UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Second Amendment)
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to ________________
Commission file number 0-50742
SIGN MEDIA SYSTEMS, INC.
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(Exact name of small business issuer as specified in its charter)
FLORIDA 02-0555904
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(State or other jurisdiction (IRS)
of incorporation or organization) Employer Identification No.)
2100 19th Street, Sarasota FL 34234
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(Address of principal executive offices)
(941) 330-0336
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 8,460,000 Common Shares no par value
as of May 31, 2005.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
The information required by Item 310(b) of Regulation S-B is attached hereto as
Exhibit One and incorporated herein by reference. The Company restated its
December 31, 2004 financial statements due to the fact that during the three
months ended March 31, 2004, the Company issued 216,000 shares of common stock
in conversion of a liability for stock to be issued. This conversion had no
effect on any income or expenses for the three months ended March 31, 2004.
Income was not effected in 2004 for the 2003 changes. Net income remained at
$47,338 and EPS at $.006. See Note 9 of the Consolidated Financial Statements
attached hereto.
Item 2. Management's Discussion and Analysis or Plan of Operation.
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, AND THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING, BUT NOT LIMITED TO COMPETITION AND OVERALL MARKET AND ECONOMIC
CONDITIONS.
RESULTS OF CONTINUING OPERATIONS
Three Months Ended
March 31
2004 2003
(restated)
Revenue $ 282,600 $ 15,751
Cost of goods sold 55,144 15,628
--------------------- --------------
Gross profit 227,456 123
Operating and
other expense 180,118 164,153
--------------------- --------------
Income (loss) from
continuing operations $ 47,338 $ (164,030)
===================== ==============
Gross profit margin 80% 1%
Earnings per share
of common stock $ 0.006 $ (0.021)
===================== ==============
The Company generated $282,600 of revenue, $227,456 of gross profit, $47,338 of
net earnings from continuing operations and $0.006 in earnings per
weighted-average common share from continuing operations for the three months
ended March 31, 2004.
For total operations, net income for the three months ended March 31, 2004, was
$47,338 or $0.006 in earnings per weighted-average common share with 8,222,222
weighted average common shares outstanding compared with a net loss of
$(164,030) or $(0.021) in earnings per weighted-average common with 8,000,000
weighted average common shares outstanding for the three months ended March 31,
2003.
Revenue for the three months ended March 31, 2004, increased $266,849 from the
same period last year. Cost of goods sold for the three months ended March 31,
2004, increased $39,516 from the same period last year. Operating and other
expenses for the three months ended March 31, 2004, increased $15,965 from the
same period last year. Net income from continuing operations for the three
months ended March 31, 2004, increased $211,368 from the same period last year.
Earnings per weighted-average common share was $0.006 for the three months ended
March 31, 2004, based on weighted-average common shares outstanding of
8,222,222, and earnings per weighted-average common share was $(0.021) for the
three months ended March 31, 2003 based upon weighted-average common shares
outstanding of 8,000,000.
MANAGEMENT'S DISCUSSION
The Company attributes the increase in revenue, cost of revenue, gross profit,
operating expenses and income form continuing operations to increases in sales
due to the continued expansion of the Company's sales and marketing division.
The Company's primary emphases is to expand sales nation wide and to also expand
into Latin America.
The Company currently has a working capital deficit. The Company will require
significant capital to implement both its short term and long-term business
strategies. However, there can be no assurance that such additional capital will
be available or, if available, that the terms will be favorable to the Company.
The absence of significant additional capital whether raised through a public or
private offering or through other means, including either private debt or equity
financings, will have a material adverse effect on the Company's operations and
prospects.
The Company's operations have consumed and will continue to consume substantial
amounts of capital, which, up until now, have been largely financed internally
through cash flows, from loans from related parties, and private investors. The
Company expects capital and operating expenditures to increase. Although the
Company believes that it will be able to attract additional capital through
private investors and as a result thereof its cash reserves and cash flows from
operations will be adequate to fund its operations through the end of calendar
year 2005, there can be no assurance that such sources will, in fact, be
adequate or that additional funds will not be required either during or after
such period. No assurance can be given that any additional financing will be
available or that, if available, it will be available on terms favorable to the
Company. If adequate funds are not available to satisfy either short or
long-term capital requirements, the Company may be required to limit its
operations significantly or discontinue its operations. The Company's capital
requirements are dependent upon many factors including, but not limited to, the
rate at which it develops and introduces its products and services, the market
acceptance and competitive position of such products and services, the level of
promotion and advertising required to market such products and services and
attain a competitive position in the marketplace, and the response of
competitors to its products and services.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
There are no pending or threatened legal proceedings against the Company or any
of its subsidiaries.
Item 2. Changes in Securities.
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
Item 5. Other Information.
NONE
Item 6. Exhibits and Reports on Form 8-K.
INDEX TO EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
-------------------------------------------------------
1 SIGN MEDIA SYSTEMS, INC.
FINANCIAL STATEMENTS
The Company filed no Forms 8K for the quarter ended March 31, 2004.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIGN MEDIA SYSTEMS, INC.
