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, 2005

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

                               POWERCHANNEL, INC.

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



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

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

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


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

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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 18, 2005: 26,669,829 shares of common stock outstanding, $0.01
par value.


<PAGE>

ITEM 1. FINANCIAL INFORMATION

                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2005
                                   (Unaudited)

<TABLE>
<CAPTION>

                                     ASSETS

Current Assets:
<S>                                                                                   <C>
  Inventories                                                                   $        63,608
  Prepaid Expenses                                                                          350
  Prepaid Consulting Fees                                                                65,837
                                                                                ----------------

         Total Current Assets                                                           129,795

Property and Equipment, Net                                                              19,947
                                                                                ----------------

                                                                                $       149,742
                                                                                ================
                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Accounts Payable                                                              $       591,002
  Accrued Liabilities                                                                 1,098,368
  Convertible Notes Payable                                                              44,305
  Deposits Payable                                                                       70,000
  Loan Payable - Other                                                                   35,000
  Advances From Related Party                                                             1,913
                                                                                ----------------

         Total Current Liabilities                                                    1,840,588
                                                                                ----------------

Commitments and Contingencies

Minority Interest                                                                       633,357
                                                                                ----------------

Stockholders' Deficit:
  Preferred Stock, Par Value $.01; Authorized 5,000,000 Shares,
    Issued and Outstanding 0 Shares                                                           -
  Common Stock, Par Value $.01; Authorized 95,000,000 Shares,
    Issued and Outstanding 26,669,829 Shares                                            266,698
  Additional Paid-In Capital                                                         15,156,341
  Common Stock to be Issued, 2,370,156 Shares                                         1,827,756
  Deferred Stock-Based Compensation                                                    (881,841)

  Accumulated Other Comprehensive Income                                                609,061
  Deficit Accumulated in the Development Stage                                      (19,302,218)
                                                                                ----------------

         Total Stockholders' Deficit                                                 (2,324,203)
                                                                                ----------------
                                                                                $       149,742
                                                                                ================
</TABLE>
The accompanying notes are an integral part of the financial statements.

                                        2
<PAGE>
                       POWERCHANNEL, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                         For the Three              For The Period
                                                                                          Months Ended              August 10, 1998
                                                                                            March 31,                (Inception)
                                                                                ----------------------------------         To
                                                                                       2005            2004          March 31, 2005
                                                                                ----------------  ----------------  ----------------
Revenues:
<S>                                                                                   <C>               <C>               <C>
  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                                                                             3,305           187,500           277,724
  Activation Fees                                                                             -                 -            15,525
                                                                                ----------------  ----------------  ----------------

         Total Revenues                                                                   3,305           187,500           303,249
                                                                                ----------------  ----------------  ----------------

Costs and Expenses:
  Cost of Sales                                                                             260           187,500           167,709
  Write-Down of Inventories                                                                   -                 -           510,706
  Selling, General and Administrative Expenses                                          132,922           529,342         7,878,640
  Impairment Loss on Investment                                                               -                 -           573,887
  Settlement of Debt                                                                          -                 -           111,300
  Equity-Based Compensation                                                             333,470         1,841,821         8,034,237
  Reversal of Equity Based Compensation Due to
    Cancellation and Nullification of Contract                                                -                 -          (479,934)
                                                                                ----------------  ----------------  ----------------

        Total Costs and Expenses                                                        466,652         2,558,663        16,796,545
                                                                                ----------------  ----------------  ----------------

Loss Before Loss From Unconsolidated Affiliate
  And Other Income (Expense)                                                           (463,347)       (2,371,163)      (16,493,296)

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

Minority Interest in Net Loss of Subsidiary                                                   -                 -             5,655

Interest Expense                                                                         (2,017)           (4,042)         (177,664)
                                                                                ----------------  ----------------  ----------------

Net Loss                                                                        $      (465,364)   $(2,375,205)     $   (19,302,218)
                                                                                ================  ================  ================


Basic and Diluted Net Loss Per Share                                            $          (.02)  $          (.10)
                                                                                ================  ================

Weighted Average Shares Outstanding - Basic and Diluted                              26,669,829        22,897,640
                                                                                ================  ================

