**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
                1934For
                the quarterly period ended September 30,
                2007or ̈
            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





**SOLOMON**  **TECHNOLOGIES,**  **INC.**


(Exact
      name of small business issuer as specified in its charter)




**Delaware**
            
            **52-1812208**(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                EmployerIdentification
                No.)





**1224
      Mill Street, Bldg. B.**


**East
      Berlin, CT 06023**


**** (Address
      of principal executive offices)





**(860)
      828-2060**


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 9, 2007, there were 48,355,748
      shares of common stock outstanding.





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







**INDEX**





Page
              Number**PART
                I. FINANCIAL INFORMATION**Item
                1. Financial Statements
            3Condensed
                Consolidated Balance Sheet at September 30, 2007
                (Unaudited)
            3Condensed
                Consolidated Statements of Operations - Three months and nine months
                ended
                September 30, 2007 and 2006 (Unaudited)
            4Condensed
                Consolidated Statements of Cash Flows - Nine months ended September
                30,
                2007 and 2006 (Unaudited)
            5Condensed
                Consolidated Statement of Deficiency in Assets for the nine months
                ended
                September 30, 2007 (Unaudited)
            6Notes
                to Condensed Consolidated Financial Statements (Unaudited)
            7Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of  Operations
            24Item
                3. Controls and Procedures
            36**PART
                II. OTHER INFORMATION**
            37Item
                1. Legal Proceedings
            37Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            37Item
                3. Defaults Upon Senior Securities
            38Item
                5. Other Information
            39Item
                6. Exhibits
            40**SIGNATURE
                PAGE**
            42





**Introductory
      Comment**





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


2




**PART
      I.****FINANCIAL
      INFORMATION**


**Solomon
        Technologies, Inc.**
 Condensed
        Consolidated Balance Sheet
 September
        30, 2007
 (Unaudited)
 (Note
        10)


**Assets**Current
                  assetsCash
              
              $
              872,701Accounts
                  receivable, net of allowance for doubtful accounts of
                  $2,200
              
              
              1,353,636Inventories,
                  net
              
              
              2,154,541Due
                  from related parties
              
              
              47,560Prepaid
                  expenses and other current assets
              
              
              140,4744,568,912Noncurrent
                  assetsProperty
                  and equipment, net
              
              
              1,714,262Goodwill
              
              
              2,873,576Intangible
                  assets, net
              
              
              1,863,509Deferred
                  debt costs, net
              
              
              636,944Other
                  assets
              
              
              132,1097,220,400$
              11,789,312**Liabilities
                  and Capital Deficiency**Current
                  liabilitiesRevolving
                  note payable to bank
              
              $
              1,000,000Accounts
                  payable
              
              
              1,436,091Accrued
                  compensation
              
              
              2,378,773Other
                  accrued expenses
              
              
              1,157,103Notes
                  payable (past due)
              
              
              182,000Notes
                  payable to related parties (including $125,000 past due)
              
              
              4,711,931Convertible
                  debentures payable, net of debt discount of $247,750
              
              
              4,771,03515,636,933Commitments
                  and Contingencies**Capital
                  Deficiency**Common
                  stock, par value $0.001 pershare;
                  authorized 100,000,000 shares;48,243,546
                  shares issued and outstanding
              
              
              48,243Additional
                  paid-in capital
              
              
              48,184,710Accumulated
                  deficit
              
              
              (52,080,574
              )(3,847,621
              )$
              11,789,312


See
        accompanying notes to condensed financial statements.


3




**Solomon
        Technologies, Inc.**
 Condensed
        Consolidated Statements of Operations
 (Unaudited)
  **Three
                    Months Ended September 30,**
                
                **Nine
                    Months Ended September 30,****2007**
                
                **2006**
                
                **2007**
                
                **2006**Net
                    sales
                
                $
                2,134,093
                
                $
                823,531
                
                $
                5,204,103
                
                $
                836,443Cost
                    of goods sold
                
                
                1,161,920
                
                
                632,914
                
                
                2,777,865
                
                
                652,533Gross
                    profit
                
                
                972,173
                
                
                190,617
                
                
                2,426,238
                
                
                183,910Operating
                    expenses:Selling,
                    general and administrative
                
                
                1,980,367
                
                
                2,412,437
                
                
                4,527,105
                
                
                3,864,667Research
                    and development
                
                
                310,108
                
                
                119,128
                
                
                869,234
                
                
                119,1282,290,475
                
                
                2,531,565
                
                
                5,396,339
                
                
                3,983,795Operating
                    loss
                
                
                (1,318,302
                )
                
                (2,340,948
                )
                
                (2,970,101
                )
                
                (3,799,885
                )Other
                    expensesInterest
                    expense
                
                
                (1,566,812
                )
                
                (394,628
                )
                
                (6,442,812
                )
                
                (1,382,378
                )Other
                    income (expenses)
                
                
                15,111
                
                
                (175,507
                )
                
                33,795
                
                
                (175,507
                )Loss
                    on extinguishment of redeemablepreferred
                    stock and other debt
                
                
                (2,496,544
                )
                
                -
                
                
                (2,496,544
                )
                
                (5,652,404
                )(4,048,245
                )
                
                (570,135
                )
                
                (8,905,561
                )
                
                (7,210,289
                )Net
                    loss
                
                
                (5,366,547
                )
                
                (2,911,083
                )
                
                (11,875,662
                )
                
                (11,010,174
                )Preferred
                    stock dividends
                
                
                -
                
                
                (36,164
                )
                
                (1,413,031
                )
                
                (96,164
                )Loss
                    applicable to commonstockholders
                
                $
                (5,366,547
                )
                $
                (2,947,247
                )
                $
                (13,288,693
                )
                $
                (11,106,338
                )Basic
                    and diluted net loss percommon
                    share
                
                $
                (0.13
                )
                $
                (0.10
                )
                $
                (0.35
                )
                $
                (0.44
                )Weighted
                    average common sharesoutstanding
                    - basic and diluted
                
                
                42,518,577
                
                
                30,200,548
                
                
                38,418,550
                
                
                25,207,772




See
        accompanying notes to condensed financial statements.




4


**Solomon
        Technologies, Inc.**
 Condensed
        Consolidated Statements of Cash Flows
 (Unaudited)
  **Nine
                  Months Ended September 30,****2007**
              
              **2006****Operating
                  activities**Net
                  loss
              
              $
              (11,875,662
              )
              $
              (11,010,174
              )Adjustments
                  to reconcile net loss to cash used by operationsLoss
                  on extinguishment of redeemable preferred stockand
                  other debt
              
              
              2,496,544
              
              
              5,652,404Stock
                  based compensation to employees and directors
              
              
              1,142,783
              
              
              -Common
                  stock and warrants issued for services
              
              
              207,614
              
              
              1,110,801Accretion
                  and amortization of debt costs included ininterest
                  expense
              
              
              5,833,671
              
              
              698,257Loss
                  on disposal of assets
              
              
              1,226
              
              
              -Depreciation
              
              
              43,389
              
              
              9,328Amortization
              
              
              308,940
              
              
              388,250Change
                  in operating assets and liabilitiesAccounts
                  receivable
              
              
              (52,854
              )
              
              (57,800
              )Inventories
              
              
              (55,593
              )
              
              231,484Prepaid
                  expenses and other current assets
              
              
              (72,011
              )
              
              25,117Accounts
                  payable and accrued expenses
              
              
              959,578
              
              
              2,159,931Net
                  cash used by operating activities
              
              
              (1,062,375
              )
              
              (792,402
              )**Investing
                  Activities**Purchase
                  of certain assets and liabilities of Deltron Inc. andsubsidiary,
                  net of cash received
              
              
              (2,508,874
              )
              
              -Cash
                  received from Technipower LLC acquisition
              
              
              -
              
              
              123,137Deferred
                  acquisition costs
              
              
              (132,109
              )
              
              -Purchase
                  of equipment
              
              
              (104,924
              )
              
              (12,021
              )Proceeds
                  from sale of equipment
              
              
              300
              
              
              -Net
                  cash (used) provided by investing activities
              
              
              (2,745,607
              )
              
              111,116**Financing
                  Activities**Proceeds
                  from issuance of notes payable to related parties
              
              
              2,750,000
              
              
              899,249Repayments
                  of notes payable to related parties
              
              
              (40,000
              )
              
              -Proceeds
                  from revolving note payable
              
              
              250,000
              
              
              50,000Proceeds
                  from issuance of converible debentures
              
              
              5,635,913
              
              
              -Repayments
                  of notes payable
              
              
              (526,150
              )
              
              -Redemption
                  of preferred stock
              
              
              (3,350,020
              )
              
              -Proceeds
                  from Rule 16B
              
              
              32,950
              
              
              36,702Repayments
                  from related parties
              
              
              27,754
              
              
              -Debt
                  issuance costs
              
              
              (187,638
              )
              
              -Repayment
                  of capital lease obligations
              
              
              (9,903
              )
              
              (1,715
              )Net
                  cash provided by financing activities
              
              
              4,582,906
              
              
              984,236**Change
                  in cash**
              
              
              774,924
              
              
              302,950**Cash
                  at beginning of period**
              
              
              97,777
              
              
              3,693**Cash
                  at end of period**
              
              $
              872,701
              
              $
              306,643Supplemental
                  disclosure:Cash
                  paid for interest
              
              **$**
              **152,260**
              
              **$**
              **23,467**
 See
          accompanying notes to condensed financial statements.
  5
  **Solomon
        Technologies, Inc.**
 Condensed
        Consolidated Statement of Deficiency in Assets
 (Unaudited)


**Series
                    C****Convertible**
                
                
                
                
                
                **Additional****Preferred
                    Stock**
                
                **Common
                    Stock**
                
                **Paid-In**
                
                **Accumulated****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Deficit**
                
                **Total****Balance
                    at December 31, 2006**
                
                
                **4,615,381**
                
                **$**
                **3,111,164**
                
                
                **33,789,827**
                
                **$**
                **33,789**
                
                **$**
                **36,522,146**
                
                
                **($38,791,881**
                **)**
                **$**
                **875,218**Common
                    share adjustment for prior issuances
                
                
                
                
                
                
                
                
                98,384
                
                
                98
                
                
                (98
                )
                
                
                
                
                -Detachable
                    warrants issued with convertible debt
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,704,007
                
                
                
                
                
                2,704,007Beneficial
                    conversion feature associated with convertible debt
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,835,372
                
                
                
                
                
                2,835,372Beneficial
                    conversion feature associated with amended debentures
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                645,541
                
                
                
                
                
                645,541Incremental
                    value of warrants issued with convertible debt amendment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                96,695
                
                
                
                
                
                96,695Common
                    shares issued for debt issuance costs
                
                
                
                
                
                
                
                
                1,548,664
                
                
                1,549
                
                
                1,151,116
                
                
                
                
                
                1,152,665Redemption
                    of Series C Preferred Stock
                
                
                (2,873,500
                )
                
                (1,936,986
                )
                
                
                
                
                
                
                
                
                
                
                (1,413,031
                )
                
                (3,350,017
                )Conversion
                    of Series C Preferred Stock
                
                
                (1,741,881
                )
                
                (1,174,178
                )
                
                1,741,881
                
                
                1,742
                
                
                1,172,436
                
                
                
                
                
                -Common
                    shares issued for fees and services
                
                
                
                
                
                
                
                
                159,441
                
                
                159
                
                
                207,455
                
                
                
                
                
                207,614Common
                    shares issued as payment for convertible debt and interest
                
                
                
                
                
                
                
                
                4,790,537
                
                
                4,791
                
                
                1,519,922
                
                
                
                
                
                1,524,713Restricted
                    common shares issued to employees and directors
                
                
                
                
                
                
                
                
                880,000
                
                
                880
                
                
                492,819
                
                
                
                
                
                493,699Stock
                    option grants
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                649,084
                
                
                
                
                
                649,084Payment
                    related to Rule 16B
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                32,950
                
                
                
                
                
                32,950Common
                    shares issued for Technipower stock payment adjustment
                
                
                
                
                
                
                
                
                4,833,562
                
                
                4,834
                
                
                (4,834
                )
                
                
                
                
                -Common
                    shares issued for convertible debt amendment incentive
                
                
                
                
                
                
                
                
                401,250
                
                
                401
                
                
                160,099
                
                
                
                
                
                160,500Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (11,875,662
                )
                
                (11,875,662
                )**Balance
                    at September 30, 2007**
                
                
                -
                
                $
                -
                
                
                48,243,546
                
                $
                48,243
                
                $
                48,184,710
                
                $
                (52,080,574
                )
                $
                (3,847,621
                )




See accompanying notes to condensed financial
      statements.




6




**Solomon
        Technologies, Inc.**




**Notes
      to Condensed Consolidated Financial Statements (unaudited)**





**NOTE
      1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND
      LIQUIDITY**





The
      historical business of Solomon Technologies, Inc. (“STI” or the “Company”) has
      been the development, engineering, manufacturing, licensing and sale of electric
      power drive systems in the marine, industrial and automotive markets. In August
      2006, the Company acquired Technipower LLC (See Note 6), a manufacturer of
      power
      supplies and related equipment for the defense, aerospace and commercial
      markets. On September 5, 2007, the Company, through its wholly-owned subsidiary,
      Deltron LLC (formerly known as Del-Inc Acquisition LLC), acquired substantially
      all of the assets and liabilities of Deltron Inc., a North Wales, Pennsylvania
      based manufacturer of power supplies and related equipment with manufacturing
      operations in Reynosa, Mexico (See Note 6) as of August 31, 2007. As a result
      of
      these acquisitions, 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 and
      Deltron LLC.





