##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-QSB



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(Mark One)

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



For the quarter ended June 30, 2004



or



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



For the transition period from  to



000-50532

(Commission File No.)



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SOLOMON TECHNOLOGIES, INC.

(Name of Small Business Issuer in Its Charter)



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|                                                              |  |                                     
|------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                      |  | 52-1812208                          
|(State or other jurisdiction of incorporation or organization |  | (I.R.S. Employer Identification No.)
|                                                              | 
|1400 L&R Industrial Blvd. Tarpon Springs, Florida             |  | 34689                               
|(Address of principal executive offices)                      |  | (Zip Code)                          



Issuers
Telephone Number, including area code: (727) 934-8778



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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  x    No ̈



As of August 12, 2004, there were 4,925,378 shares of issuers common stock outstanding.



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



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##### Table of Contents

I N D E X



|                                                                                                |  |           
|----------------------------------------------------------------------------------------------- |  | ----------
|                                                                                                |  | PageNumber
|PART I. FINANCIAL INFORMATION                                                                   |  |           
|                                                                                                | 
|Item 1. Financial Statements                                                                    |  | 3         
|                                                                                                | 
|Balance Sheet at June 30, 2004 (unaudited)                                                      |  | 3         
|                                                                                                | 
|Statements of Operations - Three months and six months ended June 30, 2004 and 2003 (unaudited) |  | 4         
|                                                                                                | 
|Statements of Cash Flows  Six months ended June 30, 2004 and 2003 (unaudited)                  |  | 5         
|                                                                                                | 
|Notes to Financial Statements (unaudited)                                                       |  | 6         
|                                                                                                | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations   |  | 9         
|                                                                                                | 
|Item 3. Controls and Procedures                                                                 |  | 11        
|                                                                                                | 
|PART II. OTHER INFORMATION                                                                      |  |           
|                                                                                                | 
|Item 1. Legal Proceedings                                                                       |  | 11        
|                                                                                                | 
|Item 2. Changes in Securities                                                                   |  | 11        
|                                                                                                | 
|Item 3. Defaults on Senior Securities                                                           |  | 12        
|                                                                                                | 
|Item 4. Submission of Matters to a Vote of Security Holders                                     |  | 12        
|                                                                                                | 
|Item 5. Other Information                                                                       |  | 13        
|                                                                                                | 
|Item 6. Exhibits and Reports on Form 8-K                                                        |  | 13        
|                                                                                                | 
|SIGNATURE PAGE                                                                                  |  | 14        



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.



Forward Looking Statements



In addition to historical information, this Quarterly Report contains
forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this Quarterly Report, the words believe,
may, should, expect, anticipate, plan, continue, estimate, project or intend and similar expressions identify forward-looking statements
regarding events, conditions and financial trends in connection with our future plan of operations, business strategy, operating results and financial position. Current stockholders and prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance. Such forward-looking statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control, and actual results for future periods could differ materially
from those discussed in this Quarterly Report, depending on a variety of important factors that include, but are not limited to, those discussed in filings that we make with the Securities and Exchange Commission and elsewhere in this Report.
Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect managements opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these
forward-looking statements.



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION



ITEM 1. Financial Statements



Solomon Technologies, Inc.

Balance Sheet

June 30, 2004

(Unaudited)



|                                                                                                                                                                                         |  |   |            
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | -----------
|Assets                                                                                                                                                                                   |  |   |            
|                                                                                                                                                                                         | 
|Cash                                                                                                                                                                                     |  | $ | 714,407    
|Accounts Receivable, net of allowances of $20,085                                                                                                                                        |  |   | 8,510      
|Inventory                                                                                                                                                                                |  |   | 119,058    
|Prepaid Expenses                                                                                                                                                                         |  |   | 71,870     
|                                                                                                                                                                                         |  |   |            
|Total Current Assets                                                                                                                                                                     |  |   | 913,845    
|                                                                                                                                                                                         | 
|Intangible Assets, net                                                                                                                                                                   |  |   | 568,115    
|Property and Equipment, net                                                                                                                                                              |  |   | 28,659     
|                                                                                                                                                                                         |  |   |            
|Total Assets                                                                                                                                                                             |  | $ | 1,510,619  
|                                                                                                                                                                                         |  |   |            
|Liabilities and Stockholders Deficiency                                                                                                                                                 |  |   |            
|                                                                                                                                                                                         | 
|Current Liabilities                                                                                                                                                                      |  |   |            
|                                                                                                                                                                                         | 
|Accounts Payable                                                                                                                                                                         |  | $ | 349,116    
|Accrued Expenses                                                                                                                                                                         |  |   | 410,001    
|Customer Deposits                                                                                                                                                                        |  |   | 39,912     
|Accrued Payroll and Taxes                                                                                                                                                                |  |   | 352,973    
|                                                                                                                                                                                         |  |   |            
|Total Current Liabilities                                                                                                                                                                |  |   | 1,152,002  
|                                                                                                                                                                                         | 
|Long Term Liabilities                                                                                                                                                                    |  |   |            
|Notes and Loans Payable                                                                                                                                                                  |  |   | 77,964     
|Preferred Stock, $.001 par value, 5,000,000 shares authorized, 3,000,000 shares designated Series A Preferred Stock, 2,506,474 shares of
Series A Preferred Stock issued and outstanding |  |   | 1,368,029  
|                                                                                                                                                                                         | 
|Stockholders Deficiency                                                                                                                                                                 |  |   |            
|Common Stock, $.001 par value, 25,000,000 shares authorized, 4,925,378 shares issued and outstanding                                                                                     |  |   | 4,914      
|Additional Paid-in Capital                                                                                                                                                               |  |   | 11,593,096 
|Accumulated Deficit                                                                                                                                                                      |  |   | -12,685,386
|                                                                                                                                                                                         |  |   |            
|Total Stockholders Deficiency                                                                                                                                                           |  |   | -1,087,376 
|                                                                                                                                                                                         |  |   |            
|Total Liabilities and Stockholders Deficiency                                                                                                                                           |  | $ | 1,510,619  
|                                                                                                                                                                                         |  |   |            



