U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-QSB


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                                  ACT OF 1934

               For the quarterly period ended September 30, 2005

    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                               POWERCHANNEL, INC.

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


            Delaware                                          65-0952186
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                           Identification No.)

                        16 North Main Street, Suite 395
                            New City, New York 10956
                    (Address of Principal Executive Offices)

                                 (845)634-7979
                          (Issuer's telephone number)



      (Former name, address and fiscal year, if changed since last report)

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

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of December 21, 2005: 26,669,829 shares of common stock outstanding,
$0.01 par value.

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



<PAGE>
ITEM 1. FINANCIAL INFORMATION

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 2005
                                   (Unaudited)

                                     ASSETS
                                     ------
Current Assets:
  Prepaid Consulting Fees                                       $        11,073
                                                                ----------------
         Total Current Assets                                            11,073

Property and Equipment, Net                                              15,690
                                                                ----------------
                                                                $        26,763
                                                                ================
                      LIABILITIES AND STOCKHOLDERS' DEFICIT
                      -------------------------------------
Current Liabilities:
  Accounts Payable                                              $       583,570
  Accrued Liabilities                                                 1,091,093
  Convertible Notes Payable                                              44,305
  Deposits Payable                                                       70,000
  Loan Payable - Other                                                   55,061
                                                                ----------------
         Total Current Liabilities                                    1,844,029
                                                                ----------------
Commitments and Contingencies

Minority Interest                                                       630,398
                                                                ----------------
Stockholders' Deficit:
  Preferred Stock, Par Value $.01; Authorized 5,000,000 Shares,
    Issued and Outstanding 0 Shares                                           -
  Common Stock, Par Value $.01; Authorized 95,000,000 Shares,
    Issued and Outstanding 26,669,829 Shares                            266,698
  Additional Paid-In Capital                                         15,318,452
  Common Stock to be Issued, 2,370,156 Shares                         1,827,756
  Deferred Stock-Based Compensation                                    (203,787)
  Accumulated Other Comprehensive Income                                609,061
  Deficit Accumulated in the Development Stage                      (20,265,844)
                                                                ----------------
         Total Stockholders' Deficit                                 (2,447,664)
                                                                ----------------
                                                                $        26,763
                                                                ================

The accompanying notes are an integral part of the financial statements.

                                       2
<PAGE>

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                                                                   For The Period
                                                                    For the Three            For the Nine          August 10, 1998
                                                                    Months Ended             Months Ended            (Inception)
                                                                     September 30,           September 30,               To
                                                              ------------------------  -----------------------     September 30,
                                                                 2005           2004       2005          2004           2005
                                                              -----------   ----------  ----------   ----------    ---------------
<S>                                                              <C>              <C>     <C>          <C>            <C>
Revenues:
  Gross License Fees - PowerChannel Europe, PLC               $        -    $       -           -    $       -     $    1,894,348
  Expenses Reimbursed Pursuant to License Agreement                    -            -           -            -         (1,884,348)
                                                              -----------   ----------  ----------   ----------    ---------------
  Net License Income                                                   -            -           -            -             10,000
  Sales - Net (Returns of $84,420 for the Quarter Ended
    June 30, 2004)                                                     -       37,500       3,305      185,866            277,724
  Activation Fees                                                      -            -           -            -             15,525
                                                              -----------   ----------  ----------   ----------    ---------------

         Total Revenues                                                -       37,500       3,305      185,866            303,249
                                                              -----------   ----------  ----------   ----------    ---------------
Costs and Expenses:
  Cost of Sales                                                        -       15,000         260      151,462            167,709
  Write-Down of Inventories                                       63,608            -      63,608       21,593            574,314
  Selling, General and Administrative Expenses                    56,441      467,408     353,858    1,443,455          8,099,576
  Impairment Loss on Investment                                        -            -           -            -            573,887
  Settlement of Debt                                                   -            -           -            -            111,300
  Equity-Based Compensation                                      340,879      982,969   1,011,523    4,692,530          8,712,290
  Reversal of Equity Based Compensation Due to Cancellation and
    Nullification of Contract                                          -            -           -            -           (479,934)
                                                              -----------   ----------  ----------   ----------    ---------------

        Total Costs and Expenses                                 460,928    1,465,377   1,429,249    6,309,040         17,759,142
                                                              -----------   ----------  ----------   ----------    ---------------

Loss Before Loss From Unconsolidated Affiliate
  and Other Income (Expense)                                    (460,928)  (1,427,877) (1,425,944)  (6,123,174)       (17,455,893)

Loss from Unconsolidated Affiliate                                     -            -           -      (48,000)        (2,636,913)

Minority Interest in Net Loss of Subsidiary                        1,479            -       2,959            -              8,614

Interest Expense                                                  (1,994)      (1,994)     (6,005)     (18,158)          (181,652)
                                                              ----------- ------------ ----------- ------------    ---------------

Net Loss                                                      $ (461,443) $(1,429,871)$(1,428,990) $(6,189,332)      $(20,265,844)
                                                              =========== ============ =========== ============    ===============
Basic and Diluted Net Loss Per Share                          $     (.02) $      (.05) $    ( .05) $     ( .24)
                                                              =========== ============ =========== ============
Weighted Average Shares Outstanding - Basic and Diluted       26,669,829   26,669,829  26,669,829   25,288,737
                                                              =========== ============ =========== ============
Pro-Forma Net Loss Per Share (Basic and Diluted)              $     (.02) $      (.05) $     (.03) $      (.23)
                                                              =========== ============ =========== ============
Pro-Forma Weighted Average Shares
  Outstanding (Basic and Diluted)                             29,039,985   29,039,985  29,039,985   27,456,422
                                                              =========== ============ =========== ============
</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       3
<PAGE>

<TABLE>
<CAPTION>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)


