financial
      Statements". SAB 108 eliminates the diversity of practice surrounding how public
      companies quantify financial statement misstatements. It establishes an approach
      that requires quantification of financial statement misstatements based on
      the
      effects of the misstatements on each of the company's financial statements
      and
      the related financial statement disclosures. We do not expect SAB 108 to have
      a
      material impact on our financial condition or results of operations. SAB 108
      must be applied to annual financial statements for their first fiscal year
      ending after November 15, 2006.





16




**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 September 30, 2006 and 2005 should
      be read in conjunction with our 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 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 complete 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 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 strong 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 include 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, in the registration statement
      of which this prospectus forms a part.





Under
      the
      Certificate of Designations for our Series C preferred stock, the holders of
      the
      Series C preferred stock are entitled to dividends at the rate of 10% of the
      stated value of the Series C preferred stock and a liquidation preference equal
      to the stated value of the Series C preferred stock plus accrued dividends.
      The
“stated value” per share of Series C Preferred Stock is currently $0.65. The
      holders of Series C preferred stock also have redemption rights. We were
      obligated to make a payment of $250,000 in cash to the holders of the Series
      C
      preferred stock if we did not redeem their shares by October 15, 2006. We have
      not yet redeemed the Series C preferred stock or made this payment. If the
      Series C preferred stock is not redeemed and such $250,000 payment is not made
      by December 15, 2006, the redemption price increases to 175% of the stated
      value
      of the Series C preferred stock, plus accrued interest.





17


As
      a
      result of the acquisition of Technipower, our operations now comprise 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. While
      our operating assets are divisionalized, we expect and encourage a formal
      exchange of engineering and sales talent across the business units.





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
      May 8,
      2006, we entered into a letter of intent to acquire Power Solutions, Inc.,
      a
      Long Island, New York based manufacturer of high volume direct current power
      supplies and power supply systems and components for the medical,
      telecommunications and commercial sectors. The letter of intent has expired
      and
      we cannot assure you whether or when the acquisition will close. Moreover,
      we
      cannot assure you that Power Solutions will not be acquired by another company
      or taken off the market completely.





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.





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.





In
      February 2004, we issued 35,000 shares of preferred stock and warrants to
      purchase 35,000 shares of common stock to five investors for $140,000. On April
      15, 2004, the five investors from the February 2004 private placement
      unanimously consented to an amendment to the existing Series A convertible
      preferred stock designation and, in return, exchanged their investment in the
      February 2004 private placement for an aggregate of 140,000 shares of redeemable
      Series A preferred stock and 280,000 warrants. In May 2004, we completed a
      private placement of our redeemable Series A preferred stock, a mandatorily
      redeemable, convertible preferred stock, and warrants to purchase common stock,
      raising gross proceeds from the offering of $1,745,000, before deducting
      placement agent fees and costs. On November 5, 2004, we sold an aggregate of
      390,000 shares of redeemable Series A preferred stock and warrants to purchase
      an aggregate of 780,000 shares of common stock to five investors for $1.00
      per
      unit in the initial closing of a second private placement of our redeemable
      Series A preferred stock and warrants. We sold an aggregate of an additional
      225,000 shares of redeemable Series A preferred stock and warrants to purchase
      an additional 450,000 shares of common stock to two investors in a second
      closing of the private placement on December 23, 2004.





We
      borrowed $1,682,000 in short-term debt financing from certain of our principal
      stockholders and other investors from March 2005 through October 2006. These
      notes are secured by a lien on all of our tangible and intangible assets. We
      have been authorized by the board to obtain an additional $128,000 of short-term
      debt financing. 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.





18


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 bears
      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 in default and carries a default interest rate of
      18%
      per annum.





In
      August
      2005, we issued 1,754 shares of our common stock and an aggregate of 518,016
      shares of our Series B Preferred Stock in settlement of certain obligations.





We
      expect
      to seek additional capital through the sale of debt and/or equity securities
      in
      the fourth quarter of 2006 in order to fund our operating capital needs.





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 United States International
      Trade Commission (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. We anticipate that the ITC Administrative
      Law Judge will issue an initial determination on or before January 18,
      2007.





The
      patent infringement action brought in the United States District Court for
      the
      Middle District of Florida, Tampa Division, is stayed until the ITC case is
      completed.