See Notes to Financial
Statements



3



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##### Table of Contents

Solomon Technologies, Inc.

Statements of Operations

(Unaudited)



|                                                                      |  |               |            |               |   |               |  |               |            |  |   |           
|--------------------------------------------------------------------- |  | ------------- | ---------- | ------------- | - | ------------- |  | ------------- | ---------- |  | - | ----------
|                                                                      |  | Three Months  |            | Six Months   
|                                                                      |  | Ended 6/30/04 |            | Ended 6/30/03 |   | Ended 6/30/04 |  | Ended 6/30/03
|Net Sales                                                             |  | $             | 7,637      |               | $ | 124,505       |  | $             | 63,705     |  | $ | 183,371   
|                                                                      |  |               |            |               |   |               |  |               |            |  |   |           
|Cost of Goods Sold                                                    |  |               | 41,568     |               |   | 110,687       |  |               | 68,942     |  |   | 150,629   
|                                                                      |  |               |            |              
|                                                                      |  |               | -33,931    |               |   | 13,818        |  |               | -5,237     |  |   | 32,742    
|                                                                      |  |               |            |              
|Operating Expenses                                                    |  |               |            |               |   |               |  |               |            |  |   |           
|Salaries and Benefits                                                 |  |               | 86,427     |               |   | 26,884        |  |               | 212,736    |  |   | 49,530    
|Noncash Compensation                                                  |  |               | 962,000    |               |   | 1,334,366     |  |               | 1,004,000  |  |   | 1,424,386 
|Professional Fees                                                     |  |               | 70,435     |               |   | 96,765        |  |               | 110,815    |  |   | 106,785   
|Advertising                                                           |  |               | 36,932     |               |   | 12,254        |  |               | 64,420     |  |   | 14,906    
|Travel and Entertainment                                              |  |               | 32,084     |               |   | 18,464        |  |               | 43,922     |  |   | 23,188    
|Rent                                                                  |  |               | 7,992      |               |   | 14,100        |  |               | 24,128     |  |   | 26,400    
|Other General & Administrative                                        |  |               | 193,192    |               |   | 218,599       |  |               | 258,413    |  |   | 337,847   
|                                                                      |  |               |            |               |   |               |  |               |            |  |   |           
|Total Operating Expenses                                              |  |               | 1,389,062  |               |   | 1,721,432     |  |               | 1,718,434  |  |   | 1,983,042 
|                                                                      |  |               |            |               |   |               |  |               |            |  |   |           
|Operating Loss                                                        |  |               | -1,422,993 |               |   | -1,707,614    |  |               | -1,723,671 |  |   | -1,950,300
|                                                                      |  |               |            |              
|Interest Expense                                                      |  |               | 1,430,901  |               |   | 29,257        |  |               | 1,594,944  |  |   | 33,321    
|                                                                      |  |               |            |              
|Net Loss                                                              |  | $             | -2,853,894 |               | $ | -1,736,871    |  | $             | -3,318,615 |  | $ | -1,983,621
|                                                                      |  |               |            |               |   |               |  |               |            |  |   |           
|Net Loss per share of Common Stock - basic and diluted                |  | $             | -0.58      |               | $ | -0.50         |  | $             | -0.68      |  | $ | -0.57     
|                                                                      |  |               |            |              
|Weighted Average number of shares of Common Stock - basic and diluted |  |               | 4,912,856  |               |   | 3,474,941     |  |               | 4,869,976  |  |   | 3,474,941 



See Notes to Financial
Statements



4



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##### Table of Contents

Solomon Technologies, Inc.