                                                                             For the Nine               For The Period
                                                                             Months Ended               August 10, 1998
                                                                             September 30,                (Inception)
                                                                   ------------------------------             To
                                                                         2005           2004         September 30, 2005
                                                                   --------------  --------------    -------------------
Cash Flow From Operating Activities:
<S>                                                                <C>                  <C>                <C>
  Net Loss                                                         $  (1,428,990)  $  (6,189,332)    $      (20,265,844)
  Adjustments to Reconcile Net Loss to
    Net Cash Used in Operating Activities:
      Intrinsic Value of Beneficial Conversion Feature
        of Convertible Notes                                                   -               -                280,000
      Equity-Based Compensation                                        1,011,523       4,692,530              8,331,808
      Expense Recorded on Issuance of Common Stock
        for Debt Settlement                                                    -               -                111,300
      Loss on Investment in PowerChannel Europe PLC                            -          48,000              2,328,587
      Minority Interest in Net Loss of Subsidiary                         (2,959)              -                 (8,614)
      Reserve for Bad Debts                                                    -          68,376                110,831
      Loss on Asset Disposal                                                   -               -                 20,456
      Write-Down of Inventories                                           63,608          21,593                574,314
      Depreciation                                                         6,385          16,411                110,744
      Impairment Loss on Investment in PowerChannel
        Europe PLC                                                             -               -                573,884
      Change in Current Operating Assets and Liabilities:
        (Increase) in Accounts Receivable                                      -        (129,831)              (110,831)
        (Increase) Decrease in Inventories                                   261         108,594               (574,314)
        (Increase) Decrease in Prepaid Expenses                           82,914        (116,311)               (11,073)
        (Increase) in Other Assets                                             -         (16,459)                     -
        Increase (Decrease) in Due to PowerChannel Europe PLC,
          Relating to Operations                                               -         (10,000)               639,632
        Increase (Decrease) in Accounts Payable and Accrued
                Liabilities                                              133,884        (106,320)             1,502,552
        Increase in Deposits Payable                                           -               -                 45,000
        Other                                                                  -               -                 13,509
                                                                   --------------  --------------    -------------------
Net Cash (Used) in Operating Activities                                 (133,374)     (1,612,749)            (6,328,059)
                                                                   --------------  --------------    -------------------
Cash Flow From Investing Activities:
  Purchase of Property and Equipment                                           -         (25,116)              (146,890)
  Net Liabilities Acquired in Reverse Merger, Net of Cash                      -               -                (16,851)
  Advances to Related Party                                                    -         (56,607)               (64,935)
  Repayments for Advances to Related Parties                                   -          43,300                 64,935
  Loans to Related Party                                                       -               -               (278,027)
  Repayments from Loans to Related Parties                                     -               -                278,027
  Payments for PCE Stock                                                       -         (40,000)               (40,000)
                                                                   --------------  --------------    -------------------
Net Cash (Used) in Investing Activities                                        -         (78,423)              (203,741)
                                                                   --------------  --------------    -------------------

The accompanying notes are an integral part of the financial statements.
</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                   (Continued)

                                                                             For the Nine             For The Period
                                                                             Months Ended             August 10, 1998
                                                                             September 30,              (Inception)
                                                                   ------------------------------            To
                                                                       2005             2004         September 30, 2005
                                                                   --------------  --------------    -------------------
Cash Flow From Financing Activities:
<S>                                                                     <C>             <C>                  <C>
  Proceeds from Issuance of Common Stock                                       -       2,187,500              3,832,864
  Fees Paid on Sale of Common Stock                                            -        (265,000)              (275,000)
  Loans and Advances from Related Parties                                 71,138               -              2,844,212
  Advances to Related Party                                                    -               -                (56,607)
  Proceeds of Subscription Receivable                                          -         300,000                      -
  Repayments of Advances to Related Party                                      -               -                 43,300
  Repayments of Loans and Advances from Related Parties                   (1,335)              -                 (1,335)
  Proceeds from Note Payable                                                   -               -                112,000
  Proceeds from Convertible Notes                                              -               -                280,000
  Proceeds from Deposits Payable                                               -          25,000                 25,000
  Proceeds from Loan Payable                                              55,061               -                 55,061
  Payments of Convertible Notes                                                -        (215,695)              (215,695)
  Payment of Note Payable                                                      -        (112,000)              (112,000)
                                                                   --------------  --------------    -------------------
Net Cash Provided By Financing Activities                                124,864       1,919,805              6,531,800
                                                                   --------------  --------------    -------------------
Net Increase (Decrease) in Cash                                           (8,510)        228,633                      -

Cash - Beginning of Period                                                 8,510          25,265                      -
                                                                   --------------  --------------    -------------------
Cash - End of Period                                               $           -   $     253,898     $                -
                                                                   ==============  ==============    ===================
Supplemental Cash Flow Information:
  Cash Paid For Interest                                           $           -   $      94,753     $           94,753
                                                                   ==============  ==============    ===================
  Cash Paid For Income Taxes                                       $           -   $           -     $                -
                                                                   ==============  ==============    ===================
Non-Cash Financing Activities:
  Issuances of Common Stock as Fees for
    Sales of Common Stock                                          $           -   $           -     $           10,500
                                                                   ==============  ==============    ===================
  Issuance of Common Stock on Settlement of
    Convertible Note Payable and Accrued Interest                  $           -   $           -     $           25,200
                                                                   ==============  ==============    ===================
Deferred Stock-Based Compensation                                  $           -   $   3,783,559     $        7,280,243
                                                                   ==============  ==============    ===================
Issuance of Common Stock for Deferred Offering Costs               $           -   $           -     $           14,000
                                                                   ==============  ==============    ===================
Write-Off of Subscription Receivable                               $           -   $           -     $           50,575
                                                                   ==============  ==============    ===================
Issuance of 250,000 Shares of Common Stock as Payment
  for Accrued Salaries - Related Parties                           $           -   $     205,000     $          205,000
                                                                   ==============  ==============    ===================
Issuance of 228,122 Shares of Common Stock as Payment
  for Accrued Salaries and Fees                                    $           -   $     187,060     $          187,060
                                                                   ==============  ==============    ===================
Repayment of Advances to Related Party by Applying Accrued
  Salaries                                                         $           -   $      13,307     $           13,307
                                                                   ==============  ==============    ===================

    The accompanying notes are an integral part of the financial statements.
</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                        (A DEVELOPMENT STAGE ENTERPRISE)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                   (Continued)