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared assuming that the Company will continue as a going concern. The Company
      has incurred significant operating losses and has not generated cash from its
      operating activities for several years. For the nine-months ended September
      30,
      2007, the Company had a net loss of $11,875,662 and used cash of $1,062,375
      in
      operating activities. As of September 30, 2007, the Company has a working
      capital deficiency of $11,068,021. In addition, the Company is delinquent for
      the payment of payroll taxes and reimbursable expenses to certain employees
      (Note 12). As discussed in Note 10, the Company was in default of a $182,000
      note payable and a $125,000 note payable to a related party at September 30,
      2007. These conditions raise substantial doubt about the Company’s ability to
      continue as a going concern.





Management
      is continuing to implement a plan to broaden its market and product base and
      exploit its intellectual property that it expects will generate cash flow from
      operations. As part of this plan, management intends to grow its business
      through licensing of its proprietary and patented technologies and through
      the
      acquisition of businesses that fit its strategy. Management is identifying
      licensing opportunities that leverage its existing or acquired knowledge and
      provide substantial positive current financial impact while it also aggressively
      pursues infringers of its existing patents. Management is also identifying
      acquisition targets that augment its existing intellectual property, marketing
      channels and human resources and provide strong cash flow. Additionally,
      management is actively seeking additional sources of capital. There can be
      no
      assurance that management can successfully implement its business plan or raise
      sufficient capital. Without sufficient additional capital or long term debt
      and
      ultimately profitable operating results the Company will not be able to continue
      as a going concern. The accompanying condensed consolidated financial statements
      do not include any adjustments relating to the recoverability and classification
      of asset carrying amounts or the amounts and classification of liabilities
      that
      may result from the outcome of this uncertainty.





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with U.S. generally accepted accounting principles for
      interim financial information and pursuant to the rules and regulations of
      the
      Securities and Exchange Commission (“SEC”). Accordingly, they do not include all
      information and disclosures required by accounting principles generally accepted
      in the United States of America for complete financial statements. In the
      opinion of management, all adjustments (consisting of normal recurring
      adjustments) considered necessary for a fair presentation have been included.
      These financial statements should be read in conjunction with the financial
      statements and related footnotes for the year ended December 31, 2006 contained
      in the annual report on Form 10-KSB as filed with the SEC. Operating results
      for
      interim periods are not necessarily indicative of the results for the full
      year.




The
      preparation of the Company’s condensed consolidated financial statements in
      conformity with accounting principles generally accepted in the United States
      of
      America requires management to make estimates and assumptions that affect the
      reported amount of assets and liabilities at the date of the financial
      statements and the reported amount of net revenue and expenses during the
      reporting period. The Company bases estimates on historical experience and
      on
      various assumptions about the future that are believed to be reasonable based
      on
      available information. The Company’s reported financial position or results of
      operations may be materially different under different conditions or when using
      different estimates or assumptions, particularly with respect to significant
      accounting policies. In the event that estimates or assumptions prove to differ
      from actual results, adjustments are made in subsequent periods to reflect
      more
      current information.




7




Estimates
      are primarily used in determining the valuation of goodwill and other intangible
      assets and their impairment, provisions for losses on accounts receivable,
      allowances for inventory obsolescence, accounting for depreciation, accounting
      for stock-based transactions and certain accrued liabilities.




**NOTE
      2 - PRINCIPLES OF CONSOLIDATION**





The
      condensed consolidated financial statements include the accounts of the Company
      and its wholly-owned subsidiaries, Technipower LLC (“Technipower”) and Deltron
      LLC (“Deltron”), from their dates of acquisition. All material intercompany
      accounts and transactions have been eliminated in consolidation.




**NOTE
      3 - LOSS PER SHARE**




Loss
      per
      share is computed by dividing the loss available to common shareholders by
      the
      weighted average number of common shares outstanding. For the three and nine
      months ended September 30, 2007 and 2006, diluted loss per share does not
      include the dilutive effect, if any, from the potential exercise of stock
      options, convertible preferred stock, warrants and the conversion of the
      Debentures, because the effect would have been anti-dilutive and such potential
      shares amounted to approximately 25,100,000 shares in 2007 periods and 1,000,000
      shares in 2006 periods, respectively.




**NOTE
      4 - INCOME TAXES**





Deferred
      tax assets and liabilities are recognized for the expected future tax
      consequences attributed to differences between the financial statement carrying
      amounts of existing asset and liabilities and their respective tax basis.
      Deferred tax assets and liabilities are measured using the enacted tax rates
      expected to be applied to taxable income in the years in which those temporary
      differences are expected to reverse. Valuation allowances are recorded to reduce
      deferred tax assets when it is more likely than not that a tax benefit will
      not
      be realized. The Company  adopted the  provisions  of
      Financial  Standards  Accounting  Board Interpretation  No.
      48 "Accounting  for Uncertainty in Income Taxes" ("FIN 48"), an
      interpretation of FASB Statement No. 109 ("SFAS 109"), effective January 1,
      2007. The Company has not completed its evaluation of net operating loss
      carryforward and the related full valuation allowance. Additionally the Company
      may be subject to Section 382 limitations of the Internal Revenue Code in
      connection with a change in ownership. The management of the Company believes
      these factors will not have a significant impact on the financial position
      of
      the Company. As the Federal income tax returns remain subject to normal review
      and adjustment for up to three years, the Company's 2003, 2004, 2005 and 2006
      returns remain open and available to the Internal Revenue Service for the
      purpose of review and possible adjustment. Management believes that an
      audit or review of the prior years, would result in no material tax liability
      and therefore no income tax penalties or interest accruals have been
      recognized. In the event that the Company is assessed interest or penalties
      in the future, these will be classified in the financial statements as other
      expenses.





**NOTE
      5 - STOCK BASED COMPENSATION**





**Stock
      Options**





Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123(R), “Share-Based Payment” (SFAS No. 123(R)), using the modified
      prospective method. Under this method, compensation cost is recognized for
      all
      share-based payments granted, modified, or settled after January 1, 2006, as
      well as for any unvested awards that were granted prior thereto. Compensation
      cost for unvested awards granted prior to January 1, 2006 is recognized using
      the same estimate of the grant-date fair value and the same attribution method
      used to determine the pro forma disclosures under SFAS No. 123 “Accounting for
      Stock-Based Compensation.” Compensation costs for awards granted after January
      1, 2006 are valued based on the estimated fair value of the awards on their
      grant date and are generally recognized over the required services
      period.





8




Prior
      to
      January 1, 2006, the Company accounted for its stock options under the
      recognition and measurement principles of Accounting Principles Board (APB)
      Opinion No. 25 “Accounting for Stock Issued to Employees” and related
      interpretations. Accordingly, no stock-based compensation expense was recognized
      in operations as all options granted had an exercise price equal to the market
      value of the underlying common stock on the date of grant. All stock options
      outstanding at December 31, 2005 and 2004 were fully vested.




Total
      stock-based compensation was $1,142,783 for the nine month period ended
      September 30, 2007. There was no expense in the nine month period ended
      September 30, 2006. In calculating compensation expense related to stock option
      grants, the fair value of each stock option is estimated on the date of grant
      using the Black-Scholes option-pricing model and the following weighted average
      assumptions:





**Nine-Months
                Ended**
              **September
                30, 2007**Expected
                term
            
            
            3
                YearsExpected
                volatility
            
            
            174
            %Dividend
                yield
            
            
            0.0
            %Risk-free
                interest rate
            
            
            4.76
            %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, 2007 follows:





WeightedAverageShares
            
            Exercise
                PriceOutstanding
                at January 1, 2007
            
            
            870,335
            
            $
            1.39Granted
            
            
            1,335,000
            
            
            1.67Forfeited
            
            
            (73,334
            )
            
            1.77Outstanding
                at September 30, 2007
            
            
            2,132,001
            
            $
            1.23




The
      intrinsic value of outstanding and exercisable options was $0 at September
      30,
      2007. Total compensation expense related to non-vested awards not yet recognized
      is $1,130,000 and the weighted average period over which it is expected to
      be
      recognized is 2.27 years. Management expects that all non-vested awards will
      vest.





The
      following table summarizes the Company's stock options at September 30, 2007:





Options
                Outstanding
            
            Options
                ExercisableWeighted
            
            Weighted
            
            
            
            WeightedAverage
            
            Average
            
            
            
            AverageRange
                ofExercise
                Prices
            
            Number
            
            Remaining
                Life
            
            Exercise
                Price
            
            Number
            
            Exercise
                Price$.22
                to $1.00
            
            
            940,335
            
            
            5.81
            
            $
            .47
            
            
            455,335
            
            $
            0.73$1.45
                to $2.09
            
            
            441,666
            
            
            3.78
            
            $
            1.74
            
            
            213,333
            
            $
            1.82$2.80
                to $3.00
            
            
            750,000
            
            
            9.33
            
            $
            2.80
            
            
            0
            
            $
            2.802,132,001
            
            
            
            
            
            
            
            
            668,668




9




The
      employment contracts of two executives contain provisions for performance based
      options to purchase an aggregate of 325,000 common shares. The performance
      based
      options will only vest if certain 2007 performance goals are achieved. The
      performance goals are annualized sales of $25,000,000 by the end of 2007 based
      on the cumulative monthly sales for the fourth quarter of 2007 multiplied by
      four and breakeven cash flow by the end of 2007 based on the sum of the monthly
      cash flows for the last two months of the year. Because the achievement of
      performance goals was not probable as of September 30, 2007, the Company has
      not
      recognized any compensation expense related to these performance based options.
      The Company will have to record an additional charge related to these options,
      when it is probable that the performance criteria have been met at the then
      fair
      value of the options.





Agreements
      with certain employees provide that options granted to purchase an aggregate
      160,000 common shares (at an exercise price of $0.22) will be subject to
      accelerated vesting if certain financial and non-financial performance goals
      are
      achieved. The Company has recognized compensation expense for these options
      based on the stated vesting period for the options without giving effect to
      accelerated vesting based on achieving the performance goals because at
      September 30, 2007, it was not probable that the Company will meet the
      performance goals. The Company will have to record an additional
      charge, measured by the excess of the fair value of the
      options after the achievement of performance goals becomes probable over
      the previous value.





In
      additions to the above options, certain employees of the Company are entitled
      to
      cash bonuses totaling $415,000 if 2007 performance goals are achieved. Because
      the achievement of performance goals was not probable as of September 30, 2007,
      the Company has not recognized any compensation expense related to these
      performance based bonuses.





**Stock
      Warrants**





A
      summary
      of the changes in warrants outstanding for the nine-months ended September
      30,
      2007 follows:





**Weighted****Average****Number
                of**
            
            **Exercise****Warrants**
            
            **Price**Outstanding
                and exercisable at December 31, 2006
            
            
            453,174
            
            $
            2.23Issued
            
            
            3,006,250
            
            
            0.35Expired
            
            
            (67,174
            )
            
            3.31Outstanding
                and exercisable at September 30, 2007
            
            
            3,392,250
            
            $
            0.50





As
      further discussed above and in Note 10, on January 17, 2007 the Company issued
      2,006,250 common stock warrants with an exercise price (as amended in August
      2007, see Note 9) of $0.35 per share as part of the sale of the Company's
      January 2007 Debentures and 1,000,000 common stock warrants with an exercise
      price of $0.35 per as part of the sale of the Company’s August 2007
      Debentures.




**NOTE
        6 - BUSINESS ACQUISITIONS**
 
 **Technipower
        LLC**
 
 On
        August
        17, 2006, the Company completed the acquisition of Technipower LLC
        (Technipower), a privately-held company based in Danbury, Connecticut. The
        purchase price of $9,655,607, which includes acquisition related costs of
        approximately $420,000 consisted of the issuance 4,615,381 shares of the
        Company’s Series C preferred stock with a fair value of $3,000,000 and
        4,461,537 shares of common stock with a fair value of $6,242,000. The fair
        value
        of the Series C preferred stock was based upon the expected cash redemption
        amount of $3,000,000. The fair value of the common stock was based upon the
        closing market price of $1.40 on August 17, 2006, the date the acquisition
        was
        completed.




10




This
        acquisition was recorded under the purchase method of accounting with the
        total
        consideration allocated to the assets acquired and liabilities assumed based
        on
        estimates of fair value. The allocation process requires an analysis of acquired
        tangible assets, customer relationships, trade-names and non-compete agreements
        to identify and record the fair value of all assets acquired and liabilities
        assumed. Management considered various factors in determining fair value,
        including but not limited to future expected discounted cash flows, third-party
        valuations, and appropriate discount rates. The excess of the purchase price
        over the fair value of the net assets acquired was allocated to
        goodwill.
  In
        connection with the Company’s acquisition of Technipower LLC in August 2006, the
        Company had to issue additional shares to the sellers at the one year
        anniversary if the 30-day average trading price is more than 5% less than
        $0.65
        per share. On August 17, 2007, the Company agreed with certain of these sellers
        to reset the trading price to $.35 per share from $.65 per share in exchange
        for
        their agreement to extend their existing lock-up agreements for approximately
        one year on shares of common stock previously owned and on the additional
        shares
        to be issued. On September 6, 2007, the Company issued an aggregate of 4,833,562
        shares of common stock to the Technipower sellers in payment of the stock
        payment adjustment due. Such amounts did not affect purchase consideration.
        The
        additional shares issued to the sellers should be registered by the Company
        pursuant to the terms of the Registration Rights Agreement, executed in
        connection with the Purchase Agreement, and the Company shall make its
        reasonable best efforts to cause the registration of the additional shares
        to be
        effective until August 17, 2008 at the latest.
 
 The
        results of operations of Technipower have been included in the Company’s
        consolidated financial statements subsequent to the date of acquisition.
 
