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 March 31, 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 May 27, 2004: 25,914,829 shares of common stock outstanding, $0.01
par value.
<PAGE>

                                     INDEX



Part I.  FINANCIAL INFORMATION                                          Page No.


         Item 1. Financial Information

                        Condensed Balance Sheet as of
                        March 31, 2004 (Unaudited).......................... 3

                        Condensed Statement of Operations
                        for the three months ended March 31,
                        2004 and March 31, 2003 (Unaudited)................. 4

                        Condensed Statements of Cash Flows
                        for the three months ended
                        March 31, 2004 and March 31, 2003
                        (Unaudited)......................................... 5

                        Notes to Condensed Financial Statements
                        for the three months ended March 31,
                        2004 (Unaudited).................................... 7

         Item 2. Management's Discussion and Analysis or Plan
                 of Operations..............................................13

         Item 3. Controls and Procedures....................................24

Part II. OTHER INFORMATION

         Item 1. Legal Proceedings..........................................25

         Item 2. Changes in Securities and use of Proceeds..................25

         Item 3. Defaults Upon Senior Securities............................25

         Item 4. Submission of Matters to a Vote of Security Holders........25

         Item 5. Other Information..........................................25

         Item 6. Exhibits and Reports on Form 8-K...........................25

Signatures..................................................................26

                                       2
<PAGE>
ITEM 1. FINANCIAL INFORMATION


                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2004
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                              ASSETS

<S>                                                                                                 <C>
Current Assets:
  Cash                                                                                              $ 1,033,584
  Inventories                                                                                            56,925
  Accounts Receivable, Net                                                                               93,750
  Subscriptions Receivable                                                                              250,000
  Prepaid Expenses                                                                                        1,576
  Prepaid Consulting Fees                                                                               117,176
                                                                                                  --------------
         Total Current Assets                                                                         1,553,011

Property and Equipment, Net                                                                              28,753

Deferred Consulting Fees, Net of Current Portion                                                         70,924
                                                                                                  --------------
                                                                                                    $ 1,652,688
                                                                                                  ==============
                                                 LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Due to Affiliate                                                                                  $ 3,978,120
  Accounts Payable                                                                                      353,738
  Accrued Liabilities                                                                                   457,918
  Convertible Notes Payable                                                                              44,305
  Note Payable - Other                                                                                  112,000
  Deposits Payable                                                                                       70,000
                                                                                                  --------------
         Total Current Liabilities                                                                    5,016,081
                                                                                                  --------------
Commitments and Contingencies

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 26,074,829 Shares                                                            260,748
  Additional Paid-In Capital                                                                         14,307,871
  Common Stock to be Issued, 2,301,731 Shares                                                         1,809,114
  Deferred Offering Costs                                                                               (14,000)
  Deferred Stock-Based Compensation                                                                  (4,647,861)
  Subscriptions Receivable                                                                              (50,000)
  Accumulated Other Comprehensive Income (Loss)                                                        (734,321)
  Deficit Accumulated in the Development Stage                                                      (14,294,944)
                                                                                                  --------------
         Total Stockholders' Deficit                                                                 (3,363,393)

                                                                                                    $ 1,652,688
                                                                                                  ==============
</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 OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                           For The Period
                                                                                 For the Three             August 10, 1998
                                                                                 Months Ended                (Inception)
                                                                                   March 31,                     To
                                                                              2004            2003          March 31, 2004
                                                                            ------------     -----------    ----------------
<S>                                                                         <C>              <C>              <C>
Revenues:
  Gross License Fees - PowerChannel Europe, PLC                             $         -      $        -       $  1,894,348
  Expenses Reimbursed Pursuant to License Agreement                                   -               -         (1,884,348)
                                                                            ------------     -----------    ----------------
  Net License Income                                                                  -               -             10,000
  Sales - Net                                                                   187,500               -            267,058
  Activation Fees                                                                     -               -             15,525
                                                                            ------------     -----------    ----------------
         Total Revenues                                                         187,500               -            292,583
                                                                            ------------     -----------    ----------------
Costs and Expenses:
  Cost of Sales                                                                 187,500               -            193,311
  Write-Down of Inventories                                                           -               -            443,063
  Selling, General and Administrative Expenses                                  529,342         112,696          6,312,558
  Impairment Loss on Investment                                                       -               -            573,887
  Settlement of Debt                                                                  -               -            111,300
  Stock-Based Compensation                                                    1,841,821               -          4,163,074
                                                                            ------------     -----------    ----------------
        Total Costs and Expenses                                              2,558,663         112,696         11,797,193
                                                                            ------------     -----------    ----------------
Loss Before Loss From Unconsolidated Affiliate
  And Other Income (Expense)                                                 (2,371,163)       (112,696)       (11,504,610)