                                                                                                       For The Period
                                                                      For the Nine Months Ended        August 10, 1998
                                                                            September 30,                (Inception)
                                                                   ------------------------------            To
                                                                      2005              2004         September 30, 2005
                                                                   --------------  --------------    -------------------
Issuance of 120,000 Shares of Common Stock as Payment for
<S>                                                                      <C>             <C>               <C>
  Accrued Liabilities                                              $           -   $      75,600     $           75,600
                                                                   ==============  ==============    ===================
Issuance of 286,687 Shares of Common Stock as Consideration
  for Purchase of PCE Shares from Related Parties                  $           -   $      77,455     $           77,455
                                                                   ==============  ==============    ===================
Cancellation of 286,687 Shares of Common Stock by
  Related Parties                                                  $           -   $       2,869     $            2,869
                                                                   ==============  ==============    ===================
Additional Paid-In Capital Arising from Acquisition of PCE         $           -   $   2,715,234     $        1,407,300
                                                                   ==============  ==============    ===================
Payable on Purchase of PCE Stock                                   $           -   $      14,898     $           14,898
                                                                   ==============  ==============    ===================
Penalties Accrued and Charged Against Additional Paid-In
  Capital Pursuant to Private Placement                            $           -   $     199,000     $          298,500
                                                                   ==============  ==============    ===================
Minority Interest                                                  $           -   $   1,176,543     $          639,012
                                                                   ==============  ==============    ===================
Conversion of Related Party Loans Payable into Contributed
  Additional Paid-In Capital                                       $      69,803   $           -     $           69,803
                                                                   ==============  ==============    ===================
Conversion of Related Party Accrued Wages into Contributed
  Additional Paid-In Capital                                       $      92,308   $           -     $           92,308
                                                                   ==============  ==============    ===================

    The accompanying notes are an integral part of the financial statements.
</TABLE>


                                       6
<PAGE>

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 1 - Basis of Presentation
         ---------------------

         The accompanying unaudited condensed consolidated financial  statements
include the accounts of PowerChannel, Inc. and its subsidiaries,  which are both
wholly  and  majority  owned.   All  significant   inter-company   accounts  and
transactions have been eliminated in consolidation.

         The accompanying unaudited condensed consolidated  financial statements
have been  prepared  in  accordance  with  U.S.  generally  accepted  accounting
principles  for interim  financial  information  and with  instructions  to Form
10-QSB.  Accordingly,  they do not include all of the  information and footnotes
required by U.S. generally accepted accounting principles for complete financial
statements.  In  the  opinion  of the  Company's  management,  the  accompanying
consolidated  financial  statements  reflect all adjustments (which include only
normal  recurring  adjustments)  necessary  to present  fairly the  consolidated
financial  position  and  results of  operations  and cash flows for the periods
presented.

         Results  of  operations  for  interim   periods  are   not  necessarily
indicative of the results of operations for a full year.

         Certain items in  these  condensed  consolidated  financial  statements
have been reclassified to conform to the current period presentation,

         The  condensed  consolidated financial statements have been prepared on
a going  concern  basis,  which  contemplates  the  realization  of  assets  and
satisfaction  of liabilities in the normal course of business.  The Company is a
development stage company and has incurred  recurring losses from operations and
operating cash  constraints  that raises  substantial  doubt about the Company's
ability to continue as a going concern.

         Our  ultimate  ability  to continue as a going  concern  depends on the
market's  acceptance of our products and our ability to raise additional funding
and to generate revenues,  operating profits, and positive cash flow. We have an
urgent  need for  additional  funding to provide  near-term  operating  cash and
enable us to  continue  our  operations  and  execute  our plans to move  toward
profitability.  Although  there can be no  assurance,  management  believes that
future financings and additional sales that we hope to generate from our product
lines will be sufficient to allow us to continue in operation.

         We  have ceased our  operations  relating to the  provision of low-cost
access to the Internet.  We will attempt to locate and negotiate with a business
entity for the  merger of that  target  business  into our  Company.  In certain
instances,  a target  business may wish to become a subsidiary of our Company or
may wish to contribute  assets to our Company  rather than merge.  No assurances
can be given that our Company will be successful in locating or negotiating with
any target  business.  If we are unsuccessful in merging or acquiring the assets
of a business entity we may cease all operations and all shareholders  will lose
their investment in our stock.


                                       7
<PAGE>

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 2 - Property and Equipment
         ----------------------

         Property and equipment consists of the following:

             Office Equipment                            $   85,949
             Furniture and Fixtures                          26,622
             Leasehold Improvements                           8,000
                                                         ----------
                                                            120,571
             Less:  Accumulated Depreciation                104,881
                                                         ----------
                                                         $   15,690
                                                         ==========

         Depreciation  expense  amounted  to  $6,385  and  $16,411  for the nine
months ended September 30, 2005 and 2004, respectively.


NOTE 3 - Related Party Transactions
         --------------------------

         Employment Agreement
         --------------------

         In February 2005, the  Company  extended its employment  agreement with
its  President  and Chief  Executive  Officer  for an  additional  year  through
February  10,  2006.  Effective  as of July 1, 2005,  pursuant  to a  settlement
agreement,  this employment  agreement was terminated.  Compensation expense for
the  nine  months  ended   September   30,  2005  and  September  30,  2004  was
approximately $80,000 and $166,000, respectively.

         Advances from Related Party
         ---------------------------

         Advances from  related party  represented funds advanced to the Company
by its President and Chief Executive  Officer.  Such advances were  non-interest
bearing and had no specific  repayment  terms. At September 30, 2005 advances of
approximately $70,000 were converted into contributed additional paid-in capital
pursuant to a settlement agreement.

         Accrued Liabilities
         -------------------

         Included  in   accrued  liabilities  were  accrued  wages  owed  to the
Company's  President and Chief Executive  Officer in the amount of approximately
$92,000.  At September 30, 2005 such accrued wages were converted to contributed
additional paid-in capital pursuant to a settlement agreement.


NOTE 4 - Write-Down of Inventories
         -------------------------

         The Company has  recognized  a  loss of $63,608  during the nine months
ended  September 30, 2005 related to the write-down of its  inventories to a net
realizable value of $0.


                                       8
<PAGE>



                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 5 - Commitments and Contingencies
         -----------------------------

         Litigation
         ----------

         Except for the  following,  the Company is currently  not party  to any
material legal proceedings.

         In October 2003, a  stockholder alleging investment fraud filed a claim
in the Civil  Court of the City of New York  seeking  damages  in the  amount of
approximately $48,000.

         In April 2003, a stockholder  alleging  investment fraud  filed a claim
in the Supreme Court of Nassau County  seeking  damages in the amount of $25,000
plus  interest.  The  plaintiff  has  withdrawn  his claim but may commence this
action at a future point in time.

         A stockholder has  demanded the return of his $100,000 investment.  The
Company intends to respond to this complaint shortly in the Supreme Court of the
State of New York, New York County.