 **Deltron
        LLC**
 
 On
        September 5, 2007, Solomon Technologies, Inc. (“Solomon”), through its
        wholly-owned subsidiary Deltron LLC (formerly known as Del-Inc Acquisition
        LLC)
        completed the acquisition of substantially all of the assets of Deltron Inc.,
        a
        privately-held corporation based in North Wales, Pennsylvania, as well as
        the
        stock of its wholly-owned subsidiary Corporacion Delinc, S.A. de C.V., a
        Reynosa, Tamaulipas, Mexico corporation (Deltron). The preliminary purchase
        price of $2,860,000 consisted of $1,508,000 in cash for Deltron’s assets, plus
        $600,000 in cash for the stock of Delinc, S.A., $425,000 in acquisition related
        costs, and the assumption of certain liabilities totaling approximately
        $327,000. A portion of the purchase price totaling $400,000 was deposited
        in
        escrow for one year from closing to support the sellers’ indemnification
        obligations. Solomon also agreed to pay the sellers an earn-out payment equal
        to
        the excess of the product of net sales of the purchased business during the
        year
        following the closing multiplied by a profit margin determined by subtracting
        from net sales the cost of goods sold divided by net sales, over $1,570,000.
        The
        earn-out payment cannot exceed $300,000 and is due 55 days following the
        one-year anniversary of the closing.
 
 To
        fund
        the purchase price, Deltron LLC borrowed a total of $2,750,000 under a secured
        promissory note provided by an affiliate of Michael D’Amelio, a director of the
        Company and incurred approximately $219,000 in debt issuance costs, of which
        $88,238 was paid through the issuance of 284,638 shares of common
        stock. The note bears interest at 12% annually, plus quarterly investment
        fees
        of 1% of the amounts then outstanding. The note matures on September 5,
        2008  (Note
        10).


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 preliminary fair value of the customer list,
          trade
          name and customer backlog were determined by an independent appraisal firm
          based
          on estimates of future cash flows associated with those assets. In accordance
          with the provisions of paragraph 46 of SFAS 141 regarding accounting for
          contingent consideration in a business combination, an amount equal to
          the
          lesser of the maximum amount of contingent consideration or the excess
          of the
          fair value of the net assets acquired over the purchase price has been
          recorded
          as a liability to the seller, until such time as the contingency is
          resolved.


11




The
        purchase accounting for this acquisition is summarized as follows:
  **Amount**
              
              **Estimated**
                **Useful
                  Life**Net
                  tangible assets
              
              $
              2,690,611Identifiable
                  intangible assets:Customer
                  relationships
              
              
              115,000
              
              
              3
                  yearsTrade
                  name
              
              
              75,000
              
              
              3
                  yearsCustomer
                  backlog
              
              
              60,000
              
              
              6
                  monthsDue
                  to seller
              
              
              (80,611
              )Total
                  preliminary purchase price
              
              $
              2,860,000
  The
        results of operations of Deltron LLC 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 combined results
        of
        operations of the Company, Technipower LLC and Deltron LLC, on a pro forma
        basis
        (unaudited), as though the companies had been combined as of the beginning
        of
        each of the periods presented:
 
 Three
                  Months Ended
              
              Nine
                  Months EndedSeptember
                  30,
                2007
              
              September
                  30,
                2006
              
              September
                  30,
                2007
              
              September
                  30,
                2006Net
                  revenues
              
              $
              2,799,995
              
              $
              2,416,319
              
              $
              8,224,167
              
              $
              7,220,793Net
                  loss
              
              $
              (5,555,770
              )
              $
              (3,292,253
              )
              $
              (12,625,604
              )
              $
              (12,209,173
              )Net
                  loss applicable to common stockholders
              
              
              (5,555,770
              )
              
              (3,367,253
              )
              
              (14,038,635
              )
              
              (12,494,173
              )Basic
                  and diluted net loss per share
              
              $
              (0.13
              )
              $
              (0.10
              )
              $
              (0.36
              )
              $
              (0.45
              )
 
 The
        pro
        forma financial information is presented for informational purposes only
        and is
        not necessarily 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.


12




**NOTE
      7 - INTANGIBLE ASSETS**





The
      following table presents the details of the Company’s intangible assets at
      September 30, 2007:





Cost
            
            Accumulated
              Amortization
            
            Net
                Book
              ValueAmortizable:Customer
                relationship
            
            $
            1,325,000
            
            $
            (274,469
            )
            $
            1,050,531Trade
                name
            
            
            442,000
            
            
            (41,140
            )
            
            325,860Non-compete
                agreement
            
            
            160,000
            
            
            (35,871
            )
            
            124,129Customer
                backlog
            
            
            60,000
            
            
            (10,000
            )
            
            50,000Patents
            
            
            814,162
            
            
            (576,173
            )
            
            237,989$
            2,801,162
            
            $
            (937,653
            )
            $
            1,863,509




Total
      amortization expense was $308,940 and $388,250 for the nine month periods ended
      September 30, 2007 and 2006, respectively.




**NOTE
      8 - INVENTORIES**





Inventories
      at September 30, 2007 consist of the following:





Raw
                materials
            
            $
            992,313Work-in-process
            
            
            924,864Finished
                goods
            
            
            237,364$
            2,154,541


**NOTE
      9 - CAPITAL TRANSACTIONS**





As
      discussed in Note 10, on January 22, 2007 the Company sold an aggregate of
      $5,350,000 principal amount of Variable Rate Self-Liquidating Senior Secured
      Convertible Debentures (the “January 2007 Debentures”) . As further described in
      Note 10, the intrinsic value of the beneficial conversion feature associated
      with the Debentures, which was determined to be approximately $2,778,229, was
      recorded as additional debt discount with a corresponding increase to additional
      paid in capital. As part of the sale of the Debentures, the Company issued
      common stock purchase warrants to the purchasers of the Debentures giving them
      the right to purchase up to an aggregate of 2,006,250 shares of common stock
      at
      an exercise price of $2.00 per share. As amended on August 24, 2007, the
      exercise price of the warrants (the “Amended Warrants”) was reduced to $0.35 per
      share. The relative fair value of the warrants was recorded as a discount to
      the
      underlying debt and a corresponding increase to additional paid in capital.
      In
      connection with the sale of the Debentures, the Company also issued 290,000
      shares of common stock with a fair value on the date of issuance of $791,700
      to
      its financial advisor for the transaction.





On
      January 22, 2007, approximately $3,350,000 of the proceeds from the sale of
      the
      Debentures was used to redeem approximately 2,873,500 shares of the Company’s
      Series C convertible preferred stock. The liquidation preference amount at
      the
      time of the redemption was 175% of the stated value of the redeemed shares
      and
      was recorded as a preferred stock dividend of approximately $1,413,000. Also
      on
      January 22, 2007, the remaining 1,741,881 shares of Series C preferred stock
      were converted into 1,741,881 shares of common stock.





During
      the nine months ended September 30, 2007, the Company issued 159,441 shares
      of
      common stock, with a fair value of $207,614 at the time of issuance, for fees
      and services (including 50,000 shares issued to the Chairman of the Company’s
      advisory board - see below).





13




In
      February 2007, the Company awarded and issued 110,000 shares of restricted
      common stock to its CEO, Gary Brandt, pursuant to Mr. Brandt’s employment
      agreement. The shares vest over a three year period according to a schedule
      in
      the agreement. The fair value of the shares at the time of issuance was
      approximately $306,000. This amount will be recorded as compensation expense
      over the vesting period. Compensation expense recognized related to these shares
      was approximately $99,000 for the nine months ended September 30,
      2007.





In
      May
      2007, the Company issued 20,000 shares of common stock with an estimated fair
      value of $4,000 to its President Peter DeVecchis pursuant to Mr. DeVecchis’
employment agreement.





In
      May
      and June 2007 the Company issued an aggregate of 3,043,270 shares of common
      stock with an estimated fair value of $825,806 to the January 2007 Debenture
      holders (Note 10) as a first redemption of January 2007 Debentures and related
      accrued interest of $535,000 and $71,333, respectively. The Company recorded
      additional interest expense of approximately $219,000 for the difference between
      the principal and accrued interest redeemed and the fair market value of the
      common stock issued.





On
      July
      13, 2007, the Board adopted a 2007 Non-Employee Director Compensation Plan
      pursuant to which the Company issued 150,000 shares of Common Stock to each
      of
      its five non-employee directors in consideration of their services as directors. The
      fair
      value of the shares at the time of issuance was approximately $389,000. Also
      on
      July 13, 2007, the Company issued 50,000 shares of Common Stock the chairman
      of
      the Company's advisory board, in consideration of his agreement to serve in
      such
      capacity.





On
      August
      17, 2007, the Company authorized the issuance of an aggregate of 401,250
      restricted shares of Common Stock, as an inducement to the holders of the
      January 2007 Debentures to enter into the Amendment Agreement dated as of August
      24, 2007.





On
      August
      24, 2007, the Company authorized the issuance of an aggregate of 1,747,267
      shares of
      common stock with an estimated fair value of $698,907 to the January 2007
      Debenture holders as a second partial redemption of January 2007
      Debentures pursuant
      to the terms of the Amendment Agreement (Note
      10) . The
      Company recorded additional interest expense of approximately $210,000 for
      the
      difference between the principal redeemed and the fair market value of the
      common stock issued.





On
      August
      27, 2007, The Company issued an aggregate of 974,026 shares of common stock
      with
      a fair value of $272,727, to JMC as payment for the commitment fee on the full
      amount of the Acquisition Credit Facility (Note 10).





As
      discussed in Note 10, on August 30, 2007 the Company sold an additional
      aggregate of $500,000 principal amount of Variable Rate Self-Liquidating Senior
      Secured Convertible Debentures (the “August 2007 Debentures”) . As a part of the
      sale of the Debentures, the Company issued common stock purchase warrants to
      the
      purchasers of the Debentures giving them the right to purchase up to an
      aggregate of 1,000,000 shares of common stock at an exercise price of $0.35
      per
      share.





On
      September 6, 2007, the Company issued an aggregate of 4,833,562 shares of common
      stock to the sellers of Technipower LLC (“Technipower”) as payment of the stock
      payment adjustment due under the terms of the Securities Purchase Agreement
      dated as of August 17, 2006 (and amended August 27, 2007), between the Company
      and the sellers of Technipower.





On
      September 7, 2007, the Company issued an aggregate of 284,638 shares of common
      stock with a fair value of $88,238 to JMC in payment of the monitoring fee
      and
      perfection fee pertaining to the loan made by JMC under the Acquisition Credit
      Facility in connection with the September 5, 2007 acquisition of Deltron,
      Inc.




14


**NOTE
      10 - DEBT**





**Notes
      Payable to Related Parties**





On
      July
      28, 2006, the Company borrowed $125,000 from an affiliate of Michael D’Amelio, a
      director of the Company and issued a promissory note in the principal amount
      of
      $125,000. The note bears interest at a rate of 15% per annum and matured on
      August 28, 2006. The note is currently in default and carries a default interest
      rate of 18% per annum.





On
      December 31, 2006, the Company entered into an agreement with holders of notes
      payable with a principal amount of $1,712,085 to extend the maturity dates
      of
      the notes to September 30, 2007. To induce the noteholders to extend the notes,
      the Company agreed to issue at the noteholders’ option either shares of common
      stock at a rate of 10,000 shares for each $100,000 of principal or cash equal
      to
      five percent of the principal amounts of the notes. Noteholders with notes
      aggregating $790,085 of principal agreed to receive a total of 79,009 shares
      of
      common stock with a fair value of $179,363 at December 31, 2006. This amount
      was
      included in deferred debt costs and amortized to interest expense through
      September 30, 2007. The shares were issued in March 2007. During the first
      quarter of 2007, the Company has recorded additional deferred costs of $46,100
      for the note holders that selected cash payments.





On
      September 28, 2007, the Company entered into an agreement with the noteholders
      pursuant to which the maturity date of the senior secured notes was extended
      from September 30, 2007, to September 7, 2008. To induce the noteholders to
      extend the notes, the Company agreed to compensate each of the noteholders
      by
      paying that noteholder an amount in cash equal to 7% of the principal amount
      of
      the notes which amount will be added to the principal amount of the holder's
      notes. These amounts are included in deferred debt costs and will be amortized
      to interest expense through September 7, 2008. The noteholders were also offered
      the opportunity to buy, for $100, the right (subject to certain restrictions)
      to
      convert their notes to common stock in the future at a conversion price of
      $0.35
      per common stock share. As the market value of the common stock was lower than
      the conversion price at the time of the amendment, there is no imbedded
      conversion feature within the senior secured notes and, as a result, the Company
      did not record a discount to the fair value of the notes. The notes are subject
      to further extension through April 17, 2009 based on the effective date of
      certain future registration statements related to the Company’s convertible
      debentures and accrual or payment of additional extension fees. The principal
      balance outstanding under the senior secured notes was $1,831,931 at September
      30, 2007.





The
      Company’s board of directors has authorized additional borrowings of up to
      $287,915 from the current noteholders and others on the same terms as the notes
      issued to the noteholders.





**Note
      Payable to Related Party under Acquisition Credit Facility**





On
      August
      24, 2007, the Company entered into an agreement with JMC Venture Partners LLC,
      pursuant to which JMC agreed to provide Solomon with a line of credit, the
      aggregate principal amount of which may not exceed $15,000,000 that is to be
      used exclusively for acquisitions (the “Acquisition Credit Facility”). The line
      of credit is available through August 24, 2008. Any amounts loaned under the
      line of credit will accrue interest at a rate of 12% per annum, plus quarterly
      investment fees of 1% of the amounts then outstanding and monitoring fees of
      2.5% of the amounts advanced under the line of credit. Upon execution of the
      line of credit agreement, the Company incurred a 2.5% commitment fee on the
      full
      amount of the line of credit. The monitoring fees and commitment fee are each
      payable in shares of common stock. The number of shares issued was calculated
      by
      dividing the dollar amount of the fee by the average closing price of a share
      of
      common stock for the 10 business days preceding the date of payment. The Company
      has agreed to register the shares for resale under the Securities Act of 1933,
      as amended, within 120 days. In the event of a default, the interest rate will
      increase to 18% per annum effective from the date of default. Loans made under
      the line of credit will be conditioned upon the approval of the proposed
      acquisition by the lender's investment committee and will be subject to the
      lender's normal due diligence and will mature on the last day of the twelfth
      month after they are made. The loans will be made to acquisition subsidiaries
      and unconditionally guaranteed by Solomon. The line of credit is subject to
      ordinary documentation requirements for each closing. The lender, JMC, is an
      affiliate of Michael A. D'Amelio, a director and officer of
      Solomon.




