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**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**





(Mark
      One)





ý  Quarterly
      Report under Section 13 or 15(d) of the Securities Exchange Act of 1934





For
      the
      quarterly period ended June 30, 2006





or





 ̈  Transition
      Report under Section 13 or 15(d) of the Securities Exchange Act of
      1934





For
      the
      transition period from _______ to _______





Commission
      file number: 000-50532





**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.)





**1400
      L&R Industrial Blvd.**


**Tarpon
      Springs, Florida 34689**


(Address
      of principal executive offices)







**(727)
      934-8778**





**Issuer’s
      Telephone Number**





Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
      for
      such shorter period that the registrant was required to file such reports),
      and
      (2) has been subject to such filing requirements for the past 90 days. Yes ý No  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).         Yes  ̈ No ý





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: As of August 9, 2006, there were 28,021,170
      shares of common stock outstanding.





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





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**INDEX**


PageNumber**PART
                  I. FINANCIAL INFORMATION**
              **3**Item
                  1. Financial Statements
              3Condensed
                  Balance Sheet at June 30, 2006
                  (Unaudited)
              3Condensed
                  Statements of Operations - Three months and six
                  months ended June 30, 2006 and 2005 (Unaudited)
              4Condensed
                  Statements of Cash Flows - Six months ended June 30,
                  2006 and 2005 (Unaudited)
              5Condensed
                  Statement of Deficiency in Assets at June 30, 2006
                  (Unaudited)
              6Notes
                  to Condensed Financial Statements
                  (Unaudited)
              7Item
                  2. Management’s Discussion and Analysis of Financial
                  Condition and Results of Operations
              11Item
                  3. Controls and Procedures
              17**PART
                  II. OTHER INFORMATION**
              **19**Item
                  1. Legal Proceedings
              19Item
                  2. Unregistered Sales of Equity Securities and Use of
                  Proceeds
              19Item
                  5. Other Information
              20Item
                  6. Exhibits
              21**SIGNATURE
                  PAGE**
              **22**




**Introductory
      Comment**





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


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**PART
      1. FINANCIAL INFORMATION**




**ITEM 1.**
            **FINANCIAL
                STATEMENTS**




**Solomon
                  Technologies, Inc.****Condensed
                  Balance Sheet****June
                  30, 2006****(
                  Unaudited)**
  **Assets**Cash
                
                $
                8,372Inventory
                    (finished parts)
                
                
                90,143Prepaid
                    expenses
                
                
                2,546Total
                    Current Assets
                
                
                101,061Intangible
                    assets, net
                
                
                342,525Property
                    and equipment, net
                
                
                9,979Other
                
                
                317,718Total
                    Asset
                
                $
                771,283**Liabilities
                    and Deficiency in Assets****Current
                    Liabilities**Notes
                    payable
                
                $
                45,000Notes
                    payable to related parties
                
                
                1,472,000Accounts
                    payable
                
                
                804,631Accrued
                    expenses
                
                
                205,078Customer
                    deposits
                
                
                19,093Accrued
                    payroll and taxes
                
                
                264,490Total
                    Current Liabilities
                
                
                2,810,292**Deficiency
                    in Assets**Common
                    stock, par value $0.001 per share; authorized 100,000,000 shares;
                    27,871,170 issued and outstanding
                
                
                27,870Additional
                    paid-in capital
                
                
                28,248,507Accumulated
                    Deficit
                
                
                (30,315,386
                )Deficiency
                    in Assets
                
                
                (2,039,009
                )Total
                    Liabilities and Deficiency in Assets
                
                $
                771,283




See
        accompanying notes.


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**Solomon
                  Technologies, Inc.****Condensed
                  Statements of Operations****(Unaudited)**
  **Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30, 2006**
              
              **June
                    30, 2005**
              
              **June
                    30, 2006**
              
              **June
                    30, 2005****Net
                  Sales**
              
              $
              7,547
              
              $
              37,908
              
              $
              12,912
              
              $
              63,073**Cost
                  of Goods Sold**
              
              
              3,113
              
              
              26,897
              
              
              5,682
              
              
              80,171**Gross
                  Margin**
              
              
              4,434
              
              
              11,011
              
              
              7,230
              
              
              ($17,098
              )**Operating
                  Expenses**Salaries
                  and benefits
              
              
              120,205
              
              
              76,477
              
              
              316,740
              
              
              252,101Noncash
                  compensation
              
              
              104,426
              
              
              573,061
              
              
              368,876
              
              
              573,061Professional
                  fees
              
              
              146,819
              
              
              180,327
              
              
              505,960
              
              
              389,839Advertising
              
              
              0
              
              
              3,240
              
              
              0
              
              
              13,581Travel
                  and entertainment
              
              
              15,135
              
              
              16,824
              
              
              29,935
              
              
              77,970Rent
              
              
              6,788
              
              
              8,233
              
              
              15,016
              
              
              16,353Other
                  general and administrative
              
              
              179,677
              
              
              264,505
              
              
              306,159
              
              
              498,252**Total
                  Operating Expenses**
              
              
              573,050
              
              
              1,122,667
              
              
              1,542,686
              
              
              1,821,157**Operating
                  Loss**
              
              
              (568,616
              )
              
              (1,111,656
              )
              
              (1,535,456
              )
              
              (1,838,255
              )Interest
                  expense
              
              
              41,359
              
              
              802,323
              
              
              769,323
              
              
              1,455,585(Gain)
                  loss on extinguishment of redeemable perferred stock and other
                  debt
              
              
              (15,165
              )
              
              0
              
              
              5,652,404
              
              
              39,924**Net
                  Loss**
              
              $
              (594,810
              )
              $
              (1,913,979
              )
              $
              (7,957,183
              )
              $
              (3,333,764
              )Basic
                  and diluted net loss per share
              
              $
              (0.02
              )
              $
              (0.32
              )
              $
              (0.35
              )
              $
              (0.59
              )Weighted
                  average common shares outstanding - basic and diluted
              
              
              27,682,292
              
              
              6,035,560
              
              
              22,711,383
              
              
              5,606,178




See
        accompanying notes.