         In July 2004  the Company received a Notice of Motion seeking a default
judgment  and  attorneys'  fees in  connection  with a  complaint  filed  by AKW
Holdings,  LLC against the Company in the Supreme Court of the State of New York
- County of Rockland. AKW Holdings, LLC is seeking unpaid rents of approximately
$160,000  and  attorneys'  fees and  interest.  On April  19,  2005 an order and
judgment  was  filed in the  Supreme  Court of the State of New York - County of
Rockland  against the Company in the amount of  $199,676.  The Company  believes
this  judgment is baseless and without  merit and intends to  vigorously  defend
this lawsuit.

         In December  2005, the  Company  received a Final Judgment  against the
Company in the Miami-Dade County, Florida County Court in the amount of $13,277.
Such amount is included in accrued liabilities at September 30, 2005.

         Antidilution Agreement
         ----------------------

         Steven Lampert, the  Company's  President,  entered into a Confidential
Antidilution  Agreement dated July 1, 2003 with Michael Fasci, a former director
and officer of the Company.  In consideration  for Mr. Fasci agreeing to vote in
favor of the reverse  merger the Company  entered into in July 2003, Mr. Lampert
agreed to  transfer  to Mr.  Fasci  shares of his common  stock in order for Mr.
Fasci's  ownership  would at all times be maintained  at 10% of the  outstanding
shares of the  Company.  The term of this  agreement  is for three  years.  As a
result,  Mr.  Lampert may be required to transfer all or a portion of his shares
to Mr. Fasci.

         Lack of Insurance
         -----------------

         The Company,  at  September  30, 2005,  did not maintain any  liability
insurance,  workers' compensation, or other forms of general insurance. Although
the Company is not aware of any claims resulting from absence of coverage, there
is no assurance that none exist.

         Accrued Liabilities
         -------------------

         Included  in  accrued  liabilities  at  September  30, 2005 are payroll
taxes  payable of  approximately  $202,000 of which  approximately  $150,000 are
under  federal  tax liens.  Such liens can result in  enforcement  action by the
Federal government to satisfy those liens.


                                       9
<PAGE>


                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 5 - Commitments and Contingencies (Continued)
         -----------------------------------------

         Settlement Agreement
         --------------------

         On  December 17, 2004 the Company  entered into a settlement  agreement
with a former consultant and other individuals.  The settlement  agreement calls
for, among other things,  (1) the termination of certain  consulting  agreements
entered  into between the Company and the former  consultant  on August 18, 2003
and December 12, 2003; (2) the  termination  of options for 1.5 million  shares;
(3) the  cancellation  of 449,672  shares of common  stock;  (4) mutual  general
releases; and (5) the cancellation of 699,672 shares of common stock.

         Accordingly,  the  Company  recorded  a  credit  on  the  statement  of
operations of $26,298  attributable  to 2003 and $453,636  attributable  to 2004
pertaining to the part of the consulting  agreement relating to the stock option
cancellation for the year ended December 31, 2004.

         Since the  449,672 and 699,672 shares of common stock have not yet been
returned to the Company for  cancellation by the transfer  agent,  the effect of
the transaction has not been recognized for financial reporting purposes.


                                       10
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

BUSINESS SUMMARY

We have ceased our operations relating to the provision of low-cost access to
the Internet.  We will attempt to locate and negotiate with a business entity
for the merger of that target business into our company.   In certain instances,
a target business may wish to become a subsidiary of our company or may wish to
contribute assets to our company rather than merge.   No assurances can be given
that our company will be successful in locating or negotiating with any target
business.  If we are unsuccessful in merging or acquiring the assets of a
business entity we may cease all operations and all shareholders will lose their
investment in our stock.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2004

REVENUES

During  the nine months ended  September 30, 2005 we had no sales.  During the
nine months ended September 30, 2004, we had sales of  $185,866, which is net of
returns of $84,420.  The reason for the decrease in revenues was the cessation
of operations due to the lack of funding.

COSTS  AND  EXPENSES

Cost and expenses  incurred  for the nine months ended September 30, 2004,
aggregated $6,309,040 as compared to $1,429,249 for the nine months ended
September 30, 2005.  Cost and expenses decreased by $4,879,791 for the nine
months ended September 30, 2005 when compared to the comparable period of the
prior year. This decrease resulted from the following:

-    Cost  of  sales  of  $151,462  during  the  nine months ended September 30,
     2004 as compared to $260 for the nine months ended September 30, 2005;
-    write  down  of  inventories  of  $21,593  during  the  nine  months  ended
     September  30,  2004  as  compared  to  $63,608  for  the nine months ended
     September  30,  2005,  thereby reflecting a net relizable value of $0 as of
     September 30, 2005;
-    selling,  general  and  administrative  expenses  for the nine months ended
     September  30,  2004 of $1,443,455, as compared to $353,858 during the nine
     months ended September 30, 2005; and
-    stock  based  compensation  in  the  amount  of  $4,692,530 during the nine
     months  ended  September 30, 2004 as compared to $1,011,523 during the nine
     months ended September 30, 2005.

NET  LOSS

The net loss was $6,189,332 for the nine months ended September 30, 2004, as
compared to a net loss of $1,428,990 for the nine months  ended September 30,
2005.

OFF-BALANCE SHEET ARRANGEMENTS

We had no off-balance  sheet  arrangements  for the three months ending
September 30, 2005.

LIQUIDITY  AND  CAPITAL  RESOURCES

FINANCIAL  CONDITION

We generated no revenue during the nine months ended September 30, 2005.
Accordingly, we have ceased operations.

At September 30, 2005,  we had total  current  assets of $11,073 and total
current liabilities  of $1,844,029 resulting in a working  capital  deficit of
$1,832,956.  In addition, we had a stockholders deficit of $2,447,664 at
September 30, 2005.

The Company is a development stage company that has a working capital deficit at
September 30, 2005 of $1,832,956 and for the period August 10, 1998 (inception)
to September 30, 2005 has incurred net losses aggregating $20,265,844.  These
factors raise substantial doubt about the Company's ability to continue as a
going concern.

CAPITAL RESOURCES

We  currently do not have any agreements or arrangements for financing.  In
December 2005, we entered into an Agreement of Settlement with Steven Lampert,
an executive officer and director of the Company, pursuant to which Mr. Lampert
agreed to convert an aggregate amount of $162,111 of accrued wages and loans
payable into contributed additional paid in capital.

Since the merger in July 2003 through September 2005, our investors have


                                       11
<PAGE>

provided funding, net of expenses, of approximately $2,338,000 in cash, and
various parties have provided services valued at approximately $7,891,000, in
consideration for the issuance of securities issued or to be issued.