15




As
      payment for the commitment fee on the full amount of the line of credit, The
      Company issued an aggregate of 974,026 shares of common stock to JMC on August
      27, 2007 with a fair value of $272,727.





At
      September 30, 2007, Deltron, LLC had a note payable of $2,750,000 to JMC under
      the terms of the Acquisition Credit Facility described above. The note bears
      interest at 12% per annum plus a quarterly investment fee of 1%. The note
      matures on September 5, 2008, is collateralized by substantially all assets
      of
      Deltron, LLC and its subsidiary Delinc, and guaranteed by Solomon. The loan
      agreement also contains certain financial covenants, which will not be in effect
      until February 2008.





On
      September 7, 2007, the Company issued an aggregate of 284,638 shares of common
      stock with a fair value of $88,238 to JMC in payment of the monitoring fee
      and
      perfection fee pertaining to the loan made by JMC under the Acquisition Credit
      Facility in connection with the September 5, 2007 acquisition of Deltron,
      Inc.





**Revolving
      Note Payable to Bank**





Pursuant
      to Technipower LLC’s revolving note payable (the “Note”) with a bank,
      Technipower LLC can borrow up to $1,500,000 based on a collateral formula
      inclusive of accounts receivable and certain classes of inventory. The Note
      bears interest at the prime rate (7.75% at September 30, 2007), requires no
      principal amortization, and has a maturity date of June 1, 2008. Amounts
      outstanding under the Note were $1,000,000 at September 30, 2007 with an
      additional availability of $64,668.





Substantially
      all of Technipower LLC’s assets have been pledged as collateral for the
      Note.




**Notes
      Payable to Davis & Gilbert LLP**





On
      November 17, 2006, the Company converted $526,149 of trade accounts payable
      to
      Davis & Gilbert LLP (“D&G”), the Company’s general counsel, to a
      promissory note payable (the “Promissory Note”) with an original principal of
      $526,149. The Promissory Note and accrued and unpaid interest at 12% was payable
      the earlier of the Company’s receipt of any proceeds from litigation, or
      receipts from an equity financing of at least $5 million, or March 31, 2007.
      To
      induce D&G to enter into this agreement, the Company issued a warrant to
      purchase 200,000 shares of the Company’s common stock at $1.73 a share. The
      exercise price was adjusted on May 14, 2007 to $1.00, when the underlying shares
      were registered for resale in accordance with the provisions of the warrants.
      The fair value of the warrant of $320,000 was initially recorded as deferred
      debt costs and was amortized over the Promissory Note’s term. The Company repaid
      substantially all of the Promissory Note in 2007 with proceeds from the January
      22, 2007 debenture transaction described below.




On
      January 19, 2007, the Company converted approximately $163,000 of trade accounts
      payable and the remaining balance and unpaid interest on the Promissory Note
      to
      D & G to a new promissory note payable (the “January 2007 Promissory Note”)
      with an original principal of $182,000. The January 2007 Promissory Note and
      accrued and unpaid interest at 12% is payable the earlier of the Company’s
      receipt of any proceeds from litigation, or receipts from an equity financing
      of
      at least $3 million, or September 30, 2007. The
      principal balance outstanding under the January
      2007 Promissory Note was
      $182,000 at September 30, 2007.




On
      October 12, 2007, the Company converted the balance of the January 2007
      Promissory Note of $182,000 plus unpaid interest of approximately $16,000 and
      approximately $330,000 of trade accounts payable to a new promissory note
      payable (the “October 2007 Promissory Note”) with an original principal of
      $564,566. The original principal also includes an additional 7% of the above
      amounts as an inducement. The note bears interest at 12% and is payable on
      September 7, 2008 unless an event occurs which requires a Mandatory Prepayment
      as described in the October 2007 Promissory Note. S ubject
      to
      certain restrictions, any of the unpaid principal and interest may be converted
      to shares of common stock at a conversion price of $0.35 per common stock share,
      at any time.


16


**Amended
      Variable Rate Self-Liquidating Senior Secured Convertible Debentures and Common
      Stock Purchase Warrants**





On
      January 22, 2007, the Company sold an aggregate of $5,350,000 principal amount
      of Variable Rate Self-Liquidating Senior Secured Convertible Debentures (the
      “January 2007 Debentures”) due March 17, 2008. The Company used approximately
      $3,350,000 of the net proceeds of the Debentures to redeem 2,873,500 shares
      of
      Series C preferred stock, approximately $768,250 of the net proceeds to pay
      down
      a promissory note and other obligations, and retained approximately $1,018,000
      of the net proceeds as working capital. On August 24, 2007, the Company entered
      into an Amendment Agreement to amend certain terms of the January 2007
      Debentures (the "Amended Debentures") and to extend the maturity date until
      April 17, 2009.





As
      a
      result of the amendment, the Company determined that a debt extinguishment
      had
      occurred in accordance with guidance in FASB’s Emerging Issues Task Force
      (“EITF”) Abstract, Issue No. 96-19, *“* Debtor’s
      Accounting for a Modification or Exchange of Debt Instruments *”* (EITF
      96-19) *.* In
      August
      2007, the debt extinguishment was calculated by comparing the carrying value
      of
      the January 2007 Debentures to the carrying value of the Amended Debentures.
      The
      Company recognized a loss on debt extinguishment of approximately $2.5 million
      and recorded the amended debentures initially at the fair value of approximately
      $5.2 million. In accordance with EITF 98-5 the intrinsic value of the imbedded
      conversion feature within the Debentures, which was determined by the Company
      to
      be approximately $646,000 was recorded as a discount to the fair value of the
      Amended Debentures.





As
      of
      August 23, 2007, the January 2007 Debentures and related accrued interest in
      the
      amount of $1,023,816 and $71,333, respectively have been redeemed with
      registered common stock. Upon redemption the Company recorded additional
      interest expense in the amount of approximately $429,000 for the difference
      between the principal and accrued interest redeemed and the fair market value
      of
      the common stock issued. In connection with the Amended Debentures, accrued
      interest of $32,100, as well as liquidated damages in the amount of $160,500,
      were added to the principal balance of the amended debenture. As of September
      30, 2007 the outstanding principal of the Amended Debentures amounted to
      $4,518,784.





The
      Amended Debentures are convertible at any time at the option of the holder
      into
      shares of common stock at $0.35 per share, subject to adjustment for stock
      splits, stock dividends, and the like. In the event that the Company issues
      or
      grants any rights to purchase any of its common stock, or other securities
      convertible into its common stock, for an effective per share price less than
      the conversion price then in effect, the conversion price of all unconverted
      Amended Debentures will be decreased to equal such lower price. The conversion
      price adjustment will not apply to certain exempt issuances (“exempt issuances”)
      including the issuance of (a) shares of Common Stock or options to employees,
      officers or directors of the Company pursuant to any stock or option plan duly
      adopted for such purpose by a majority of the non-employee members of the Board
      of Directors of the Company or a majority of the members of a committee of
      non-employee directors, (b) up to, in the aggregate, 250,000 shares of Common
      Stock or options (subject to reverse and forward stock splits and the like)
      during any 12 month period issued to the officers, directors or employees of
      the
      Company or its Subsidiaries and approved by a majority of the members of the
      Board of Directors of the Company, (c) up to, in the aggregate, $200,000 of
      Common Stock during any 6 month period approved by a majority of the members
      of
      the Board of Directors of the Company, (d) securities upon the exercise or
      exchange of or conversion of any Securities issued hereunder and/or other
      securities exercisable or exchangeable for or convertible into shares of Common
      Stock issued and outstanding on the date of the Amended Debentures, (e)
      securities issued pursuant to acquisitions or strategic transactions approved
      by
      a majority of the disinterested directors of the Company, (f) up to 160,000
      shares of Common Stock to be issued to Ardour Capital Investments LLC or its
      designees in partial consideration for its services to the Company in connection
      with the Amended Debentures, (g) up to $375,000 of Common Stock to be issued
      to
      JMC Venture Partners LLC (" JMC ")
      or its
      assigns as a commitment fee for a $15 million acquisition line of credit to
      be
      entered into between the Company and JMC and an additional $100,000 of Common
      Stock per quarter to be issued to JMC as a monitoring fee, which shares shall
      be
      issued for an effective per share price of at least the fair market value of
      the
      Common Stock on the date of issuance of the applicable shares as determined
      by
      the Company's board of directors in good faith. In accordance with EITF 98-5,
      “Accounting for Convertible Securities with Beneficial Conversion Features or
      Contingently Adjustable Conversion Ratios” (EITF 98-5) the intrinsic value of
      the imbedded conversion feature within the January 2007 Debentures, which was
      determined by the Company to be $2,778,229, was recorded as an additional
      discount to the debenture. Prior to extinguishment of the January 2007
      Debentures on August 24, 2007, and in accordance with EITF 00-27, “Application
      of Issue No. 98-5 to Certain Convertible Instruments”, the debt discount was
      being amortized over the remaining term of the Amended Debentures. In accordance
      with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets
      and Extinguishments of Liabilities,” the unamortized discount was included in
      the loss of extinguishment of debt on August 24, 2007.





17




Prior
      to
      maturity, the Amended Debentures will bear interest at the higher of (i) 8%
      per
      annum or (ii) the six-month London Interbank Offered Rate plus 2%, payable
      quarterly in arrears in cash, or, at the Company’s option, in shares of common
      stock. The Company’s ability to pay interest with shares of common stock will be
      subject to specified conditions, including the existence of an effective
      registration statement covering the resale of the shares issued in payment
      of
      interest and certain minimum trading volumes in the common stock. All overdue
      and accrued interest will accrue a late fee equal to the lesser of 15% per
      annum
      or the maximum rate permitted by applicable law. From and after an event of
      default under the Amended Debentures and for so long as the event of default
      is
      continuing, the Amended Debentures will bear default interest at a rate of
      the
      lesser of 15% per annum or the maximum rate permitted by applicable law. Accrued
      interest related to the Amended Debentures, which is included in accrued
      expenses, amounted to approximately $94,000 as of September 30,
      2007.





Beginning
      on the earlier of the first day of the first month immediately following the
      effectiveness of a registration statement covering the resale of the shares
      of
      common stock issuable upon conversion of the Amended Debentures or December
      1,
      2007, and on the first day of each month thereafter, the Company will be
      required to redeem 1/17th of the outstanding principal of the Amended Debentures
      in cash or, at the Company’s election, with shares of common stock. The
      Company’s ability to pay the redemption price in shares of common stock will be
      subject to specified conditions, including the existence of an effective
      registration statement covering the resale of the shares issued in payment
      of
      the redemption amount and certain minimum trading volumes in common stock.
      Any
      common stock delivered in satisfaction of an amortization payment will be valued
      at 82.5% of the average of the daily volume weighted average price of the
      applicable shares for the 10 trading days prior to the amortization payment.
      Any
      unconverted Amended Debentures will become due at maturity.




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




The
      Company’s obligations under the Amended Debentures are secured by a security
      interest in substantially all of the Company’s assets pursuant to a Security
      Agreement dated as of January 17, 2007 between the Company and the purchasers
      of
      the Amended Debentures. The Company has agreed that in the event that it forms
      any new subsidiaries and moves assets to those subsidiaries, those subsidiaries
      will become guarantors of the Amended Debentures.




As
      a part
      of the issuance of the January 2007 Debentures, the Company issued common stock
      purchase warrants (the January 2007 Warrants) to the purchasers of the January
      2007 Debentures giving them the right to purchase up to an aggregate of
      2,006,250 shares of common stock at an exercise price of $0.35 per share, as
      amended on August 24, 2007 (the Amended Warrants). The Amended Warrant exercise
      price is subject to adjustment for stock splits, stock dividends, and the like.
      In the event that the Company issues or grants any rights to purchase any common
      stock, or other security convertible into common stock, for a per share price
      less than the exercise price then in effect, the exercise price of the Amended
      Warrants with respect to shares of common stock will be reduced to equal such
      lower price and the number of shares of common stock for which the warrants
      may
      be exercised will be increased so that the total aggregate exercise price
      remains constant. The foregoing adjustment to the exercise price for common
      stock will not apply to certain exempt issuances, as defined above. All of
      the
      Amended Warrants will expire January 17, 2012, unless sooner exercised. As
      of
      September 30, 2007, none of the warrants issued in connection with the Amended
      Debentures have been exercised.




18




In
      accordance with APB 14, “Accounting for Convertible Debt and Debt Issued with
      Stock Purchase Warrants,” the relative fair value of the January 2007 Warrants
      on their date of grant, which was determined to be approximately $2,571,771
      was
      recorded as a discount to the underlying debenture and as an addition to
      additional paid-in capital. The discount was being amortized to interest expense
      over the term of the underlying debenture. The fair value of the Amended
      Warrants was computed using the Black-Scholes option pricing model. The Company
      assumed a risk-free interest rate of 4.78%, no dividends, expected volatility
      of
      approximately 179% and an expected warrant life of approximately 3 years. In
      accordance with SFAS No. 140 the unamortized discount associated with the
      January 2007 Warrants was included in the loss on extinguishment of debt on
      August 24, 2007. On August 24, 2007, the Company determined the incremental
      value of the Amended Warrants to be approximately $97,000, which has been
      recorded as an additional fee and included in the loss on extinguishment of
      debt. The Company determined the fair value of the warrants using a risk-free
      interest rate of 4.31%, no dividends, expected volatility of approximately
      183%
      and an expected warrant life of approximately 3 years, respectively.