Statements of Cash Flows

(Unaudited)



|                                                                          |  |                      |            |               |   |           
|------------------------------------------------------------------------- |  | -------------------- | ---------- | ------------- | - | ----------
|                                                                          | 
|                                                                          |  | For Six Months Ended
|                                                                          |  | June 30, 2004        |            | June 30, 2003
|Cash Flows from Operating Activities                                      |  |                      |            |               |   |           
|                                                                          |  |                     
|Net Loss                                                                  |  | $                    | -3,318,615 |               | $ | -1,983,621
|                                                                          |  |                     
|Adjustments to reconcile net loss to net cash used                        |  |                      |            |               |   |           
|Common stock issued in lieu of pay for services                           |  |                      | 1,004,000  |               |   | 1,424,386 
|Amortization/Depreciation                                                 |  |                      | 66,814     |               |   | 72,585    
|Amortization of Discounted notes payable                                  |  |                      | 25,080     |               |   | 0         
|Bad debts                                                                 |  |                      | 0          |               |   | 2,738     
|Interest recorded, Mandatorily Redeemable Series Preferred A Stock        |  |                      | 1,368,029  |               |   | 0         
|Interest recorded, monthly preferred dividend                             |  |                      | 24,667     |               |   | 0         
|Interest recorded in connection with conversion of debt                   |  |                      | 190,666    |               |   | 0         
|                                                                          |  |                     
|Changes in Assets (Increase) / Decrease                                   |  |                      |            |               |   |           
|Accounts Receivable                                                       |  |                      | 154        |               |   | -31,985   
|Inventory                                                                 |  |                      | -119,058   |               |   | 18,418    
|Other                                                                     |  |                      | -63,591    |               |   | 4,614     
|                                                                          |  |                     
|Changes In Liabilities Increase / (Decrease)                              |  |                      |            |               |   |           
|Accounts Payable/Accrued Expenses                                         |  |                      | -130,304   |               |   | 94,296    
|Customer Deposits                                                         |  |                      | 418        |               |   | 9,552     
|Payroll Taxes                                                             |  |                      | 4,662      |               |   | 128,249   
|                                                                          |  |                     
|Net Cash Flow in Operating Activity                                       |  |                      | -947,078   |               |   | -260,768  
|                                                                          |  |                      |            |               |   |           
|Cash Flows from Investing Activities                                      |  |                      |            |               |   |           
|Capital Expenditures                                                      |  |                      | 0          |               |   | -23,021   
|Expenditures for intangible assets                                        |  |                      | 0          |               |   | -6,451    
|                                                                          |  |                      |            |               |   |           
|                                                                          |  |                     
|Net Cash Used in investing activities                                     |  |                      | 0          |               |   | -29,472   
|                                                                          |  |                      |            |               |   |           
|Cash Flow from Financing Activity                                         |  |                      |            |               |   |           
|Proceeds from notes and loans payable                                     |  |                      | 0          |               |   | 138,257   
|Repayment of notes and loans payable                                      |  |                      | 0          |               |   | -8,398    
|Proceeds from advances from affiliates                                    |  |                      | 0          |               |   | 28,687    
|Proceeds from the sale of common stock & warrants                         |  |                      | 0          |               |   | 105,170   
|Proceeds from the sale of Mandatorily Redeemable Series A Preferred Stock |  |                      | 1,610,815  |               |   | 0         
|                                                                          |  |                      |            |               |   |           
|Net Increase/(Decrease)Cash                                               |  |                      | 663,737    |               |   | -26,524   
|                                                                          |  |                     
|Cash - beginning of period                                                |  |                      | 50,670     |               |   | 64,160    
|                                                                          |  |                      |            |               |   |           
|Cash - end of period                                                      |  | $                    | 714,407    |               | $ | 37,636    
|                                                                          |  |                      |            |               |   |           
|Supplemental Disclosure of Cash Flow information                          |  |                      |            |               |   |           
|                                                                          |  |                     
|Cash paid during period for:                                              |  |                      |            |               |   |           
|Interest                                                                  |  | $                    | 0          |               | $ | 9,534     
|Income Taxes                                                              |  | $                    | 0          |               | $ | 0         
|                                                                          |  |                     
|Noncash investing and financing activities                                |  |                      |            |               |   |           
|                                                                          |  |                     
|Conversion of Pinetree Note                                               |  | $                    | 621,474    |               |   |          
|Conversion of accrued payroll and expenses into common stock              |  |                      |           |               | $ | 470,000   
|Conversion of related party advances into common stock                    |  |                      |           |               | $ | 100,000   



See Notes to Financial
Statements



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##### Table of Contents

Notes to Financial Statements (unaudited)



Note
1  Basis of Presentation



Solomon Technologies, Inc.
(the Company) commenced operations on August 22, 1995 and was incorporated in the State of Maryland. The Company develops and markets electric propulsion systems for marine applications. Management believes that the Companys
systems will have additional applications in the transportation, industrial and commercial sectors.