Although
      the cost of litigation in these matters is often large, we have arranged
      financing from sources outside our company to fully fund the litigation to
      its
      conclusion. We provide more information about the arrangements we have made
      to
      fund this litigation in “Liquidity and Capital Resources” below.





On
      September 14, 2005, we issued an aggregate of 26,000 shares of our common stock
      to three employees of our company and one consultant in consideration for their
      services. On March 28, 2006, we issued 10,000 shares to one consultant in
      consideration of his services to our company.





On
      February 15, 2006, we completed a recapitalization of our Series A preferred
      stock whereby each outstanding share of Series A preferred stock and all accrued
      and unpaid dividends thereon were converted into five shares of common stock.
      At
      the time of the recapitalization there were 3,071,474 shares of Series A
      preferred stock outstanding. These shares were converted into 15,357,370 shares
      of common stock. In addition, on February 15, 2006, warrants to purchase an
      aggregate of 4,646,474 shares of common stock at an exercise price of $1.00
      per
      share were exchanged by the warrant holders for an aggregate of 2,323,237 shares
      of common stock, and on March 3, 2006, warrants to purchase an aggregate of
      750,000 shares of common stock at an exercise price of $1.00 per share were
      exchanged by the warrant holders for an aggregate of 375,000 shares of common
      stock. The warrants were held principally by the individuals and entities that
      had held the Series A preferred stock. The recapitalization and warrant exchange
      were effected on the basis of an exemption from registration provided by Section
      3(a)(9) of the Securities Act of 1933, as amended.





19


Prior
      to
      the recapitalization, Woodlaken LLC, a Connecticut limited liability company,
      served as the representative of the holders of the Series A preferred stock.
      Woodlaken had held an irrevocable proxy from each holder of Series A preferred
      stock to vote such holder’s shares of Series A preferred stock for directors and
      on other matters on which the Series A preferred stock was entitled to vote.
      Woodlaken was able to elect a majority of our board of directors and exercise
      significant influence over all matters requiring stockholder approval, including
      the approval of significant corporate transactions. As a result of the
      recapitalization, the proxies held by Woodlaken terminated.





**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 September 30, 2006 compared with three months ended September
      30,
      2005.*





For
      the
      three months ended September 30, 2006 we generated revenues of $823,531 as
      compared to $3,674 for the three months ended September 30, 2005 an increase
      of
      $819,857. Cost of products sold for the three months ended September
      30, 2006 was $632,913 generating a gross margin of $190,617. Cost of products
      sold for the three months ended September 30, 2005 were $994 generating a gross
      margin of $2,680. The increase in our revenues was due to the results of our
      Power Electronics Division which was acquired on August 17, 2006. We believe
      with this addition, revenue levels equal to and above previous quarters will
      continue.





Research
      and Development costs were $119,128 for the three months ended September 30,
      2006 compared to $0 for the three months ended September 30, 2005. The increase
      was the result of continued R&D expenditures in our Power Electronics
      Division of $109,128 and $10,000 of R & D expenditures in our Motive Power
      Division.





Selling,
      general and administrative expenses were $931,964 for the three months ended
      September 30, 2006 compared to $482,154 for the three months ended September
      30,
      2005, an increase of $449,810 or 93.3%. This increase was primarily due to
      an
      issuance of common stock to certain promissory note holders as incentive to
      extend the due dates for payment to January of 2007 and approximately $140,000
      related to the Power Electronics Division. Other general and administrative
      expenses were above the previous year caused by an increase in management
      activity and professional fees focused on the acquisition of Technipower
      LLC.





Non
      cash
      compensation was $543,238 for the three months ended September 30, 2006 as
      compared to $78,464 for the three months ended September 30, 2005 and increase
      of $464,774. Non cash compensation consisted of the Company’s common stock
      issued to directors and officers for services rendered and fees.





We
      incurred interest expense of $63,012 for the three months ended September 30,
      2006. Interest expense incurred for the three months ended September 30, 2005
      was $986,225. The decrease of $923,213 in interest expense was due primarily
      to
      a decrease in interest accretion of $986,225 recorded on our redeemable Series
      A
      preferred stock, which was recapitalized as common shares in the first quarter
      of 2006.





We
      reported a net loss for the three months ended September 30, 2006 of $1,467,725.
      Our net loss for the three months ended September 30, 2005 was $1,544,163.
      Loss
      applicable to common stockholders for the three months ended September 30,
      2006
      was $2,567,725 reflecting a beneficial conversion feature of $1,100,000 relating
      to Series C Preferred Stock issued in the quarter.