In
      connection with the sale of the Amended Debentures and Amended Warrants, the
      Company entered into a Registration Rights Agreement with the purchasers of
      the
      Amended Debentures and Amended Warrants under which the Company is required,
      on
      or before October 1, 2007, to file a registration statement with the Securities
      and Exchange Commission covering the resale of the shares of common stock
      issuable pursuant to the Amended Debentures and Amended Warrants. The Company
      did file the required registration statement on October 1, 2007 and an amended
      statement on November 8, 2007. The registration statement is not yet effective,
      but such registration statement is required to be effective no later than
      January 22, 2008.





In
      accordance with FASB Staff Position No. EITF 00-19-2, “Accounting for
      Registration Payment Arrangements”, the Company measured their contingent
      obligation under the Registration Rights Agreement in accordance with FASB
      Statement No. 5, “Accounting for Contingencies”. As of June 30, 2007 and through
      the date of the Amended Debentures, August 24, 2007, the Company was not in
      compliance with the Registration Rights Agreement. During the three months
      ended
      September 30, 2007, the Company issued additional Debentures in the amount
      of
      $160,500 in satisfaction of liquidated damages under the Registration Rights
      Agreement for failure to timely file a registration statement by the defined
      date.





**August
      2007 Variable Rate Self-Liquidating Senior Secured Convertible Debentures and
      Common Stock Purchase Warrants**





On
      August
      30, 2007, the Company sold an aggregate of $500,000 principal amount of Variable
      Rate Self-Liquidating Senior Secured Convertible Debentures (the “August 2007
      Debentures”) due April 17, 2009, under the same terms and conditions as the
      Amended Debentures.





The
      August 2007 Debentures are convertible at any time at the option of the holder
      into shares of common stock at $0.35 per share, subject to adjustment for stock
      splits, stock dividends, and the like, and subject to the terms and provisions
      of the Amended Debentures. In accordance with EITF 98-5 the intrinsic value
      of
      the imbedded conversion feature within the Debentures, which was determined
      by
      the Company to be approximately $100,000, was recorded as a discount to the
      August 2007 Debentures. In accordance with EITF 00-27, the remaining discount
      in
      the amount of approximately $90,000 as of September 30, 2007, will be amortized
      over the term of the August 2007 Debentures.





Prior
      to
      maturity, the August 2007 Debentures will bear interest at the higher of (i)
      8%
      per annum or (ii) the six-month London Interbank Offered Rate plus 2%, payable
      quarterly in arrears in cash, or, at the Company’s option, in shares of common
      stock. The Company’s ability to pay interest with shares of common stock will be
      subject to specified conditions, including the existence of an effective
      registration statement covering the resale of the shares issued in payment
      of
      interest and certain minimum trading volumes in the common stock. All overdue
      and accrued interest will accrue a late fee equal to the lesser of 15% per
      annum
      or the maximum rate permitted by applicable law. From and after an event of
      default under the Debentures and for so long as the event of default is
      continuing, the Debentures will bear default interest at a rate of the lesser
      of
      15% per annum or the maximum rate permitted by applicable law. Accrued interest,
      related to the August 2007 Debentures, which is included in accrued expenses,
      amounted to approximately $4,000 as of September 30, 2007.




19




Beginning
      on the earlier of the first day of the first month immediately following the
      effectiveness of a registration statement covering the resale of the shares
      of
      common stock issuable upon conversion of the August 2007 Debentures and December
      1, 2007, and on the first day of each month thereafter, the Company will be
      required to redeem 1/17th of the face value of the August 2007 Debentures in
      cash or, at the Company’s election, with shares of common stock. The Company’s
      ability to pay the redemption price in shares of common stock will be subject
      to
      specified conditions, including the existence of an effective registration
      statement covering the resale of the shares issued in payment of the redemption
      amount and certain minimum trading volumes in common stock. Any common stock
      delivered in satisfaction of an amortization payment will be valued at 82.5%
      of
      the average of the daily volume weighted average price of the applicable shares
      for the 10 trading days prior to the amortization payment. As of September
      30,
      2007, no August 2007 Debentures have been redeemed.




As
      a part
      of the sale of the Debentures, the Company issued common stock purchase warrants
      to the purchasers of the Debentures giving them the right to purchase up to
      an
      aggregate of 1,000,000 shares of common stock at an exercise price of $0.35
      per
      share. The warrant exercise price is subject to adjustment for stock splits,
      stock dividends, and the like. In the event that the Company issues or grants
      any rights to purchase any common stock, or other security convertible into
      common stock, for a per share price less than the exercise price then in effect,
      the exercise price of the warrants with respect to shares of common stock will
      be reduced to equal such lower price and the number of shares of common stock
      for which the warrants may be exercised will be increased so that the total
      aggregate exercise price remains constant. The foregoing adjustment to the
      exercise price for common stock will not apply to certain exempt issuances,
      as
      defined in the Amended Debentures.





In
      accordance with APB 14, “Accounting for Convertible Debt and Debt Issued with
      Stock Purchase Warrants”, the relative fair value of these warrants on their
      date of grant, which was determined to be approximately $174,000, was recorded
      as a discount to the underlying debt and as an addition to additional paid-in
      capital. The discount is being amortized to interest expense over the term
      of
      the underlying debt. The fair value of the warrants was computed using the
      Black-Scholes option pricing model. The Company assumed a risk-free interest
      rate of 4.30%, no dividends, expected volatility of approximately 184% and
      an
      expected warrant life of approximately 3 years. As of September 30, 2007, the
      unamortized discount relating to the warrants on the August 2007 Debentures
      amounted to approximately $113,000.





**NOTE
      11 - PATENT INFRINGEMENT**





The
      Company is involved in litigation against Toyota Motor Corporation and certain
      of its affiliates (collectively, “Toyota”) for infringement of its Electric
      Wheel patent. On January 10, 2006, the Company filed a complaint with the United
      States International Trade Commission (“ITC”) in Washington D.C. seeking an
      exclusion order prohibiting the importation of infringing
      technology.





On
      April
      30, 2007, the ITC terminated the investigation with a finding of no violation
      of
      Section 337 of the Tariff Act of 1930. On June 1, 2007, the Company announced
      that it will appeal the determination of the ITC to the Court of Appeals for
      the
      Federal Circuit in Washington, DC (CAFC). The Company believes that the ITC’s
      findings are not binding on other courts and that the CAFC is the appropriate
      forum by which to establish the proper interpretation of its patent claims
      and
      to provide future options to pursue full and fair remedies.





The
      Company has an agreement with Oliver Street Finance LLC (“Oliver Street”). Under
      this agreement Oliver Street provides funding to the Company to prosecute the
      Company’s initial patent infringement action against Toyota Motor Corporation,
      Toyota Motor Sales U.S.A., Inc. and Toyota Manufacturing North America
      (collectively, “Toyota”). Oliver Street pays all legal fees and out of pocket
      expenses billed by the Company’s special patent counsel in connection with the
      litigation against Toyota and approved by the Company in exchange for a portion
      of any recovery that the Company may receive from the litigation equal to the
      greater of 40% of the recovery or the actual amount of legal fees and expenses
      Oliver Street pays on the Company’s behalf. Michael A. D’Amelio, a director and
      shareholder of the Company, is a principal of Oliver Street. Through February
      15, 2006, Mr. D’Amelio was the beneficial owner of more than 10% of the
      Company’s common stock. During this period, expenses paid on behalf of the
      Company by Oliver Street totaling $236,620 in 2005 and $129,949 in 2006 were
      recorded as professional fee expense as well as an increase to additional
      paid-in capital. In connection with the extinguishment of the Redeemable Series
      A preferred stock for common stock on February 15, 2006, Mr. D’Amelio’s
      beneficial ownership of the Company's common stock decreased to below 10%.
      As
      such, expenses paid by Oliver Street on behalf of the Company since February
      15,
      2006 are no longer reflected in the financial statements.





20




On
      June
      7, 2007 the Company announced the engagement of new patent counsel, as
      additional litigation counsel in this matter. The Company has no present
      agreement to provide funding to prosecute the appeal litigation.





**NOTE
      12 - ACCRUED AND UNPAID PAYROLL TAXES**





At
      September 30, 2007, the Company has accrued interest and penalties of $192,000
      related to payroll and payroll related taxes. This amount includes additional
      interest of approximately $99,000 charged to operations in the first nine months
      of 2007. The interest and penalties were the subject of a delinquency proceeding
      with the U.S. Internal Revenue Service. During the first quarter of 2007, the
      Company signed an agreement with the IRS to settle the outstanding interest
      and
      penalties. The agreement provides for the Company’s payment of the accrued
      interest and penalties in monthly installments of $10,000.





**NOTE
      13 - POTENTIAL ACQUISITIONS**




On
      July
      2, 2007, the Company entered into a letter of intent to acquire Unipower
      Corporation, a Coral Springs, Florida based manufacturer of power supplies
      and
      related equipment for telecom, datacom, network equipment and industrial
      applications. Unipower provides high-density, low profile and hot swap power
      system solutions and has overseas operations in the United Kingdom. The letter
      of intent contemplates that, through an acquisition subsidiary, the Company
      will
      purchase all of the capital stock of Unipower for cash in an amount to be
      determined with the purchase price subject to changes in Unipower's net assets
      through the closing date. The transaction is subject to the negotiation and
      execution of a definitive purchase agreement and the satisfaction of various
      closing conditions, including a due diligence investigation. Management
      currently anticipates that it will complete the transaction during
      the fourth quarter of 2007.





**NOTE
      14 - TRANSACTIONS WITH RELATED PARTIES**





**Notes
      payable to Related Parties**





During
      the quarter ended December 31, 2006 the Company issued a total of 79,009 shares
      of common stock to certain note holders to extend the terms of payment to
      September 30, 2007. The estimated fair market value was $179,363. During the
      quarter ended March 31, 2007 the Company accrued $46,100 in cash incentives
      to
      certain note holders to extend the terms of payment to September 30, 2007 On
      September 28, 2007, the Company
      agreed to compensate each of the noteholders by paying that noteholder an amount
      in cash equal to 7% of the principal amount of the notes which amount was added
      to the principal amount of the holder's notes. The
      aggregate principal balance on these notes was $1,831,931
      at September 30, 2007 (Note 10) .





At
      September 30, 2007, the Company has a note payable of $125,000 to an affiliate
      of Michael A.
      D’Amelio, a director and officer of Solomon. The note is currently in default
      and carries a default interest rate of 18% per annum (Note 10).





In
      August
      2007, the Company entered into an Acquisition Credit Facility Agreement with
      JMC
      Venture Partners LLC (“JMC”), an affiliate of Michael A. D’Amelio, a director
      and officer of Solomon. The line of credit is to be used exclusively for
      acquisitions and the aggregated principal may not exceed $15,000,000 (Note
      10).
      The Company issued 974,026 shares of common stock, valued at $272,727, as
      payment for the commitment fee on the Acquisition Credit Facility on August
      27,
      2007 (Notes 9 and 10).





In
      September 2007, the Company borrowed $2,750,000 from JMC under the terms of
      the
      Acquisition Credit Facility to effectuate the Deltron acquisition. In connection
      with this transaction the Company issued 284,238 shares of common stock to
      JMC
      as payment of the monitoring and perfection fees pertaining to this loan (Notes
      9 and 10).





21




Interest
      expense on notes to related parties was approximately $226,000 and $51,000
      for
      the three months ended September 30, 2007 and 2006, respectively and $479,000
      and $119,000 for the nine months ended September 30, 2007 and 2006,
      respectively.





**Expenses**





In
      2007
      and 2006, Bril Corporation provided bookkeeping services for $5,000 a month.
      Two
      principals of Bril Corporation are also directors and stockholders of
      the Company. Total expense for the nine months ended September 30, 2007 and
      2006
      was $45,000 for each nine-month period.






**NOTE
      15 - 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 LLC and Deltron LLC and specializes
      in
      the design, development and production of customer power systems, chassis and
      power supply products for defense related markets.




Segment
      financial information follows:





THREE
                MONTHS ENDED
            
            NINE
                MONTHS ENDEDSeptember
                30,
              2007
            
            September
                30,
              2006
            
            September
                30,
              2007
            
            September
                30,
              2006Revenues:Sales
                to unaffiliated customers:Power
                Electronics
            
            $
            2,134,093
            
            $
            799,312
            
            $
            5,172,425
            
            $
            799,312Motive
                Power
            
            
            0
            
            
            24,219
            
            
            31,678
            
            
            37,131$
            2,134,093
            
            $
            823,531
            
            $
            5,204,103
            
            $
            836,443Net
                Profit (Loss):Power
                Electronics
            
            $
            196,746
            
            $
            (54,730
            )
            $
            445,067
            
            $
            (54,730
            )Motive
                Power
            
            
            (1,515,048
            )
            
            (2,286,218
            )
            
            (3,415,168
            )
            
            (3,745,155
            )Operating
                Loss
            
            
            (1,318,302
            )
            
            (2,340,948
            )
            
            (2,970,101
            )
            
            (3,799,885
            )Interest
                expense
            
            
            (1,566,812
            )
            
            (394,628
            )
            
            (6,442,812
            )
            
            (1,382,378
            )Other
                income (expense)
            
            
            15,111
            
            
            (175,507
            )
            
            33,795
            
            
            (175,507
            )Loss
                on extinguishments of redeemable preferred stock and other
                debt
            
            
            (2,496,544
            )
            
            0
            
            
            (2,496,544
            )
            
            (5,652,404
            )Net
                Loss
            
            
            (5,366,547
            )
            
            (2,911,083
            )
            
            (11,875,662
            )
            
            (11,010,174
            )Preferred
                stock dividends
            
            
            0
            
            
            (36,164
            )
            
            (1,413,031
            )
            
            (96,164
            )Loss
                applicable to common stockholders
            
            $
            (5,366,547
            )
            $
            (2,947,247
            )
            $
            (13,288,693
            )
            $
            (11,106,338
            )




**NOTE
      16 - NEW ACCOUNTING STANDARDS**





In
      February 2007, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards (SFAS) No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities, Including an Amendment of FASB
      Statement No. 115,” which will become effective in 2008. SFAS No. 159 permits
      entities to elect to measure eligible financial assets, financial liabilities
      and firm commitments at fair value, on an instrument-by-instrument basis, that
      are otherwise not permitted to be accounted for at fair value under other
      generally accepted accounting principles. The fair value measurement election
      is
      irrevocable and subsequent changes in fair value must be recorded in
      earnings.  The Company will adopt this Statement in fiscal year 2008 and is
      currently evaluating if it will elect the fair value option for any of its
      eligible financial instruments and other items.