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**Solomon
                  Technologies, Inc.****Condensed
                  Statements of Cash Flows****(Unaudited)**
  **For
                  the Six Months Ended**
                **June
                  30,****2006**
              
              **2005****Operating
                  activities**Net
                  loss
              
              $
              (7,957,183
              )
              $
              (3,333,764
              )Adjustments
                  to reconcile net loss to net cash used by operationsCommon
                  stock and warrants issued for services, fees and
                  compensation
              
              
              662,125
              
              
              810,397Loss
                  on extinguishment of redeemable preferred stock and other
                  debt
              
              
              5,652,404
              
              
              39,924Accretion
                  and dividends
              
              
              698,257
              
              
              1,444,070Amortization
                  and depreciation
              
              
              45,023
              
              
              48,978Loss
                  on sale of equipment
              
              
              —
              
              
              371Change
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              —
              
              
              (504
              )Inventory
              
              
              (22,277
              )
              
              23,902Other
                  assets
              
              
              (317,718
              )
              
              37,474Accounts
                  payable and accrued expenses
              
              
              694,227
              
              
              335,675Customer
                  deposits
              
              
              19,093
              
              
              —Accrued
                  payroll and payroll taxes
              
              
              (29,310
              )
              
              (31,550
              )Net
                  cash used by operating activities
              
              
              (555,359
              )
              
              (625,027
              )**Investing
                  Activities**Purchase
                  of equipment
              
              
              (1,962
              )
              
              (685
              )Proceeds
                  from sale of equipment
              
              
              —
              
              
              10,500Net
                  cash (used) provided by investing activities
              
              
              (1,962
              )
              
              9,815**Financing
                  Activities**Proceeds
                  from notes and loans payable
              
              
              562,000
              
              
              378,000Repayments
                  of notes and loans payable
              
              
              —
              
              
              (9,507
              )Net
                  cash provided by financing activities
              
              
              562,000
              
              
              368,493Change
                  in cash
              
              
              4,679
              
              
              (246,719
              )Cash
                  at beginning of period
              
              
              3,693
              
              
              249,024Cash
                  at end of period
              
              $
              8,372
              
              $
              2,305


See
      accompanying notes.




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**Solomon
                  Technologies, Inc.****Condensed
                  Statement of Deficiency in
                  Assets****(Unaudited)**
  **Series
                  B****Convertible**
              
              
              
              
              
              **Additonal****Preferred
                  Stock**
              
              **Common
                  Stock**
              
              **Paid-In**
              
              **Accumulated****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit**
              
              **Total**Balance
                  at December 31, 2005
              
              
              120,000
              
              $
              120,000
              
              
              8,487,330
              
              $
              8,487
              
              $
              14,876,095
              
              $
              (22,358,203
              )
              $
              (7,353,621
              )Shares
                  issued to extinguishRedeemable
                  Series APreferred
                  Stock
              
              
              
              
              
              
              
              
              15,357,370
              
              
              15,357
              
              
              12,424,113
              
              
              
              
              
              12,439,470Conversion
              
              
              (120,000
              )
              
              (120,000
              )
              
              175,439
              
              
              175
              
              
              119,825
              
              
              
              
              
              —Shares
                  and warrants issued atfair
                  value for fees and services
              
              
              
              
              
              
              
              
              885,950
              
              
              887
              
              
              524,189
              
              
              
              
              
              525,076Exchange
                  of warrantsfor
                  shares
              
              
              
              
              
              
              
              
              2,698,237
              
              
              2,698
              
              
              (2,698
              )
              
              
              
              
              —Shares
                  issued to extinguishdebt
              
              
              
              
              
              
              
              
              266,844
              
              
              266
              
              
              177,034
              
              
              
              
              
              177,300Expenses
                  paid on Company's behalf
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              129,949
              
              
              
              
              
              129,949Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (7,957,183
              )
              
              (7,957,183
              )Balance
                  at June 30, 2006
              
              
              —
              
              $
              —
              
              
              27,871,170
              
              $
              27,870
              
              $
              28,248,507
              
              $
              (30,315,386
              )
              $
              (2,039,009
              )See
                  accompanying notes.




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**Notes
        to Financial Statements (unaudited)**
 
 **NOTE
        1 -BUSINESS AND BASIS OF PRESENTATION**
 
 The
        historical business of Solomon Technologies, Inc. (“STI” or the “Company”) has
        been the development, engineering, manufacturing, licensing and sale of electric
        power drive systems. The Company is presently pursuing direct sales
        opportunities for its products and technologies in the marine, industrial
        and
        automotive markets. The Company is identifying licensing opportunities that
        it
        anticipates will leverage its existing or acquired knowledge and provide
        substantial positive current financial impact while it also aggressively
        pursues
        infringers of its existing patents. The Company is also identifying acquisition
        targets that it expects will augment its existing intellectual property,
        marketing channels and human resources and provide strong cash
        flow.
 
 The
        accompanying unaudited financial statements have been prepared in accordance
        with U.S. generally accepted accounting principles for interim financial
        information and pursuant to the rules and regulations of the Securities and
        Exchange Commission (“SEC”). The accompanying financial statements for the
        interim periods are unaudited. They reflect all adjustments (consisting only
        of
        normal recurring adjustments) which are, in the opinion of management, necessary
        for a fair presentation. These financial statements should be read in
        conjunction with the financial statements and related footnotes for the year
        ended December 31, 2005 contained in the annual report on Form 10-KSB as
        filed
        with the SEC. Operating results for interim periods are not necessarily
        indicative of the results for the full year.
 
 **NOTE
        2 - BUSINESS ACQUISITION EXPENSES**
 
 Direct
        costs incurred in business acquisition efforts are capitalized for transactions
        that are likely to occur. Such costs are evaluated at the end of each reporting
        period. Costs associated with a potential acquisition that is deemed unlikely
        to
        occur are expensed upon such determination. As of June 30, 2006 the Company
        has
        capitalized approximately $317,718 of business acquisition costs.
 
 **NOTE
        3 - ACCRUED PAYROLL AND PAYROLL TAXES**
 
 As
        of
        June 30, 2006, the Company had accrued payroll and unpaid payroll taxes of
        approximately $79,000 and accrued interest and penalties of $185,000 with
        respect to such taxes. On July 28, 2006 the Company paid $62,758 for unpaid
        payroll taxes. This action is expected to resolve the trust portion of the
        IRS
        liability. The penalty and interest portion of this obligation remains
        outstanding and continues to subject the Company to delinquency proceedings
        from
        the U.S. Internal Revenue Service.
 