RELATED PARTY LOANS

During the quarter ended March 31, 2004, we made certain loans to the President
and CEO, aggregating $56,607. During this same period the loans were repaid
through the payment of cash in the amount of $43,300 and the application of
accrued salaries in the amount of $13,307. These loans made to Mr. Lampert
violate Section 402 of the Sarbanes Oxley Act of 2002. As a result, despite the
fact that such loans were repaid, our company and/or Mr. Lampert may be subject
to fines, sanctions and/or penalties. At this time, we are unable to determine
the amount of such fines, sanctions and/or penalties that may be incurred by our
company and/or Mr. Lampert.  The purpose of such loan was for personal use.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The  accompanying discussion and analysis of our financial condition and results
of  operations  are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United  States  of  America  ("US  GAAP"). The preparation of these consolidated
financial statements requires us to make estimates and judgments that affect the
reported  amounts  of  assets,  liabilities,  revenues and expenses, and related
disclosure  of contingent assets and liabilities. These estimates form the basis
for  making  judgments  about the carrying values of assets and liabilities that
are not readily apparent from other sources. We base our estimates and judgments
on  historical  experience and all available information. However, future events
are  subject  to  change, and the best estimates and judgments routinely require
adjustment.  US  GAAP  requires  us  to  make estimates and judgments in several
areas,  including  those  related  to  recording  bad  debt  allowances, various
accruals (such as incentive compensation and restructuring costs), income taxes,
the  useful  lives  of  long-lived  assets,  such  as property and equipment and
intangible  assets,  and  potential losses from contingencies and litigation. We
believe  the  policies discussed below are the most critical to our consolidated
financial  statements  because  they  are affected significantly by management's
judgments,  assumptions  and  estimates.

Accounts  Receivable
--------------------

Management  determines  the  allowance  for  bad  debts  based on known troubled
accounts,  historical  experience,  and other currently available evidence.  The
Company  has  an  allowance  for  bad  debts  of $110,831 at September 30, 2005.

Fair  Value  of  Financial  Instruments
---------------------------------------

The  carrying amounts of cash, accounts payable, notes payable and other current
liabilities  approximates  fair  value  because  of  the immediate or short-term
maturity  of  these  financial  instruments.

Income Taxes
------------

The  Company  records deferred income taxes using the asset and liability method
as  prescribed  under  the  provisions  of  SFAS  No.  109.  Under the asset and
liability  method,  deferred  tax  assets and liabilities are recognized for the
expected  future tax consequences of temporary differences between the financial
statement  and  income  tax  bases  of the Company's assets and liabilities.  An
allowance  is  recorded,  based upon currently available information, when it is
more  likely  than  not  that  any or all of the deferred tax assets will not be
realized.  The  provision  for income taxes includes taxes currently payable, if
any,  plus the net change during the year in deferred tax assets and liabilities
recorded  by  the  Company.

Stock-Based  Compensation
-------------------------

As  permitted  under FAS No. 123, "Accounting for Stock-Based Compensation", the
Company  has  elected  to follow Accounting Principles Board Opinion No. 25 (APB
No. 25), "Accounting for Stock Issued to Employees", and related interpretations
in  accounting  for  stock-based awards to employees.  Accordingly, compensation
cost for stock options and restricted stock grants is measured as the excess, if
any, of the market price of the Company's common stock at the date of grant over
the  exercise  price.  Warrants and options issued to nonemployees are accounted
for  using  the fair value method of accounting as prescribed by FAS No. 123 and
Emerging  Issues  Task  Force  ("EITF")  No.  96-18,  "Accounting  for  Equity
Instruments  That  Are  Issued  to  Other  Than  Employees  for Acquiring, or in
Conjunction  with Selling, Goods or Services".  Compensation costs are amortized
in  a manner consistent with Financial Accounting Standards Board Interpretation
No.  28  (FIN  No.  28),  "Accounting  for  Stock  Appreciation Rights and Other
Variable  Stock  Option  or  Award  Plans".  The  Company uses the Black-Scholes
option  pricing  model  to  value  options, restricted stock grants and warrants
granted  to  nonemployees.

Basic  and  Diluted  Earnings  (Loss)  Per  Share
-------------------------------------------------

Basic earnings (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the period.

Because  the  Company  is  incurring  losses,  the  effect  of stock options and
warrants  is  antidilutive.  Accordingly,  the Company's presentation of diluted
net  loss  per  share  is  the  same  as  that  of  basic  net  loss  per share.



                                       12
<PAGE>

Pro-forma weighted average shares outstanding includes the pro-forma issuance of
2,370,156  and  2,315,531  common shares at September 30, 2005 and September 30,
2004, respectively, reserved to be issued pending potential litigation (see Note
11  to  Consolidated  Financial  Statements).

Use  of  Estimates
------------------

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United States of America requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and the disclosures of contingent assets and liabilities at the date
of  the  financial  statements and the reported amounts of revenues and expenses
during  the reporting period.  Actual results could differ from these estimates.

Recent  Accounting  Pronouncements
----------------------------------

In December  2004, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement No. 123R ("SFAS 123R") "Share Based Payment," a revision of Statements
No. 123,  "Accounting for Stock Based  Compensation." This standard requires the
Company to measure the cost of employee services received in exchange for equity
awards based on grant date fair value of the awards.  The Company is required to
adopt  SFAS  123R  effective  January  1,  2006.  The  standard  provides  for a
prospective  application.  Under this method, the Company will begin recognizing
compensation  cost for equity based  compensation for all new or modified grants
after the date of adoption. In addition, the Company will recognize the unvested
portion  of the grant  date fair value of awards  issued  prior to the  adoption
abased on the fair values  previously  calculated  for disclosure  purposes.  At
December 31, 2004, the Company had no unvested options.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest  Entities - an Interpretation of Accounting  Research Bulletin
No.  51" ("FIN No.  46").  This  interpretation  provides  guidance  related  to
identifying  variable interest  entities  (previously known generally as special
purpose  entities  or SPEs) and  determining  whether  such  entities  should be
consolidated. Certain disclosures are required when FIN No. 46 becomes effective
if it is  reasonably  possible  that a  company  will  consolidate  or  disclose
information  about a variable  interest entity when it initially applies FIN No.
46.  This  interpretation  must be  applied  immediately  to  variable  interest
entities created or obtained after January 31, 2003. For those variable interest
entities  created or obtained on or before  January 31,  2003,  the Company must
apply the provisions of FIN No. 46 for the year ended December 31, 2003. FIN No.
46 did not have a  significant  impact on the Company's  consolidated  financial
position or results of operations.