Loss from Unconsolidated Affiliate                                                    -          (1,500)        (2,630,797)

Interest Expense                                                                 (4,042)              -           (159,537)
                                                                            ------------     -----------    ----------------
Net Loss                                                                    $(2,375,205)     $ (114.196)      $(14,294,944)
                                                                            ============     ===========    ================

Basic and Diluted Net Loss Per Share                                        $      (.10)     $     (.01)
                                                                            ============     ===========
Weighted Average Shares Outstanding - Basic and Diluted                      22,897,640      11,212,052
                                                                            ============     ===========
Pro-Forma Net Loss Per Share (Basic and Diluted)                                  $(.10)              -
                                                                            ============     ===========
Pro-Forma Weighted Average Shares Outstanding
  (Basic and Diluted)                                                        24,833,993               -
                                                                            ============     ===========

</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)
<TABLE>
<CAPTION>
                                                                                                                   For The Period
                                                                                For the Three                      August 10, 1998
                                                                                 Months Ended                        (Inception)
                                                                                   March 31,                             To
                                                                              2004              2003               March 31, 2004
                                                                         ------------     ------------             ---------------
<S>                                                                      <C>              <C>                      <C>
Cash Flow From Operating Activities:
  Net Loss                                                               $(2,375,205)     $  (114,196)             $ (14,294,944)
  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                                             1,841,821                -                  4,262.526
      Expense Recorded on Issuance of Common Stock
        for Debt Settlement                                                        -                -                    111,300
      Loss (Income) on Investment in PowerChannel
        Europe PLC                                                                 -            1,500                  2,322,471
      Loss on Asset Disposal                                                       -                -                     20,456
      Write-Down of Inventories                                                    -                -                    443,063
      Depreciation                                                             4,531            5,000                     84,848
      Reserve for Bad Debts                                                   93,750                -                     93,750
      Impairment Loss on Investment in PowerChannel
        Europe PLC                                                                 -                -                    573,884
      Change in Current Operating Assets and Liabilities:
        (Increase) Decrease in Inventories                                   187,500              556                   (499,988)
        (Increase) in Accounts Receivable                                   (187,500)               -                   (187,500)
        (Increase) in Prepaid Expenses                                      (118,752)               -                   (118,752)
        (Increase) Decrease in Other Assets                                  (70,924)           5,138                    (70,924)
        Increase (Decrease) Due to PowerChannel Europe PLC,
          Relating to Operations                                             (10,000)          74,120                    678,142
        Increase (Decrease) in Accounts Payable and Accrued
                Liabilities                                                  (61,184)          18,924                  1,222,224
        Increase in Deposits Payable                                               -                -                     45,000

Net Cash (Used) in Operating Activities                                     (695,963)          (8,958)                (5,034,444)
                                                                         ------------     ------------             ---------------
Cash Flow From Investing Activities:
  Purchase of Property and Equipment                                         (14,216)               -                   (134,057)
  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
                                                                         ------------     ------------             ---------------
Net Cash (Used) in Investing Activities                                      (27,523)               -                   (164,215)
                                                                         ------------     ------------             ---------------

</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 Three                 August 10, 1998
                                                                                   Months Ended                     (Inception)
                                                                                       March 31,                        To
                                                                                 2004               2003           March 31, 2004
                                                                             ------------       ------------       ---------------
<S>                                                                            <C>                 <C>                  <C>
Cash Flow From Financing Activities:
  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 from Deposits Payable                                                  25,000                 -                25,000
  Payments of Convertible Notes                                                 (215,695)                -              (215,695)
  Proceeds from Note Payable                                                           -                 -               112,000
  Proceeds from Convertible Notes                                                      -                 -               280,000
                                                                             ------------       ------------       ---------------
Net Cash Provided By Financing Activities                                      1,731,805                 -             6,232,243
                                                                             ------------       ------------       ---------------
Net Increase (Decrease) in Cash                                                1,008,319            (8,958)            1,033,584