 **NOTE
        4 - CHANGE IN ACCOUNTING METHOD**
 
 Effective
        January 1, 2006, the Company adopted Statement of Financial Accounting Standards
        No. 123(R), “Share-Based Payment” (SFAS No. 123(R)), using the modified
        prospective method. Under this method, compensation cost is recognized for
        all
        share-based payments granted, modified, or settled after January 1, 2006,
        as
        well as for any unvested awards that were granted prior thereto. Compensation
        cost for unvested awards granted prior to January 1, 2006 is recognized using
        the same estimate of the grant-date fair value and the same attribution method
        used to determine the pro forma disclosures under SFAS No. 123, “Accounting for
        Stock-Based Compensation.” Compensation costs for awards granted after January
        1, 2006 is based on the estimated fair value of the awards on their grant
        date
        and is generally recognized over the required service period.
 
 No
        stock
        options were granted in the first six months of 2006 and all stock options
        outstanding at December 31, 2005 and 2004 were fully vested. As such, the
        adoption of SFAS No. 123(R) had no impact on the Company’s financial
        statements.
 
 There
        were 567,835 outstanding options with a weighted average exercise price of
        $1.29
        per share and 340,856 outstanding warrants with a weighted average exercise
        price of $0.83 per share as of June 30, 2006.
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  **NOTE
        5 - STOCK ISSUANCES AND OTHER EQUITY EVENTS**
 
 On
        February 15, 2006, the Company issued 15,357,370 shares of common stock with
        an
        estimated fair value of $12,439,470 to extinguish its obligations under its
        Redeemable Series A Preferred Stock. In February 2006, the Company also issued
        256,844 shares of its common stock with an estimated fair value of $170,200
        to
        extinguish its obligations under notes payable, including accrued interest.
        In
        connection with these transactions an extinguishment loss of $5,667,569 was
        recognized.
 
 Also
        during the quarter ended March 31, 2006 the Company issued 100,000 warrants
        and
        477,500 common shares with an estimated aggregate fair value of $264,450
        to
        directors, certain note holders, and an officer for services and fees. Operating
        results include a related charge for $264,450. The warrants may be exercised
        to
        purchase 100,000 shares of the Company’s common stock at $.40 a
        share.
 
 On
        April
        4, 2006, the Company filed a certificate of elimination for its Series A
        preferred stock and its Series B preferred stock with the Secretary of State
        of
        Delaware, the Company’s state of incorporation. The
        Company filed the certificate of elimination because no shares of either
        class
        of preferred stock are outstanding and the Company has no plans to issue
        such
        stock.
 
 On
        May 3,
        2006, the Company issued an aggregate of 124,700 shares of common stock to
        the
        holders of certain promissory notes as an inducement to each noteholder agreeing
        to extend the promissory notes.  The issuance was recorded at fair value
        and the Company recorded $62,350 of non-cash compensation.
 
 On
        May 8,
        2006, in connection with the execution of a letter of intent to acquire Power
        Solutions, Inc., the Company issued 100,000 shares of common stock to each
        of
        Myron Koslow and the Norman S. and Marian B. Berkowitz Revocable Trust. The
        issuance was recorded at fair value and the Company recorded $142,000 of
        capitalized business acquisition costs.
 
 On
        May 8,
        2006, the Company issued 10,000 shares of common stock with an estimated
        fair value of $7,100 to Floyd E. Johnson in settlement of $22,265 of
        indebtedness arising from services rendered to us by FEJ Consulting. In
        connection with this transaction, the Company recorded a gain of $15,165
        on the
        settlement of debt.
 
 On
        May
        31, 2006, the Company issued 20,000 shares of common stock with an estimated
        fair value of $14,200 to its President, Peter W. DeVecchis pursuant to Mr.
        DeVecchis’ employment agreement.
 
 On
        June
        5, 2006, the Company issued an aggregate of 63,750 shares of common stock
        to the
        holders of certain promissory notes as an inducement to each noteholder agreeing
        to purchase the notes. The issuance was recorded at fair value and the Company
        recorded $42,075 of non-cash compensation.
 
 **NOTE
        6 - NOTES PAYABLE**
 
 On
        April
        7, 2006, the Company borrowed $50,000 from Peter and Barbara Carpenter (the
        “Carpenters”) and Woodlaken LLC assigned $50,000 of its promissory note issued
        by the Company on March, 2006 in the aggregate principal amount of $172,000
        (the
“Woodlaken Note”) to the Carpenters. On April 10, 2006, the Company borrowed
        $50,000 from Pascal Partners, LLC and Woodlaken assigned $50,000 of the
        Woodlaken Note to Pascal. The Company issued promissory notes in the principal
        amount of $100,000 to
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  the
        Carpenters and Pascal. The Company also issued a promissory note in the
        principal amount of $72,000 to Woodlaken representing the balance of the
        principal amount under the Woodlaken Note. The new notes bear interest at
        a rate
        of 12% per annum and were due to mature on April 30, 2006.
 
 On
        April
        28, 2006, the Company entered into an agreement with all related and affiliated
        party promissory note holders to extend the terms of each note to June 30,
        2006.
        As an inducement to the extension, the Company issued each investor 10,000
        shares of common stock for each $100,000 in principal amount of Notes held
        for
        an aggregate of 124,700 shares.
 
 On
        May
        23, 2006, the Company borrowed $200,000 from Coady Family LLC (“Coady”) and
        issued a promissory note in the principal amount of $200,000 to Coady. The
        new
        note bears interest at a rate of 12% per annum and was due to mature on June
        30,
        2006.
 
 On
        June
        13, 2006, the Company borrowed $25,000 from Steven Kilponen (“Kilponen”) and
        issued a promissory note in the principal amount of $25,000 to Kilponen.
        The new
        note bears interest at a rate of 12% per annum and was due to mature on June
        30,
        2006.
 
 As
        disclosed in Note 8, subsequent to the quarter end the maturity date of the
        above notes as well as those others outstanding was extended to January 15,
        2007.
 
 As
        disclosed in Note 8, subsequent to the quarter end, the Company borrowed
        $100,000 from Meriden Cooper Corporation 401K Profit Sharing Plan, Joseph
        Cooper
        Trustee (“Meriden Cooper”), and issued a promissory note in the principal amount
        of $100,000 to Meriden Cooper. The new note bears interest at a rate of 12%
        per
        annum and is due to mature on January 15, 2007.
 
