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, 2004

     [ ] 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 November 19, 2004: 26,669,829 shares of common stock outstanding,
$0.01 par value.



<PAGE>
ITEM 1. FINANCIAL INFORMATION

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 2004
                                   (Unaudited)

                                     ASSETS

Current Assets:
  Cash                                                            $    253,898
  Inventories                                                          114,238
  Accounts Receivable, Net                                              61,455
  Prepaid Expenses                                                       5,414
  Prepaid Consulting Fees                                              110,897
                                                                  ------------

         Total Current Assets                                          545,902

Property and Equipment, Net                                             27,774

Deferred Consulting Fees, Net of Current Portion                        16,459
                                                                  ------------
                                                                  $    590,135
                                                                  ============
                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Accounts Payable                                                $    643,471
  Accrued Liabilities                                                  849,425
  Convertible Notes Payable                                             44,305
  Deposits Payable                                                      70,000
                                                                  ------------
         Total Current Liabilities                                   1,607,201
                                                                  ------------
Commitments and Contingencies

Minority Interest                                                    1,176,543
                                                                  ------------
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                                        17,057,729
  Common Stock to be Issued, 2,370,156 Shares                        1,827,756
  Deferred Offering Costs                                              (14,000)
  Deferred Stock-Based Compensation                                 (1,902,294)
  Accumulated Other Comprehensive Income (Loss)                     (1,320,427)
  Deficit Accumulated in the Development Stage                     (18,109,071)
                                                                  ------------

         Total Stockholders' Deficit                                (2,193,609)
                                                                  ------------
                                                                  $    590,135
                                                                  ============

    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 Three               For the Nine       For The Period
                                                                   Months Ended                Months Ended      August 10, 1998
                                                                   September 30,               September 30,       (Inception)
                                                          ----------------------------  -------------------------       To
<S>                                                           <C>            <C>           <C>            <C>               <C> <C>
                                                              2004           2003          2004           2003    September 30, 2004
                                                          ------------   ------------   ------------   ---------- ------------------
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
    September 30, 2004)                                         37,500            -          185,866           -            265,424
  Activation Fees                                                  -              -              -             -             15,525
                                                          ------------   ------------   ------------   ----------     --------------
         Total Revenues                                         37,500            -          185,866           -            290,949
                                                          ------------   ------------   ------------   ----------     --------------
Costs and Expenses:
  Cost of Sales                                                 15,000            -          151,462           -            157,273
  Write-Down of Inventories                                        -              -           21,593           -            464,656
  Selling, General and Administrative Expenses                 467,408        309,802      1,443,455       446,955        7,226,671
  Impairment Loss on Investment                                    -              -              -             -            573,887
  Settlement of Debt                                               -              -              -             -            111,300
  Stock-Based Compensation                                     982,969      1,663,446      4,692,530     1,663,446        7,013,783
                                                          ------------   ------------   ------------   ----------     --------------
        Total Costs and Expenses                             1,465,377      1,973,248      6,309,040     2,110,401        15,547,570
                                                          ------------   ------------   ------------   ----------     --------------
Loss Before Income (Loss) From Unconsolidated Affiliate
  And Other Income (Expense)                                (1,427,877)    (1,973,248)    (6,123,174)   (2,110,401)     (15,256,621)

Income (Loss) from Unconsolidated Affiliate                        -            4,958     (   48,000)        1,932      ( 2,678,797)

Interest Expense                                            (    1,994)           -       (   18,158)          -        (   173,653)
                                                          ------------   ------------   ------------   ----------     --------------
Net Loss                                                  $ (1,429,871)  $ (1,968,290)  $ (6,189,332)  $(2,108,469)   $ (18,109,071)
                                                          ============   ============   ============   ===========    =============

Basic and Diluted Net Loss Per Share                      $       (.05)  $       (.16)  $       (.24)  $      (.18)
                                                          ============   ============   ============   ===========
Weighted Average Shares Outstanding - Basic and Diluted     26,669,829     12,334,748     25,288,737    11,661,130
                                                          ============   ============   ============   ===========
Pro-Forma Net Loss Per Share (Basic and Diluted)          $       (.05)  $       (.15)  $       (.23)  $      (.18)
                                                          ============   ============   ============   ===========
Pro-Forma Weighted Average Shares Outstanding
  (Basic and Diluted)                                       29,039,984     13,515,160     27,456,422    11,988,003
                                                          ============   ============   ============   ===========
</TABLE>

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


                                        3
<PAGE>



                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                              For The Period
                                                                For the Nine                 August 10, 1998
                                                               Months Ended                    (Inception)
                                                                September 30,                       To
                                                                  2004           2003        September 30, 2004
                                                              -------------   ------------    -------------
Cash Flow From Operating Activities:
<S>                                                           <C>             <C>             <C>
  Net Loss                                                    $ (6,189,332)   $ (2,108,469)   $(18,109,071)
  Adjustments to Reconcile Net Loss to
    Net Cash Used in Operating Activities:
      Intrinsic Value of Beneficial Conversion Feature
        of Convertible Notes                                             -               -         280,000
      Stock-Based Compensation                                   4,692,530       1,726,108       7,113,235
      Expense Recorded on Issuance of Common Stock
        for Debt Settlement                                              -               -         111,300
      (Loss) Income on Investment in PowerChannel
        Europe PLC                                                  48,000         (19,458)      2,370,471
      Loss on Asset Disposal                                             -               -          20,456
      Write-Down of Inventories                                     21,593         138,299         464,656
      Depreciation                                                  16,411               -          96,728
      Reserve for Bad Debts                                         68,376               -          68,376
      Impairment Loss on Investment in PowerChannel
        Europe PLC                                                       -               -         573,884
      Change in Current Operating Assets and Liabilities:
        Decrease in Inventories                                    108,594               -        (578,894)
        (Increase) in Accounts Receivable                         (129,831)              -        (129,831)
        (Increase) in Prepaid Expenses                            (116,311)              -        (116,311)
        (Increase) Decrease in Other Assets                        (16,459)         21,502         (16,459)
        Increase (Decrease) Due to PowerChannel Europe PLC,
          Relating to Operations                                   (10,000)        122,668         678,142
        Increase (Decrease) in Accounts Payable and Accrued
                Liabilities                                       (106,320)        (58,008)      1,177,088
        Increase in Deposits Payable                                     -               -          45,000
                                                              -------------   ------------    -------------
Net Cash (Used) in Operating Activities                         (1,612,749)       (177,358)     (5,951,230)
                                                              -------------   ------------    -------------
Cash Flow From Investing Activities:
  Purchases of Property and Equipment                              (25,116)              -        (144,957)
  Net Liabilities Acquired in Reverse Merger, Net of Cash                -               -         (16,851)
  Advances to Related Party                                        (56,607)              -        (121,542)
  Repayments for Advances to Related Parties                        43,300               -         108,235
  Loans to Related Party                                                 -               -        (278,027)
  Repayments from Loans to Related Parties                               -               -         278,027
  Purchase of PCE Stock                                            (40,000)              -         (40,000)
                                                              -------------   ------------    -------------
Net Cash Provided by (Used) in Investing Activities                (78,423)              -        (215,115)
                                                              -------------   ------------    -------------
</TABLE>