20





*Nine
      Months ended September 30, 2006 Compared to Nine Months ended September 30,
      2005.*





For
      the
      nine months ended September 30, 2006 we incurred a non-cash loss of $5,652,404
      on the extinguishment of debt of redeemable preferred stock and other debt.
      The
      loss was measured by the excess of the market value of our common stock issued
      over the carrying value of the obligations including accrued accretion and
      interest. Last year we incurred a loss of $39,924 on a similar
      transaction.





For
      the
      nine months ended September 30, 2006 we generated revenues of $836,443 as
      compared to $66,747 for the nine months ended September 30, 2005, an increase
      of
      $769,696. This increase was primarily due to the addition of Technipower LLC
      which now operates as the Power Electronics Division. Cost of products sold
      for
      the nine months ended September 30, 2006 was $652,533 generating a gross margin
      of $183,910. Cost of product sold for the nine months ended September 30, 2005
      was $81,165 generating a gross margin loss of $14,418. The increase in our
      margin was due to the addition of Techipower revenues to our operating activity.
      We believe our margin will continue to improve with the continuity of our Power
      Electronics Division and with an increase in sales in our Motive Power
      Division.





Research
      and Development costs were $119,128 for the nine months ended September 30,
      2006
      compared to $0 for the nine months ended September 30, 2005. The increase was
      the result of continued R&D expenditures in our Power Electronics Division
      of $109,128 and $10,000 of R & D expenditures in our Motive Power
      Division





Selling,
      general and administrative expenses were $2,091,837 for the nine months ended
      September 30, 2006 as compared to $1,730,250 for the nine months ended September
      30, 2005. This increase of $361,587 or 20.1% is primarily due to the issuance
      of
      common stock as incentive to certain promissory note holders to extend the
      terms
      of the notes held.





Non
      cash
      compensation expenses for the nine months ended September 30, 2006 were $912,114
      as compared to $651,525 for the nine months ended September 30, 2005. This
      increase was primarily due to the issuance of common stock to directors and
      officers for services rendered and fees. We expect to issue stock in lieu of
      compensation in future quarters if necessary to preserve operating
      capital.





Interest
      Expense was $832,233 for the nine months ended September 30, 2006 as compared
      to
      $2,441,810 for the nine months ended September 30, 2005. The decrease of
      $1,609,577 was due primarily to a decrease in interest accretion of $1,664,175
      reflecting the recapitalization of series A preferred stock during the first
      quarter of 2006.





We
      reported a net loss for the nine months ended September 30, 2006 of $9,424,906.
      Our net loss for the nine months ended September 30, 2005 was $4,877,927. The
      increase in net loss for the nine months ended September was primarily due
      to
      the non-cash loss of $5,652,404 on the extinguishment of redeemable preferred
      stock. Loss applicable to common stockholders for the nine months ended
      September 30, 2006 was $10,524,906 reflecting a beneficial conversion feature
      of
      $1,100,000 relating to Series C Preferred Stock issued in August
      2006.





Solomon
      Technologies, Inc. acquired Technipower LLC on August 17, 2006. As a result,
      the
      activities of the two separate entities are discussed below for each of the
      full
      periods presented.





Motive
      Power Division





*Three
      Months Ended September 30, 2006 Compared With Three Months Ended September
      30,
      2005*





For
      the
      three months ended September 30, 2006 we generated revenues of $24,219 as
      compared to $ 3,674 for the
      three months ended September 30, 2005, an increase of $20,545. Cost of products
      sold for the three months ended September 30, 2006 was $25,201 generating a
      gross margin of $(1,482). Cost of products sold for the three months ended
      September 30, 2005 was $ 994 generating a gross margin of $2,680. The increases in our revenues was due
      to an
      increase in shipments from prior year. We believe we will improve our total
      margins with an increase in sales, which will improve our economies of scale.





21


Salaries
      and benefits for the three months ended September 30, 2006 were $81,464 compared
      to $96,764 for the three months ended September 30, 2005, a de crease of
      $15,300, or 15.8%. This decrease was due primarily to a reduction in
      staff.





Noncash
      compensation **** for
      the
      three months ended September 30, 2006 was $543,238 compared to $78,464 for
      the
      three months ended September 30, 2005. Noncash compensation for 2006 consisted
      of the market value of the Company’s common stock issued to directors, certain
      note holders, and an officer for services rendered and fees. We expect to issue
      stock in lieu of cash compensation in future quarters if necessary to preserve
      operating capital.