 The
        board
        of directors of the Company has authorized the Company to borrow up to an
        additional $28,000 from the initial investors and others on the same terms
        as
        the notes and the new note issued to Meriden Cooper.
  As
        disclosed in Note 8, subsequent to the quarter end,
        the Company borrowed $125,000 from Jezebel Management Corporation ("Jezebel")
        and issued a promissory note in the principal amount of $125,000 to Jezebel.
        The
        new note bears interest at a rate of 15% and is due to mature on August 28,
        2006.
 
 **NOTE
        7 - CONCENTRATION OF RISK**
 
 Customers:
 
 Three
        customers accounted for all sales for the six months ended June 30, 2006.
        Two
        customers accounted for 41% and 22%, respectively, of sales for the six months
        ended June 30, 2005.
 
 Supplier:
 
 Presently
        the Company has one manufacturer for a principal component of its marine
        propulsion systems. If the supplier were to become unwilling or unable to
        continue fulfilling the Company’s orders, it could have a materially adverse
        effect on the Company’s financial position.
 
 **NOTE
        8 - COMMITMENT AND CONTINGENCIES**
 
 The
        Company has an agreement with Oliver Street Finance LLC (Oliver Street).
        Under
        this agreement Oliver Street provides funding to the Company to prosecute
        the
        Company’s patent infringement action against Toyota Motor Corporation, Toyota
        Motor Sales U.S.A., Inc. and Toyota Manufacturing North America (collectively,
        Toyota). Oliver Street pays all legal fees and out of pocket expenses billed
        by
        the Company’s special patent counsel in connection with the litigation against
        Toyota and approved by the Company in exchange for a portion of any recovery
        that the Company may receive from the litigation equal to the greater of
        40% of
        the recovery or the actual amount of legal fees and expenses Oliver Street
        pays
        on the Company’s behalf. Michael A. D’Amelio, a director and shareholder of the
        Company, is a principal of Oliver Street. Through February 15, 2006, Mr.
        D’Amelio held more than 10% of the Company’s outstanding shares of common stock.
        During this period, expenses paid on behalf of the Company by Oliver Street
        totaling $129,949 were recorded as professional fee expense as well as an
        increase to
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  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 common
        stock holdings decreased to below 10%. As such, expenses paid by Oliver Street
        on behalf of the Company since February 15, 2006 are no longer reflected
        in the
        financial statements.
 
 The
        Company has filed a lawsuit against Toyota alleging claims for patent
        infringement and damages from the unauthorized use of the Company’s patents. In
        connection therewith the Company filed a complaint with the United States
        International Trade Commission (ITC) seeking an exclusion order prohibiting
        the
        importation of infringing technology. ITC is currently conducting its
        investigation and has scheduled a hearing for October 30, 2006 through November
        3, 2006.
 
 The
        Company is not involved in any other litigation.
 
 **NOTE
        9 FINANCING AND EQUITY TRANSACTIONS WITH RELATED PARTIES**
 
 During
        the quarter ended June 30, 2006 the Company issued 188,450 common shares
        with an
        estimated aggregate fair market value of $104,426 to certain note holders.
        Operating results include a related charge for $104,426 for the quarter ended
        June 30, 2006. The Company also issued 20,000 shares of common stock with
        an
        estimated fair value of $14,200 to its President pursuant to his employment
        agreement.
 
 **NOTE
        10 - SUBSEQUENT EVENTS**
 
 On
        July
        3, 2006, the Company borrowed $100,000 from Meriden Cooper and issued a
        promissory note in the principal amount of $100,000 to Meriden Cooper. The
        new
        note bears interest at a rate of 12% per annum and is due to mature on January
        15, 2007. As an incentive to Meriden Cooper purchasing the note, the Company
        has
        agreed to issue to Meriden Cooper 50,000 shares of common stock.
 
 On
        July
        28, 2006 the Company borrowed $125,000 from Jezebel and issued a promissory
        note
        in the principal amount of $125,000 to Jezebel. The new note bears interest
        at a
        rate of 15% per annum and matures on August 28, 2006. As an incentive to
        purchase the note the Company has agreed to issue 25,000 shares of common
        stock
        to Jezebel.
 
 On
        August
        4, 2006 the Company granted 150,000 of common shares to each of the five
        directors of the Company for services performed over the last year. The
        aggregate of 750,000 shares issued to the five directors is estimated to
        have a
        fair market value of $375,000.
 
 On
        August
        11, 2006 the Company entered into an agreement dated as of June 30, 2006
        with
        all of its noteholders to extend the maturity date for all promissory notes
        held
        to January 15, 2007. As an incentive to the noteholders, the Company has
        agreed
        to issue to each of the noteholders shares of common stock of the Company
        in an
        amount equal to 35,000 shares for each $100,000, in principal amount of notes,
        or fraction thereof, held by such noteholder.
 
 **NOTE
        11 - GOING CONCERN**
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. The Company has incurred significant operating
        losses and used cash in its operating activities for several years. For the
        first six months of 2006, the Company had a net loss of $7,957,183 and used
        cash
        of $555,359 in operating activities. As of June 30, 2006, the Company has
        a
        working capital deficiency of $2,709,231 and a deficiency in assets of
        $2,039,009. These conditions raise substantial doubts about the Company’s
        ability to continue as a going concern.
 
 Management
            is continuing to implement a plan to broaden its market and product base
            and
            exploit its intellectual property that it expects will generate substantial
            profits and cash flow. As part of this plan, management intends to grow
            its
            business through licensing of its proprietary and patented technologies
            and
            through the acquisition of businesses that fit its strategy. Management
            is
            identifying licensing opportunities that leverage its existing or acquired
            knowledge and provide substantial positive current financial impact while
            it
            also aggressively pursues infringers of its existing patents. Management
            is also
            identifying acquisition targets that augment its existing intellectual
            property,
            marketing channels and human resources and provide strong cash flow.
            Additionally, management is actively seeking additional sources of capital.
            There can be no assurance that management can successfully implement
            its
            business plan or raise sufficient capital. Without sufficient additional
            capital
            or long term debt and ultimately profitable operating results the Company
            will
            not be able to continue as a going concern. The accompanying 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.
  
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**ITEM 2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF****OPERATIONS**





***The
      following discussion and analysis of our consolidated financial condition and
      results of operations for the quarters ended June 30, 2006 and 2005 should
      be
      read in conjunction with our financial statements included elsewhere in this
      Quarterly Report.***





**Overview**





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





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





We
      are
      presently 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 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 augment our existing intellectual property, marketing channels and human
      resources and provide strong cash flow. We cannot assure you, however, that
      we
      will be able to identify licensing opportunities and acquisition targets that
      meet these goals, or if we identify such opportunities or targets that we will
      be able to take full advantage of them.