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

                                       4
<PAGE>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                   (Continued)
<TABLE>
<CAPTION>
                                                                                          For The Period
                                                                For the Nine              August 10, 1998
                                                                Months Ended                (Inception)
                                                                September 30,                   To
                                                                    2004           2003   September 30, 2004
                                                                ------------   ---------- ------------------
Cash Flow From Financing Activities:
<S>                                                               <C>                <C>      <C>
  Proceeds from Issuance of Common Stock                          2,187,500            -    3,532,864
  Fees Paid on Sale of Common Stock                                (265,000)           -     (275,000)
  Loans and Advances from Related Parties                                 -            -    2,773,074
  Proceeds of Subscription Receivable                               300,000            -      300,000
  Proceeds from Deposits Payable                                     25,000            -       25,000
  Payments of Convertible Notes                                    (215,695)           -     (215,695)
  Proceeds from Note Payable                                              -      112,000      112,000
  Proceeds from Convertible Notes                                         -            -      280,000
  Payment of Note Payable                                          (112,000)           -     (112,000)
                                                                ------------   ---------- ------------------
Net Cash Provided By Financing Activities                         1,919,805      112,000    6,420,243
                                                                ------------   ---------- ------------------
Net Increase (Decrease) in Cash                                     228,633      (65,358)     253,898

Cash - Beginning of Period                                           25,265       65,358            -
                                                                ------------   ---------- ------------------
Cash - End of Period                                             $  253,898    $       -   $  253,898
                                                                ============   ---------- -------------------
</TABLE>


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

                                       5
<PAGE>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                   (Continued)

<TABLE>
<CAPTION>
                                                                                                      For The Period
                                                                          For the Nine                August 10, 1998
                                                                          Months Ended                 (Inception)
                                                                          September 30,                    To
                                                                      2004              2003          September 30, 2004
                                                                   ----------------  --------------    -------------
Supplemental Cash Flow Information:
<S>                                                                <C>               <C>               <C>
  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      $        -        $7,271,549
                                                                   =============     ==============    =============
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
                                                                   =============     ==============    =============
Issuance of 120,000 Shares of Common Stock as Payment for
  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         $2,715,254        $        -        $2,715,254
                                                                   =============     ==============    =============
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        $        -        $  199,000
                                                                   =============     ==============    =============
Increase in Minority Interest                                      $1,176,543        $        -        $1,176,543
                                                                   =============     ==============    =============
</TABLE>


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

                                       6
<PAGE>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (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.

     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.


NOTE 2 - Property and Equipment

         Property and equipment consists of the following:

                       Office Equipment                            $     8,000
                       Furniture and Fixtures                           83,275
                       Leasehold Improvements                           27,364
                                                                   -----------
                                                                       118,639
                       Less:  Accumulated Depreciation                  90,865
                                                                   -----------
                                                                   $    27,774
                                                                   ===========

       Depreciation expense amounted to $16,411 for the nine months ended
                               September 30, 2004.


                                        7
<PAGE>

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (Unaudited)


NOTE 3 - Investment In Unconsolidated Affiliate

     As of December 31, 2003 the Company determined that there was an other than
temporary decline in value of its investment in PowerChannel Europe PLC ("PCE").
Accordingly,  the Company  recognized  an  impairment  charge to operations of $
573,887  for the year  ended  December  31,  2003  representing  this other than
temporary  decline in value,  thereby  reducing  the  carrying  value to zero at
December 31, 2003. As of September 30, 2004 the Company  increased its ownership
percentage in PCE to 70.41%. Accordingly, the Company no longer accounts for PCE
under the equity  method.  As a majority  owned  subsidiary  PCE is  included in
consolidation (see Note 4).


NOTE 4 - Acquisition

     On May 31, 2004 the Company acquired 13.47% of PCE (see Note 3) for $54,898
from a third party and on June 30, 2004 the Company  acquired  38.44% of PCE for
$77,455 from two related  parties.  The Company  issued 286,687 shares of common
stock  to  the  two  related  parties  as  consideration  for  the  PCE  shares.
Concurrently  therewith,  the 286,687 shares of the Company were donated back to
the Company and cancelled by the two related parties.

     At June 30, 2004,  the  Company's  ownership in PCE increased to 70.41% and
the  accounts  of  PCE  have  been  included  in  these  consolidated  financial
statements.  The transaction  has been accounted for under the purchase  method.
Accordingly,  the  consolidated  statements  of  operations  will include  PCE's
results of operations from June 30, 2004. Prior to June 30, 2004 the Company had
accounted  for its  investment in PCE under the equity method and has recorded a
loss from the  unconsolidated  affiliate  in the amount of  $48,000  for the six
months ended June 30, 2004. PCE does not engage in any operations however it was
formerly engaged in the providing of Internet access.

     Unaudited  pro  forma   consolidated   results  of  operations  as  if  the
acquisition  had  taken  place at the  beginning  of 2003  would  not have  been
materially different from the amounts reported.

     The following table provides  unaudited  condensed  consolidated  financial
information about PCE as of June 30, 2004 and for the six months then ended:

                    Current Assets                    $     3 931,504
                    Total Assets                      $     3,931,504
                    Current Liabilities               $       593,076
                    Total Liabilities                 $       593,076
                    Equity                            $     3,338,428
                    Revenues                          $             -
                    Net (Loss)                        $       150,000

     The current assets included in the above table includes receivable from the
Company aggregating approximately $3.9 million.


NOTE 5 - Minority Interest

     Minority   interest  at  September   30,  2004   represents   the  minority
shareholders' 29.59% interest in the equity of PCE in the amount of $1,176,543.

                                        8
<PAGE>

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (Unaudited)


NOTE 6 - Convertible Notes Payable

     On February 29, 2000,  PowerChannel  entered into  subscription  agreements
with seven individuals and in conjunction with such agreements,  issued Series A
Convertible Notes.  Pursuant to these notes,  PowerChannel  acquired $280,000 in
investment  capital and issued  security  interests at 7% interest for a term of
three  years.  At the option of the note  holders,  these notes may be converted
into common  stock for the value of the note at a price of $0.1287 per share.  A
beneficial conversion amount was recorded in the amount of $280,000 and expensed
in 2000. In December 2003, one $20,000 Series A Note was paid in connection with
a  settlement  agreement  and in January  2004 the Company  paid an aggregate of
$215,695  principal to four note holders.  At September 30, 2004,  the remaining
balance due on these notes was $44,305.


NOTE 7 - Note Payable - Other

     On June 25, 2003, the Company borrowed $112,000 (the "June 2003 Note") from
Knightsbridge   Holdings,   LLC  ("Knightsbridge")   pursuant  to  that  certain
Promissory Note and Security Agreement entered with Knightsbridge. In connection
with the June 2003 Note,  which bears  interest at 5% per annum and is due March
2004,  the Company  granted a security  interest in all of its  inventories.  In
addition, several stockholders of the Company, including the CEO of the Company,
pledged their shares  (14,803,296  shares) to  Knightsbridge  to secure the June
2003 Note.

     The June 2003 Note was paid in full in May  2004.  Simultaneously  with the
payment of the outstanding balance of the June 2003 Note,  Knightsbridge  agreed
to (i) release its security interest on the Company's  inventory and (ii) return
all of the shares that had been  pledged to it as  collateral  for the June 2003
Note. In addition,  the Company and Knightsbridge  entered into a mutual release
whereby the parties released each other from all obligations with respect to the
June 2003 Note.