Pro-Forma Net Loss Per Share (Basic and Diluted)                                $          (.02)  $          (.10)
                                                                                ================  ================

Pro-Forma Weighted Average Shares Outstanding
  (Basic and Diluted)                                                                29,039,985        24,833,993
                                                                                ================  ================
</TABLE>

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

                                        3
<PAGE>

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

<TABLE>
<CAPTION>

                                                                                 For the Three                      For The Period
                                                                                 Months Ended                       August 10, 1998
                                                                                   March 31,                          (Inception)
                                                                                ----------------------------------        To
                                                                                     2005               2004         March  31,2005
                                                                                ----------------  ----------------  ----------------
<S>                                                                                   <C>               <C>               <C>
Cash Flow From Operating Activities:
  Net Loss                                                                      $     (465,364)   $    (2,375,205)  $   (19,302,218)
  Adjustments to Reconcile Net Loss to
    Net Cash Used in Operating Activities:
      Intrinsic Value of Beneficial Conversion Feature
        of Convertible Notes                                                                  -                 -           280,000
      Equity-Based Compensation                                                         333,470         1,841,821         7,653.755
      Expense Recorded on Issuance of Common Stock
        for Debt Settlement                                                                   -                 -           111,300
      Loss on Investment in PowerChannel Europe PLC                                           -                 -         2,328,587
      Minority Interest in Net Loss of Subsidiary                                             -                 -            (5,655)
      Reserve for Bad Debts                                                                   -            93,750           110,831
      Loss on Asset Disposal                                                                  -                 -            20,456
      Write-Down of Inventories                                                               -                 -           510,706
      Depreciation                                                                        2,127             4,531           106,486
      Impairment Loss on Investment in PowerChannel
        Europe PLC                                                                            -                 -           573,884
      Change in Current Operating Assets and Liabilities:
        (Increase) in Accounts Receivable                                                     -          (187,500)         (110,831)
        (Increase) Decrease in Inventories                                                  261           187,500          (574,314)
        (Increase) Decrease in Prepaid Expenses                                          27,800          (118,752)          (66,187)
        (Increase) in Other Assets                                                            -           (70,924)                -
        Increase (Decrease) Due to PowerChannel Europe PLC,
          Relating to Operations                                                              -           (10,000)          639,632
        Increase (Decrease) in Accounts Payable and Accrued
                Liabilities                                                              56,283           (61,184)        1,424,951
        Increase in Deposits Payable                                                          -                 -            45,000
        Other                                                                                 -                 -            13,509
                                                                                ----------------  ----------------  ----------------

Net Cash (Used) in Operating Activities                                                 (45,423)         (695,963)       (6,240,108)
                                                                                ----------------  ----------------  ----------------

Cash Flow From Investing Activities:
  Purchase of Property and Equipment                                                          -           (14,216)         (146,890)
  Net Liabilities Acquired in Reverse Merger, Net of Cash                                     -                 -           (16,851)
  Advances to Related Party                                                                   -                 -           (64,935)
  Repayments for Advances to Related Parties                                                  -                 -            64,935
  Loans to Related Party                                                                      -                 -          (278,027)
  Repayments from Loans to Related Parties                                                    -                 -           278,027
  Payments for PCE Stock                                                                      -                 -
                                                                                ----------------  ----------------  ----------------

Net Cash Provided by (Used) in Investing Activities                                           -           (14,216)         (203,741)
                                                                                ----------------  ----------------  ----------------
</TABLE>

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

                                        4
<PAGE>

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

                                                                                          For the Three             For The Period
                                                                                          Months Ended              August 10, 1998
                                                                                             March 31,                (Inception)
                                                                                ---------------------------------           To
                                                                                       2005              2004      March 31,  2005
                                                                                ----------------  ----------------  ----------------

<S>                                                                                  <C>               <C>                <C>
Cash Flow From Financing Activities:
  Proceeds from Issuance of Common Stock                                                      -         2,187,500         3,832,864
  Fees Paid on Sale of Common Stock                                                           -          (265,000)         (275,000)
  Loans and Advances from Related Parties                                                 3,248                 -          2,776,322
  Advances to Related Party                                                                   -           (56,607)          (56,607)