On
      December 15, 2005, we signed a letter of intent to acquire Technipower LLC,
      a
      Danbury, Connecticut based manufacturer of power supplies and related equipment
      for the defense, aerospace and commercial sectors. The letter of intent
      contemplated that we would purchase Technipower for $3 million in cash and
      common stock valued at $2.4 million and that the purchase price would be subject
      to increase or decrease based on changes in Technipower’s working capital. The
      letter of intent also provided that we would assume Technipower’s revolving
      credit facility as part of the transaction. It is now contemplated that we
      would
      purchase Technipower for $150,000 in cash, $2,900,000 in shares of our common
      stock and $3,000,000 in shares of a new class of preferred stock. The
      transaction will be subject to the negotiation and execution of the definitive
      purchase agreement and the satisfaction of various closing conditions, including
      a due diligence investigation and the negotiation and execution of agreements
      with Technipower personnel. While no assurances can be given as to when the
      acquisition may close, we currently anticipate that the acquisition will close
      during the third quarter of this year.





On
      May 8,
      2006, we entered into a letter of intent to acquire Power Solutions, Inc.,
      a
      Long Island, New York based manufacturer of high volume direct current power
      supplies and power supply systems and components for the medical,
      telecommunications and commercial sectors. As part of this acquisition, we
      would
      also acquire a controlling stake in Ultrapower Ltd. that is presently held
      by
      Power Solutions. Based in Taiwan, Ultrapower is a manufacturer of power supplies
      and associated products. The letter of intent contemplated that we would
      purchase Power Solutions for $5 million in cash, of which $250,000 would be
      held
      in escrow for 15 months to secure certain obligations of the sellers. 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 and the negotiation and execution of agreements with
      Power Solutions personnel. The letter of intent has expired and no assurances
      can be given as to if or when the acquisition may close; we currently anticipate
      that the acquisition will close during the third quarter of 2006. In connection
      with and in consideration for the execution of the letter of intent, we issued
      100,000 shares of common stock to each of Myron **** Koslow and
      the Norman S. and Marian B. Berkowitz


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Revocable
      Trust. Myron **** Koslow and
      the Norman S. and Marian B. Berkowitz Revocable Trust have each agreed not
      to
      sell or otherwise transfer these shares for a period of one year.





Three
      of
      our directors, Gary Laskowski, Jonathan Betts and Michael D’Amelio, hold
      indirect ownership interests in Technipower and Power Solutions. Our board
      of
      directors has formed an independent committee to negotiate the documentation
      of
      these transaction and ultimately approve or disapprove these transactions on
      our
      behalf.





We
      anticipate that Technipower will serve as a platform for a new Power Systems
      Division of our company and that our current energy efficient technologies
      will
      become part of a new Alternative Energy Division. With this new structure we
      intend to exploit opportunities for market consolidation, cross marketing and
      core business growth in separate but compatible niche markets for specialized
      high value OEM power applications and electric power drive systems. The
      operating assets will be divisionalized but will permit a formal exchange of
      engineering and sales talent across business units.





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





Our
      goal
      is to increase revenue significantly, generate enough cash to finance our
      operations and growth and, eventually, become profitable. We currently do not
      generate enough cash from operations to continue operations indefinitely. Our
      ability to continue is dependent on either raising significant capital or
      increasing revenue, or both. If we are unable to raise such capital and unable
      to increase revenue significantly, we will likely not be able to generate enough
      cash to continue operations. In that event, we would have to seek alternative
      opportunities, such as selling our assets or seeking a merger partner or other
      business combination; otherwise we may default on our debt obligations and
      lose
      our assets to our creditors.





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





We
      used a
      portion of the net proceeds of the November and December 2004 private placement
      to expand our marketing program and to meet our inventory needs. We believe
      that
      we can increase our revenue from the marine markets over the next two years
      by
      establishing a stronger sales presence with commercial marine boat builders
      and
      other OEM accounts and by increasing substantially the number of retrofit sales,
      which we intend to accomplish primarily through distributors and commission-only
      sales representatives. We plan to pursue aggressively other
      commercial/industrial sectors that would benefit from our proprietary property
      and patents through both product sales and licensing agreements.





We
      borrowed $1,572,000 in short-term debt financing from certain of our principal
      stockholders and other investors from March 2005 through July 2006. These notes
      are secured by a lien on all of our tangible and intangible assets. We have
      been
      authorized by the board to obtain an additional $28,000 of short-term debt
      financing. On March 15, 2006, we issued and sold an aggregate of 235,856 shares
      of common stock to the noteholders. Of these shares, 93,356 shares of common
      stock were issued upon conversion of accrued and unpaid interest on the
      promissory notes


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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
      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 new note
      bears interest at a rate of 15% per annum and matures on August 28, 2006. As
      an
      incentive to purchase the note we have agreed to issue 25,000 shares of common
      stock to Jezebel.





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 have agreed
      to
      issue to each of the noteholders 35,000 shares for each $100,000 of
      principal amount of notes, or fraction thereof, held by each
      holder.





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





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





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





On
      January 10, 2006, we filed a complaint with the United States International
      Trade Commission (ITC) in Washington D.C. seeking an exclusion order prohibiting
      the importation of infringing technology. On or about February 8, 2006, the
      ITC
      instituted an investigation based on our complaint. The ITC acts as an
      administrative investigative body to determine, among other things, whether
      or
      not goods imported into the United States infringe U.S. patents. If we are
      successful in our ITC action, Toyota could be prohibited from importing into
      the
      United States infringing combination motor and transmission systems and those
      products containing such systems, including the Toyota Prius and Highlander
      models. The ITC has scheduled the hearing on our complaint for October 30
      through November 3, 2006.





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





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





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





On
      February 15, 2006, we completed a recapitalization of our Series A preferred
      stock whereby each outstanding share of Series A preferred stock and all accrued
      and unpaid dividends thereon were converted into five shares of common stock.
      At
      the time of the recapitalization there were 3,071,474 shares of Series A
      preferred stock outstanding. These shares were converted into 15,357,370 shares
      of common stock. In addition, on February 15,


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2006,
      warrants to purchase an aggregate of 4,646,474 shares of common stock at an
      exercise price of $1.00 per share were exchanged by the warrant holders for
      an
      aggregate of 2,323,237 shares of common stock, and on March 3, 2006, warrants
      to
      purchase an aggregate of 750,000 shares of common stock at an exercise price
      of
      $1.00 per share were exchanged by the warrant holders for an aggregate of
      375,000 shares of common stock. The warrants were held principally by the
      individuals and entities that had held the Series A preferred stock. The
      recapitalization and warrant exchange were effected on the basis of an exemption
      from registration provided by Section 3(a)(9) of the Securities Act of 1933,
      as
      amended.