Cash - Beginning of Period                                                        25,265            65,358                     -
                                                                             ------------       ------------       ---------------
Cash - End of Period                                                         $ 1,033,584          $ 56,400         $   1,033,584
                                                                             ============       ============       ===============
Supplemental Cash Flow Information:
  Cash Paid For Interest                                                     $    84,769   $             -         $      84,769
                                                                             ============       ============       ===============
  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                                            $ 3,764,917          $      -         $   7,151,507
                                                                             ============       ============       ===============
Issuance of Common Stock for Deferred Offering Costs                         $         -          $      -         $      14,000
                                                                             ============       ============       ===============
Write-Off of Subscription Receivable                                         $         -          $      -         $      50,575
                                                                             ============       ============       ===============
Stock Subscriptions Receivable Arising from Sale of
     Common Stock                                                            $   300,000          $      -         $     300,000
                                                                             ============       ============       ===============
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
                                                                             ============       ============       ===============
</TABLE>
    The accompanying notes are an integral part of the financial statements.


                                       6
<PAGE>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (Unaudited)


NOTE 1 -  Basis of Presentation

          The accompanying unaudited condensed consolidated financial statements
include the accounts of PowerChannel,  Inc. and its  subsidiaries,  all of which
are wholly 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 recurring losses from operations and operating
cash constraints  that raise  substantial  doubt about the Company's  ability to
continue as a going concern.


NOTE 2 -  Property and Equipment

          Property and equipment are summarized as follows:

                           Office Equipment                            $  83,080
                           Furniture and Fixtures                         24,658
                                                                       ---------
                                                                         107,738
                           Less:  Accumulated Depreciation                78,985
                                                                       ---------
                                                                       $  28,753
                                                                       =========

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.  The carrying  amount at March 31, 2004 remains at zero.  PCE
had no income or expense during the quarter ended March 31, 2004.


                                       7
<PAGE>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (Unaudited)

NOTE 4 -  Subscriptions Receivable

          Subscriptions  receivable represents funds held in escrow with regards
to the sale of Units  consisting  of  common  stock and  warrants  (see Note 9).
Subscriptions  receivable  in the amount of  $250,000  are  reported  as current
assets at March 31, 2004 since  these funds were  released to the Company in May
2004.  Subscriptions  receivable  in the amount of  $50,000  are  reported  as a
component of stockholders'  deficit at March 31, 2004 since these funds have not
yet been released to the Company.

NOTE 5 -  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 March 31, 2004,
the remaining balance due on these notes was $44,305.

NOTE 6 -  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.

NOTE 7 -  Related Party Transactions

          PowerChannel Europe PLC

          In 2002, the Company bought its entire inventory of set-top boxes from
PCE. At December 31,  2002,  the amounts due to PCE  consisted of  approximately
$690,000 related to the aforementioned inventory purchase and approximately $2.8
million  of loans and  advances,  which are due on demand  and are not  interest
bearing.  As of March 31,  2004,  the amounts owed to PCE was  $3,879,748  after
giving effect to foreign currency translation.

          Advances to Related Party

          During the quarter  ended March 31,  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.


                                       8
<PAGE>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (Unaudited)


NOTE 8 -  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                          (108,372)
                                                                    ------------
                        Balance - March 31, 2004                    $  (734,321)
                                                                    ============

NOTE 9 -  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 $57,714 for the
quarter ended March 31, 2004.

          On January 20, 2004 the Company agreed to issued 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 $59,926 for the quarter  ended March 31,  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 March 31,2004.

          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 $ 66,271 for the quarter  ended March 31,
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 $ 200,505  for the
quarter ended March 31, 2004.

                                       9
<PAGE>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (Unaudited)

NOTE 9 -  Stockholders' Deficit (Continued)

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

          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 March 31, 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.


          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  quarter  ended  March 31,  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.


                                       10
<PAGE>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (Unaudited)

NOTE 10 - 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 quarter
ended  March 31, 2004 the Company has  reserved  an  additional  797,538  shares
valued at $763,923. Such 2,301,731 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 $688,502 for the quarter  ended March 31, 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.

          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.

          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 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

                                       11
<PAGE>
                               POWERCHANNEL, INC.
 AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL
                     STATEMENTS MARCH 31, 2004 (Unaudited)


NOTE 10 - Commitments and Contingencies (Continued)

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.