NOTE 8 - Related Party Transactions

     Advances to Related Party

     During the quarter  ended June 30, 2004,  the Company made certain loans to
the  President  and CEO of the Company,  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,  the Company  and/or
Mr. Lampert may be subject to fines,  sanctions and/or penalties.  At this time,
the Company is unable to determine  the amount of such fines,  sanctions  and/or
penalties that may be incurred by the Company and/or Mr. Lampert.

                                       9
<PAGE>

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (Unaudited)


NOTE 8 - Related Party Transactions (Continued)

     Purchase of Inventories

     In May 2004, The Lampert Group, an entity 100% owned by Steven Lampert, the
Company's Chief  Executive  Officer and a director,  successfully  bid on 42.336
set-top  boxes  auctioned  off by S&H  Storage  &  Haulage  Ltd.  ("S&H")  at an
aggregate  price  of  approximately  $44,000.  Prior  to the  auction,  S&H took
possession of the set top boxes after PowerChannel  Europe PLC had failed to pay
for their storage. The Company then purchased the set-top boxes from The Lampert
Group for approximately $44,000.


NOTE 9 - Other  Comprehensive  Income (Loss) - Supplemental  Non-Cash  Investing
Activities

     Other   comprehensive   income  (loss)  consists  of  accumulated   foreign
translation gains and losses and is summarized as follows:

                 Balance - December 31, 2003                 $    (625,949)
                 Equity Adjustments from Foreign
                 Currency Translation                             (694,478)
                                                             -------------
                 Balance - September 30, 2004                $  (1,320,427)
                                                             =============

NOTE 10 - Stockholders' Deficit

     Issuances of Common Stock and Stock Options in Connection  with  Consulting
     Agreements

     On January  20,  2004 the  Company  agreed to issue an  additional  260,943
shares of common  stock  valued at  $245,286  and make  payment  of $10,000 to a
consultant in lieu of  additional  compensation  bonuses  relating to a one year
consulting  agreement originally entered into on November 24, 2003. The value of
the  stock  is  being  amortized  over  the  remaining  life  of the  agreement.
Amortization  reported as stock-based  compensation amounted to $204,405 for the
nine months ended September 30, 2004.

     On January  20,  2004 the  Company  agreed to issue an  additional  270,943
shares of common stock valued at $254,686 to a consultant  in lieu of additional
compensation  bonuses  relating to a one year  consulting  agreement  originally
entered  into on November 24,  2003.  The value of the stock is being  amortized
over the remaining life of the agreement.  Amortization  reported as stock-based
compensation  amounted to $212,239 for the nine months ended September 30, 2004.
This consultant was also appointed in January 2004 as a director of the Company.

     On February 6, 2004 the Company agreed to issue an additional 50,000 shares
of common  stock valued at $61,500 to a consultant  as  additional  compensation
relating to a one year consulting  agreement originally entered into on December
4, 2003. This consulting agreement was subsequently terminated in April 2004 and
accordingly  the entire  amount was charged to  operations  in the quarter ended
June 30, 2004.

                                       10
<PAGE>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (Unaudited)


NOTE 10 - Stockholders' Deficit (Continued)

     Issuances of Common Stock and Stock Options in Connection  with  Consulting
     Agreements (Continued)

     On April 9, 2004 the Company  entered into  Amendment  No. 1 to the Amended
and Restated  Consulting  Agreement,  effective  as of February 9, 2004,  with a
consultant.  The Company had previously  entered into a consulting  agreement on
November 24, 2003 and an Amended and Restated Consulting  Agreement effective as
of January 20, 2004 with the consultant.  The amendments  provide issuance of an
additional  660,943  shares of common  stock  valued at $621,286  and payment of
$202,000 to the  consultant.  The value of the stock is being amortized over the
remaining life of the  agreement,  as extended.  Amortization  reported as stock
based compensation  amounted to $234,708 for the nine months ended September 30,
2004.  In  consideration  for  extending  the term of the Restated  Agreement to
November 24, 2005, the Corporation will grant the consultant  2,000,000  options
with a five year term and piggyback  registration  rights. The exercise price of
the  options  is $1 per share.  The  Company  estimated  the fair value of these
options to be $ 1,879,735 utilizing the Black-Scholes valuation method using the
following assumptions:  a risk-free interest rate of 3.1%, volatility of 339.44%
and a term of five years. Such amount is being amortized over the remaining life
of the agreement,  as extended.  Amortization  amounted to $710,122 for the nine
months ended September 30, 2004.

     Other

     During the quarter ended March 31, 2004 the Company  issued  239,158 shares
of common stock valued at $ 234,466 to various  consultants  for  services.  The
entire  amount has been  reported  as stock based  compensation  for the quarter
ended June 30, 2004.

     During the quarter ended March 31, 2004 the Company  issued  250,000 shares
of common  stock  valued at  $205,000  to its  President  as  payment of accrued
salaries,  232,122  shares of common  stock  valued at $182,960 to  employees as
payment of accrued salaries and 5,000 shares of common stock valued at $4,100 to
a consultant as payment of accrued fees.

     During the quarter ended June 30, 2004 the Company issued 120,000 shares of
common stock valued at $75,600 as payment of previously accrued consulting fees.

     During the quarter  ended  September  30, 2004 the Company  issued  500,000
shares of common  stock  valued at $110,000 to a consultant  for  services.  The
entire  amount has been  reported  as stock based  compensation  for the quarter
ended September 30, 2004.

     During the quarter ended  September 30, 2004 the Company  cancelled  25,000
shares of common stock valued at $23,500  previously  issued to a consultant for
services.  The entire  amount has been  reported as a  reduction  of stock based
compensation for the quarter ended September 30, 2004.

                                       11
<PAGE>

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (Unaudited)


NOTE 10 - Stockholders' Deficit (Continued)

     2004 Incentive Stock Plan

     During January 2004, the Company adopted the 2004 Incentive Stock Plan (the
"2004 Plan") under which  options  (either  incentive  or  nonqualified),  stock
awards and restricted  stock purchase  offers,  covering an aggregate  amount of
2,000,000  shares  of common  stock,  may be  granted  to  officers,  directors,
employees and consultants of the Company. The exercise price established for any
awards granted under the Plan,  shall be determined by a Compensation  Committee
appointed by the Company's  Board of Directors.  The exercise price of incentive
stock  options  cannot be less than 100%  (110% for 10% or  greater  shareholder
employees)  of the fair  market  value  ("FMV")  at the  date of  grant  and the
exercise price of nonqualified options cannot be less than 85% of the FMV at the
date of grant. The exercise period of incentive  options cannot extend beyond 10
years from the date of grant and  nonqualified  options  cannot extend beyond 10
years from the date of grant.  During the nine months ended  September  30, 2004
the Company  issued an aggregate  of 2,000,000  shares of common stock under the
2004 Plan.