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





**Results
      of Operations**





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





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





For
      the
      three months ended June 30, 2006 we incurred a non-cash gain of $15,165 on
      the
      extinguishment of debt. The gain was measured by the market value of our
      common stock issued over the carrying value of the obligations including accrued
      accretion and interest.





For
      the
      three months ended June 30, 2006 we generated revenues of $7,547 as compared
      to
      $37,908 for the three months ended June 30, 2005, a decrease of $30,361. Cost
      of
      products sold for the three months ended June 30, 2006 was $3,113 generating
      a
      gross margin of $4,434. Cost of products sold for the three months ended June
      30, 2005 was $26,897 generating a gross margin of $11,011. The decreases in
      our
      revenues and margin were due to a decrease in shipments from prior year
      shipments. We believe we will improve our total margins with an increase in
      sales, which will improve our economies of scale. In the three months ended
      June
      30, 2006, our percentage margin increased as a result of improved pricing and
      a
      reduction in warranty costs.





Salaries
      and benefits for the three months ended June 30, 2006 were $120,205 compared
      to
      $76,477 for the three months ended June 30, 2005, an increase of $43,728, or
      57.2%. This increase was due primarily to stock compensation above base pay
      to
      certain corporate officers.





Noncash
      compensation **** for
      the
      three months ended June 30, 2006 was $104,426 compared to $573,061 for the
      three
      months ended June 30, 2005. Noncash compensation for 2006 consisted of the
      market value of the Company’s common stock issued to directors, certain note
      holders, and an officer for services rendered and fees. We expect to issue
      stock
      in lieu of cash compensation in future quarters if necessary to preserve
      operating capital.





Professional
      fees for the three months ended June 30, 2006 were $146,819 as compared to
      $180,327 for the three months ended June 30, 2005, a decrease of $33,508 or
      18.6%. This decrease was due primarily to litigation settlements in the three
      months ended June 30, 2005.





Advertising
      expense for the three months ended June 30, 2006 was $0 as compared to $3,240
      for the three months ended June 30, 2005. The decrease in advertising expense
      was due to the termination of our marketing personnel, as well as the
      termination of trade show attendance, publication advertisements and direct
      advertising activity.





Travel
      and entertainment costs for the three months ended June 30, 2006 were $15,135
      as
      compared to $16,824 for the three months ended June 30, 2005, a decrease of
      $1,689, or 10.0%. The
      decrease in travel and entertainment costs was due primarily to the termination
      of our presence at trade shows **** and
      the
      elimination of all travel and associated entertainment related to reduced sales
      and corresponding installations.


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  Rent
        for
        the three months ended June 30, 2006 was $6,788 as compared to $8,233 for
        the
        three months ended June 30, 2005, a decrease of $1,455, or 17.5%.





Other
      general and administrative costs for the three months ended June 30, 2006 were
      $179,677 as compared to $264,505 for the three months ended June 30, 2005,
      an
      decrease of $84,828 or 32.1%. Other costs primarily consisted of depreciation,
      amortization of intangibles, insurance, office supplies and equipment, and
      printing.





We
      incurred interest expense of $41,359 for the three months ended June 30, 2006.
      Interest expense incurred for the three months ended June 30, 2005 was $802,323.
      The decrease of $760,964 in interest expense was due primarily to a decrease
      in
      interest accretion of $792,403 recorded on our redeemable Series A preferred
      stock, which was recapitalized as common shares on February 15,
      2006.





We
      reported a net loss for the three months ended June 30, 2006 of $594,810. Our
      net loss for the three months ended June 30, 2005 was $1,913,979.





***Six
      Months Ended June 30, 2006 Compared With Six Months Ended June 30,
      2005***





For
      the
      six months ended June 30, 2006 we incurred a non-cash loss of $5,650,304 on
      the
      extinguishment of redeemable preferred stock and other debt. The loss was
      measured by the excess of the market value of our common stock issued over
      the
      carrying value of the obligations including accrued accretion and interest.
      Last
      year we incurred a loss of $39,924 on a similar transaction.





For
      the
      six months ended June 30, 2006 we generated revenues of $12,912 as compared
      to
      $63,073 for the six months ended June 30, 2005, a decrease of $50,161. The
      decrease in revenues was due to a decrease in shipments from prior year
      shipments. Cost of products sold for the six months ended June 30, 2006 was
      $5,682 generating a gross margin of $7,230. Cost of products sold for the six
      months ended June 30, 2005 was $80,171 generating a loss of $17,098. The
      increase in our margin was due to a decrease in warranty replacement costs
      from
      prior year shipments. We believe we will improve our margins and, with an
      increase in sales, and achieve economies of scale.





Salaries
      and benefits for the six months ended June 30, 2006 were $316,740 compared
      to
      $252,101 for the six months ended June 30, 2005, an increase of $64,639, or
      25.6%. This increase was due primarily to stock compensation above base pay
      to
      certain corporate officers in the second quarter of 2006.





Noncash
      compensation **** for
      the
      six months ended June 30, 2006 was $368,876 compared to $573,061 for the six
      months ended June 30, 2005. Noncash compensation for 2006 consisted of the
      market value of the Company’s common stock issued to directors, certain note
      holders, and an officer for services rendered and fees. We expect to issue
      stock
      in lieu of cash compensation in future quarters if necessary to preserve
      operating capital.





Professional
      fees for the six months ended June 30, 2006 were $505,960 as compared to
      $389,839 for the six months ended June 30, 2005, an increase of $116,121, or
      29.8%. Professional fees include $129,949 of non-cash charges funded on our
      behalf by Oliver Street Finance LLC and related to our patent litigation
      referred to in Note 8 to the Financial Statements contained in this Report.
      This
      increase is due primarily to costs associated with reporting to the SEC and
      necessary activities related to patent infringement litigation against Toyota
      Motor Company.