In July 2003, the Company effected a merger in order to change its state of incorporation from Maryland to Delaware. In connection with this merger, the
Company issued one share of common stock of the Delaware corporation for each two shares of common stock of the Maryland corporation, thereby effecting the equivalent of a 1-for-2 reverse stock split. All shares and amount presented in this report
give retroactive affect to this reverse stock split.



The
accompanying unaudited financial statements have been prepared in accordance with 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 and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation
of the financial position and operating results for the periods presented. These financial statements should be read in conjunction with the financial statements and related footnotes for the year ended December 31, 2003 contained in the annual
report on Form 10-KSB as filed with the Securities and Exchange Commission. The results of operations for the six months ended June 30, 2004 are not necessarily indicative of the results for the full fiscal year ending December 31, 2004.



Note 2  May 13, 2004 Financing



On May 13, 2004 the Company completed a new financing, raising through the
sale of new Preferred shares, net of expenses, $1,470,815 and refinanced the Pinetree debt of $621,474 including accrued interest, and converted previously issued Preferred A shares (Old Preferred) to 140,000 new Preferred shares. The
Company issued 2,506,474 new Preferred A shares (the Preferred) which are convertible to common shares on a one to one basis. The Preferred are redeemable at the option of the holder on or after April 29, 2007 at $6.00 per share.
Further, in connection with the offering the new investors received two ten-year warrants to purchase common shares at a $1.00 per share for each Preferred share purchased; the holders of the Pinetree debt received one warrant for each share. The
Preferred has preferences as to dividends, the right to elect directors, right to pass on various corporate activities, preemptive rights, anti-dilution rights and registration rights.



As the Preferred is redeemable at the option of the holder, it has been treated as Mandatorily Redeemable Preferred Stock as
required under Financial Accounting Standards Board Statement 150  Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. Such accounting treats the Preferred as if it were debt. Further, as the
Preferred was issued with warrants attached the proceeds were allocated between the Preferred and warrants based on the estimated value of the underlying instruments as required by Accounting Principles Board Opinion 14  Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants. Further, as the conversion price of the Preferred of $1.00 per share was less than the closing price of the common on May 13, 2004, there is a beneficial conversion feature
which is accounted for as required by Emerging Issues Task Force Consensi 98-5 and 00-27.



The following is a summary of the transactions:



|                                          |  |   |          
|----------------------------------------- |  | - | ---------
|Proceeds from sale of 1,745,000 Preferred |  | $ | 1,745,000
|Expenses relating to the placement        |  |   | 274,185  
|                                          |  |   |          
|Net proceeds                              |  |   | 1,470,815
|Proceeds from conversion of Old Preferred |  |   | 140,000  
|Amount due to Pinetree                    |  |   | 621,474  
|                                          |  |   |          
|Total proceeds                            |  | $ | 2,232,289
|                                          |  |   |          
|Amount attributed to warrants             |  | $ | 1,044,182
|Amount attributed to Preferred            |  |   | 1,188,107
|                                          |  |   |          
|Total proceeds                            |  | $ | 2,232,289
|                                          |  |   |          



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##### Table of Contents

As the intrinsic value of the beneficial conversion feature of the Preferred exceeded the amount
attributed to the Preferred and such Preferred is convertible immediately, the beneficial conversion feature was recorded as interest expense of $1,188,107 with a corresponding credit to Additional Paid-in-Capital.



The Preferred has a total redemption value of $15,038,844 on or after April
29, 2007, equal to the 2,506,474 Preferred times the $6.00 redemption price. The Preferred is being accreted quarterly, at an imputed interest rate of 88.7% per annum, so that the recorded amount on April 29, 2007 will be the redemption value.
During the two months ended June 30, 2004, $179,922 of such accretion was charged to interest expense.



Note 3  Accrued Payroll and Payroll Taxes



As of June 30, 2004, the Company had accrued and unpaid payroll taxes in the amount of approximately $191,000 and accrued interest and penalties of $168,000 with respect to such taxes.



Note 4  Stockholders Deficiency



Stock Options and Warrants:



In April 2004, the Company settled with various employees to accept a
significant reduction in the amount of back-pay owing to them. The Company reduced the amount by which the Company is obligated to pay such employees by approximately $361,000. As partial consideration for waiving a portion of such back pay, the
Company granted these employees stock options to purchase an aggregate of 305,335 shares of our common stock. The options, which are granted under the Companys 2003 Stock Option Plan, are exercisable at $1.00-$2.00 per share and terminate on
April 14, 2009. Additional compensation of approximately $962,000 has been recorded in connection with this transaction.