NOTE 11 - Subsequent Events

          In May 2004, the Company and Churchill Investments, Inc. ("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.

          In  addition,  in May 2004,  the Company  paid off the balance owed in
connection with the June 2003 Note.  Simultaneously with such 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.


                                       12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

          The statements contained in this Report that are not historical are
forward-looking statements, including statements regarding our expectations,
intentions, beliefs or strategies regarding the future. Forward-looking
statements include our statements regarding liquidity, anticipated cash needs
and availability and anticipated expense levels. All forward-looking statements
included in this Report are based on information available to our company on the
date hereof, and we assume no obligation to update any such forward-looking
statement. It is important to note that our actual results could differ
materially from those in such forward-looking statements. Additionally, the
following discussion and analysis should be read in conjunction with the
Financial Statements and notes thereto appearing elsewhere in this Report. The
discussion is based upon such financial statements which have been prepared in
accordance with U.S. Generally Accepted Accounting Principles.

Our History

We were incorporated in Delaware in 1995 under the name UC'NWIN Systems, Inc. In
August 1999, we changed our name to The Winners Edge.com, Inc. During 1999, as a
result of a Chapter 11 Bankruptcy Plan of Reorganization, we acquired the assets
of The Winners Edge Licensing Corporation. In addition to the assets, we also
acquired a ten-year license with the exclusive right to market the Winners Edge
handicapping product renewable for a second ten years. We did not acquire the
ownership of the handicapping program. In September 2000, we stopped marketing
the Winners Edge handicapping product due to insufficient income. On March 30,
2001, we acquired a roofing sealant product, Roof Shield. In July 2001, we
changed our name to Sealant Solutions, Inc. In September 2001, we acquired the
rights to sell and distribute in the United States the Lady Ole' line of
cosmetics products. In February 2002, we entered into a joint venture agreement
with IFG Goldstar Cement Company for the entitlement to a royalty payment based
upon the sale of certain concrete products. In April of 2002, we sold our rights
to the Lady Ole line of cosmetic products. In November of 2002, we agreed to
terminate and cancel the remaining term of our licensing agreement with the
Winners Edge Licensing Corporation.

On July 21, 2003, pursuant to a Stock Purchase Agreement and Share Exchange, as
amended, between our company and PowerChannel, Inc., a Delaware corporation,
PowerChannel merged into our company. Pursuant to the Stock Purchase Agreement,
PowerChannel ceased to exist and we continued as the surviving corporation. In
addition, we changed our name to Powerchannel, Inc. Under this agreement, we
issued 10,137,897 shares of our common stock. Such shares are deemed
"restricted" as defined under Rule 144 as promulgated under the Securities Act
of 1933, as amended. Under the terms of the agreement, we are the acquiring
company. The merger was accounted for as a reverse merger, which effectively is
a recapitalization of the target company.

Pursuant to the Agreement, Michael Fasci remained on our Board of Directors
until his resignation in February 2004, Edward Fasci resigned from our Board of
Directors and Steven Lampert was appointed to our Board of Directors. In
addition, Michael Fasci resigned as President and Chief Executive Officer and
Steven Lampert was appointed as President, Chief Executive Officer, Chief
Financial Officer and Secretary. The Acquisition was approved by the unanimous
consent of the Board of Directors of our company and PowerChannel on July 21,
2003. Mr. 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.

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.

                                       13
<PAGE>
Results of Operations - Three Months Ended March 31, 2004 compared to Three
Months Ended March 31, 2003

Revenues

We generated $187,500 of revenues during the three months ended March 31, 2004.
During the three months ended March 31, 2003, we did not generate any revenue.
The reason for the increase in the revenues was the Company's change in its
business plan in connection with its reverse merger in July 2003. Revenues from
the sale of the Company's set-top boxes are recognized at the time of shipment
to the customer. Access fees are deferred and amortized over the life of the
subscription.