Professional
      fees for the three months ended September 30, 2006 were $278,093 as compared
      to
      $260,368 for the three months ended September 30, 2005, an in crease of
      $17,125 or 6.8%. This in crease was due
      primarily to increased activity supportive of the Technipower
      acquisition.





Advertising
      expense for the three months ended September 30, 2006 was $0 as compared to
      $420
      for the three months ended September 30, 2005. The decrease in advertising
      expense was due to the termination of our marketing personnel, as well as the
      termination of trade show attendance, publication advertisements and direct
      advertising activity.





Travel
      and entertainment costs for the three months ended September 30, 2006 were
      $14,746 as compared to $10,823 for the three months ended September 30, 2005,
      an
      increase of $3,923, or 36.2%. The
      increase in travel and entertainment costs was due primarily to management
      travel to support activities for the Technipower acquisition and Toyota
      litigation demands.





Rent
      for
      the three months ended September 30, 2006 was $10,971 as compared to $11,723
      for
      the three months ended September 30, 2005, a decrease of $752, or 6.4%.





Other
      general and administrative costs for the three months ended September 30, 2006
      were $496,932 as compared to $102,056 for the three months ended September
      30,
      2005, an in crease of
      $394,876 or 386.0%. This increase was primarily due to the issuance of common
      stock as incentive to certain promissory note holders to extend the terms of
      the
      notes held. Other costs primarily consisted of depreciation, amortization of
      intangibles, insurance, office supplies and equipment, and printing.





We
      incurred interest expense of $51,271 for the three months ended September 30,
      2006. Interest expense incurred for the three months ended September 30, 2005
      was $ 986,225 .
      The
      decrease of $934,954 in interest expense was due primarily to a decrease in
      interest accretion of $986,225 recorded on our redeemable Series A preferred
      stock, which was recapitalized as common shares in the first quarter of
      2006.





We
      reported a net loss for the three months ended September 30, 2006 of $1,400,254.
      Our net loss for the three months ended September 30, 2005 was $ 1,544,163 .





*Nine
      Months Ended September 30, 2006 Compared With Nine Months Ended September 30,
      2005*





For
      the
      nine months ended September 30, 2006 we incurred a non-cash loss of $5,652,404
      on the extinguishment of redeemable preferred stock and other debt. The loss
      was
      measured by the excess of the market value of our common stock issued over
      the
      carrying value of the obligations including accrued accretion and interest.
      Last
      year we incurred a loss of $39,924 on a similar transaction.





For
      the nine months
      ended September 30, 2006 we generated revenues of $37,371 as compared to $66,747
      for the nine months
      ended September 30, 2005, a decrease of $29,616. The decrease in revenues was
      due to a decrease in shipments from prior year. Cost of products sold for the nine months
      ended September 30, 2006 was $45,321 generating a gross margin of $(8,190).
      Cost
      of products sold for the nine months
      ended September 30, 2005 was $81,165 generating a loss of $14,418. We believe
      we
      will improve our margins and, with an increase in sales, and achieve economies
      of scale.





Salaries
      and benefits for the nine months
      ended September 30, 2006 were $3 98,204 compared
      to $348,865 for the nine months
      ended September 30, 2005, an increase of $49,339, or14.1%. This increase was
      due
      primarily to stock compensation above base pay to certain corporate officers
      in
      the second quarter of 2006.





22


Noncash
      compensation **** for
      the nine months
      ended September 30, 2006 was $912,114 compared to $651,525 for the nine months
      ended September 30, 2005. Noncash compensation for 2006 consisted of the market
      value of the Company’s common stock issued to directors, certain note holders,
      and an officer for services rendered and fees. We expect to issue stock in
      lieu
      of cash compensation in future quarters if necessary to preserve operating
      capital.





Professional
      fees for the nine months
      ended September 30, 2006 were $784,053 as compared to $650,207 for the nine months
      ended September 30, 2005, an increase of $133,846, or 17.1%. Professional fees
      include $129,949 of non-cash charges funded on our behalf by Oliver Street
      Finance LLC and related to our patent litigation referred to in Note 10 to
      the Financial Statements contained in this Report. This increase is due
      primarily to costs associated with reporting to the SEC and necessary activities
      related to patent infringement litigation against Toyota Motor
      Company.