On May 15, 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments  with   Characteristics  of  both  Liabilities  and  Equity,"  which
establishes standards for how financial instruments that have characteristics of
both  liabilities  and equity  instruments  should be  classified on the balance
sheet.  The  requirements  of SFAS No. 150  generally  outline  those  financial
instruments  that give the  issuer a choice of  settling  an  obligation  with a
variable  number of  securities  or  settling an  obligation  with a transfer of
assets or any mandatory  redeemable security should be classified as a liability
on the  balance  sheet.  At December  31,  2004,  the Company  does not have any
instruments that are within the scope of SFAS No. 150.

RISK FACTORS

RISKS RELATED TO OUR BUSINESS

IF WE ARE UNABLE TO MERGE WITH A NEW BUSINESS, OUR STOCKHOLDERS WILL LOSE THEIR
ENTIRE INVESTMENT

Due to the cessation in business  activity  associated  with our Intenet  access
business, we will attempt to locate and negotiate with a business entity for the
merger of that target business into our company. In certain instances,  a target
business  may  wish  to  become  a  subsidiary  of our  company  or may  wish to
contribute  assets to our company rather than merge.  No assurances can be given
that our company will be successful in locating or  negotiating  with any target
business.  If we are  unsuccessful  in  merging  or  acquiring  the  assets of a
business entity we may cease all operations and all shareholders will lose their
investment in our stock.

WE  HAVE  A HISTORY OF LOSSES SINCE OUR INCEPTION AND EXPECT TO INCUR LOSSES FOR
THE  FORESEEABLE  FUTURE.

For the nine months ended  September  30, 2005 we incurred  losses of $1,428,990
and $20,265,844  since  inception.  We have not had sales during the nine months
ended September 30, 2005. We have not yet achieved profitability and we can give
no assurances that we will achieve  profitability  within the foreseeable future
as we fund  acquisitions,  operating and capital  expenditures  in areas such as
establishment and expansion of markets, sales and marketing, operating equipment
and research  and  development.  We cannot  assure  investors  that we will ever
achieve or sustain  profitability or that our operating losses will not increase
in the future.

OUR  INDEPENDENT  AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO
CONTINUE  AS  A  GOING  CONCERN,  WHICH  MAY HINDER OUR ABILITY TO OBTAIN FUTURE
FINANCING.

For the year ended December 31, 2004, our  independent  auditors stated that our
financial statements for the year ended December 31, 2004 were prepared assuming
that we would  continue as a going  concern.  Our ability to continue as a going
concern is an issue raised as a result of recurring  losses from  operations and
cash flow deficiencies from our inception. We continue to experience net losses.
Our ability to continue as a going concern is subject to our ability to generate


                                       13
<PAGE>

a profit  and/or  obtain  necessary  funding  from  outside  sources,  including
obtaining  additional funding from the sale of our securities,  increasing sales
or  obtaining  loans  and  grants  from  various  financial  institutions  where
possible.  Our  continued  net losses and  stockholders'  deficit  increases the
difficulty  in  meeting  such  goals and there  can be no  assurances  that such
methods will prove successful.

IN CONNECTION WITH THE FILING OF OUR FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31,
2004, WE WERE UNABLE TO OBTAIN AN AUDIT REPORT ON OUR FINANCIAL  STATEMENTS  FOR
THE PERIOD  COVERING  AUGUST 10, 1998  (INCEPTION) TO DECEMBER 31, 2002, AND THE
INABILITY TO OBTAIN SUCH REPORT MAY AFFECT THE  COMPANY'  ABILITY TO PROVIDE THE
NECESSARY  FINANCIAL  INFORMATION  REQUIRED TO MAINTAIN  ITS STATUS AS A CURRENT
REPORTING  ISSUER WHICH COULD RESULT IN THE COMPANY'S  SECURITIES BEING DELISTED
FROM THE OVER THE COUNTER BULLETIN BOARD.

In connection with the filing of our Form 10-KSB for the year ended December 31,
2004, we were unable to obtain an audit report on our financial  Statements  for
the period  covering  August 10,  1998  (inception)  to  December  2002 from our
predecessor auditors, Yohalem Gillman & Company, LLP. The Company had previously
included such report in its prior  filings,  including its annual report on Form
10-KSB  for the  year  ended  December  31,  2003,  as well as its  registration
statement,  as  amended,  on Form SB-2 (SEC file No.  333-112784).  The  Company
corresponded  with the Securities and Exchange  Commission  regarding this issue
and was  advised by the  Commission  that they  would not object to the  Company
presenting  such  information  on an unaudited  basis in its Form 10-KSB for the
year ended  December  31, 2004.  As a result,  all  required  development  stage
company  financial  statements  and  disclosures  included  in the Form  10-KSB,
pursuant  to SFAS 7,  covering  the  cumulative  period  from  August  10,  1998
(inception) through December 31, 2004 was provided on an unaudited basis.

No assurance  can be given that the Company will  Commission  will not object in
the future to the presentation of such information on an unaudited basis. Should
such  information  be required to be presented  in future  filings on an audited
basis,  the  failure to so provide  such  information  may result in the Company
failing to maintain its status as a current  reporting issuer which could result
in the Company's  securities  being delisted from the Over The Counter  Bulletin
Board and/or the imposition of fines, sanctions and/or penalties.

OUR  COMPANY  AND/OR OUR  PRESIDENT  AND CEO MAY BE SUBJECT TO FINES,  SANCTIONS
AND/OR  PENALTIES OF AN  INDETERMINABLE  NATURE AS A RESULT OF VIOLATIONS OF THE
SARBANES-OXLEY  ACT OF 2002 IN  CONNECTION  WITH LOANS MADE TO THE PRESIDENT AND
CEO.

During the quarter  ended March 31, 2004,  we made certain  loans to Mr.  Steven
Lampert, our President and CEO, aggregating $56,607. During this same period the
loans were  repaid  through the payment of cash in the amount of $43,300 and the
application  of accrued  salaries in the amount of $13,307.  These loans made to
Mr. Lampert  violate Section 402 of the Sarbanes Oxley Act of 2002. As a result,
despite the fact that such loans were repaid, our company and/or Mr. Lampert may
be subject to fines, sanctions and/or penalties.  At this time, we are unable to
determine  the amount of such  fines,  sanctions  and/or  penalties  that may be
incurred by our  company  and/or Mr.  Lampert.  The purpose of such loan was for
personal use.