Advertising
      expense for the six months ended June 30, 2006 was $0 as compared to $13,581
      for
      the six months ended June 30, 2005. The decrease in advertising expense was
      due
      to the termination of our marketing personnel, as well as the termination of
      trade show attendance, publication advertisements and direct advertising
      activity.





Travel
      and entertainment costs for the six months ended June 30, 2006 were $29,935
      as
      compared to $77,970 for the six months ended June 30, 2005, a decrease of
      $48,035 or 61.6%. The decrease in travel and entertainment costs was due
      primarily to the termination of our presence at trade shows **** and
      the
      elimination of all travel and associated entertainment related to reduced sales
      and corresponding installations.





Rent
      for
      the six months ended June 30, 2006 was $15,016 as compared to $16,353 for the
      six months ended June 30, 2005, a decrease of $1,337, or 8.2%.


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Other
      general and administrative costs for the six months ended June 30, 2006 were
      $306,159 as compared to $498,252 for the six months ended June 30, 2005, a
      decrease of $192,093, or 38.6%. Other costs primarily consisted of depreciation,
      amortization of intangibles, insurance, office supplies and equipment, and
      printing.





We
      incurred interest expense of $769,323 for the six months ended June 30, 2006.
      Interest expense incurred for the six months ended June 30, 2005 was $1,455,585.
      The decrease of $686,262 in interest expense was due primarily to a decrease
      in
      interest accretion of $792,403 reflecting the recapitalization of series A
      preferred stock on February 15, 2006.





We
      reported a net loss for the six months ended June 30, 2006 of $7,957,183. Our
      net loss for the six months ended June 30, 2005 was $3,333,764.





**Liquidity
      and Capital Resources**





Our
      available cash balance at June 30, 2006 was $8,372. We borrowed $1,572,000
      in
      short-term debt financing from certain of our principal stockholders and other
      investors from March 2005 through July 2006. These notes are secured by a lien
      on all of our tangible and intangible assets. We have been authorized by the
      board to obtain an additional $28,000 of short-term debt financing. We expect
      to
      seek additional capital through the sale of debt and/or equity securities in
      the
      third quarter of 2006 in order to fund our operating capital needs, although
      we
      cannot assure you that we will be able to obtain any of such additional capital.





During
      the six months ended June 30, 2006, we used net cash of $555,359 for operations.
      This consisted of a net loss of $7,957,183 offset by net noncash charges of
      $7,057,809. Additionally, we had net cash flows from financing activities of
      $562,000 consisting primarily of proceeds from notes payable to related parties.





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





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





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





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





**Off-Balance
      Sheet Arrangements**





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


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Special
      Note Regarding Forward-Looking Statements





This
      Quarterly Report contains “forward-looking statements,” which include
      information relating to future events, future financial performance, strategies,
      expectations, competitive environment, regulation and availability of resources.
      These forward-looking statements include, without limitation, statements
      regarding





•
            expectations
                as to market acceptance of our
                products,





•
            expectations
                as to revenue growth and earnings,





•
            the
                time by which certain objectives will be
                achieved,





•
            proposed
                new products,





•
            our
                ability to protect our proprietary and intellectual property
                rights,





•
            statements
                concerning projections, predictions, expectations, estimates or forecasts
                as to our business, financial and operational results and future
                economic
                performance, and





•
            statements
                of management’s goals and objectives and other similar expressions
                concerning matters that are not historical
                facts.





Words
      such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,”
“expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates”
and similar expressions, as well as statements in future tense, identify
      forward-looking statements.





Forward-looking
      statements should not be read as a guarantee of future performance or results,
      and will not necessarily be accurate indications of the times at, or by which,
      such performance or results will be achieved. Forward-looking information is
      based on information available at the time and/or management’s good faith belief
      with respect to future events, and is subject to risks and uncertainties that
      could cause actual performance or results to differ materially from those
      expressed in the statements. Important factors that could cause such differences
      include, but are not limited to





•
            industry
                competition, conditions, performance and
                consolidation,





•
            legislative
                and/or regulatory developments,





•
            the
                effects of adverse general economic conditions, both within the United
                States and globally,





•
            any
                adverse economic or operational repercussions from recent terrorist
                activities, any government response thereto and any future terrorist
                activities, war or other armed conflicts,
                and





•
            other
                factors described in the “Risk Factors” contained in Exhibit 99.1 to our
                Annual Report on Form 10-KSB for the year ended December 31,
                2005.





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




**ITEM
                3.**
              ****Controls
                  and
                  Procedures****




We
      performed an evaluation under the supervision and with the participation of
      our
      management, including our chief executive and chief financial officer, of the
      effectiveness of our disclosure controls and procedures (as defined


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in
      Rules
      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended)
      as of June 30, 2006. A control system, no matter how well designed and operated,
      can provide only reasonable, not absolute, assurance that it will detect or
      uncover failures within our company to disclose material information otherwise
      required to be set forth in our periodic reports. Following the evaluation
      described above, our management, including our chief executive and chief
      financial officer, concluded that based on the evaluation our disclosure
      controls and procedures were effective at that time.





There
      has
      been no change in our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
      amended) that occurred in the quarter ended June 30, 2006, that has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.


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**PART
      II. OTHER INFORMATION**


**ITEM
                1.**
              ****Legal
                  Proceedings****




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





On
      January 10, 2006, we filed a complaint with the United States International
      Trade Commission (ITC) in Washington D.C. seeking an exclusion order prohibiting
      the importation of infringing technology. On or about February 8, 2006, the
      ITC
      instituted an investigation based on our complaint. The ITC acts as an
      administrative investigative body to determine, among other things, whether
      or
      not goods imported into the United States infringe U.S. patents. If we are
      successful in our ITC action, Toyota could be prohibited from importing into
      the
      United States infringing combination motor and transmission systems and those
      products containing such systems, including the Toyota Prius and Highlander
      models. The ITC has scheduled the hearing on our complaint for October 30
      through November 3, 2006.





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





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





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




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





On
      May 3,
      2006, we issued an aggregate of 124,700 shares of common stock to the holders
      of
      certain promissory notes as an inducement to each noteholder agreeing to extend
      the promissory notes. The sales of these securities were 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
      May 8,
      2006, in connection with the execution of a letter of intent to acquire Power
      Solutions, Inc., we issued 100,000 shares of common stock to each of Myron
      Koslow and the Norman S. and Marian B. Berkowitz Revocable Trust in
      consideration of Power Solutions, Inc.’s agreement to enter into the letter of
      intent. The sales of these securities were determined to be exempt from
      registration under Section 4(2) of the Securities Act of 1933 as transactions
      by
      an issuer not involving a public offering.