22




In
      September 2006, the FASB issued Financial Accounting Standard No. 157, ‘‘Fair
      Value Measurements’’ (‘‘SFAS 157’’). SFAS 157 is effective for financial
      statements issued for fiscal years beginning after November 15, 2007 as well
      as
      interim periods within such fiscal years. SFAS 157 provides a common fair value
      hierarchy for companies to follow in determining fair value measurements in
      the
      preparation of financial statements and expands disclosure requirements relating
      to how such fair value measurements were developed. SFAS 157 clarifies the
      principle that fair value should be based on the assumptions that the
      marketplace would use when pricing an asset or liability, rather than company
      specific data. The Company is currently assessing the impact that SFAS 157
      will
      have on its results of operations and financial position.





**NOTE
      17 - COMMITMENTS AND CONTINGENCIES**





**Business
      Acquisition**





In
      connection with the Company’s acquisition of Deltron LLC in August 2007, the
      Company agreed to pay the sellers an earn-out payment equal to the excess of
      the
      product of net sales of the purchased business during the year following the
      closing multiplied by a profit margin determined by subtracting from net sales
      the cost of goods sold divided by net sales, over $1,570,000. The earn-out
      payment cannot exceed $300,000.


23


**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, 2007 and 2006 should
      be read in conjunction with our consolidated financial statements included
      elsewhere in this Quarterly Report.*





**Overview**




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





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





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





On
      August
      17, 2006, we entered into a Securities Purchase Agreement with Integrated Power
      Systems LLC, Power Designs Inc., The Vantage Partners LLC, certain other persons
      and Technipower LLC, a Danbury, Connecticut based manufacturer of power supplies
      and related equipment for the defense, aerospace and commercial sectors, and
      simultaneously closed on the acquisition of all of the outstanding membership
      units and warrants to purchase membership units of Technipower. We purchased
      Technipower for 4,615,381 shares of Series C convertible redeemable preferred
      stock, 4,461,537 shares of common stock and the assumption of certain
      liabilities totaling approximately $850,000, including approximately $700,000
      outstanding under Technipower’s $1.5 million revolving credit facility.
      Twenty-five percent of the common stock was deposited in escrow to support
      the
      sellers’ indemnity obligations under the purchase agreement. The escrowed shares
      will also fund any required working capital adjustment in our favor. The share
      amounts were calculated using an agreed $.65 per share price. The common share
      value of the shares issued at closing in our financial statements was calculated
      based on the closing market price on the date of the closing of the transaction,
      August 17, 2006, of $1.40 per share. We
      agreed
      to issue additional shares to the sellers of Technipower 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. On August 17, 2007, we agreed with
      certain of these sellers to reset the trading price to $.35 per share from
      $.65
      per share in exchange for their agreement to extend their existing lock-up
      agreements for approximately one year on shares of common stock previously
      owned
      and on the additional shares to be issued. On September 6, 2007, we issued
      an
      aggregate of 4,833,562 shares of common stock to these sellers as payment of
      this stock payment adjustment using the reset trading price of $.35 per share.
      We determined that the issuance of these shares of common stock was exempt
      from
      registration under Section 4(2) of the Securities Act as transactions by an
      issuer not involving a public offering.




After
      the
      acquisition of Technipower, we divided our operations into two divisions: a
      Power Electronics Division, which encompasses our power systems businesses,
      and
      a Motive Power Division, which encompasses our electric power drive
      technologies. With this structure, we are working 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.





24





Our
      Power
      Electronics Division focuses its efforts in engineered power systems while
      also
      providing both technical and sales augmentation to our Motive Power Division.
      The Power Electronics Division specializes in the design, development and
      production of custom power electronics 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
      September 5, 2007, we acquired the assets of Deltron, Inc., a North
      Wales, Pennsylvania based manufacturer of power supplies and related equipment
      with manufacturing operations in Reynosa, Mexico, pursuant to an Asset Purchase
      Agreement dated June 1, 2007, as amended on July 9, 2007, August 2, 2007, August
      9, 2007, August 16, 2007, August 24, 2007, August 31, 2007, and September
      4, 2007, by and among Del-Inc Acquisition LLC, a Delaware limited liability
      company and wholly-owned subsidiary of the Company, Deltron, Corporacion Delinc,
      S.A. de C.V., a Reynosa, Tamaulipas, Mexico corporation, Aaron Anton and other
      shareholders of Deltron Inc. The purchase price of $2,860,000 consisted of
      $1,508,000 in cash for Deltron’s assets, plus $600,000 in cash for the stock of
      Delinc, S.A., $425,000 in acquisition related costs, and the assumption of
      certain liabilities in the amount of approximately $327,000. A portion of the
      purchase price totaling $400,000 was deposited in escrow for one year from
      closing to support the sellers’ indemnification obligations. We also agreed to
      pay the sellers an earn-out payment equal to the product of net sales of the
      purchased business during the year following the closing multiplied by a profit
      margin determined by subtracting from net sales the cost of goods sold divided
      by net sales. The earn-out payment cannot exceed $300,000. Following the closing
      of the transaction, we changed the name of Del-Inc Acquisition LLC to Deltron
      LLC.





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





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





On
      August
      24, 2007, we entered into an agreement with JMC Venture Partners LLC, pursuant
      to which JMC agreed to provide Solomon with a line of credit, the aggregate
      principal amount of which may not exceed $15,000,000, that is to be used
      exclusively for acquisitions. The line of credit will be available through
      August 24, 2008. As
      payment for the commitment fee on the full amount of the line of credit, we
      issued an aggregate of 974,026 shares of common stock to JMC on August 27,
      2007.
      We provide more information about this line of credit in "Liquidity and Capital
      Resources" below.


25




Del-Inc
      Acquisition LLC borrowed a total of $2,750,000 from JMC under the line of credit
      to fund the purchase price for the Deltron assets. The loan was made pursuant
      to
      the terms of a Secured Promissory Note Loan Security and Pledge Agreement dated
      as of September 5, 2007, between Del-Inc and JMC and a related promissory note
      issued by Del-Inc to JMC on September 5, 2007. We guaranteed the loan fully
      and
      unconditionally pursuant to a Guaranty Agreement with JMC dated September 5,
      2007. The loan matures on September 5, 2008.





We
      incurred a 2.5% monitoring fee, which we paid in shares of common stock, on
      the
      amount of loan advanced to Del-Inc under the line of credit. The number of
      shares issued was calculated by dividing the dollar amount of the fee by the
      average closing price of a share of common stock for the 10 business days
      preceding the date of payment. Del-Inc agreed to pay JMC a separate perfection
      fee in the amount of $27,500, payable in shares of our common stock, with
      respect to the loan made by JMC under the line of credit in connection with
      the
      acquisition of the assets of Deltron. The number of shares issued was calculated
      by dividing the dollar amount of the fee by the market price on the date of
      the
      closing. As payment for the monitoring fee and the perfection fee, we issued
      an
      aggregate of 284,638 shares of common stock to JMC on September 7,
      2007.




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





In
      January 2007, we sold an aggregate of $5,350,000 principal amount of Variable
      Rate Self-Liquidating Senior Secured Convertible Debentures due March 18, 2008.
      We redeemed $535,000 in principal amount of the debentures and accrued interest
      thereon in June 2007. In August 2007, we entered into an amendment agreement
      with the holders of these debentures pursuant to which, among other things,
      we
      extended the maturity date to April 17, 2009. In connection with the amendment
      agreement, we (i) issued to the holders an additional $160,500 in
      debentures due April 17, 2009, and (ii) issued an aggregate of 1,747,267
      shares of common stock in partial satisfaction of the redemption payment that
      was due to the holders on July 1, 2007, with the balance of the redemption
      payment carried forward and payable when redemption payments recommence.
      Separately, to induce the holders of the January Debentures to enter into the
      amendment agreement, we agreed to issue to each holder an amount of restricted
      shares of common stock calculated by multiplying the dollar amount of each
      holder’s initial investment by 0.075. In fulfillment of this agreement, we
      issued an aggregate of 401,250 restricted shares of common stock.





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





26




In
      August
      2007, we sold an aggregate of $500,000 principal amount of Variable Rate
      Self-Liquidating Senior Secured Convertible Debentures due April 17,
      2009.





We
      provide more information about these loan transactions in “Liquidity and Capital
      Resources” below.





**Results
      of Operations**





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





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





For
      the
      three months ended September 30, 2007 we generated revenues of $2,134,093 as
      compared to $823,531 for the three months ended September 30, 2006, an increase
      of $1,310,562. Cost of products sold for the three months ended September 30,
      2007 was $1,161,920, generating a gross margin of $972,173. Cost of products
      sold for the three months ended September 30, 2006 was $632,914, generating
      a
      gross margin of $190,617. The increase in our revenues was due to the results
      of
      our Power Electronics Division which includes the Technipower acquisition effective August 17, 2006. We believe that with these additions, revenue
      levels will continue to equal or exceed those of previous quarters.




Research
      and Development costs were $310,108 for the three months ended September 30,
      2007 as compared to $119,128 for the three months ended September 30, 2006.
      The
      increase was the result of continued R&D expenditures in our Power
      Electronics Division as the Company continues to target the design and
      production of custom power-ready systems, chassis and power supply products
      for
      industrial and defense-related markets.





Selling,
      general and administrative expenses were $1,980,367 for the three months ended
      September 30, 2007 as compared to $2,412,437 for the three months ended
      September 30, 2006, a decrease of $432,070 or 18%. This decrease was partially
      due to the 2006 charge of $1,410,000 to deferred compensation in recognition
      of
      a November 2005 compensation award regarding Mr. Laskowski and Mr.
      D’Amelio. There was no similar expense in the 2007 period. This reduction is
      partially offset by the additional 2007 expense of our Power Electronics
      Division as well as the additional compensation expense related to the retention
      of a Chief Executive Officer in February 2007 and other executives.





We
      incurred interest expense of $1,566,812 for the three months ended September
      30,
      2007. Interest expense incurred for the three months ended September 30, 2006
      was $394,628. The increase of $1,172,184 in interest expense was primarily
      due
      to an increase in accrued cash and non-cash interest charges related to the
      variable rate self-liquidating senior secured convertible debentures sold in
      January and August 2007.





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





Three
                Months Ended September 30,2007
            
            2006Interest
                on notes payable
            
            $
            199,801
            
            $
            382,887Interest
                on bank debt
            
            
            13,921
            
            
            11,741Interest and penalties
                on unpaid payroll taxes
            
            
            3,773
            
            
            -Interest
                and accretion on variable rate self-liquidating senior secured convertible
                debentures
            
            
            1,349,317
            
            
            -**Total
                interest expense**
            
            $
            1,566,812
            
            $
            394,628





27




We
      recorded a $2,496,544 loss related to the extinguishment of redeemable preferred
      stock and other debt in the three months ended September 30, 2007 related to
      the
      amendment of the January 2007 variable rate self-liquidating senior secured
      convertible debentures. We reported a net loss and loss applicable to
      common stockholders for the three months ended September 30, 2007 of $5,366,547.
      Our net loss and loss applicable to common stockholders for the three months
      ended September 30, 2006 was $2,911,083 and $2,947,247
      respectively.




*Nine
      months ended* September *30,
      2007 compared with Nine months ended* September *30,
      2006.*





For
      the
      nine months ended September 30, 2007 we generated revenues of $5,204,103 as
      compared to $836,443 for the nine months ended September 30, 2006, an increase
      of $4,367,660. Cost of products sold for the nine months ended September 30,
      2007 was $2,777,865, generating a gross margin of $2,426,238. Cost of products
      sold for the nine months ended September 30, 2006 was $652,533, generating
      a
      gross margin of $183,910. The increase in our revenues was due to the results
      of
      our Power Electronics Division which includes the Technipower acquisition effective August 17, 2006.





Research
      and Development costs were $869,234 for the nine months ended September 30,
      2007
      as compared to $119,128 for the nine months ended September 30, 2006. The
      increase was the result of continued R&D expenditures in our Power
      Electronics Division.





Selling,
      general and administrative expenses were $4,527,105 for the nine months ended
      September 30, 2007 as compared to $3,864,667 for the nine months ended September
      30, 2006, an increase of $662,438 or 17%. This increase was primarily due to
      the
      additional expense of our expanded Power Electronics Division as well as the
      additional compensation expense related to the retention of a Chief Executive
      Officer in February 2007 and other executives, offset partially by the 2006
      charge of $1,410,000 to deferred compensation in recognition of a November
      2005
      compensation award regarding Mr. Laskowski and Mr. D’Amelio.