     Private Placement

     During  February  and March  2004 the  Company  sold 99.5  Units to private
investors,  each Unit  consisting  of 50,000  shares of common  stock and 50,000
common  stock  purchase  warrants at a price of $25,000 per Unit,  pursuant to a
private placement  memorandum that called for a maximum offering of 50 Units. In
connection  with this  offering  the Company  issued an  aggregate  of 4,975,000
shares of  common  stock and  4,975,000  common  stock  purchase  warrants.  The
warrants are exercisable  into one share of common stock at an exercise price of
$.75 per warrant.  The warrants are callable when the five-day  average  closing
bid price of the common stock equals or exceeds $1. The warrants are exercisable
for a period of 36 months from the final closing of the offering.  In connection
with this  offering  the  Company  received  gross  proceeds of  $2,487,500  and
incurred  offering  costs  of  approximately  $265,000.   Since  a  registration
statement  covering these shares of common stock has not been declared effective
by May 29, 2004 the  Company is required to pay a penalty  equal to 2% per month
on the amount  invested by each investor.  Accordingly,  the Company has accrued
$199,000 as of  September  30, 2004 with a  corresponding  charge to  additional
paid-in capital.

                                       12
<PAGE>

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (Unaudited)


NOTE 11 - Commitments and Contingencies

     Consulting Services

     On June 23,  2003,  the  Company  entered  into an  Engagement  Letter with
Knightsbridge  Holdings,  LLC,  ("Knightsbridge")  pursuant to which the Company
engaged  Knightsbridge to provide certain  consulting and related services for a
one-year  term.  As  consideration  for the  services to be  rendered  under the
Engagement  Letter,  the Company issued an aggregate of 625,000 shares of common
stock valued at $625,000 to  Knightsbridge.  The Engagement Letter provides that
the Company issue to Knightsbridge,  or its designees, an amount of common stock
of the 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.  The
Company  believes 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. As of December 31, 2003, the Company has
reserved  for  issuance  however,  1,504,193  shares of common  stock  valued at
$1,045,191  based  upon the terms of the  Engagement  Letter and during the nine
months ended September 30, 2004, the Company has reserved an additional  865,963
shares valued at $782,564.  Such  2,315,531  shares of common stock to be issued
have been reported as a component of stockholders'  deficit.  The value of these
shares to be issued  along  with the  original  625,000  shares  issued is being
amortized  over one year and the remaining  life of the  contract.  Amortization
reported as stock based compensation  amounted to $1,674,524 for the nine months
ended September 30, 2004. There can be no assurance that  Knightsbridge will not
commence an action  against  the  Company  relating to its rights to receive the
shares, or if instituted, that such action will not be successful.  Although the
Company  believes that any action which may be commenced would be without merit,
and it would vigorously defend any such action,  the cost of such litigation can
be  substantial  even if the Company were to prevail.  Further,  an  unfavorable
outcome could have a material adverse effect on the Company's revenues, profits,
results of operations, financial condition and future prospects.

     On July 31, 2003,  the Company  entered into a consulting  agreement  ("the
Consulting Agreement") pursuant to which it engaged Churchill Investments,  Inc.
("Churchill") to provide certain  advisory  services for a one-year term, for an
aggregate fee of $250,000. In lieu of payment, Churchill accepted a non-recourse
assignment   of  $280,000   Series  A  Convertible   Notes  (the   "Non-recourse
Assignment').   Following  the  execution  and  delivery  of  the   Non-recourse
Assignment,  Churchill  or its  assignees,  converted  $110,539  of the Series A
Convertible Notes into 855,000 shares of common stock.  These shares were valued
at $579,700 and were charged to operations in the year ended  December 31, 2003.
The issuance of the shares of common stock in connection  with the conversion of
the  Series A Notes  may not have  been in  compliance  with  certain  state and
federal securities laws. The Company is currently unable to determine the amount
of damages, if any, that it may incur as a result of this issuance.  The payment
of damages  could  have a material  adverse  effect on the  Company's  revenues,
profits, results of operations, financial condition and future prospects.

     In May 2004,  the  Company  and  Churchill  entered  into a mutual  release
whereby the parties  released each other party from all obligations with respect
to the  Consulting  Agreement  and the  Non-recourse  Assignment.  In  addition,
Churchill agreed to reassign the remaining  outstanding  balance of the Series A
Notes in the  amount  of  $169,461  to the  Company  and the  Company  agreed to
indemnify  Churchill  for any losses  due to claims  instituted  by third  party
purchasers of shares issued upon conversion of the Series A Notes.

                                       13
<PAGE>

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (Unaudited)


NOTE 11 - Commitments and Contingencies (Continued)

     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.

     The  Company  has  recently  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 Index #2693/04.  AKW Holdings,  LLC is seeking unpaid rents
of  approximately  $160,000 and  attorneys'  fees.  As of the date  hereof,  the
Company has no  knowledge  as to whether a default  judgment has been entered by
the  Supreme  Court of the State of New York - County of  Rockland  against  the
Company.  The Company  believes  this lawsuit is baseless and without  merit and
intends to vigorously defend this lawsuit.

     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.

     Antidilution Agreement

     Steven Lampert,  the Company's  President,  has 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  whereby 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.

     Employment Agreement

     On February 10, 2004, the Company entered into an employment agreement with
its Chief  Executive  Officer.  The agreement is for a one year term with annual
renewal  options.  It provides  for an annual base  salary of  $160,000,  annual
performance bonuses, stock and stock option eligibility, and employee benefits.

     Accrued Liabilities

     Included  in accrued  liabilities  are  federal  payroll  taxes  payable of
approximately $150,000 under federal tax liens.

                                       14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Business Summary

We provide low-cost access to the Internet. In order to accomplish this, we also
provide the physical hardware to deliver it through the use of the consumer's
existing television. We are primarily focused on the Hispanic market, using a
bilingual (English/Spanish) approach to meet the needs of the differing
generations within the Hispanic community. Our home page offers the subscriber
an English/Spanish language option at the click of a button. Our portal points
the subscriber to all the major Hispanic portals and to links with Hispanic
commercial, educational and community sites. The reach of our links is designed
to embrace the full extent of diverse Hispanic cultural and ethnic interests. As
we develop, we will continue to utilize the already existing and successful
Hispanic-specific content of others to enhance the practical sense of community
that its planned household penetration creates.

Acquisition of a Controlling Interest in Powerchannel Europe PLC

On May 31, 2004, we acquired 13.47% of Powerchannel Europe PLC ("PCE") for
$54,898 from Internet Investors, Inc. , a wholly owned subsidiary of Long
Distance Direct Holdings, Inc. ("LDH"). Mr. Lampert, our sole executive officer
and a director, resigned as an officer and a director of LDH on December 31,
2002 and currently owns approximately 9% of the issuance and outstanding shares
of common stock of LDH.

On June 30, 2004, we acquired 38.44% of PCE for $77,455 from Mr. Steven Lampert,
our Chief Executive Officer and a director, and Michael Preston. Mr. Preston has
occasionally served as a consultant to our company and owns a limited number of
our shares of common stock. We issued 286,687 shares of common stock to Mr.
Lampert and Mr. Preston as consideration for the PCE shares. Concurrently
therewith, the 286,687 shares were returned to us by Mr. Lampert and Mr. Preston
as capital contributions.

At June 30, 2004, our ownership in PCE increased to 70.41% and the accounts of
PCE have been included in our consolidated financial statements. The transaction
has been accounted for under the purchase method. Accordingly, the consolidated
statements of operations will include PCE's results of operations from June 30,
2004. Prior to June 30, 2004, we had accounted for its investment in PCE under
the equity method and has recorded a loss from the unconsolidated affiliate in
the amount of $48,000 for the six months ended June 30, 2004. PCE does not
engage in any operations however it was formally engaged in the providing of
Internet access.