Costs and Expenses


Cost and expenses incurred for the three months ended March 31, 2004, aggregated
$2,558,663 as compared to $112,696 for the three months ended March 31, 2003.
Cost and expenses increased by $2,445,967 for the three months ended March 31,
2004 when compared to the comparable period of the prior year. This increase
resulted from the following:

     o    cost of sales for the three months ended March 31, 2004 was $187,500
          as compared to none for the comparable period during 2003, which such
          increase was the result of the Company's change in its business plan
          in connection with its reverse merger in July 2003;

     o    selling, general and administrative expenses for the three months
          ended March 31, 2004 was $529,342, which includes a bad debt expense
          of $93,750 recognized by the Company that relates to the current
          period sales, as compared to $112,696 during the three month ended
          March 31, 2003, which represents an increase of $416,646; and

     o    the Company recognized stock based compensations in the amount of
          $1,841,821 during the three months ended March 31, 2004 as compared to
          none during the three months ended March 31, 2003.

Net Loss

The net loss was $2,375,205 for the three months ended March 31, 2004, as
compared to a net loss of $114,196 for the three months ended March 31, 2003.
The net loss increased by $2,261,009 from the previous period primarily as a
result of the reasons set forth above.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements for the three months ending
March 31, 2004.

Liquidity and Capital Resources

Financial Condition

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

At March 31, 2004, the Company had total current assets of $1,553,011 and total
current liabilities of $5,016,081 resulting in a working capital deficit of
$3,463,070. In addition, the Company had a stockholders deficit of $3,363,393 at
March 31, 2004.

The Company is a development stage company that has a working capital deficit at
March 31, 2004 of $3,463,070 and for the period August 10, 1998 (inception) to
March 31, 2004 has incurred net losses aggregating $14,294,944. These factors
raise substantial doubt about the Company's 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 in the
Company, and through potential operating revenues stemming from the sale of
set-top boxes and internet access. Continuation of the Company is dependent on
(1) consummation of the contemplated financings, (2) achieving sufficiently
profitable operations (3) subsequently maintaining adequate financing
arrangements and (4) its exiting the development stage. The achievement and/or
success of the Company's planned measures, however, cannot be determined at this
time.


                                       14
<PAGE>
Capital Resources

The Company anticipates generating cash to continue its operations either though
private sales of its common stock or from capital contributions from its
officers and/or directors. In addition, the Company hopes to reach levels of
revenue sufficient to meet its operating costs. There is no guarantee that the
Company will be able to reach these levels or generate cash through the sale of
its common stock.

Since the merger in July 2003 through April 2004, the Company's investors have
provided funding approximately in the amount of $2,550,000 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. The Company
needs to raise an additional $2,000,000 during the next 12 months to effectively
institute its business plan to market and distribute its products. The Company
is currently negotiating debt and/or equity financing arrangements to provide an
alternative source for its future capital needs. However, there can be no
assurance that it 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.

In February 2000, the Company issued Series A Convertible Notes (the "Series A
Notes") in the aggregate amount of $280,000 to several investors (the "Original
Holders").

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. 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 quarter ended March 31, 2004 the
Company has reserved an additional 797,538 shares valued at $763,923. Such
2,301,731 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 $688,502 for the quarter ended March 31, 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.

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 quarter ended March 31, 2004 the Company has
reserved an additional 797,538 shares valued at $763,923. Such 2,301,731 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.

On June 25, 2003, the Company borrowed $112,000 (the "June 2003 Note") from
Knightsbridge pursuant to that certain Promissory Note and Security Agreement
entered with Knightsbridge. In connection with the June 2003 Note, the Company
granted a security interest in all of its inventory. In addition, several
stockholders of the Company, including Steven Lampert, the CEO of the Company,
pledged their shares to Knightsbridge to secure the June 2003 Note.

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 March 31, 2004, the remaining
balance due on these notes was $44,305. In May 2004, the Company and Churchill
Investors, Inc. entered into a mutual release whereby the parties released each
other 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.

                                       15
<PAGE>
In addition, in May 2004, the Company paid off the balance owed in connection
with the June 2003 Note. Simultaneously with such 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.

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 three months ended March 31, 2004 of $2,375,205. 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
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.

                                       16
<PAGE>
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.

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.

                                       17
<PAGE>
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.

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.

                                       18
<PAGE>
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
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.

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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
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.

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.

Shares of common stock issued in connection with the conversion of Series A
Convertible Notes may have not have been in compliance with certain state and
federal securities laws.

On July 31, 2003, the Company entered into a Consulting Agreement pursuant to
which the Company 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. The Company is 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 Company having to
rescind the issuance of these shares. The payment of damages could have a
material adverse effect on the Company's revenues, profits, results of
operations, financial condition and future prospects.