RISKS RELATED TO OUR STOCK

A FORMER  CONSULTANT  MAY BE ENTITLED TO RECEIVE  11.50% OF OUR COMPANY'S  FULLY
DILUTED  OUTSTANDING  SHARES  WHICH,  IF WE ARE REQUIRED TO ISSUE THESE  SHARES,
COULD HAVE A MATERIAL  ADVERSE  EFFECT ON OUR FINANCIAL  CONDITION AND RESULT IN
SUBSTANTIAL DILUTION TO OUR STOCKHOLDERS. FURTHER, WE WILL BE REQUIRED TO DEFEND
ANY ACTION BROUGHT BY THE CONSULTANT WHICH WILL RESULT IN SUBSTANTIAL EXPENSE TO
OUR COMPANY.

On June 23, 2003,  we entered into an Engagement  Letter which  requires that we
issue to Knightsbridge Holdings LLC, or its designees, an amount of common stock
of our company, upon the closing of a merger/acquisition  with a public company,
in an amount not less than 11.50% of the fully diluted shares of the post merger
company.  The Engagement Letter further provides that such shares will have full
ratchet anti  dilution  provisions  for the term of the  Engagement  Letter.  We
believe that Knightsbridge failed to provide the consideration and services that
were contracted  for, and, as a result,  does not intend to issue any additional
shares to Knightsbridge.  There can be no assurance that  Knightsbridge will not
commence an action  against us relating to its rights to receive the shares,  or
if instituted, that such action will not be successful. Although we believe that
any  action  which  may be  commenced  would  be  without  merit,  and we  would
vigorously  defend  any  such  action,  the  cost  of  such  litigation  can  be
substantial even if we were to prevail.  Further,  an unfavorable  outcome could
have a material adverse effect on our revenues,  profits, results of operations,
financial condition and future prospects.

THE  ISSUANCE  OF  SHARES  OF  COMMON STOCK IN CONNECTION WITH THE CONVERSION OF
SERIES  A  CONVERTIBLE  NOTES  MAY HAVE NOT HAVE BEEN IN COMPLIANCE WITH CERTAIN
STATE  AND  FEDERAL SECURITIES LAWS AND ANY DAMAGES THAT WE MAY HAVE TO PAY AS A
RESULT  OF  SUCH  ISSUANCE COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUES,
PROFITS,  RESULTS  OF  OPERATIONS,  FINANCIAL  CONDITION  AND  FUTURE PROSPECTS.

On  July  31,  2003, we entered into a Consulting Agreement pursuant to which we
engaged the consultant to provide certain advisory services for a one-year term,
for  an  aggregate fee of $250,000. In lieu of payment, the Consultant agreed to
accept in the form of a non-recourse assignment of $280,000 Series A Convertible
Notes.  Following the execution and delivery of the Non-recourse Assignment, the
consultant  or  its  assignees,  converted  $110,539 of the Series A Convertible
Notes  into 855,000 shares of common stock. The issuance of the shares of common
stock  in  connection  with the conversion of the Series A Convertible Notes may
not  have  been in compliance with certain state and federal securities laws due
to the fact that the consultant or its assignees, at the time of the conversion,
may  not have been the lawful holder in due course of the notes by virtue of the
fact  that  the  notes were assigned to them without the consent of the original
note holders. It should be noted that we subsequently settled with a majority of
the  original  note holders and we entered into a settlement with the consultant
whereby  the  remaining  portion  of  the  assigned  note  was  cancelled.

In  addition,  any subsequent sale of the shares issuable upon conversion of the

                                       14
<PAGE>
notes,  may have violated Rule 144 if the consultant  sold the shares under Rule
144 and relied upon the holding period of the initial note holder to qualify for
such  sale.  As we have  settled  with the  consultant,  we do not plan to offer
rescission  at this time.  We are  currently  unable to determine  the amount of
damages, if any, that it may incur as a result of this issuance,  which include,
but are not limited to, damages that may result from the following

-    subsequent  third  party  purchaser(s)  of  the  shares that were resold by
     the  consultant  and  its  assignees upon conversion of the Series A Notes,
     and/or

-    other  existing  shareholders  of  our  Company that may make a claim, on a
     derivative  basis,  that these transactions and the shares issued, may have
     resulted in a dilution of the value of their shareholdings.

The  payment  of  damages  could have a material adverse effect on our revenues,
profits,  results  of  operations,  financial  condition  and  future prospects.

STEVEN  LAMPERT,  OUR  SOLE  OFFICER  AND  A DIRECTOR, ENTERED INTO AN AGREEMENT
WHEREBY HE MAY BE REQUIRED TO TRANSFER HIS SHARES OF COMMON STOCK OF OUR COMPANY
WHICH  COULD  RESULT  IN  A  CHANGE  IN  CONTROL  OF  OUR  COMPANY.

Steven Lampert has entered into a Confidential Antidilution Agreement dated July
1, 2003 with Michael  Fasci,  a former  director and officer of our company.  In
consideration  for Mr. Fasci agreeing to vote in favor of the reverse merger, we
entered into in July 2003, Mr. Lampert agreed to transfer to Mr. Fasci shares of
his common stock so that Mr. Fasci's  ownership would at all times be maintained
at 10% of the outstanding  shares of our company.  The term of this agreement is
for three years.  As a result,  Mr. Lampert may be required to transfer all or a
portion of his shares to Mr. Fasci.  If Mr.  Lampert is required to transfer all
or a portion of his shares this could result in a change in control and a change
in management.

WE  HAVE  ANTI-TAKEOVER  PROVISIONS,  WHICH COULD INHIBIT POTENTIAL INVESTORS OR
DELAY  OR  PREVENT  A  CHANGE  OF  CONTROL  THAT  MAY  FAVOR  YOU.

Some of the  provisions  of our  certificate  of  incorporation,  our bylaws and
Delaware law could,  together or separately,  discourage  potential  acquisition
proposals or delay or prevent a change in control.  In particular,  our board of
directors is authorized to issue up to 5,000,000 shares of preferred stock (less
any outstanding shares of preferred stock) with rights and privileges that might
be senior to our common stock,  without the consent of the holders of the common
stock.

IF WE CANNOT OPERATE AS A GOING CONCERN, OUR STOCK PRICE WILL DECLINE AND YOU
MAY LOSE YOUR ENTIRE INVESTMENT.