  Repayments of Advances to Related Party                                                     -            43,300            43,300
  Repayments of Loans and Advances from Related Parties                                  (1,335)                -            (1,335)
  Proceeds from Note Payable                                                                  -                 -           112,000
  Proceeds from Convertible Notes                                                             -                 -           280,000

  Proceeds from Deposits Payable                                                              -            25,000            25,000
  Proceeds from Loan Payable                                                             35,000                 -            35,000
  Payments of Convertible Notes                                                               -          (215,695)         (215,695)
  Payment of Note Payable                                                                     -                 -          (112,000)
                                                                                ----------------  ----------------  ----------------

Net Cash Provided By Financing Activities                                                36,913         1,718,498         6,443,849
                                                                                ----------------  ----------------  ----------------

Net Increase (Decrease) in Cash                                                          (8,510)        1,008,319                 -

Cash - Beginning of Period                                                                8,510            25,265                 -
                                                                                ----------------  ----------------  ----------------

Cash - End of Period                                                            $             -   $     1,033,584   $             -
                                                                                ================  ================  ================

Supplemental Cash Flow Information:
  Cash Paid For Interest                                                        $         2,017   $        84,769   $        96,770
                                                                                ================  ================  ================

  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   $     7,271,549
                                                                                ================  ================  ================

Issuance of Common Stock for Deferred Offering Costs                            $             -   $             -   $        14,000
                                                                                ================  ================  ================

Write-Off of Subscription Receivable                                            $             -   $             -   $        50,575
                                                                                ================  ================  ================


Issuance of 250,000 Shares of Common Stock as Payment
  for Accrued Salaries - Related Parties                                        $             -   $       205,000   $       205,000
                                                                                ================  ================  ================
Issuance of 228,122 Shares of Common Stock as Payment
  for Accrued Salaries and Fees                                                 $       187,060   $       187,060   $       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.


                                       5
<PAGE>

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

<TABLE>
<CAPTION>


                                                                                                                    For The Period
                                                                                     For the Three Months Ended     August 10, 1998
                                                                                             March 31,                 (Inception)
                                                                                ----------------------------------          To
                                                                                2005               2004               March 31,2005
                                                                                ----------------  ----------------  ----------------


<S>                                                                                   <C>                <C>                <C>
Issuance of 120,000 Shares of Common Stock as Payment for
  Accrued Liabilities                                                           $             -   $             -   $        75,600
                                                                                ================  ================  ================

Issuance of 286,687 Shares of Common Stock as Consideration
  for Purchase of PCE Shares from Related Parties                               $             -   $             -   $        77,455
                                                                                ================  ================  ================

Cancellation of 286,687 Shares of Common Stock by
  Related Parties                                                               $             -   $             -   $         2,869
                                                                                ================  ================  ================

Additional Paid-In Capital Arising from Acquisition of PCE                      $             -   $             -   $     1,407,300
                                                                                ================  ================  ================

Payable on Purchase of PCE Stock                                                $             -   $             -   $        14,898
                                                                                ================  ================  ================

Penalties Accrued and Charged Against Additional Paid-In
  Capital Pursuant to Private Placement                                         $             -   $             -   $       298,500
                                                                                ================  ================  ================

Minority Interest                                                               $             -   $             -   $       639,012
                                                                                ================  ================  ================

</TABLE>

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

                                       6
<PAGE>

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


NOTE 1 - Basis of Presentation

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

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

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

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

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

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


NOTE 2 - Property and Equipment

           Property and equipment consists of the following:

                  Office Equipment                            $         85,949
                  Furniture and Fixtures                                26,622
                  Leasehold Improvements                                 8,000
                                                              -----------------
                                                                       120,571
                  Less:  Accumulated Depreciation                      100,624
                                                              -----------------
                                                              $         19,947

     Depreciation  expense  amounted  to $2,127 and $4,531 for the three  months
ended March 31, 2005 and 2004, respectively.

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

NOTE 3 - 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 and $84,121 accrued interest to four note holders.  At March
31, 2005, the remaining balance due on these notes was $44,305.


NOTE 4 - Advances from Related Party

     Advances from related party represents funds advanced to the Company by its
President. Such advances are non-interest bearing and have no specific repayment
terms.