Advertising
      expense for the nine months
      ended September 30, 2006 was $0 as compared to $14,001 for the nine months
      ended September 30, 2005. The decrease in advertising expense was due to the
      termination of our marketing personnel, as well as the termination of trade
      show
      attendance, publication advertisements and direct advertising
      activity.





Travel
      and entertainment costs for the nine months
      ended September 30, 2006 were $44,681 as compared to $88,793 for the nine months
      ended September 30, 2005, a decrease of $44,112 or 98.7%. The decrease in travel
      and entertainment costs was due primarily to the termination of our presence
      at
      trade shows **** and
      the
      elimination of all travel and associated entertainment related to reduced sales
      and corresponding installations.





Rent
      for
      the nine months
      ended September 30, 2006 was $25,987 as compared to $28,076 for the nine months
      ended September 30, 2005, a decrease of $2,089, or 7.4%.





Other
      general and administrative costs for the nine months
      ended September 30, 2006 were $803,090 as compared to $600,308 for the nine months
      ended September 30, 2005, an increase of $202,782, or 33.8%. This increase
      was
      primarily due to the issuance of common stock as an incentive for certain
      promissory note holders to extend the terms of the notes held. Other costs
      primarily consisted of depreciation, amortization of intangibles, insurance,
      office supplies and equipment, and printing.





We
      incurred interest expense of $820,592 for the nine months
      ended September 30, 2006. Interest expense incurred for the nine months
      ended September 30, 2005 was $2,441,810. The decrease of $1,612,218 in interest
      expense was due primarily to a decrease in interest accretion of $1,664,175
      reflecting the recapitalization of series A preferred stock during the first
      quarter of 2006.





We
      reported a net loss for the nine months
      ended September 30, 2006 of $9,357,435. Our net loss for the nine months
      ended September 30, 2005 was $4,767,927.





Power
      Electronics Division





As
      noted
      above the Company acquired Technipower LLC on August 17, 2006. Technipower
      LLC
      operations are reported in the Power Electronics Division segment from the
      date
      of the purchase. The following analysis presents the results of operations
      for
      the Power Electronics Division segment as if the transaction occurred at the
      beginning of the periods presented.





*Three
      Months Ended September 30, 2006 Compared with Three Months Ended September
      30,
      2005*





For
      the
      three months ended September 30, 2006 Power Electronics Division generated
      revenues of $1,325,076 as compared to $1,241,500 for the comparable period
      in
      2005. Cost of products sold for the three months ended September 30, 2006 was
      $783,185 generating a gross profit of $541,891, or 40.9% of revenues. Cost
      of
      products sold for the three months ended September 30, 2005 was $685,681
      generating a gross profit of $555,819, or 44.8% of revenues. The decrease in
      margin was due to a less profitable mix of legacy products ordered for customer
      delivery in 2006 over the same period in 2005 as well as the pilot production
      of
      new high voltage commercial products.





23


Research
      and development expenses for the three months ended September 30, 2006 were
      $218,677 compared to $169,312 for the three months ended September 30, 2005,
      an
      increase of $49,365 or 29.2%. This increase was due primarily to the retention
      of additional engineering resources engaged in the development of new high
      voltage product designs.





Selling,
      general and administrative expenses for the three months ended September 30,
      2006 were $225,652 as compared to $301,511 for the three months ended September
      30, 2005, a decrease of $75,859 or 25.2%. This decrease was due primarily to
      a
      reduction in executive incentive compensation during 2006.





Noncash
      compensation for the three months ended September 30, 2006 was $6,077 compared
      to $0 for the three months ended September 30, 2005. Noncash compensation for
      2006 consisted of the market value of Technipower’s capital appreciation
      membership units issued to officers and employees for services
      rendered


The
      capital appreciation membership units were terminated in connection with the
      Technipower acquisition.





Technipower
      incurred interest expense of $24,551 for the three months ended September 30,
      2006. Interest expense for the three months ended September 30, 2005 was
      $15,098. The increase in interest expense was due primarily to the periodic
      amortization of the $33,166 in debt issuance costs incurred to secure a new
      revolving facility with Citizen’s Bank of Massachusetts on May 4, 2006.





Other
      expenses for the three months ended September 30, 2006 were $29,798 as compared
      to $25,205 for the three months ended September 30, 2005, an increase of $4,593.
      Other expenses primarily consisted of legal and other professional fees incurred
      by Technipower’s board of managers in anticipation of the acquisition by Solomon
      Technologies.