We
      incurred interest expense of $6,442,812 for the nine months ended September
      30,
      2007. Interest expense incurred for the nine months ended September 30, 2006
      was
      $1,382,378. The increase of $5,060,434 in interest expense was primarily due
      to
      an increase in accrued cash and non-cash interest charges related to the
      variable rate self-liquidating senior secured convertible debentures sold in
      January and August 2007.




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




Nine
                Months Ended September 30,2007
            
            
            2006Accretion
                and dividends, Series A preferred stock
            
            $
            -
            
            $
            698,080Interest
                on notes payable
            
            
            696,554
            
            
            672,557Interest
                on bank debt
            
            
            51,290
            
            
            11,741Interest and penalties
                on unpaid payroll taxes
            
            
            98,629
            
            
            -Interest
                and accretion on variable rate self-liquidating senior secured convertible
                debentures
            
            
            5,596,339
            
            
            -**Total
                interest expense**
            
            $
            6,442,812
            
            $
            1,382,378





We
      recorded a $2,496,544 loss related to the extinguishment of redeemable preferred
      stock and other debt in the nine months ended September 30, 2007 related to
      the
      amendment of the January 2007 variable rate self-liquidating senior secured
      convertible debentures. We reported a net loss for the nine months ended
      September 30, 2007 of $11,875,662. Our net loss for the nine months ended
      September 30, 2006 was $11,010,174. We recorded a $5,652,404 loss related to
      the
      extinguishment of redeemable preferred stock and other debt in the nine months
      ended September 30, 2006. Loss applicable to common stockholders for the
      nine months ended September 30, 2007 was $13,288,693, reflecting dividends
      of
      $1,413,031 relating to the redemption of the Series C preferred stock
      issued in August 2006. Loss applicable to common stockholders for the nine
      months ended September 30, 2006 was $11,106,338, reflecting dividends of $60,000
      relating to Series B preferred stock recorded in March 2006 and $36,164 relating
      to Series C preferred stock.





28




**Liquidity
      and Capital Resources**




Our
      available cash balance at September 30, 2007 was $872,701. We borrowed
      $1,877,085 in short-term debt financing from certain of our principal
      stockholders and other investors from March 2005 through December 2006. These
      notes are secured by liens on all of our tangible and intangible
      assets.





During
      the nine months ended September 30, 2007, we used net cash of $1,062,375 from
      operations. This consisted of a net loss of $11,875,662 augmented by net
      non-cash charges of $10,034,167. Additionally, financing activities provided
      net
      cash in the amount of $4,582,906 consisting primarily of proceeds from
      convertible promissory notes payable and notes payable to related parties.
      The
      Power Electronics Division experienced positive cash flow from operating
      activities of $850,205.





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





We
      have
      incurred significant operating losses and used cash in our operating activities
      for several consecutive years. As of September 30, 2007, we have negative
      working capital and a capital deficiency. These conditions raise substantial
      doubt about our ability to continue as a going concern. In the past we have
      been
      able to obtain financing to fund our losses. We expect to seek additional
      capital through the sale of debt and/or equity in 2007 in order to fund our
      operating and capital needs, although there can be no assurance that we will
      be
      successful. Our ability to continue is dependent on obtaining additional
      long-term financing and ultimately achieving profitable operating results.
      To
      date we have not been able to establish acceptable sales levels. With the
      acquisitions of Technipower and Deltron, we believe our ability to achieve
      profitability has been enhanced.





In
      order
      to fund future acquisitions, we intend to complete 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.





We
      borrowed $1,877,085 in short-term debt financing from certain of our principal
      stockholders and other investors from March 2005 through December 2006. These
      notes are secured by a lien on all of our tangible and intangible assets. On
      March 15, 2006, we issued and sold an aggregate of 235,856 shares of common
      stock to the noteholders. Of these shares, 93,356 shares of common stock were
      issued upon conversion of accrued and unpaid interest on the promissory notes
      through February 28, 2006, at a price per share equal to a 20% discount from
      the
      market price per share of our common stock as of March 14, 2006. The remaining
      142,500 shares were issued to certain of the noteholders as an inducement to
      each noteholder agreeing to extend the maturity date of the notes from March
      15,
      2006, to April 30, 2006. On May 3, 2006, we issued and sold an additional
      aggregate of 124,700 shares of common stock to certain of the noteholders as
      an
      inducement to such noteholders agreeing to extend the maturity date of their
      notes from April 30, 2006, to June 30, 2006. On June 5, 2006, we issued and
      sold
      an aggregate of 63,750 shares of common stock to the holders of certain of
      the
      promissory notes. These shares were issued as an inducement to each noteholder
      agreeing to purchase the notes. On August 11, 2006, we entered into an agreement
      dated as of June 30, 2006, with certain of our noteholders pursuant to which
      the
      maturity date of their notes was extended from June 30, 2006, to January 15,
      2007. As an inducement to such noteholders agreeing to extend their notes,
      we
      issued to each of the noteholders 35,000 shares for each $100,000 of principal
      amount of notes, or fraction thereof, held by each holder. On December 31,
      2006,
      we entered into an agreement with certain of our noteholders pursuant to which
      the maturity date of their notes was extended from January 15, 2007, to
      September 30, 2007. To induce the noteholders to extend the notes, we agreed
      to
      compensate each of the noteholders, at the noteholder’s option, by either (i)
      issuing shares of our common stock in an amount equal to 10,000 shares for
      each
      $100,000 in principal amount of notes, or fraction thereof, held by that
      noteholder or (ii) paying that noteholder an amount in cash equal to 5% of
      the
      principal amount of notes, or fraction thereof, held by that
      noteholder.





29




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





On
      September 28, 2007, we entered into an agreement with certain of our noteholders
      pursuant to which the maturity date of the senior secured notes was extended
      from September 30, 2007, to September 7, 2008, subject to further extension
      as
      follows: (a) if by September 7, 2008, there is no effective registration
      statement covering the shares of our common stock issuable upon conversion
      of
      our convertible debentures due April 17, 2009 or exercise of the related
      warrants, the maturity date will automatically be extended to December 31,
      2008,
      upon notice to the holders of the senior secured notes and the accrual or
      payment of an amount equal to 5% of each holder’s principal balance, and (b) if
      by December 31, 2008, there is no effective registration statement covering
      the
      shares of our common stock issuable upon conversion of our convertible
      debentures due April 17, 2009 or exercise of the related warrants, the maturity
      date will automatically be extended to April 17, 2009, upon notice to the
      holders of the senior secured notes and the accrual or payment of an amount
      equal to 5% of each holder’s principal balance. To induce the noteholders to
      extend the notes, we agreed to compensate each of the noteholders by (i) paying
      that noteholder an amount in cash equal to 7% of the principal amount of the
      notes, or fraction thereof, held by that holder, which amount will be added
      to
      the principal amount of the holder’s notes, and (ii) giving each of the
      noteholders the opportunity to buy, for $100, the right to convert their notes
      to common stock in the future.





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





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





The
      debentures initially provided that, beginning on the first day of the first
      month immediately following the earlier of the effectiveness of a registration
      statement covering the resale of the shares of common stock issuable upon
      conversion of the debentures or May 17, 2007, and on the first day of each
      month
      thereafter, we would be required to redeem one tenth of the face value of the
      debentures in cash or, at our election, with shares of our common stock. Our
      ability to pay the redemption price in shares of common stock was subject to
      specified conditions, including the existence of an effective registration
      statement covering the resale of the shares issued in payment of the redemption
      amount and certain minimum trading volumes in our common stock. Any common
      stock
      delivered in satisfaction of an amortization payment would be valued at 82.5%
      of
      the average of the daily volume weighted average price of the applicable shares
      for the 10 trading days before the amortization payment. Any unconverted
      debentures would become due on March 18, 2008. We redeemed 10% of the principal
      amount of the debentures on June 1, 2007. On July 1, 2007, we failed to make
      the
      redemption payment due with respect to the debentures.





30




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





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





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





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





On
      August
      24, 2007, we agreed with the holders of the debentures to amend the terms of
      the
      debentures and several related agreements. Under the terms of the amendment
      agreement,





•
            the
                maturity of the debentures was extended to April 17,
                2009;





•
            redemptions
                of principal of the debentures were suspended until the first first
                of the
                month following the earlier of (i) the date that a new registration
                statement covering the shares of common stock issuable upon conversion
                of
                the debentures or exercise of the related common stock purchase warrants
                held by the holders is declared effective by the SEC and (ii) December
                1,
                2007;





•
            once
                redemptions recommence, they will be required to continue on a monthly
                basis through the new maturity date of the debentures, at an amount
                equal
                to the principal amount of the debentures on the date the redemptions
                recommence divided by the number of months remaining to maturity
                of the
                debentures;





•
            the
                conversion price of the debentures and the exercise price of the
                related
                warrants were each reduced from $2.00 per share of common stock to
                $0.35
                per share of common stock;





•
            we
                are required to file a new registration statement by October 1, 2007,
                and
                cause such registration statement to be declared effective by January
                22,
                2008, and if we fail to meet either deadline we will incur liquidated
                damages as specified in the registration rights agreement among us
                and the
                holders;




31




•
            we
                are entitled to issue shares of common stock in payment of fees in
                connection with certain proposed transactions without such shares
                triggering an adjustment to the conversion price of the January debentures
                or the exercise price of the related
                warrants;





•
            we
                issued an aggregate of $160,500 in new debentures to the holders
                in
                satisfaction of liquidated damages incurred through the date of the
                amendment agreement under the registration rights
                agreement;





•
            we
                issued an aggregate of 1,747,267 shares of common stock in partial
                satisfaction of the redemption payment that was due on July 1, 2007,
                with
                the balance of the redemption payment carried forward and payable
                when
                redemption payments recommence; and





•
            the
                holders waived certain restrictions to enable us to raise up to $1
                million
                of additional financing through private placements of
                securities.





Separately,
      to induce the holders of the debentures to enter into the amendment agreement,
      we agreed to issue to each holder an amount of restricted shares of common
      stock
      calculated by multiplying the dollar amount of each holder’s investment by
      0.075. In fulfillment of this agreement we issued an aggregate of 401,250
      restricted shares of common stock on August 27, 2007.





On
      August
      24, 2007, we entered into an agreement with JMC Venture Partners LLC, pursuant
      to which JMC agreed to provide us with a line of credit, the aggregate principal
      amount of which may not exceed $15,000,000, that is to be used exclusively
      for
      acquisitions. The line of credit will be available through August 24, 2008.
      Any
      amounts loaned under the line of credit will accrue interest at a rate of 12%
      per annum, plus quarterly investment fees of 1% of the amounts then outstanding
      and monitoring fees of 2.5% of the amounts advanced under the line of credit.
      Upon execution of the line of credit agreement, we incurred a 2.5% commitment
      fee on the full amount of the line of credit. The monitoring fees and commitment
      fee are each payable in shares of our common stock. The number of shares to
      be
      issued will be calculated by dividing the dollar amount of the fee by the
      average closing price of a share of common stock for the 10 business days
      preceding the date of payment. We have agreed to register the shares for resale
      under the Securities Act of 1933, as amended, within 120 days. In the event
      of a
      default, the interest rate will increase to 18% per annum. Loans made under
      the
      line of credit will be conditioned upon the approval of the proposed acquisition
      by the lender’s investment committee and will be subject to the lender’s normal
      due diligence and will mature on the last day of the twelfth month after they
      are made. The loans will be made to our acquisition subsidiaries and
      unconditionally guaranteed by Solomon. The line of credit is subject to ordinary
      documentation requirements for each closing. The lender, JMC, is an affiliate
      of
      Michael A. D’Amelio, a director and officer of Solomon.





As
      payment for the commitment fee on the full amount of the line of credit, we
      issued an aggregate of 974,026 shares of common stock to JMC on August 27,
      2007.





Del-Inc
      Acquisition LLC borrowed a total of $2,750,000 from JMC under the line of credit
      to fund the purchase price for the Deltron assets. The loan was made pursuant
      to
      the terms of a secured promissory note loan security and pledge agreement dated
      as of September 5, 2007, between Del-Inc and JMC and a related promissory note
      issued by Del-Inc to JMC on September 5, 2007. We guaranteed the loan fully
      and
      unconditionally pursuant to a guaranty agreement with JMC dated September 5,
      2007. The loan matures on September 5, 2008.





We
      incurred a 2.5% monitoring fee, which we paid in shares of common stock, on
      the
      amount of loan advanced to Del-Inc under the line of credit. The number of
      shares issued was calculated by dividing the dollar amount of the fee by the
      average closing price of a share of common stock for the 10 business days
      preceding the date of payment. Del-Inc agreed to pay JMC a separate perfection
      fee in the amount of $27,500, payable in shares of our common stock, with
      respect to the loan made by JMC under the line of credit in connection with
      the
      acquisition of the assets of Deltron. The number of shares issued was calculated
      by dividing the dollar amount of the fee by the market price on the date of
      the
      closing. As payment for the monitoring fee and the perfection fee, we issued
      an
      aggregate of 284,638 shares of common stock to JMC on September 7,
      2007





32




On
      August
      30, 2007, we sold an aggregate of $500,000 principal amount of Variable Rate
      Self-Liquidating Senior Secured Convertible Debentures due April 17, 2009.
      We
      used the net proceeds of the debentures to provide operating capital. The
      definitive agreements permit us to sell up to an additional $500,000 in
      principal amount of debentures over a 60-day period following signing of the
      securities purchase agreement. As a part of the sale of the debentures, we
      issued common stock purchase warrants to the purchasers of the debentures giving
      them the right to purchase up to an aggregate of 1,000,000 shares of our common
      stock at an exercise price of $0.35 per share. The terms of the debentures
      and
      warrants sold on August 30, 2007, are substantially the same as the terms of
      the
      debentures and warrants sold in January 2007, as amended by the amendment
      agreement dated August 24, 2007.