NOTE 5 - Commitments and Contingencies

     Litigation

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

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

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

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

     Antidilution Agreement

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

     Lack of Insurance

     The Company,  at March 31, 2005, did not maintain any liability  insurance,
workers' compensation, or other forms of general insurance. Although the Company
is not aware of any  claims  resulting  from  absence of  coverage,  there is no
assurance  that  none  exist.  Management  plans to obtain  coverage  as soon as
possible.

     Unaudited Financial Statements

     We are unable to obtain an audit report on our financial statements for the
period  August 10, 1998  (inception)  to December 31, 2002 from our  predecessor
auditors.  The  Company  has  corresponded  with  the  Securities  and  Exchange
Commission regarding this issue and has been advised by the Commission that they
would not object to the Company  presenting  such  information  on an  unaudited
basis in the  Company's  Form 10-KSB for the year ended  December 31, 2004. As a
result,  all  required   development  stage  company  financial  statements  and
disclosures  included  in this Form  10-KSB,  pursuant to SFAS 7,  covering  the
cumulative period from August 10, 1998 (inception) through December 31, 2004 has
been provided on an unaudited basis.

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

                                       8
<PAGE>

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


NOTE 5 - Commitments and Contingencies (Continued)

     Accrued Liabilities


     Included in accrued liabilities at March 31, 2005 are payroll taxes payable
of approximately  $207,000 of which approximately $150,000 are under federal tax
liens. Such liens can result in enforcement  action by the Federal government to
satisfy those liens.

     Settlement Agreement

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

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

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


NOTE 6 - Subsequent Events

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

                                       9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Business Summary

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

Acquisition of a Controlling Interest in Powerchannel Europe PLC

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

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

At June 30, 2004,  our  ownership in PCE increased to 70.41% and the accounts of
PCE have been included in our consolidated financial statements. The transaction
has been accounted for under the purchase method. Accordingly,  the consolidated
statements of operations  will include PCE's results of operations from June 30,
2004.  Prior to June 30, 2004, we had accounted for its  investment in PCE under
the equity method and has recorded a loss from the  unconsolidated  affiliate in
the amount of $6,116 for the six months ended June 30, 2004. PCE does not engage
in any operations  however it was formally  engaged in the providing of Internet
access.

Results of Operations

Three Months Ended March 31, 2005 compared to Three Months Ended March 31, 2004

Revenues

During the three months ended March 31, 2005 we had net sales of $3,305.  During
the three months  ended March 31, 2004,  we had sales in the amount of $187,500.
The decrease in the revenues resulted from the decrease in market demand for our
products.

Costs and Expenses

Cost and expenses incurred for the three months ended March 31, 2005, aggregated
$466,652 as compared to  $2,558,663  for the three  months ended March 31, 2004.
Cost and expenses  decreased by $2,092,011  for the three months ended March 31,
2005 when  compared to the  comparable  period of the prior year.  This decrease
resulted from the following:

     o    cost of sales of $260 during the three  months ended March 31, 2005 as
          compared to $187,500 for the three months ended March 31, 2004,  which
          represents a decrease of $187,240;

     o    selling,  general and  administrative  expenses  for the three  months
          ended March 31, 2005 of $132,922,  as compared to $529,342  during the
          three  months  ended March 31,  2004,  which  represents a decrease of
          $396,420; and

     o    stock based  compensation  in the amount of $333,470  during the three
          months ended March 31, 2005 as compared to $1,841,821 during the three
          months  ended  March  31,  2004,   which   represents  a  decrease  of
          $1,508,351.

                                       10
<PAGE>
Net Loss

The net loss was $465,364 for the three months ended March 31, 2005, as compared
to a net loss of $2,375,205  for the three months ended March 31, 2004.  The net
loss decreased by $1,909,841 from the previous  period  primarily as a result of
the reasons set forth above.

Off-Balance Sheet Arrangements

We had no off-balance  sheet  arrangements for the three months ending March 31,
2005.

Liquidity and Capital Resources

Financial Condition

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

At March 31, 2005,  we had total  current  assets of $129,795 and total  current
liabilities of $1,840,588  resulting in a working capital deficit of $1,710,793.
In addition, we had a stockholders deficit of $2,324,203 at March 31, 2005.