*Nine
      Months Ended September 30, 2006 Compared with Nine Months Ended September 30,
      2005*





For
      the
      nine months ended September 30, 2006 Technipower generated revenues of
      $3,836,250 as compared to $3,701,542 for the comparable period in 2005. Cost
      of
      products sold for the nine months ended September 30, 2006 was $2,065,266
      generating a gross profit of $1,770,984, or 46.2% of revenues. Cost of products
      sold for the nine months ended September 30, 2005 was $2,010,946 generating
      a
      gross profit of $1,690,596, or 45.7% of revenues. The slight improvement in
      margin was due to a more profitable mix of legacy products ordered for customer
      delivery in 2006 over the same period in 2005.





Research
      and development expenses for the nine months ended September 30, 2006 were
      $697,281 compared to $588,333 for the nine months ended September 30, 2005,
      an
      increase of $108,948 or 18.5%. This increase was due primarily to an increase
      in
      additional engineering staff during the last quarter of 2005 and the first
      quarter of 2006.





Selling,
      general and administrative expenses for the nine months ended September 30,
      2006
      were $693,445 as compared to $757,403 for the nine months ended September 30,
      2005, a decrease of $63,958 or 8.4%. This decrease was due primarily to a
      reduction in executive incentive compensation during 2006.





Noncash
      compensation for the nine months ended September 30, 2006 was $115,423 compared
      to $0 for the nine months ended September 30, 2005. Noncash compensation for
      2006 consisted of the market value of Technipower’s capital appreciation
      membership units issued to officers and employees for services
      rendered.





Technipower
      incurred interest expense of $88,291 for the nine months ended September 30,
      2006. Interest expense for the nine months ended September 30, 2005 was $46,470.
      The increase in interest expense was due primarily to a $26,250 late fee paid
      to
      Monadnock Funding LLC when that revolving loan facility was repaid on May 4,
      2006 as well as the periodic amortization of the $33,166 in debt issuance costs
      incurred to secure a replacement lender.





Other
      expenses for the nine months ended September 30, 2006 were $91,744 as compared
      to $23,114 for the nine months ended September 30, 2005, an increase of $68,630.
      Other expenses primarily consisted of legal and other professional fees incurred
      by Technipower’s board of managers in anticipation of the acquisition by Solomon
      Technologies.





24


**Liquidity
      and Capital Resources**





Our
      available cash balance at September 30, 2006 was $306,643. We borrowed
      $1,849,069 in short-term debt financing from certain of our principal
      stockholders and other investors from March 2005 through 2006. These notes
      are
      secured by a lien on all of our tangible and intangible assets. We have been
      authorized by the board to obtain an additional $150,931 of short-term debt
      financing. We expect to seek additional capital through the sale of debt and/or
      equity securities in the fourth quarter of 2006 in order to fund our operating
      capital needs, although we cannot assure you that we will be able to obtain
      any
      of such additional capital.





During
      the nine months
      ended September 30, 2006, we used net cash of $792,402 from operations. This
      consisted of a net loss of $9,424,906 augmented by net non-cash charges of
      $7,859,040. Additionally, we provided net cash in financing activities of
      $984,236 consisting primarily of proceeds from notes payable.





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 and director of our company, is also affiliated with Oliver
      Street.





We
      presently do not have any plans to purchase a new facility or significant new
      equipment.





We
      have
      incurred significant operating losses and used cash in our operating activities
      for several consecutive years. As of September 30, 2006 we have deficiencies
      in
      both working capital and net assets. These conditions raise substantial doubt
      about our ability to continue as a going concern. In the past we have been
      able
      to obtain financing to fund our losses. Our ability to continue is dependent
      on
      obtaining additional long-term financing and ultimately achieving profitable
      operating results. To date we have not been able to establish acceptable sales
      levels. We are currently seeking additional financing to fund operations to
      achieve acceptable sales levels.





In
      order
      to fund the cash component of the purchase price for the Technipower acquisition
      and other possible 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.





**Off-Balance
      Sheet Arrangements**





We
      have
      no off-balance sheet arrangements that have or are reasonably likely to have
      a
      current or future material effect on our financial condition, changes in
      financial condition, revenues or expenses, results of operations, liquidity,
      capital expenditures or capital resources.