Stock option and warrant activity for the six months ended June 30, 2004 is summarized as follows:



|                                 |  |                 |  |                                |     
|-------------------------------- |  | --------------- |  | ------------------------------ | ----
|                                 |  | Number ofshares |  | Weighted averageexercise price
|Outstanding at December 31, 2003 |  | 468,292         |  | $                              | 2.80
|Granted                          |  | 4,638,068       |  |                                | 1.06
|Exercised                        |  |                |  |                                |    
|Expired                          |  |                |  |                                |    
|                                 |  |                 |  |                                |     
|Outstanding at June 30, 2004     |  | 5,106,360       |  | $                              | 1.22
|                                 |  |                 |  |                                |     



The following table
summarizes the Companys stock options and warrants outstanding at June 30, 2004:



|                        |  |                                  |  |                                 |  |                              |      |        |           |                              |   |     
|----------------------- |  | -------------------------------- |  | ------------------------------- |  | ---------------------------- | ---- | ------ | --------- | ---------------------------- | - | ----
|                        |  | Options and warrants outstanding |  | Options and warrantsexercisable
|Range of exercise price |  | Number                           |  | Weightedaverageremaininglife    |  | Weightedaverageexerciseprice |      | Number |           | Weightedaverageexerciseprice
|$0.33  2.00            |  | 5,063,186                        |  | 9.81                            |  | $                            | 1.20 |        | 4,841,474 |                              | $ | 1.17
|2.00  4.00             |  | 43,174                           |  | 3.99                            |  |                              | 3.66 |        | 26,000    |                              |   | 4.00
|                        |  |                                  |  |                                 |  |                              |      |        |           |                              |   |     
|                        |  | 5,106,360                        |  |                                 |  |                              |      |        | 4,867,474 |                              |   |     
|                        |  |                                  |  |                                 |  |                              |      |        |           |                              |   |     



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##### Table of Contents

The following disclosure is for awards of stock based compensation for the six months ended June 30, 2004
and 2003:



|                                                                                                                                    |  |                           |            |   |      |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                    |  | Six Months Ended June 30, |           
|                                                                                                                                    |  | 2004                      |            |   | 2003 |  
|Net loss, as reported                                                                                                               |  | $                         | (3,318,615 | ) |      | $ | (1,983,621 | )
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax
effects |  |                           |           |   |      |   |           |  
|Pro forma net loss                                                                                                                  |  | $                         | (3,318,615 | ) |      | $ | (1,983,621 | )
|Loss per share:                                                                                                                     |  |                           |            |   |      |   |            |  
|Basic and diluted  as reported                                                                                                     |  | $                         | (0.68      | ) |      | $ | (0.57      | )
|Basic and diluted  pro forma                                                                                                       |  | $                         | (0.68      | ) |      | $ | (0.57      | )



The Company has valued
interim stock based compensations awards utilizing the Black-Scholes options pricing model using the following assumptions: risk free interest rate of 3.37%, volatility of 0%, an estimated life of three years, and dividend yield of 0%.



NOTE 5 - Contingencies



In March 2004, Ann Poyas, the Companys former chief operating officer
and a former director, her husband, Donald Poyas, the Companys former Vice President of Procurement, and their son, Michael Poyas, a former consultant to the Company, brought a lawsuit in the Circuit Court for Charles County, Maryland,
alleging that they are owed in the aggregate approximately $1,150,000. In the opinion of management, this action has no merit. As this case is in the early stages of discovery, the financial impact to the Company, if any, cannot be predicted.



In May 2004, Donald James, the Companys former
president, has submitted, in writing, a claim that alleging that he is owed for unpaid wages. The Company disagrees with the claim and no action has been brought by Mr. James.



In July 2004, Charles Shannon, the Companys former Vice President of Sales and former director, brought a lawsuit
against the Company in the Circuit Court for Charles County, Maryland, alleging that he is owed approximately $1,000,000. The Company believes that it has good and meritorious defenses against the complaint and intends to defend it vigorously. In
the opinion of management, this action has no merit. As this case has only recently commenced, the financial impact to the Company, if any, cannot be predicted.



NOTE 6 - Concentration of Risk



Customers:



The Companys three largest customers accounted for approximately 92.5% of the sales for the six months ended June 30, 2004. Three customers
accounted for approximately 100% of the Companys accounts receivable as of June 30, 2004.



Supplier:



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



NOTE 7  Subsequent Events



In July 2004, the Company amended its certificate of incorporation to increase its authorized common stock to 50 million shares and its authorized preferred stock to 10 million shares.



8



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERTIONS



The following discussion and analysis of our consolidated financial condition and results of operations for the six months ended June 30, 2004 and
2003 should be read in conjunction with our consolidated financial statements included elsewhere in this Quarterly Report.