On
      May 8,
      2006, we issued 10,000 shares of common stock to Floyd E. Johnson in settlement
      of $22,265.00 **** of
      indebtedness arising from services rendered to us by FEJ Consulting. The sale
      of
      these securities was determined to be exempt from registration under Section
      4(2) of the Securities Act of 1933 as a transaction by an issuer not involving
      a
      public offering.





On
      May
      31, 2006, we issued 20,000 shares of common stock to our president, Peter W.
      DeVecchis, Jr. pursuant to Mr. DeVecchis’ employment agreement. The sale of
      these securities was determined to be exempt from registration under Section
      4(2) of the Securities Act of 1933 as a transaction by an issuer not involving
      a
      public offering.





On
      June
      5, 2006, we issued an aggregate of 63,750 shares of common stock to the holders
      of certain promissory notes as an inducement to each noteholder agreeing to
      purchase the notes.


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The
      sales
      of these securities were determined to be exempt from registration under Section
      4(2) of the Securities Act of 1933 as transactions by an issuer not involving
      a
      public offering.




On
        July
        3, 2006, we borrowed $100,000 from Meriden Cooper Corporation 401K Profit
        Sharing Plan, Joseph Cooper Trustee and issued a promissory note in the
        principal amount of $100,000 to Meriden Cooper. As an incentive to Meriden
        Cooper purchasing the note, we have agreed to issue Meriden Cooper 50,000
        shares
        of common stock. The sale of these securities was determined to be exempt
        from
        registration under Section 4(2) of the Securities Act of 1933 as transactions
        by
        an issuer not involving a public offering.




On
      July
      28, 2006, we borrowed $125,000 from Jezebel Mangement Corporation and issued
      a
      promissory note in the principal amount of $125,000 to Jezebel. As an incentive
      to Jezebel purchasing the note, we have agreed to issue Jezebel 25,000 shares
      of
      common stock. The sale of these securities was determined to be exempt from
      registration under Section 4(2) of the Securities Act of 1933 as transactions
      by
      an issuer not involving a public offering.




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





On
      August
      11, 2006, we entered into an agreement dated as of 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 have agreed to issue to each
      of
      the noteholders 35,000 shares for each $100,000 of principal amount of
      notes, or fraction thereof, held by each holder. The sales
      of these securities were determined to be exempt from registration under Section
      4(2) of the Securities Act of 1933 as transactions by an issuer not involving
      a
      public offering.




The
      recipients of securities in each such transaction represented their intention
      to
      acquire the securities for investment only and not with a view to or for sale
      in
      connection with any distribution thereof and appropriate legends were affixed
      to
      the share certificates and other instruments issued in such transactions. The
      sales of these securities were made without general solicitation or advertising. The
      securities may not be sold by the holders absent registration or an applicable
      exemption from the registration requirements of the Securities
      Act.




**(b)**
            **Use
                of Proceeds**





Not
      applicable.





**(c)**
            **Repurchase
                of Securities**





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





**ITEM
              5.**
            **Other
                Information**





On
      July
      3, 2006, we borrowed $100,000 from Meriden Cooper Corporation 401K Profit
      Sharing Plan, Joseph Cooper Trustee and issued a promissory note in the
      principal amount of $100,000 to Meriden Cooper. The new note bears interest
      at a
      rate of 12% per annum and matures on January 15, 2007. The new note has
      substantially the same terms as the promissory notes in the aggregate principal
      amount of $1,472,000 issued by us to Woodlaken LLC, Jezebel Management Corp.,
      Pinetree (Barbados), Inc., Coady Family LLC, F. Jay Leonard, Peter and Barbara
      Carpenter, Pascal Partners LLC and Steven Kilponen between March 2005 and June
      2006 and with the other notes is secured by a first priority security interest
      in all of the tangible and intangible assets of the Company. The note may be
      accelerated by Meriden Cooper upon the occurrence of certain events of default,
      including bankruptcy or liquidation or breach of any of our representations
      or
      obligations under the note. As an incentive to Meriden Cooper purchasing the
      note, we have agreed to issue Meriden Cooper 50,000 shares of common
      stock.





The
      board
      of directors has authorized us to borrow up to an additional $28,000 from the
      initial investors and others on the same terms.





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 new note
      bears interest at a rate of 15% per annum and matures on August 28, 2006. As
      an
      incentive to purchase the note we have agreed to issue 25,000 shares of common
      stock to Jezebel.


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




**Exhibit No.**
            
            **Description**10.1
            
            Senior
                Secured Promissory Note issued to Coady Family LLC dated May 23,
                2006.10.2
            
            Senior
                Secured Promissory Note issued to Steven Kilponen dated June 13,
                2006.10.3
            
            Joinder
                Agreement by and between Solomon Technologies, Inc. and Steven Kilponen
                dated June 13, 2006.10.4
            
            Note
                Extension Agreement dated as of June 30, 2006, among Solomon Technologies,
                Inc., Woodlaken LLC, Jezebel Management Corporation, Pinetree (Barbados),
                Inc., Coady Family LLC, F. Jay Leonard, Peter and Barbara Carpenter,
                Pascal Partners, LLC and Steven Kilponen.10.5
            
            Senior
                Secured Promissory Note issued to Meriden Cooper Corporation 401K
                Profit
                Sharing Plan dated July 3, 2006.10.6
            
            Joinder
                Agreement by and between Solomon Technologies, Inc. and Meriden Cooper
                Corporation 401K Profit Sharing Plan dated July 3,
                2006.10.7
            
            Promissory
                Note issued to Jezebel Management Corporation dated July 28,
                2006.31.1
            
            Certification
                by President pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.31.2
            
            Certification
                by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.32.1
            
            Certification
                by President pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            
            Certification
                by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.




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**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Securities and Exchange Act of 1934,
      as amended, Solomon Technologies, Inc. has duly caused this report to be signed
      on its behalf by the undersigned thereunto duly authorized.





Dated:
      August 14, 2006








**SOLOMON
      TECHNOLOGIES, INC.**








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





Peter
      W.
      DeVecchis, Jr.


President


(principal
      executive officer)











By: 
      /s/ Samuel F. Occhipinti





Samuel
      F.
      Occhipinti


Chief
      Financial Officer


(principal
      financial and accounting officer)


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