We are a development  stage company that has a working  capital deficit at March
31, 2005 of $1,710,793  and for the period August 10, 1998  (inception) to March
31, 2005 has incurred net losses aggregating $19,302,218. These factors combined
with our urgent need to provide near-term operating cash raise substantial doubt
about our  ability  to  continue  as a going  concern.  Management's  plans with
respect to  alleviation of the going concern  issues  include  establishment  of
strategic partnerships with key suppliers and customers,  the raising of capital
by the sale of  shares  of  common  stock our  company,  and  through  potential
operating  revenues stemming from the sale of set-top boxes and internet access.
Continuation of our company is dependent on (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.

                                       11
<PAGE>
Capital Resources

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

Since the merger in July 2003 through March 2005,  our  investors  have provided
funding,  net of expenses,  of  approximately  $2,338,000  in cash,  and various
parties  have  provided   services  valued  at  approximately   $7,554,000,   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.

Related Party Loans

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Accounts Receivable

Management  determines  the  allowance  for bad  debts  based on known  troubled
accounts,  historical  experience,  and other currently available evidence.  The
Company has an allowance for bad debts of $110,831 at March 31, 2005.

Fair Value of Financial Instruments

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

                                       12
<PAGE>
Income Taxes

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

Stock-Based Compensation

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

Basic and Diluted Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the period.
The Common stock issued and outstanding  with respect to the pre-merger  Sealant
Solutions 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
2,370,156  and  1,504,193  common  shares at March 31, 2005 and March 31,  2004,
respectively, reserved to be issued pending potential litigation (see Note 11 to
Consolidated Financial Statements).

Use of Estimates

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

Recent Accounting Pronouncements

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

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

                                       13
<PAGE>
On May 15, 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments  with   Characteristics  of  both  Liabilities  and  Equity,"  which
establishes standards for how financial instruments that have characteristics of
both  liabilities  and equity  instruments  should be  classified on the balance
sheet.  The  requirements  of SFAS No. 150  generally  outline  those  financial
instruments  that give the  issuer a choice of  settling  an  obligation  with a
variable  number of  securities  or  settling an  obligation  with a transfer of
assets or any mandatory  redeemable security should be classified as a liability
on the  balance  sheet.  At December  31,  2004,  the Company  does not have any
instruments that are within the scope of SFAS No. 150.

Risk Factors

Risks Related to Our Business

If we are unable to merge with a new business,  our stockholders will lose their
entire investment

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

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

We incurred net losses for the three  months ended March 31, 2004 of  $2,375,205
and for the three  months  ended March 31, 2005 we incurred  losses of $465,364.
During the three months ended March 31, 2005 we had net sales of $3,177. We have
not  yet  achieved  profitability  and we can  give no  assurances  that we will
achieve  profitability  within the foreseeable  future as we fund  acquisitions,
operating and capital  expenditures in areas such as establishment and expansion
of  markets,   sales  and  marketing,   operating  equipment  and  research  and
development.  We cannot  assure  investors  that we will ever achieve or sustain
profitability or that our operating losses will not increase in the future.

Our Independent  Auditors have expressed  substantial doubt about our ability to
continue  as a going  concern,  which may  hinder our  ability to obtain  future
financing.

For the year ended December 31, 2004, our  independent  auditors stated that our
financial statements for the year ended December 31, 2004 were prepared assuming
that we would  continue as a going  concern.  Our ability to continue as a going
concern is an issue raised as a result of recurring  losses from  operations and
cash flow deficiencies from our inception. We continue to experience net losses.
Our ability to continue as a going concern is subject to our ability to generate
a profit  and/or  obtain  necessary  funding  from  outside  sources,  including
obtaining  additional funding from the sale of our securities,  increasing sales
or  obtaining  loans  and  grants  from  various  financial  institutions  where
possible.  Our  continued  net losses and  stockholders'  deficit  increases the
difficulty  in  meeting  such  goals and there  can be no  assurances  that such
methods will prove successful.

In connection with the filing of our Form 10-KSB for the year ended December 31,
2004, we were unable to obtain an audit report on our financial  Statements  for
the period  covering  August 10, 1998  (inception) to December 31, 2002, and the
inability to obtain such report may affect the  Company'  ability to provide the
necessary  financial  information  required to maintain  its status as a current
reporting  issuer which could result in the Company's  securities being delisted
from the Over The Counter Bulletin Board.