Overview



We develop and sell electric propulsion systems primarily for the marine industry. These systems utilize our proprietary technology, including our
patented Electric Wheel. In addition, we believe that our technology will have additional applications in the transportation, industrial and commercial sectors. We will continue to target areas for strategic growth.



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



Our goal is to significantly increase revenue, 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 our either raising significant capital or increasing revenue, or both. If we are unable to raise
such capital and unable to significantly increase revenue, we would likely not be able to generate enough cash to continue operations. As a result, we would have to seek alternative opportunities, such as selling our assets or seeking a merger
partner or other business combination; otherwise we may default on our debt obligations and lose our assets to our creditors.



In May, 2004, we completed a private placement of our Series A Preferred Stock, a mandatorily redeemable, convertible preferred stock, raising gross
proceeds from the offering, before deducting any placement agent fees or costs, of $1,745,000.



Our business plan requires that we obtain an additional $4 million of capital. Such capital would be used to expand out marketing program and to meet our inventory needs. If we are able to acquire such capital, we
believe that we can increase our revenue over the next two years by establishing a stronger sales presence to OEMs and by increasing substantially the number of retrofit sales. We would also use a portion of such additional capital to hire
additional administrative personnel. We only have seven full-time employees, many of whom perform multiple functions within our organization.



We believe we could also significantly increase our current gross margin of 15% to approximately 50% from such additional capital. Our suppliers offer
significant quantity discounts which we are currently unable to take advantage of due to the small number of purchases we make at any time. With additional capital, we could make larger purchase orders for the quantity discounts thereby increasing
our gross margin.



Results of Operations



The following should be read in conjunction with our consolidated financial
statements and the related notes thereto included elsewhere herein. The following table sets forth, as a percentage of sales, certain items appearing in our consolidated statements of operations.



|                        |  |                  |    |  |                    |   |  |               |    |  |               |  
|----------------------- |  | ---------------- | -- |  | ------------------ | - |  | ------------- | -- |  | ------------- | -
|                        |  | Six Months Ended |    |  | Three Months Ended |  
|                        |  | June 30, 2004    |    |  | June 30, 2003      |   |  | June 30, 2004 |    |  | June 30, 2003 |  
|Net Sales               |  | 100              | %  |  | 100                | % |  | 100           | %  |  | 100           | %
|Cost of Sales           |  | 108              | %  |  | 82                 | % |  | 544           | %  |  | 89            | %
|Gross Profit            |  | (8               | )% |  | 18                 | % |  | (444          | )% |  | 11            | %
|Total Operating Expense |  | 2697             | %  |  | 1081               | % |  | 18189         | %  |  | 1383          | %
|Loss from Operations    |  | 2706             | %  |  | 1064               | % |  | 18633         | %  |  | 1372          | %
|Interest Expense        |  | 2504             | %  |  | 18                 | % |  | 18736         | %  |  | 23            | %
|Net Loss                |  | 5209             | %  |  | 1082               | % |  | 37369         | %  |  | 1395          | %



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For the six months ended June 30, 2004, we generated revenues of $63,705 as compared to $183,371 for the
comparable period ended in 2003. Cost of goods sold for the six months ended June 30, 2004 was $68,942 generating a negative gross profit of $5,237. Cost of goods sold for the six months ended June 30, 2003 was $150,629 generating a gross profit of
$32,742. For the three months ended June 30, 2004, we generated revenues of $7,637 as compared to $124,505 for the comparable period ended in 2003. Cost of goods sold for the six months ended June 30, 2004 was $41,568 generating a negative gross
profit of $33,931. Cost of goods sold for the three months ended June 30, 2003 was $110,687 generating a gross profit of $13,818. The reason for the decline in revenue and the resulting negative gross profit result from:



| |  | the revenue reversal of approximately $19,000 from the previous sale of one of our systems recorded as revenue in a previous period,
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| |  | unanticipated warranty repairs of approximately $20,000, which increased cost of goods sold without corresponding revenue, and
| | - | ------------------------------------------------------------------------------------------------------------------------------



| |  | insufficient cash flow in previous periods which resulted in lost or cancelled sales opportunities.
| | - | ---------------------------------------------------------------------------------------------------



Operating expenses for the six months ended June 30, 2004 were $1,718,434 compared to $1,983,042 for the six months ended
June 30, 2003, and for the three months ended June 30, 2004 were $1,389,062 compared to $1,721,432 for the three months ended June 30, 2003. This decrease was due to a decrease in non-cash compensation which was partially offset by an increase in
salaries and benefits.



Non-cash compensation for the six
months ended June 30, 2004 was $1,004,000 as compared to $1,424,386 for the six months ended June 30, 2003. Non-cash compensation for the three months ended June 30, 2004 was $962,000 as compared to $1,334,366 for the three months ended June 30,
2003. Non-cash compensation consists of common stock issued to consultants and employees for services rendered. Salaries and benefits for the six months ended June 30, 2004 were $212,736 compared to $49,530 for the six months ended June 30, 2003.
This increase was due to our employees accruing unpaid wages in the first quarter of 2004.