Our  auditors included an explanatory paragraph in their report on our financial
statements  for  the  year  ended  December  31,  2004 which states that, due to
recurring  losses  from  operations  since  inception  of  our company, there is
substantial  doubt  about  our  ability  to  continue  as  a  going concern. Our
financial  statements  for  the three months ended March 31, 2005 do not include
any  adjustments  that  might  result  from our inability to continue as a going
concern.  These  adjustments  could  include  additional  liabilities  and  the
impairment  of  certain  assets. If we had adjusted our financial statements for
these  uncertainties,  our  operating results and financial condition would have
been  materially  and  adversely  affected.

OUR  COMMON  STOCK  IS  SUBJECT  TO  THE  "PENNY STOCK" RULES OF THE SEC AND THE
TRADING  MARKET  IN  OUR  SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR
STOCK  CUMBERSOME  AND  MAY  REDUCE  THE  VALUE  OF  AN INVESTMENT IN OUR STOCK.

The Securities and Exchange  Commission has adopted Rule 15g-9 which establishes
the  definition  of a "penny  stock,"  for the  purposes  relevant to us, as any
equity  security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.  For
any transaction involving a penny stock, unless exempt, the rules require:

-    that  a  broker  or  dealer  approve a person's account for transactions in
     penny stocks; and
-    the  broker  or  dealer  receive  from  the investor a written agreement to
     the transaction, setting forth the identity and quantity of the penny stock
     to be purchased.

In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:

-    obtain  financial  information  and  investment  experience  objectives  of
     the person; and
-    make  a  reasonable  determination  that  the  transactions in penny stocks
     are  suitable  for  that person and the person has sufficient knowledge and
     experience  in  financial  matters to be capable of evaluating the risks of
     transactions in penny stocks.

The broker or dealer  must also  deliver,  prior to any  transaction  in a penny
stock, a disclosure  schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:

-    sets  forth  the  basis  on  which  the  broker  or  dealer  made  the
     suitability determination; and
-    that  the  broker  or  dealer  received  a  signed,  written agreement from
     the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities
subject to the "penny stock" rules. This may make it more difficult for
investors to dispose of our common stock and cause a decline in the market value
of our stock.

                                       15
<PAGE>

Disclosure  also has to be made about the risks of  investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative,  current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock  transactions.  Finally,  monthly  statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.

ITEM 3. CONTROLS AND PROCEDURES

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

(b) Changes in internal  controls.  There was no change in our internal controls
or in other  factors  that could affect  these  controls  during our last fiscal
quarter that has  materially  affected,  or is  reasonably  likely to materially
affect, our internal control over financial reporting.



                                       16
<PAGE>

               PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Except for the  following,  we are currently  not a party to any material  legal
proceedings.

-    In  October  2003,  a  stockholder  alleging investment fraud filed a claim
     in the Civil Court of the City of New York seeking damages in the amount of
     approximately $50,000;

-    In  April  2003,  a  stockholder  alleging  investment  fraud filed a claim
     in  the  Supreme  Court  of  Nassau County seeking damages in the amount of
     $25,000  plus  interest.  The  plaintiff  has  withdrawn  his claim but may
     commence this action at a future point in time;

-    In  December  2004,  a  stockholder  alleging  investment  fraud  filed  a
     claim  in  the  Supreme  Court of the State of New York, County of New York
     seeking damages in the amount of approximately $100,000;

-    On  July  20,  2004,  the  Company  filed  a complaint In the Circuit Court
     of  the 11th Judicial Circuit in and for Miami-Dade County, Florida against
     Knightsbridge Holdings, LLC, Advantage Fund I, LLC, Triple Crown Consulting
     Co.,  Phoenix  Capital Partners, LLC, Churchill Investments, Inc., Alyce B.
     Schreiber,  Robert Press, Benjamin Kaplan, Newbridge Securities Corporation
     and  Anslow  & Jacklin, LLP, the Company's former attorneys. The Company is
     seeking  relief  deemed  appropriate  by  the  court  and  to  establish  a
     constructive  trust  over  all  securities  held  by the defendants and all
     proceeds  from  the sale of such securities. The Company is also seeking to
     rescind  the  Letter Agreement entered with Knightsbridge Holdings, LLC. In
     its  complaint,  the  Company  alleged  fraudulent  inducement,  breach  of
     contract, conspiracy and breach of fiduciary duty.

-    In  July  2004  the  Company  received a Notice of Motion seeking a default
     judgment  and  attorneys'  fees in connection with a complaint filed by AKW
     Holdings,  LLC against the Company in the Supreme Court of the State of New
     York  -  County  of  Rockland. AKW Holdings, LLC is seeking unpaid rents of
     approximately  $160,000 and attorneys' fees and interest. On April 19, 2005
     an  order  and  judgment was filed in the Supreme Court of the State of New
     York  -  County  of Rockland against the Company in the amount of $199,676.
     The  Company  believes  this  judgment  is  baseless  and without merit and
     intends to vigorously defend this lawsuit.

-    In  December  2005,  the  Company  received  a  Final  Judgment against the
     Company  in  the  Miami-Dade  County, Florida County Court in the amount of
     $13,276.53.

Management believes that the resolution of these claims will not have a material
effect on the financial position or results of operations of the Company.


ITEM 2. CHANGES IN SECURITIES.

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY NONE HOLDERS.

None

ITEM 5. OTHER INFORMATION.

In  December  2005,  we entered  into an  Agreement  of  Settlement  with Steven
Lampert, an executive officer and director of the Company, pursuant to which Mr.
Lampert  agreed to convert an aggregate  amount of $162,111 of accrued wages and
loans payable into  contributed  additional  paid in capital.  Mr.  Lampert also
agreed to terminate his employment agreement.

ITEM 6. EXHIBITS

Exhibit Number          Description
--------------          -----------

10.1                    Agreement  of  Settlement  entered  by  and between the
                        Company and Steven Lampert

31.1                    Certification of CEO and CFO Pursuant to Section 302 of
                        the Sarbanes Oxley Act of 2002

32.1                    Certification of CEO and CFO Pursuant to section 906 of
                        the Sarbanes Oxley Sarbanes Oxley Act of 2002

                                       17
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed in its
behalf by the undersigned, thereunto duly authorized, on December 21, 2005.

                               POWERCHANNEL, INC.



                 Date: December 21, 2005 By: /s/ Steven Lampert
                                             -------------------------
                                             Steven Lampert
                                             Chairman, CEO, CFO and
                                             President



                                       18