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

                                       14
<PAGE>
No assurance  can be given that the Company will  Commission  will not object in
the future to the presentation of such information on an unaudited basis. Should
such  information  be required to be presented  in future  filings on an audited
basis,  the  failure to so provide  such  information  may result in the Company
failing to maintain its status as a current  reporting issuer which could result
in the Company's  securities  being delisted from the Over The Counter  Bulletin
Board and/or the imposition of fines, sanctions and/or penalties.

Our  company  and/or our  President  and CEO may be subject to fines,  sanctions
and/or  penalties of an  indeterminable  nature as a result of violations of the
Sarbanes-Oxley  Act of 2002 in  connection  with loans made to the President and
CEO.

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

Risks Related To Our Stock

A former  consultant  may be entitled to receive  11.50% of our company's  fully
diluted  outstanding  shares  which,  if we are required to issue these  shares,
could have a material  adverse  effect on our financial  condition and result in
substantial dilution to our stockholders. Further, we will be required to defend
any action brought by the consultant which will result in substantial expense to
our company.

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

The  issuance of shares of common stock in  connection  with the  conversion  of
Series A  Convertible  Notes may have not have been in  compliance  with certain
state and federal  securities  laws and any damages that we may have to pay as a
result of such issuance  could have a material  adverse  effect on our revenues,
profits, results of operations, financial condition and future prospects.

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

                                       15
<PAGE>
In addition,  any subsequent  sale of the shares issuable upon conversion of the
notes,  may have violated Rule 144 if the consultant  sold the shares under Rule
144 and relied upon the holding period of the initial note holder to qualify for
such  sale.  As we have  settled  with the  consultant,  we do not plan to offer
rescission  at this time.  We are  currently  unable to determine  the amount of
damages, if any, that it may incur as a result of this issuance,  which include,
but are not limited to, damages that may result from the following

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

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


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

Steven  Lampert,  our sole  officer and a director,  entered  into an  agreement
whereby he may be required to transfer his shares of common stock of our company
which could result in a change in control of our company.

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

We have  anti-takeover  provisions,  which could inhibit potential  investors or
delay or prevent a change of control that may favor you.

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

If we cannot  operate as a going  concern,  our stock price will decline and you
may lose your entire investment.

Our auditors included an explanatory  paragraph in their report on our financial
statements  for the year ended  December  31,  2004 which  states  that,  due to
recurring  losses from  operations  since  inception  of our  company,  there is
substantial  doubt  about  our  ability  to  continue  as a going  concern.  Our
financial  statements  for the three  months ended March 31, 2005 do not include

                                       16
<PAGE>
any  adjustments  that might  result from our  inability  to continue as a going
concern.   These  adjustments  could  include  additional  liabilities  and  the
impairment of certain  assets.  If we had adjusted our financial  statements for
these  uncertainties,  our operating results and financial  condition would have
been materially and adversely affected.

Our  Common  Stock is  Subject  to the  "Penny  Stock"  Rules of the SEC and the
Trading Market in Our  Securities is Limited,  Which Makes  Transactions  in Our
Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.

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

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

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

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

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

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

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

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

Item 3. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

Our Chief  Executive  Officer  and Chief  Financial  Officer  (collectively  the
"Certifying  Officers")  maintain a system of disclosure controls and procedures
that is designed to provide  reasonable  assurance  that  information,  which is
required to be disclosed,  is accumulated and communicated to management timely.
Under the supervision and with the  participation of management,  the Certifying
Officers  evaluated  the  effectiveness  of  the  design  and  operation  of our
disclosure  controls and  procedures  (as defined in Rule  [13a-14(c)/15d-14(c)]
under the Exchange Act) as of March 31, 2005.  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.

                                       17
<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 $50,000;

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

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

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

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

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.

None

Item 6. Exhibits

Exhibit Number                  Description

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

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

                                       18
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed in its
behalf by the undersigned, thereunto duly authorized, on November 19, 2004.

                               POWERCHANNEL, INC.





Date:  June 6, 2005   By: /s/ Steven Lampert
                             -------------------------
                             Steven Lampert
                             Chairman and President




                                       19