We incurred interest expense of $1,594,944 for the six months ended June 30, 2004 and $1,430,901 for the three months ended June 30, 2004 relating to our various financings. Most of the increase was due to $1,368,029
in interest expense from recognizing additional interest related to the issuance of our Series A Preferred Stock. Interest expense was $33,321 for the six months ended June 30, 2003 was $33,321 and $29,257 for the three months ended June 30, 2003.



Because of the mandatory redemption feature of our Series A
Preferred Stock and the significant premium of six times the face value of such preferred stock payable when redeemed in April 2007, we anticipate accruing interest expense over the next three years of approximately $14 million. Such interest
expense will not provide us with any income tax benefit. Please see Note 2 to our financial statements accompanying this quarterly report.



We had a net loss of $3,318,615 for the six months ended June 30, 2004 compared to a net loss of $1,983,621 for the six months ended June 30, 2003. We had
a per-share loss of $0.54 for the six months ended June 30, 2004 and $0.54 for the six months ended June 30, 2003 was $0.57.



We reported a net loss for the three months ended June 30, 2003 of $1,736,871. Our net loss for the three months ended June 30, 2004 was $2,853,894. We
had a per-share loss of $0.58 for the three months ended June 30, 2004 and $0.50 for the three months ended June 30, 2003.



Liquidity and Capital Resources



Our available cash balance at June 30, 2004 was approximately $714,047, and is approximately $413,585 at August 16, 2004. During the six months ended June
30, 2004, we raised an aggregate of approximately $1.8 million, before expenses, through the sale of our Series A Preferred Stock. In addition, we issued the same class of preferred stock as payment of approximately $621,000 of outstanding secured
debt.



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During the six months ended June 30, 2004, we used net cash of approximately $1,138,000 for operations.
This consisted of a net loss of approximately $3.3 million offset primarily by non-cash expenses of approximately $1 million for non-cash compensation and approximately $1.37 million for interest on our Series A Preferred Stock.



There are presently no plans to purchase a new facility or significant new
equipment.



Off-Balance Sheet Arrangements



Our agreement with Homewood requires that we purchase at least 100 electric
motors during 2004. If we do not complete such purchase, we must pay Homewood on or before January 1, 2005 an amount equal to the average purchase price for all motors actually purchased by us multiplied by the motors not purchased by us up to 100.
For example, if the average purchase price of the motors actually purchased by us was $8,000, and we purchased only 75 motors during 2004, we would owe Homewood $200,000. We have not purchased the 100 motors yet, and we can not determine whether we
will meet this minimum requirement.



Except as set forth above,
we have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on us.



ITEM 3. Controls and Procedures



As of the end of the period covered by this report, our company conducted an evaluation, under the supervision and with the participation of our president and chief financial officer, of our disclosure controls and procedures (as defined in
Rules 13a-15(e) of the Exchange Act). Based on this evaluation, our president and chief financial officer concluded that our companys disclosure controls and procedures are effective to ensure that information required to be disclosed by us in
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.



There was no change in our internal controls, which are included within
disclosure controls and procedures, during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls.



PART II. OTHER INFORMATION



ITEM 1. Legal Proceedings



In
July 2004, Charles Shannon, our former vice president of sales and a former director, brought a lawsuit against us in the Circuit Court for Charles County, Maryland, alleging that he is owed approximately $1,000,000. We believe that we have good and
meritorious defenses against the complaint and intend to defend it vigorously.



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



ITEM 2. Changes in Securities



Recent Sales of
Unregistered Securities



On May 13, 2004, we completed a
private placement of 1,745,000 shares of Series A Preferred Stock and 3,490,000 warrants, each warrant entitling the holder to purchase one share of our common stock, par value $0.001 per share. We received gross proceeds from the offering, before
deducting any placement agent fees or costs, of $1,745,000. The offering was placed by First Dunbar Securities Corporation of Boston, Massachusetts on a best efforts basis. We paid First Dunbar placement fees of $148,325, which is 8.5%
of the gross proceeds of the offering, plus out-of-pocket expenses. We also granted First Dunbar a ten year warrant to purchase 250,000 shares of our common stock at $0.33 per share.



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Simultaneous with the closing of the May 2004 private placement, Pinetree (Barbados), Inc. exchanged all
of the outstanding principal and accrued interest on our promissory note, in the aggregate amount of $621,474, for 621,474 shares of Series A Preferred Stock and warrants to purchase 621,474 shares of common stock at $1.00 per share.



Further, simultaneous with the closing of the May 2004 private placement,
holders of 35,000 shares of preferred stock and warrants to purchase 35,000 shares of common stock we issued in February 2004 exchanged the preferred stock and warrants for an aggregate of 140,000 shares of Series A Preferred Stock and 280,000
warrants.