**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,





25


•
            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,
                2005.





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 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 September 30, 2006. 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 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 September 30, 2006, that has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.





26


**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 United States International
      Trade Commission (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. The ITC held a hearing on our complaint from October 30 through November
      3, 2006. We anticipate that the ITC Administrative Law Judge will issue a
      preliminary determination on or before January
      18, 2007.





The
      patent infringement action brought in the United States District Court for
      the
      Middle District of Florida, Tampa Division, is stayed until the ITC case is
      completed.





Except
      as
      set forth above, we do not believe there are any pending or threatened legal
      proceedings that, if adversely determined, would have a material adverse effect
      on us.




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





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





On
      July
      3, 2006, we borrowed $100,000 from Millennium Trust Co. LLC Custodian FBO Joseph
      Cooper Rollover IRA 90M020013 (the “Cooper IRA”) and issued a promissory note in
      the principal amount of $100,000 to the Cooper IRA. As an incentive to the
      Cooper IRA to purchase the note, we agreed to issue the Cooper IRA 35,000 shares
      of common stock. We issued these shares on October 6, 2006. The sale of these
      securities was determined to be exempt from registration under Section 4(2)
      of
      the Securities Act of 1933 as transactions by an issuer not involving a public
      offering.




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. As an incentive
      to Jezebel purchasing the note, we agreed to issue Jezebel 25,000 shares of
      common stock. We have not yet issued these shares. The sale of these securities
      was determined to be exempt from registration under Section 4(2) of the
      Securities Act of 1933 as transactions by an issuer not involving a public
      offering.





On
      August
      3, 2006, we granted 150,000 shares of common stock to each of our directors.
      These shares of common stock were granted in partial consideration for each
      person’s past contributions to Solomon Technologies and to encourage their
      continued service. The sales of these securities were determined to be exempt
      from registration under Section 4(2) of the Securities Act of 1933 as
      transactions by an issuer not involving a public offering.





On
      August
      11, 2006, we entered into an agreement dated as of September 30, 2006 with
      our
      senior noteholders pursuant to which the maturity date of certain of the notes
      was extended from September 30, 2006 to January 15, 2007. As an inducement
      to
      such noteholders agreeing to extend their notes, we agreed to issue to each
      of
      the noteholders 35,000 shares for every $100,000 of principal amount of
      notes, or fraction thereof, held by each holder. We issued 461,450 of these
      shares on August 18, 2006, 87,500 of these shares on October 5, 2006 and 15,000
      of these shares on October 6, 2006. The sales of these securities were
      determined to be exempt from registration under Section 4(2) of the Securities
      Act of 1933 as transactions by an issuer not involving a public
      offering.





27


On
      August
      17, 2006, we acquired all of the outstanding membership units and warrants
      to
      purchase membership units of Technipower LLC from Integrated Power Systems
      LLC,
      Power Designs Inc., The Vantage Partners LLC, certain other persons. As part
      of
      the consideration for this acquisition we issued 4,615,381 shares of Series
      C
      convertible redeemable preferred stock and 4,461,537 shares of common stock
      to
      the sellers. The sales of these securities were determined to be exempt from
      registration under Section 4(2) of the Securities Act of 1933 as transactions
      by
      an issuer not involving a public offering. Each share of Series C Preferred
      Stock is convertible at any time after December 16, 2006 and from time to time
      thereafter into the greater of (i) the result of dividing the Stated Value
      by
      the Conversion Price and (ii) the result of dividing the Liquidation Preference
      by the 30-day average closing price of the common stock for the 30 trading
      days
      preceding the date of conversion. The “Stated Value” per share of Series C
      Preferred Stock is $.65. The “Conversion Price” is initially equal to the Stated
      Value but is subject to adjustment for stock splits, stock dividends and similar
      transactions. The “Liquidation Preference” is equal to $.65 per share plus
      accrued and unpaid dividends. The holders of the Series C Preferred Stock are
      entitled to dividends at the rate of 10% of the Stated Value per
      annum.





On
      August
      23, 2006, we issued 17,178 shares of common stock upon exercise of a warrant
      to
      purchase 25,000 shares of our common stock on a cashless basis to Crescent
      Communications. On September 29, 2006, we issued 62,152 shares of common stock
      upon exercise of a warrant to purchase 75,000 shares of our common stock on
      a
      cashless basis to Crescent Communications. The transactions were deemed to
      be
      exempt from registration under Section 4(2) of the Securities Act as sales
      by an
      issuer to an “accredited investor” in transactions not involving a public
      offering.