Results of Operations

Nine Months Ended September 30, 2004 compared to Nine Months Ended September 30,
2003

Revenues

During the nine months ended September 30, 2004 we had sales of approximately
$185,866, which is net of returns of $84,420. During the nine months ended
September 30, 2003, we did not generate any revenue. The reason for the increase
in the revenues was the commencement of our new business of providing low cost
Internet access.

Costs and Expenses

Cost and expenses incurred for the nine months ended September 30, 2004,
aggregated $6,309,040 as compared to $2,110,401 for the nine months ended
September 30, 2003. Cost and expenses increased by $4,198,639 for the nine
months ended September 30, 2004 when compared to the comparable period of the
prior year. This increase resulted from the following:

     o    Cost of sales of $151,462 during the nine months ended September 30,
          2004 as compared to none for the nine months ended September 30, 2003;
     o    write down of inventories of $21,593 during the nine months ended
          September 30, 2004 as compared to none for the nine months ended
          September 30, 2003;
     o    selling, general and administrative expenses for the nine months ended
          September 30, 2004 of $1,443,455, as compared to $446,955 during the
          nine months ended September 30, 2003, which represents an increase of
          $996,500; and
     o    stock based compensation in the amount of $4,692,530 during the nine
          months ended September 30, 2004 as compared to $1,663,446 during the
          nine months ended September 30, 2003.


                                       15
<PAGE>
Net Loss

The net loss was $6,189,332 for the nine months ended September 30, 2004, as
compared to a net loss of $2,108,469 for the nine months ended September 30,
2003. The net loss increased by $4,080,863 from the previous period primarily as
a result of the reasons set forth above.

Three Months Ended September 30, 2004 compared to Three Months Ended September
30, 2003

Revenues


During the quarter ended September 30, 2004 we had sales of approximately
$37,500, , which is net of returns of $84,420. During the three months ended
September 30, 2003, we did not generate any revenue. The reason for the returns
was the return of a majority of our set-top terminals previously delivered to
ISS-LG, Inc. for sale in Puerto Rico. The reason for the increase in the
revenues was the commencement of our new business of providing low cost Internet
access. Access fees are deferred and amortized over the life of the
subscription.

Costs and Expenses

Cost and expenses incurred for the three months ended September 30, 2004,
aggregated $1,465,377 as compared to $1,973,248 for the three months ended
September 30, 2003. Cost and expenses decreased by $507,871 for the three months
ended September 30, 2004 when compared to the comparable period of the prior
year. This decrease resulted from a decrease in stock based compensation in the
amount of $680,477. During the three months ended September 30, 2004 the
Company's stock based compensation was $982,969 and during the three months
ended September 30, 2003, the Company's stock based compensation was $1,663,446.
The decrease resulting from the decrease in stock based compensation was off-set
by an increase in the amount of $15,000 for the costs of sales and $157,606 in
selling, general and administrative expenses.

Net Loss

The net loss was $1,429,871 for the three months ended September 30, 2004, as
compared to a net loss of $1,968,290 for the three months ended September 30,
2003. The net loss decreased by $538,419 from the previous period primarily as a
result of a decrease in stock based compensation and an increase in revenues.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements for the three months ending September
30, 2004.

Liquidity and Capital Resources

Financial Condition

We generated minimal revenue to date and have financed our operations through
sales of our common stock and debt. The future success of our company depends
upon our ability to raise additional financing, generate greater revenue, and
exit the development stage. There is no guarantee that we will be able to do so.

At September 30, 2004, we had total current assets of $545,902 and total current
liabilities of $1,607,201 resulting in a working capital deficit of $1,061,299.
In addition, we had a stockholders deficit of $2,193,609 at September 30, 2004.

We are a development stage company that has a working capital deficit at
September 30, 2004 of $1,061,299 and for the period August 10, 1998 (inception)
to September 30, 2004 has incurred net losses aggregating $18,109,071. These
factors combined with our urgent need to provide near-term operating cash raise
substantial doubt about our ability to continue as a going concern. Management's
plans with respect to alleviation of the going concern issues include
establishment of strategic partnerships with key suppliers and customers, the
raising of capital by the sale of shares of common stock our company, and
through potential operating revenues stemming from the sale of set-top boxes and
internet access. Continuation of our company is dependent on the following:

     o    consummation of the contemplated financings,
     o    achieving sufficiently profitable operations,
     o    subsequently maintaining adequate financing arrangements and
     o    exiting the development stage.

The achievement and/or success of our company's planned measures, however,
cannot be determined at this time.




                                       16
<PAGE>
Capital Resources

We anticipate generating cash to continue our operations either though private
sales of our common stock or from capital contributions from our officers and/or
directors. In addition, we hope to reach levels of revenue sufficient to meet
our operating costs. There is no guarantee that we will be able to reach these
levels or generate cash through the sale of our common stock. We currently do
not have any agreements or arrangements for financing.

Since the merger in July 2003 through April 2004, our investors have provided
funding approximately in the amount of $2,600,000 in cash, and various parties
have provided services valued at approximately $5,000,000, in consideration for
the issuance of securities issued or to be issued. To obtain funding for our
ongoing operations, pursuant to an offering conducted under Rule 506 of
Regulation D, as promulgated under the Securities Act of 1933, we sold units to
accredited investors with each unit consisting of 50,000 shares of common stock


and 50,000 common stock purchase warrants at a price of $25,000 per unit. In
connection with this offering we issued an aggregate of 4,975,000 shares of
common stock and 4,975,000 common stock purchase warrants for an aggregate
purchase price of $2,487,500. The common stock purchase warrants are each
exercisable into one share of common stock at the holder's option at an exercise
price of $.75 per warrant. At anytime after the filing of this registration
statement, we may call the warrants when the five-day average closing bid price
of the common stock equals or exceeds $1.00. The warrants are exercisable for a
period of thirty-six months.


We need to raise an additional $2,000,000 during the next 12 months to
effectively institute our business plan to market and distribute our products.
In connection with this private placement, we agreed to file a registration
statement registering the shares of common stock issued and to have such
registration statement declared effective by May 29, 2004. In the event a
registration statement covering these shares of common stock has not been
declared effective by May 29, 2004, we are required to pay a penalty equal to 2%
per month on the amount invested by each investor. If we are required to pay
this penalty, our working capital will be severely limited and we may be forced
to curtail or ceased our operations. We are currently seeking debt and/or equity
financing arrangements to provide an alternative source for our future capital
needs. We currently do not have any agreements or arrangements for financing.
There can be no assurance that we will be able to obtain this capital on
acceptable terms, if at all. In such an event, this may have a materially
adverse effect on our business, operating results and financial condition. The
following discusses the manner in which we will utilize our material funding
requirements of $2,000,000:

----------------------------------- -------------------------------------
Expense                             Amount
----------------------------------- -------------------------------------
Working Capital                     $800,000
----------------------------------- -------------------------------------
Marketing                           $750,000
----------------------------------- -------------------------------------
Professional Expenses               $250,000
----------------------------------- -------------------------------------
General and Administrative          $200,000
----------------------------------- -------------------------------------



                                       17
<PAGE>
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

Principals of Consolidation

The consolidated financial statements include the accounts of PowerChannel, Inc.
and its wholly owned and majority owned subsidiaries. All significant
intercompany accounts and transactions are eliminated in consolidation.