The sales and issuances of those securities were
determined to be exempt from registration under Section 4(2) of the Securities Act and Rule 506 thereunder as transactions by an issuer not involving a public offering solely to accredited investors.



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



The foregoing transactions are more fully described under Part II Other
Information  Item 2 Changes in Securities  Modification of Securities in our Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004 filed with the SEC on May 24, 2004.



Repurchase of Securities



We did not repurchase any shares of our common stock during the second
quarter of 2004.



Modification of Securities



In July 2004, we amended our certificate of incorporation to increase our
authorized common stock to 50 million shares and our authorized preferred stock to 10 million shares.



ITEM 3. Defaults Upon Senior Securities



None.



ITEM 4. Submission of Matters to a Vote of Security Holders



The 2004 Annual Meeting of Stockholders was held at the Hyatt Regency in Baltimore, Maryland, on Wednesday, July 21, 2004. The three proposals brought before the stockholders were:



| |  | Election of two members to our Board of Directors to serve as our Common Stockholder Directors until the 2005 Annual Meeting of Stockholders;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  | Election of three members to our Board of Directors to serve as our Series A Preferred Stockholder Directors until the 2005 Annual Meeting of Stockholders;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Ratification of our 2003 Stock Option Plan; and
| | - | -----------------------------------------------



| |  | Approval of an amendment to our Certificate of Incorporation to increase our authorized common stock to 50 million shares and our authorized preferred stock to 10 million shares.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The total number of shares of common stock
entitled to vote at the meeting was 4,925,378 and the total number of shares of Series A Preferred Stock entitled to vote at the meeting was 2,506,474.



As a result of the votes cast by the holders of our common stock, as described below, both Common Stockholder Directors nominated were elected for one
year terms to expire at the 2005 Annual Meeting of Stockholders:



|                |  |           |  |         
|--------------- |  | --------- |  | --------
|Name            |  | For       |  | Withhold
|David E. Tether |  | 2,482,658 |  | 309,904 
|David Lindahl   |  | 2,767,405 |  | 25,157  



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As a result of the votes cast by the holders of our Series A Preferred Stock, as described below, all
three Series A Preferred Stockholder Directors nominated were elected for one year terms to expire at the 2005 Annual Meeting of Stockholders:



|                  |  |           |  |         
|----------------- |  | --------- |  | --------
|Name              |  | For       |  | Withhold
|Gary M. Laskowski |  | 2,506,474 |  | 0       
|Michael DAmelio  |  | 2,506,474 |  | 0       
|Jonathan D. Betts |  | 2,506,474 |  | 0       



As a result of the
votes cast, as described below, by the holders of our common stock and the holders of our Series A Preferred Stock, on an as converted basis, Proposal 2  Ratify our 2003 Stock Option Plan  was approved.



|          |  |         |  |        
|--------- |  | ------- |  | -------
|For       |  | Against |  | Abstain
|4,987,295 |  | 310,491 |  | 1,250  



As a result of the
votes cast, as described below, by the holders of our common stock and the holders of our Series A Preferred Stock, on an as converted basis, Proposal 3  Approval of an amendment to our Certificate of Incorporation to increase our authorized
common stock to 50 million shares and our authorized preferred stock to 10 million shares  was approved. The holders of our Series A Preferred Stock, voting separately as a class, unanimously approved Proposal 3.



|          |  |         |  |         |  |          
|--------- |  | ------- |  | ------- |  | ---------
|For       |  | Against |  | Abstain |  | Not Voted
|4,984,916 |  | 312,867 |  | 1,250   |  | 3        



No other business was
brought before the Annual Meeting.



ITEM 5. Other Events



(a) None.



(b) No change.



ITEM 6. Exhibits and Form 8-K Filings



|(a) | Exhibits
|--- | --------



|            |  |                                                    
|----------- |  | ---------------------------------------------------
|Exhibit No. |  | Description                                        
|3.1         |  | Amendment to the Certificate of Incorporation      
|            | 
|10.1        |  | 2003 Stock Option Plan                             
|            | 
|31.1        |  | Section 302 Certification  President              
|            | 
|31.2        |  | Section 302 Certification  Chief Financial Officer
|            | 
|32.1        |  | Section 906 Certification  President              
|            | 
|32.2        |  | Section 906 Certification  Chief Financial Officer





(b) Reports on Form 8-K



Form 8-K dated April 30, 2004 was filed on May 14, 2004 announcing the May 2004 private placement and the change in control of our company.



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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 19, 2004



SOLOMON TECHNOLOGIES, INC.By

/s/ PETER W. DEVECCHISPeter W. DeVecchisPresident(principal executive officer)By

/s/ SAMUEL F. OCCHIPINTISamuel F. OcchipintiChief Financial Officer(principal financial and accounting officer)




14