On
      September 14, 2006, we granted options to purchase 100,000 shares of common
      stock under our 2003 Stock Option Plan to Peter W. DeVecchis, Jr. On September
      14, 2006, we also granted options to purchase an aggregate of 95,000 shares
      of
      common stock under our 2003 Stock Option Plan to other employees.





On
      June
      13, 2006, we borrowed $25,000 from Steven Kilponen and issued a promissory
      note
      in the principal amount of $25,000 to Mr. Kilponen. As an incentive to Mr.
      Kilponen purchasing the note, we agreed to issue 3,750 shares of common stock
      to
      Mr. Kilponen on September 26, 2006. We have not yet issued these shares. The
      sale of these securities was determined to be exempt from registration under
      Section 4(2) of the Securities Act of 1933 as transactions by an issuer not
      involving a public offering.





The
      recipients of securities in each of the transactions listed above represented
      their intention to acquire the securities for investment only and not with
      a
      view to or for sale in connection with any distribution thereof and appropriate
      legends were affixed to the share certificates and other instruments issued
      in
      such transactions. The sales of these securities were made without general
      solicitation or advertising.





**(b)
      Use of Proceeds**





Not
      applicable.





**(c)
      Repurchase of Securities**





We
      did
      not repurchase any shares of our common stock during the third quarter of 2006.





28




**ITEM
                6.**
              **Exhibits**




**Exhibit
                No.**
            
            **Description**10.1
            
            Amended
                and Restated 2003 Stock Option Plan (1)10.2
            
            Senior
                Secured Promissory Note issued to Millennium Trust Co. LLC Custodian
                FBO
                Joseph Cooper Rollover IRA 90M020013 (2)10.3
            
            Joinder
                Agreement by and between Solomon Technologies, Inc. and Millennium
                Trust
                Co. LLC Custodian FBO Joseph Cooper Rollover IRA 90M020013 dated
                July 3,
                2006 (2)**Exhibit
                No.**
            
            **Description**10.4
            
            Promissory
                Note issued to Jezebel Management Corporation dated July 28, 2006
                (2)10.5
            
            Agreement
                dated as of September 30, 2006, among Solomon Technologies, Inc.,
                Woodlaken LLC, Jezebel Management Corporation, Pinetree (Barbados),
                Inc.,
                Coady Family LLC, F. Jay Leonard, Peter and Barbara Carpenter, Pascal
                Partners, LLC, Steven Kilponen and Millennium Trust Co. LLC Custodian
                FBO
                Joseph Cooper Rollover IRA 90M020013 (1)10.6
            
            Securities
                Purchase Agreement dated as of August 17, 2006, by and among Solomon
                Technologies, Inc., Integrated Power Systems LLC, Power Designs Inc.,
                The
                Vantage Partners LLC, Anthony F. Intino, II, Allison E. Bertorelli,
                and
                Mariano Moran, the holders of Warrants listed on the signature pages
                thereto and Technipower LLC (1)10.7
            
            Registration
                Rights Agreement dated as of August 17, 2006 (1)10.8
            
            Escrow
                Agreement dated as of August 17, 2006 (1)10.9
            
            Lease
                Agreement by and between Commerce Park Realty LLC and Power Designs,
                Inc.,
                as assigned to Technipower LLC (1)10.10
            
            Loan
                and Security Agreement dated May 3, 2006 between Technipower LLC
                and
                Citizens Bank of Massachusetts, as amended (1)31.1
            
            Certification
                by President pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.31.2
            
            Certification
                by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.32.1
            
            Certification
                by President pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            
            Certification
                by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.





(1)
            Incorporated
                by reference from the Registration Statement on Form SB-2, File No.
                333-138240 filed on October 27,
                2006.


(2)
            Incorporated
                by reference from the Quarterly Report on Form 10-QSB filed on August
                14,
                2006.




29


**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:
      November 14, 2006





**SOLOMON
      TECHNOLOGIES, INC.**











By:          /s/
      Peter W. DeVecchis,
      Jr.


Peter
      W.
      DeVecchis, Jr.


President


(principal
      executive officer)











By:          /s/
      Samuel F.
      Occhipinti


Samuel
      F.
      Occhipinti


Chief
      Financial Officer


(principal
      financial and accounting officer)






30