Inventories

Inventories are stated at the lower of cost or market on a first-in, first-out
basis. We have recognized a loss of $443,063 and $21,593 during the year ended
December 31, 2003 and the nine months ended September 30, 2004, respectively,
related to the valuation of its inventories.

Deferred Offering Costs

Deferred offering costs represent costs incurred in connection with a proposed
offering of our securities. Upon successful completion of the proposed offering
such costs will be charged to additional paid-in capital. These deferred
offering costs represent the issuance of 35,000 shares of common stock valued at
$14,000. Accordingly, deferred offering costs are reported as a component of
stockholders' deficit.

Revenue Recognition

Revenues from the sale of set-top boxes are recognized at time of shipment to
customer. Access fees are deferred and amortized over the life of the
subscription.

Comprehensive Income (Loss)

Comprehensive income (loss) which is reported on the accompanying consolidated
statement of stockholders' deficit as a component of accumulated other
comprehensive income (loss) consists of accumulated foreign translation gains
and losses.

Stock-Based Compensation

As permitted under FAS No. 123, "Accounting for Stock-Based Compensation", we
have 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 our 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
Tak 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". We use 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 based by dividing net income (loss)
by the weighted average number of shares of common stock outstanding during the
period. The Common stock issued and outstanding with respect to the pre-merger
Sealant stockholders has been included since January 1, 2001.

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

Pro-forma weighted average shares outstanding includes the pro-forma issuance of
1,504,953 common shares reserved to be issued pending potential litigation.



                                       18
<PAGE>
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 May 2003, the FASB issued FAS No. 150 (FAS 150), "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
statement affects the classification, measurement and disclosure requirements of
certain freestanding financial instruments including mandatorily redeemable
shares. FAS 150 is effective for all financial instruments entered into or
modified after May 31, 2003.

In August 2001, the FASB issued FAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". This statement supercedes FAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of", and amends Accounting Principles Board ("APB") Opinion No. 30,
"Reporting Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions". FAS No. 144 retains the fundamental provisions of FAS
No. 121 for recognition and measurement of impairment, but amends the accounting
and reporting standards for segments of a business to be disposed of. FAS No.
144 was effective in 2002.

On December 31, 2002, the FASB issued FAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure". FAS No. 148 amends FAS No. 123,
"Accounting for Stock-Based Compensation", to provide alternative methods of
transition to FAS No. 123's fair value method of accounting for stock-based
employee compensation. FAS No. 148 also amends the disclosure provisions of FAS
No. 123 and Accounting Principles Board ("APB") Opinion No. 28, "Interim

Financial Reporting", to require disclosure in the summary of significant
accounting policies of the effects of an entity's accounting policy with respect
to stock-based employee compensation on reported net income and earnings per
share in annual and interim financial statements. While the statement does not
amend FAS No. 123 to require companies to account for employee stock options
using the fair value method, the disclosure provisions of FAS No. 148 are
applicable to all companies with stock-based employee compensation, regardless
of whether they account for that compensation using the fair value method of FAS
No. 123, or the intrinsic value method of APB Opinion 25, "Accounting for Stock
issued to Employees" ("APB 25").

The adoption of FAS 144 and 150 is not expected to have a material effect on our
results of operations or financial position.

Risk Factors

Risks relating to our company

We have a history of losses since our inception and expect to incur losses for
the foreseeable future.

We incurred net losses for the year ended December 31, 2003 of $4,393,962 and
for the nine months ended September 30, 2004 of $6,189,332. 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.

We have a limited operating history in which to evaluate our business

Although our predecessor was in business for eight years, we have been in
business less than one year. We have limited operating history and limited
assets. Our limited financial resources are significantly less than those of
other companies, which can develop a similar product in the U.S.

If we do not obtain additional cash to operate our business, we may not be able
to execute our business plan and may not achieve profitability.

In the event that cash flow from operations is less than anticipated and we are
unable to secure additional funding to cover these added losses, in order to
preserve cash, we would be required to further reduce expenditures and effect
further reductions in our corporate infrastructure, either of which could have a
material adverse effect on our ability to continue our current level of
operations. To the extent that operating expenses increase or we need additional
funds to make acquisitions, develop new technologies or acquire strategic



                                       19
<PAGE>
assets, the need for additional funding may be accelerated and there can be no
assurances that any such additional funding can be obtained on terms acceptable
to us, if at all. If we are not able to generate sufficient capital, either from
operations or through additional financing, to fund our current operations, we
may not be able to continue as a going concern. If we are unable to continue as
a going concern, we may be forced to significantly reduce or cease our current
operations. This could significantly reduce the value of our securities, which
could result in our de-listing from the OTC Bulletin Board and cause investment
losses for our shareholders.

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.

In their report dated April 16, 2004, our independent auditors stated that our
financial statements for the year ended December 31, 2003 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
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.

Our future success is dependent, in part, on the performance and continued
service of our President.

Our performance and future operating results are substantially dependent on the
continued service and performance of Steven Lampert, our President, Chief
Executive Officer and shareholder. We will rely on Mr. Lampert to develop our
business and possible acquisitions. If Mr. Lampert's services become
unavailable, our business and prospects would be adversely affected. We do not
currently maintain "key man" insurance for any of our executive officers or
other key employees and do not intend to obtain this type of insurance until
such time as the Company has positive cash flow and is profitable. The loss of
the services of Mr. Lampert could have a material adverse effect on our
financial condition, operating results, and, on the public market for our common
stock.

Increased competition in the Internet service industry may make it difficult for
our company to attract and retain members and to maintain current pricing
levels.

We operate in the Internet services market, which is extremely competitive. Our
current and prospective competitors include many large companies that have
substantially greater market presence, financial, technical, marketing and other
resources than we have. We compete directly or indirectly with the following
categories of companies:

     o    established online service providers, such as America Online, Inc.,
          the Microsoft Network and Prodigy Communications Corporation;
     o    local, regional and national Internet service providers;
     o    national telecommunications companies;
     o    regional Bell operating companies, such as BellSouth Corporation and
          SBC Communications Inc.;
     o    personal computer manufacturers with Internet service provider
          businesses such as Gateway, Inc. and Dell Computer Corporation;
     o    "free access" Internet service providers; and
     o    online cable services; and
     o    television manufacturers with "built in Internet capabilities" such as
          Sony, Toshiba and Mitsubishi.

We will also face competition from companies that provide broadband and other
high-speed connections to the Internet, including local and long-distance
telephone companies, cable television companies, electric utility companies, and
wireless communications companies. These companies may use broadband
technologies to include Internet access or Web hosting in their basic bundle of
services or may offer Internet access or Web hosting services for a nominal
additional charge. Broadband technologies enable consumers to transmit and
receive print, video, voice and data in digital form at significantly faster
access speeds than existing dial-up modems.

                                       20
<PAGE>
Our competition is likely to increase. We believe this will probably happen as
large diversified telecommunications and media companies acquire Internet
service providers, as Internet service providers consolidate into larger, more
competitive companies and as providers who offer free access to the Internet
grow in number and size. Diversified competitors may bundle other services and
products with Internet connectivity services, potentially placing us at a
significant competitive disadvantage. In addition, competitors may charge less
than we do for Internet services, or may charge nothing at all in some
circumstances, causing us to reduce, or preventing us from raising, our fees.
Furthermore, the increase in "wired" homes with high speed Internet access
equipment built directly into the home may prevent us from achieving a
substantial member based. As a result, our business may suffer.