                                       20
<PAGE>
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:

     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.

                                       21
<PAGE>
Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Principals of Consolidation

The consolidated financial statements include the accounts of PowerChannel, Inc.
and its wholly 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. The Company has recognized a loss of $443,063 during the year ended
December 31, 2003 related to the valuation of its inventories.

Investment in PowerChannel Europe PLC

The investment in an unconsolidated affiliate, PowerChannel Europe PLC, over
which the Company exercises significant influence but not control, is accounted
for by the equity method. As of December 31, 2003 the Company has recognized an
other than temporary loss in value of this investment and accordingly has
reduced the carrying amount down to zero.

Deferred Offering Costs


Deferred offering costs represent costs incurred in connection with a proposed
offering of the Company's 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.

Foreign Currency Translation


Receivables of the Company's unconsolidated UK Affiliate is translated to US
dollars using the current exchange rate for assets and liabilities. Gains or
losses resulting from foreign currency translation are included as a component
of other comprehensive income (loss).

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", the
Company has elected to follow Accounting Principles Board Opinion No. 25 (APB
No. 25), "Accounting for Stock Issued to Employees", and related interpretations
in accounting for stock-based awards to employees. Accordingly, compensation
cost for stock options and restricted stock grants is measured as the excess, if
any, of the market price of the Company's common stock at the date of grant over
the exercise price. Warrants and options issued to nonemployees are accounted
for using the fair value method of accounting as prescribed by FAS No. 123 and
Emerging Issues 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". The Company uses the Black-Scholes option pricing model
to value options, restricted stock grants and warrants granted to nonemployees.

                                       22
<PAGE>
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 the Company is incurring losses, the effect of stock options and
warrants is antidilutive. Accordingly, the Company's presentation of diluted net
loss per share is the same as that of basic net loss per share.

Pro-forma weighted average shares outstanding includes the pro-forma issuance of
1,504,953 common shares reserved to be issued pending potential litigation (see
Note 11).

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 August 2001, the Financial Accounting Standards Board ("FASB") issued FAS No.
143 (FAS 143), "Accounting for Obligations Associated with the Retirement of
Long-Lived Assets" which is required to be adopted in fiscal years beginning
after June 15, 2002. FAS 143 establishes accounting standards for the
recognition of and measurement of an asset retirement obligation and its
associated asset retirement cost.

In April 2002, the FASB issued FAS No. 145 (FAS 145), "Recission of FASB
Statements No. 4, 44 and 64, amendment of FASB Statement No. 13, and Technical
Corrections," which among other matters, limits the classification of gains and
losses from extinguishments of debt as extraordinary to only those transactions
that are unusual and infrequent in nature as defined by APB Opinion No. 30
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." FAS 145 is effective no later than January 1, 2003.


In June 2002, the FASB issued FAS No. 146 (FAS 146), "Accounting for Costs
Associated with Exit or Disposal Activities." FAS 146 generally requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. This pronouncement is effective for exit or disposal activities initiated
after December 31, 2002.

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").

                                       23
<PAGE>
The adoption of FAS 143,144, 145 (other than as noted below), 146 and 150 is not
expected to have a material effect on the Company's results of operations or
financial position. The adoption of FAS 145 in recording the Company's shares of
PowerChannel Europe PLC's 2001 net income was not material.

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 March 31, 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.

                                       24
<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; and

     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.

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

Item 2. Changes in Securities.

None

Item 3. Defaults Upon Senior Securities.

None

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

None

Item 5. Other Information.

Between January 20, 2004 through March 25, 2004, the Company made certain loans
to Steven Lampert, CEO of the Company, aggregating $56,607. During this same
period, Mr. Lampert repaid all of such loans, either through the payment to the
Company of cash ($43,300) or through the offset of salary owed to Mr. Lampert
($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.

Item 6. Exhibits and Reports of Form 8-K.

Reports on Form 8K

On January 28, 2004, the Company filed a Form 8K with the SEC reporting under
Item 4 that it had terminated its Radin Glass & Co., LLP, its independent public
accountants and engaged Wolinetz, Lafazan & Company, P.C.

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

                                       25
<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 June 1, 2004.

                               POWERCHANNEL, INC.





Date:  June 1, 2004     By: /s/ Steven Lampert
                             -------------------------
                             Steven Lampert
                             Chairman and President


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