Our
      obligations under the new debentures are secured by a security interest in
      substantially all of our assets pursuant to a security agreement dated as of
      August 30, 2007, between the purchasers of the debentures and us. If we form
      any
      new subsidiaries and move assets to those subsidiaries, those subsidiaries
      will
      become guarantors of the debentures.




In
      connection with the sale of the debentures and warrants, we entered into a
      registration rights agreement with the purchasers of the debentures and warrants
      under which we are required, on or before October 1, 2007, to file a
      registration statement with the Securities and Exchange Commission covering
      the
      resale of the shares of common stock issuable pursuant to the debentures and
      warrants and to use our best efforts to have the registration statement declared
      effective as promptly as possible thereafter but in any event, by January 22,
      2008.





Our
      Technipower LLC subsidiary has a bank line of credit with borrowings as of
      June
      30, 2007, of $1,000,000.





In
      order
      to fund our operating capital needs in 2007, we expect to seek additional
      capital through the sale of debt or equity securities or both.





**Critical
      Accounting Policies and Estimates**





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





***Revenue
      Recognition***





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





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


33


***Inventory
      Valuation***





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





***Patents
      and Trademarks***





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





***Financial
      Instruments***





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


34




**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





Ÿ
            expectations
                as to market acceptance of our products,Ÿ
            expectations
                as to revenue growth and earnings,Ÿ
            the
                time by which certain objectives will be achieved,Ÿ
            proposed
                new products,Ÿ
            our
                ability to protect our proprietary and intellectual property
                rights,Ÿ
            statements
                concerning projections, predictions, expectations, estimates or forecasts
                as to our business, financial and operational results and future
                economic
                performance, andŸ
            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





Ÿ
            industry
                competition, conditions, performance and consolidation,Ÿ
            legislative
                and/or regulatory developments,Ÿ
            the
                effects of adverse general economic conditions, both within the United
                States and globally,Ÿ
            any
                adverse economic or operational repercussions from recent terrorist
                activities, any government response thereto and any future terrorist
                activities, war or other armed conflicts, andŸ
            other
                factors described in the “Risk Factors” contained in Exhibit 99.1 to our
                Annual Report on Form 10-KSB for the year ended December 31,
                2006.





Forward-looking
      statements speak only as of the date the statements are made. We assume no
      obligation to update forward-looking statements to reflect actual results,
      changes in assumptions or changes in other factors affecting forward-looking
      information except to the extent required by applicable securities laws. If
      we
      update one or more forward-looking statements, no inference should be drawn
      that
      we will make additional updates with respect thereto or with respect to other
      forward-looking statements.


35


**Item
      3. Controls and Procedures**





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





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


36




**PART
      II. OTHER INFORMATION**





**Item
      1. Legal Proceedings**





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





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





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





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





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





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





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





In
      accordance with the terms of the Company’s Variable Rate Self-Liquidating Senior
      Secured Convertible Debentures (the “Debentures”), on May 24, 2007, we issued
      1,953,583 shares of its common stock, $.001 par value per share (the “Shares”),
      to the holders of the Debentures (“Holders”) as an advance against the first
      monthly partial redemption of the Debentures, due June 1, 2007. On June 1,
      2007,
      we issued 1,089,687 additional Shares to the Holders. These Shares were issued
      as payment of the balance of the first monthly redemption of the Debentures,
      due
      June 1, 2007. On August 24 and 27, 2007, we issued 1,747,267 and 401,250
      additional shares, respectively, in connection with the issuance of additional
      Debentures to cure our default. *See* “Liquidity
      and Capital Resources.” The offer and sale of securities were made pursuant to
      the exemption from registration provided by Section 4(2) of the Securities
      Act
      of 1933, as amended, including pursuant to Rule 506 and/or Rule 144A thereunder.
      Such offers and sales were made solely to “accredited investors” under Rule 506
      and/or “qualified institutional buyers” under Rule 144A.





37




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





On
      July
      24, 2007, we issued 50,000 Shares to David Long in payment of a $20,000 finders
      fee. The sale of these securities was determined to be exempt from registration
      under Section 4(2) of the Securities Act as transactions by an issuer not
      involving a public offering.





On
      July
      13, 2007, we issued 750,000 Shares to five non-employee directors. Each of
      Duane
      Crisco, Kenneth Przysiecki, Shannon LeRoy, Thomas Kell and Jonathan Betts
      received 150,000 Shares in consideration of his service as a director of the
      Company. Also on July 213, 2007, we issued 50,000 Shares to Glen Wegner in
      consideration of his agreement to serve on the Company’s Advisory Board. The
      sale of these securities was determined to be exempt from registration under
      Section 4(2) of the Securities Act as transactions by an issuer not involving
      a
      public offering.





On
      September 6, 2007, we issued an aggregate of 4,833,562 Shares to the sellers
      of
      Technipower LLC (“Technipower”) as payment of the stock payment adjustment due
      under the terms of the Securities Purchase Agreement dated as of August 17,
      2006, between the sellers of Technipower and us, as amended by the Amendment
      Agreement dated as of August 27, 2007, between the Company, Power Designs,
      Inc.
      and Integrated Power Systems LLC.





On
      August
      27, 2007, we issued 974,026 Shares to JMC Venture Partners LLC (“JMC”) in
      payment of the commitment fee pursuant to the Acquisition Line of Credit
      Agreement.




On
      September 7, 2007, we issued an aggregate of 284,638 Shares to JMC in payment
      of
      the monitoring fee and perfection fee pertaining to the loan made by JMC under
      the Line of Credit in connection with the acquisition of the assets of Deltron.





On
      October 9, 2007, we issued an aggregate of 15,625 Shares to Next Generation
      for
      investment banking services.





On
      October 9, 2007, we issued 31,250 Shares to Jonathan Edwards for services
      rendered to, and expenses incurred on behalf of, the Company.





**(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
      2007.




**Item
      3. Defaults Upon Senior Securities**




On
      August
      23, 2007, we cured our default under the terms of the Variable Rate
      Self-Liquidating Senior Secured Convertible Debentures. *See* “Liquidity
      and Capital Resources, Additional Debentures Terms.”





38


**Item
      5. Other Information**





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




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




39




**Item
                6.**
            **Exhibits****Exhibit
                No.**
            
            **Description**3.10
            
            Certificate
                of Elimination of Series C Preferred Stock. (1)10.1
            
            Securities
                Purchase Agreement dated as of January 17, 2007 among Solomon
                Technologies, Inc. and each purchaser identified on the signature
                pages
                thereto. (2)10.2
            
            Form
                of Variable Rate Self-Liquidating Senior Secured Convertible Debentures.
                (2)10.3
            
            Registration
                Rights Agreement, dated as of January 17, 2007, among Solomon
                Technologies, Inc. and each purchaser identified on the signature
                pages
                thereto. (2)10.4
            
            Form
                of Common Stock Warrant. (2)10.5
            
            Security
                Agreement dated as of January 17, 2007 among Solomon Technologies,
                Inc.
                and each purchaser identified on the signature pages thereto.
                (2)10.6
            
            Redemption
                and Conversion Agreement dated as of January 17, 2007 among Solomon
                Technologies, Inc. and the holders of Series C preferred stock.
                (2)10.7
            
            Employment
                Agreement, dated as of January 27, 2007, by and between Solomon
                Technologies, Inc. and Gary G. Brandt. (1)10.8
            
            Option
                Agreements, dated as of February 5, 2007, by and between Solomon
                Technologies, Inc. and Gary G. Brandt.(3)10.9
            
            Stock
                Restriction Agreement, dated as of February 5, 2007, by and between
                Solomon Technologies, Inc. and Gary G. Brandt. (3)10.10
            
            Incentive
                Compensation Agreement dated May 1, 2007 by and between Solomon
                Technologies, Inc. and Peter W. DeVecchis, Jr.(4)10.11
            
            Employment
                Agreement, dated as of May 31, 2007, by and between Solomon Technologies,
                Inc. and Jack Worthen. (4)10.12
            
            Asset
                Purchase Agreement, dated as of June 1, 2007 by and among Solomon
                Technologies, Inc. and DEL-INC Acquisition LLC and Deltron, Inc.
                and its
                subsidiaries and shareholders, and related
                amendments.(4)10.13
            
            Option
                Agreements, dated as of June 4, 2007, by and between Solomon Technologies,
                Inc. and Jack Worthen.(4)10.14
            
            Amendments
                dated as of August 9, 2007, August 16, 2007, August 24, 2007, August
                31,
                2007, and September 4, 2007 to the Asset Purchase Agreement, dated
                as of
                June 1, 2007, by and among Solomon Technologies, Inc. and DEL-INC
                Acquisition LLC and Deltron, Inc. and its subsidiaries and shareholders.
                (5)10.15
            
            Amendment
                Agreement, dated as of August 24, 2007, between Solomon Technologies,
                Inc.
                and each debenture purchaser identified on the signature pages thereto.
                (5)10.16
            
            Acquisition
                Line of Credit Agreement, dated as of August 24, 2007, between Solomon
                Technologies, Inc. and JMC Venture Partners LLC. (5)10.17
            
            Securities
                Purchase Agreement dated as of August 30, 2007, between Solomon
                Technologies, Inc. and each purchaser identified on the signature
                pages
                thereto. (5)10.18
            
            Form
                of Variable Rate Self-Liquidating Senior Secured Convertible Debentures.
                (5)10.19
            
            Registration
                Rights Agreement, dated as of August 30, 2007, between Solomon
                Technologies, Inc. and each purchaser identified on the signature
                pages
                thereto. (5)10.20
            
            Form
                of Common Stock Warrant. (5)10.21
            
            Form
                of Legal Opinion. (5)10.22
            
            Security
                Agreement dated as of August 30, 2007, between Solomon Technologies,
                Inc.
                and each purchaser identified on the signature pages thereto.
                (5)10.23
            
            Form
                of Subsidiary Guarantee. (5)10.24
            
            Form
                of Lock-Up Agreement. (5)10.25
            
            Escrow
                Agreement dated as of August 30, 2007, among Solomon Technologies,
                Inc.
                and each purchaser identified on the signature pages thereto and
                Davis
                & Gilbert LLP. (5)10.26
            
            Secured
                Promissory Note Loan, Security and Pledge Agreement dated as of September
                5, 2007, between Del-Inc Acquisition LLC and JMC Venture Partners
                LLC.
                (5)




40




**Exhibit
                No.**
            
            **Description**


10.27
            
            Secured
                Promissory Note dated September 5, 2007, issued to JMC Venture Partners
                LLC. (5)10.28
            
            Guaranty
                Agreement dated as of September 5, 2007, by Solomon Technologies,
                Inc. in
                favor of JMC Venture Partners LLC. (5)10.29
            
            Guaranty
                Agreement dated as of September 5, 2007, by Corporacion Delinc, S.A.
                de
                C.V. in favor of JMC Venture Partners LLC. (5)10.30
            
            Pledge
                and Security Agreement dated as of September 5, 2007, by Corporacion
                Delinc, S.A. de C.V. and JMC Venture Partners LLC. (5)10.31
            
            Agreement
                dated as of September 18, 2007, among Solomon Technologies, Inc.,
                Woodlaken LLC, Jezebel Management Corporation, Pinetree (Barbados),
                Inc.,
                Coady Family LLC, Jezebel Management Corporation, Pinetree (Barbados),
                Inc., Coady Family LLC, F. Jay Leonard, Peter and Barbara Carpenter,
                Pascal Partners, LLC, Steven Kilponen, Millennium Trust Company LLC
                Custodian FBO Joseph Cooper Rollover IRA 90M020013 and Millenium
                Trust
                Company LLC Custodian FBO Steven Kilponen, Millennium Company LLC
                Custodian FBO Steven Kilponen IRA Rollover Account #90N727012.
                (5)10.32
            
            Amendment
                Agreement by and among Solomon Technologies, Inc. dated as of October
                25,
                2007 and each debenture purchaser identified on the signature pages
                thereto. (6)10.33
            
            Amendment
                Agreement dated August 17, 2007 to Securities Purchase Agreement
                dated
                August 16, 2006 among Solomon Technologies, Inc. and each purchaser
                identified on the signature page thereto. (6)16.1
            
            Letter
                from UHY LLP to the Securities and Exchange Commission dated May
                31,
                2007(7).31.1
            
            Certification
                by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.31.2
            
            Certification
                by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.32.1
            
            Certification
                by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.32.2
            
            Certification
                by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.





(1)
            Incorporated
                by reference from Amendment No. 2 to the Registration Statement on
                Form
                SB-2, File No. 333-13820, filed on February 12, 2007.(2)
            Incorporated
                by reference from the Current Report on Form 8-K filed on January
                18,
                2007.(3)
            Incorporated
                by reference from Amendment No. 4 to the Registration Statement on
                Form
                SB-2, File No. 333-13820, filed on May 9, 2007.(4)
            Incorporated
                by reference from the Form 8-10QSB filed on August 20,
                2007.(5)
            Incorporated
                by reference from the Registration Statement on Form SB-2, File No.
                333-146424, filed on October 1, 2007.(6)
            Filed
                herewith.(7)
            Incorporated
                by reference from the Current Report on Form 8-K filed May 31,
                2007.




41




**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 15, 2007**SOLOMON
                  TECHNOLOGIES, INC.**By:
              /s/
                  Gary G. BrandtGary
                  G. BrandtChief
                  Executive Officer(principal
                  executive officer)By:
              /s/
                  Samuel F. OcchipintiSamuel
                  F. OcchipintiChief
                  Financial Officer(principal
                  financial and accounting officer)


42





**Exhibit
      Index**




**Exhibit
                No.**
            
            **Description**31.1
            
            Certification
                by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.31.2
            
            Certification
                by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.32.1
            
            Certification
                by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.32.2
            
            Certification
                by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.




43