Any disruption in the Internet access provided by our company could adversely
affect our business, results of operations and financial condition.

Our systems and infrastructure will be susceptible to natural and man-made
disasters such as earthquakes, fires, floods, power loss and sabotage. Our
systems also will be vulnerable to disruptions from computer viruses and
attempts by hackers to penetrate our network security.

We will be covered by insurance from loss of income from some of the events
listed above, but this insurance may not be adequate to cover all instances of
system failure. Any of the events described above could cause interference,
delays, service interruptions or suspensions and adversely affect our business
and results of operations.

We must continue to expand and adapt our system infrastructure to keep pace with
the increase in the number of members who use the services we expect to provide.
Demands on infrastructure that exceed our current forecasts could result in
technical difficulties with our servers. Continued or repeated system failures
could impair our reputation and brand names and reduce our revenues.

If, in the future, we cannot modify these systems to accommodate increased
traffic, we could suffer slower response times, problems with customer service
and delays in reporting accurate financial information. Any of these factors
could significantly and adversely affect the results of our operations.

If our third party network providers are unable or unwilling to provide Internet
access to our members on commercially reasonable terms, we may suffer the loss
of customers, higher costs and lower overall revenues.

We provide dial-up access through company-owned points of presence and through
third party networks. We will be able to serve our members through the
combination of network providers that we deem most efficient. Our ability to
provide Internet access to our members will be limited if:

     o    our third-party network providers are unable or unwilling to provide
          access to our members;
     o    we are unable to secure alternative arrangements upon termination of
          third-party network provider agreements; or
     o    there is a loss of access to third-party providers for other reasons.

These events could also limit our ability to further expand nationally and/or
internationally, which could have a material adverse affect on our business. If
we lose access to third-party providers under current arrangements, we may not
be able to make alternative arrangements on terms acceptable to us, or at all.
We do not currently have any plans or commitments with respect to alternative
third-party provider arrangements in areas served by only one network provider.
Moreover, while the contracts with the third-party providers require them to
provide commercially reliable service to our members with a significant
assurance of accessibility to the Internet, the performance of third-party
providers may not meet our requirements, which could materially adversely affect
our business, financial condition and results of operations.

Our revenues and results of operations will be dependent upon our proprietary
technology and we may not be successful in protecting our proprietary rights or
avoiding claims that we are infringing upon the proprietary rights of others.

Our success depends in part upon our software and related documentation. We
principally rely upon copyright, trade secret and contract laws to protect our
proprietary technology. We cannot be certain that we have taken adequate steps
to prevent misappropriation of our technology or that our competitors will not
independently develop technologies that are substantially equivalent or superior
to our technology.



                                       21
<PAGE>
We could incur substantial costs and diversion of management resources in the
defense of any claims relating to proprietary rights, which could materially
adversely affect our business, financial condition, and results of operations.
Parties making these claims could secure a judgment awarding substantial damages
as well as injunctive or other equitable relief that could effectively block our
ability to license our products in the United States or abroad. Such a judgment
could have a material adverse effect on our business, financial condition and
results of operations. If a third party asserts a claim relating to proprietary
technology or information against us, we may seek licenses to the intellectual
property from the third party. We cannot be certain, however, that third parties
will extend licenses to us on commercially reasonable terms, or at all. If we
fail to obtain the necessary licenses or other rights, we could materially
adversely affect our business, financial condition and results of operations.

If we fail to grow our user base, we may not be able to generate revenues,
decrease per user telecommunications costs or implement our strategy

If we are unable to grow our user base, we may not be able to generate revenues,
decrease per-user telecommunications costs or implement our strategy. We intend
to generate new users through other distribution channels, such as television,
radio and print media advertising, direct marketing campaigns, and bundling,
co-branding and retail distribution arrangements. However, we have little
practical experience with marketing our service through these channels. If these
distribution channels prove more costly or less effective than anticipated, it
could adversely impact our ability to grow. We would also be unable to grow our
user base if a significant number of our current registered users stopped using
our service. We cannot assure you that we will be able to successfully address
these issues and retain our existing user base.

Changed in government regulation could decrease our revenues and increase our
costs.

Changes in the regulatory environment could decrease our revenues and increase
our costs. As a provider of Internet access and e-mail services, we are not
currently subject to direct regulation by the Federal Communications Commission.
However, several telecommunications carriers are seeking to have communications
over the Internet regulated by the FCC in the same manner as other more
traditional telecommunications services. Local telephone carriers have also
petitioned the FCC to regulate Internet access providers in a manner similar to
long distance telephone carriers and to impose access fees on these providers,
and recent events suggest that they may be successful in obtaining the treatment
they seek. In addition, we operate our services throughout the United States,
and regulatory authorities at the state level may seek to regulate aspects of
our activities as telecommunications services. As a result, we could become
subject to FCC and state regulation as Internet services and telecommunications
services converge.

We remain subject to numerous additional laws and regulations that could affect
our business. Because of the Internet's popularity and increasing use, new laws
and regulations with respect to the Internet are becoming more prevalent. These
laws and regulations have covered, or may cover in the future, issues such as:

     o    user privacy;

     o    pricing;

     o    intellectual property;

     o    federal, state and local taxation;

     o    distribution; and

     o    characteristics and quality of products and services.

Legislation in these areas could slow the growth in use of the Internet
generally and decrease the acceptance of the Internet as a communications and
commercial medium. Additionally, because we rely on the collection and use of


                                       22
<PAGE>
personal data from our subscribers for targeting advertisements shown on our
services, we may be harmed by any laws or regulations that restrict our ability
to collect or use this data. The Federal Trade Commission has begun
investigations into the privacy practices of companies that collect information
about individuals on the Internet. In addition, the FTC is conducting an ongoing
investigation into the marketing practices of Internet-related companies,
including Juno. As part of the FTC's activities, we have been requested to
provide, and have provided, marketing-related and customer service-related
information to the FTC. Depending on the outcome of the FTC inquiry, we could be
required to modify our marketing or customer service practices in a way that
could negatively affect our business.

It may take years to determine how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet. Any
new legislation or regulation regarding the Internet, or the application of
existing laws and regulations to the Internet, could harm us. Additionally,
while we do not currently operate outside of the United States, the
international regulatory environment relating to the Internet market could have
an adverse effect on our business, especially if we should expand
internationally.

The growth of the Internet, coupled with publicity regarding Internet fraud, may
also lead to the enactment of more stringent consumer protection laws. For
example, numerous bills have been presented to Congress and various state
legislatures designed to address the prevalence of unsolicited commercial bulk
e-mail on the Internet. These laws may impose additional burdens on our
business. The enactment of any additional laws or regulations in this area may
impede the growth of the Internet, which could decrease our potential revenues
or otherwise cause our business to suffer.

Regulation of content and access could limit our ability to generate revenues
and expose us to liability

Prohibition and restriction of Internet content and access could dampen the
growth of Internet use, decrease the acceptance of the Internet as a
communications and commercial medium and expose us to liability. A variety of
restrictions on content and access, primarily as they relate to children, have
been enacted or proposed, including laws which would require Internet service
providers to supply, at cost, filtering technologies to limit or block the
ability of minors to access unsuitable materials on the Internet. Because of
these content restrictions and potential liability to us for materials carried
on or disseminated through our systems, we may be required to implement measures
to reduce our exposure to liability. These measures may require the expenditure
of substantial resources or the discontinuation of our product or service
offerings that subject us to this liability. Further, we could incur substantial
costs in defending against any of these claims and we may be required to pay
large judgments or settlements or alter our business practices. In addition, our
liability insurance may not cover potential claims relating to the Internet
services we provide or may not be adequate to indemnify us for all liabilities
that may be imposed on us.

We could be exposed to liability for defamation, negligence and infringement.

Because users download and redistribute materials that are cached or replicated
by us in connection with our Internet services, claims could be made against us
for defamation, negligence, copyright or trademark infringement, or other
theories based on the nature and content of such materials. While we have
attempted to obtain safe harbor protection against claims of copyright
infringement under the Digital Millenium Copyright Act of 1998, there can be no
guarantee that we will prevail in any such claims. We also could be exposed to
liability because of third-party content that may be accessible through our
services, including links to Web-sites maintained by our users or other third
parties, or posted directly to our Web-site, and subsequently retrieved by a
third party through our services. It is also possible that if any third-party
content provided through our services contains errors, third parties who access
such material could make claims against us for losses incurred in reliance on
such information. You should know that these types of claims have been
successfully brought against other online service providers. In particular,
copyright and trademark laws are evolving and it is uncertain how broadly the
rights provided under these laws will be applied to online environments. It is
impossible for us to determine who the potential rights holders may be with
respect to all materials available through our services.

We are dependent on strategic marketing alliances as a source of revenues and
our business could suffer if any of these alliances are terminated.

We have strategic marketing alliances with a number of third parties, and most
of our strategic marketing partners have the right to terminate their agreements
with us on short notice. Any termination may result in the substantial loss of
members obtained through the alliance. If any of our strategic marketing

                                       23
<PAGE>
agreements are terminated, we cannot assure you that we will be able to replace
the terminated agreement with an equally beneficial arrangement. We also expect
that we will not be able to renew all of our current agreements when they expire
or, if we are, that we will be able to do so on acceptable terms. We also do not
know whether we will be successful in entering into additional strategic
marketing alliances, or that any additional relationships, if entered into, will
be on terms favorable to us. Our receipt of revenues from our strategic
marketing alliances may also be dependent on factors which are beyond our
control, such as the quality of the products or services offered by our
strategic marketing partners.

The Company and/or its 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, the Company's 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.

We may be required to pay penalties to the investors that participated in our
private placement that closed in January 2004 due to the fact that the
registration statement registering the shares issued in connection with this
private placement has not been declared effective within the required deadline.
If we are required to pay such penalties, we may be forced to cease or curtail
our operations.

To obtain funding for our ongoing operations, pursuant to an offering conducted
under Rule 506 of Regulation D, we sold units to accredited investors with each
unit consisting of 50,000 shares of common stock and 50,000 common stock
purchase warrants at a price of $25,000 per unit. In connection with this
offering, we raised $2,487,500. In connection with this private placement, we
agreed to file a registration statement registering the shares of common stock
issued and to have such registration statement declared effective by May 29,
2004. Since a registration statement covering these shares of common stock has
not been declared effective by May 29, 2004 the Company is required to pay a
penalty equal to 2% per month on the amount invested by each investor.
Accordingly, the Company has accrued $199,000 as of September 30, 2004 with a
corresponding charge to additional paid-in capital.

Risks Related To Our Stock

A former consultant may be entitled to receive 11.50% of the Company's fully
diluted outstanding shares which, if the Company is required to issue these
shares, could have a material adverse effect on our financial condition.

On June 23, 2003, the Company entered into an Engagement Letter which requires
that the Company issue to Knightsbridge, or its designees, an amount of common
stock of the 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. The Company believes 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 the Company
relating to its rights to receive the shares, or if instituted, that such action
will not be successful. Although the Company believes that any action which may
be commenced would be without merit, and it would vigorously defend any such
action, the cost of such litigation can be substantial even if the Company were
to prevail. Further, an unfavorable outcome could have a material adverse effect
on the Company's 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.

                                       24
<PAGE>
          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 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

     o    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

     o    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, the Company's sole officer and a director, entered into an
agreement whereby he may be required to transfer his shares of common stock of
the Company

Steven Lampert has 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 so that 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.


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, 2003 which states that, due to
recurring losses from operations since inception of the Company, there is
substantial doubt about our ability to continue as a going concern.

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:

                                       25
<PAGE>
          o    that a broker or dealer approve a person's account for
               transactions in penny stocks; and

          o    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:

          o    obtain financial information and investment experience objectives
               of the person; and
          o    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:

          o    sets forth the basis on which the broker or dealer made the
               suitability determination; and
          o    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.

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.

Our Chief Executive Officer and Chief Financial Officer (collectively the
"Certifying Officers") maintain a system of disclosure controls and procedures
that is designed to provide reasonable assurance that information, which is
required to be disclosed, is accumulated and communicated to management timely.
Under the supervision and with the participation of management, the Certifying
Officers evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule [13a-14(c)/15d-14(c)]
under the Exchange Act) as of September 30, 2004. Based upon that evaluation,
the Certifying Officers concluded that our disclosure controls and procedures
are effective in timely alerting them to material information relative to our
company required to be disclosed in our periodic filings with the SEC.

(b) Changes in internal controls.

Our Certifying Officers have indicated that there were no significant changes in
our internal controls or other factors that could significantly affect such
controls subsequent to the date of their evaluation, and there were no such
control actions with regard to significant deficiencies and material weaknesses.






                                       26
<PAGE>
                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

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

     o    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;

     o    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; and

     o    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.

     o    We have recently received a Notice of Motion seeking a default
          judgment and attorneys' fees in connection with a complaint filed by
          AKW Holdings, LLC against our company in the Supreme Court of the
          State of New York - County of Rockland Index #2693/04. AKW Holdings,
          LLC is seeking unpaid rents of approximately $160,000 and attorneys'
          fees. As of the date hereof, we have no knowledge as to whether a
          default judgment has been entered by the Supreme Court of the State of
          New York - County of Rockland against our company. We believe this
          lawsuit is baseless and without merit and intend to vigorously defend
          this lawsuit.

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.

In July 2004, the Company issued 500,000 shares of common stock to Isaac
Weinhouse in consideration for consulting services.

* All of the above offerings and sales were deemed to be exempt under Rule 506
of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No
advertising or general solicitation was employed in offering the securities. The
offerings and sales were made to a limited number of persons, all of whom were
accredited investors, business associates of PowerChannel or executive officers
of PowerChannel, and transfer was restricted by PowerChannel in accordance with
the requirements of the Securities Act of 1933. In addition to representations
by the above-referenced persons, we have made independent determinations that
all of the above-referenced persons were accredited or sophisticated investors,
and that they were capable of analyzing the merits and risks of their
investment, and that they understood the speculative nature of their investment.
Furthermore, all of the above-referenced persons were provided with access to
our Securities and Exchange Commission filings.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security None Holders.

None

Item 5. Other Information.

None

Item 6. Exhibits

Exhibit Number      Description

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


                                       27
<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 November 19, 2004.

                               POWERCHANNEL, INC.





Date:  November 19, 2004                    By: /s/ Steven Lampert
                                                    --------------
                                                    Steven Lampert
                                                    Chairman and President






                                       28