(Registrant)
Date September 9, 2005 /s/Antonio F. Uccello, III
----------------- -----------------------------
Antonio F. Uccello, III
Chief Executive Officer
Chairman of the Board
EXHIBIT F-1
SIGN MEDIA SYSTEMS, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2004 AND 2003
SIGN MEDIA SYSTEMS, INC.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheet (Unaudited) as of March 31, 2004 F-1
Condensed Consolidated Statements of Income (Operations) for the
Three Months Ended March 31, 2004 and 2003 (Unaudited) F-2
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2004 and 2003 (Unaudited) F-3
Notes to Condensed Consolidated Financial Statements F-4-11
SIGN MEDIA SYSTEMS, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
MARCH 31, 2004
ASSETS
(RESTATED)
CURRENT ASSETS
Cash and cash equivalents $ 149,559
Accounts receivable 546,949
Inventory 46,674
------------------------
Total Current Assets 743,182
------------------------
PROPERTY AND EQUIPMENT - Net 111,251
------------------------
TOTAL ASSETS $ 854,433
========================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current Portion of long-term debt $ 17,940
Accounts payable and accrued expenses 168,340
Due to related parties 109,761
------------------------
Total Current Liabilities 296,041
------------------------
LONG-TERM DEBT - Net of Current Portion 20,682
DUE TO RELATED PARTIES 367,944
------------------------
TOTAL LIABILITIES $ 684,667
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value, 100,000,000
shares authorized at March 31, 2004 and
8,460,000 issued and outstanding
at March 31, 2004. 5,000
Additional paid-in capital 671,700
Accumulated deficit (506,934)
------------------------
Total Stockholders' Equity 165,766
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 854,433
========================
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-1
SIGN MEDIA SYSTEMS, INC.
CONDENSED STATEMENTS OF INCOME (OPERATIONS)
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
2004 2003
(restated)
---------------- ----------------
REVENUE - NET OF DISCOUNTS $ 282,600 $ 15,751
COST OF GOODS SOLD 55,144 15,628
---------------- --------------
GROSS PROFIT 227,456 123
---------------- --------------
OPERATING EXPENSES
Professional fees 21,357 63,202
General and administrative expenses 154,169 93,461
Depreciation 4,500 2,363
---------------- ---------------
Total Operating Expenses 180,026 159,026
---------------- ---------------
NET INCOME (LOSS) BEFORE OTHER (EXPENSE) 47,430 (158,903)
OTHER (EXPENSE)
Interest expense (92) (5,127)
---------------- ---------------
Total Other (Expense) (92) (5,127)
---------------- ----------------
NET INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES $ 47,338 $ (164,030)
Provision for income taxes - -
---------------- --------------
NET INCOME (LOSS) APPLICABLE TO
COMMON SHARES $ 47,338 $ (164,030)
================ ===============
NET INCOME (LOSS) PER BASIC AND
DILUTED SHARES $ 0.006 $ (0.021)
=============== ===============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 8,222,222 8,000,000
=============== ================
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-2
SIGN MEDIA SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
2004 2003
-------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 47,338 $ (164,030)
------------- -----------
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities
Depreciation 4,500 2,363
Changes in assets and liabilities
(Increase) decrease in accounts receivable 24,949 (8,574)
(Increase) in inventory (8,283) (425)
Decrease in prepaid expenses and other assets 55,144 -
Increase in accounts payable and accrued expenses 15,380 16,685
Assets received for stock - 55,702
-------------- ----------
Total adjustments 91,690 65,751
-------------- ----------
Net cash provided by (used in)
operating activities 139,028 (98,279)
-------------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of property and equipment (12,697) (56,444)
-------------- ----------
Net cash (used in) investing activities (12,697) (56,444)
-------------- ----------
CASH FLOWS FROM FINANCING ACTIVITES
Proceeds (payments) from long-term debt,
net of current portion (49,402) 13,702
Payments to officers/stockholders - (5,889)
Proceeds (payments) to related parties 25,552 112,154
Contribution of additional paid in capital - 29,937
------------- -----------
Net cash provided by (used in) financing activities (23,850) 149,904
------------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 102,491 (4,819)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 47,068 5,138
------------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 149,559 $ 319
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest expense $ (92) $ (5,127)
============= ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-3
SIGN MEDIA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
The condensed unaudited interim financial statements included
herein have been prepared by Sign Media Systems, Inc. (the
"Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the
"SEC"). Certain information and footnote disclosures normally
included in the financial statements prepared in accordance
with accounting principles generally accepted in the United
States of America have been condensed or omitted as allowed by
such rules and regulations, and the Company believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated
financial statements be read in conjunction with the December
31, 2003 audited financial statements and the accompanying
notes thereto. While management believes the procedures
followed in preparing these condensed financial statements are
reasonable, the accuracy of the amounts are in some respects
dependent upon the facts that will exist, and procedures that
will be accomplished by the Company later that year.
The management of the Company believes that the accompanying
unaudited condensed consolidated financial statements contain
all adjustments (including normal recurring adjustments)
necessary to present fairly the operations and cash flows for
the periods presented.
The Company restated the March 31, 2004 financial statements
by restating the December 31, 2003 deficit (see Note 9).
The Company began business as Go! Agency LLC, a Florida
Limited Liability Company ("Go Agency"). Go Agency was formed
in April 2000, principally to pursue third party truck side
advertising. The principal of Go Agency invested approximately
$857,000 in Go Agency pursuing this business. It became
apparent that a more advanced truck side mounting system would
be required and that third party truck side advertising alone
would not sustain an ongoing profitable business. Go Agency
determined to develop a technologically advanced mounting
system and focused on a different business plan.
F-4
SIGN MEDIA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2004 AND 2003
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
The Company was incorporated on January 28, 2002 as a Florida
corporation. Upon incorporation, an officer of the Company
contributed $5,000 and received 1,000 shares of common stock
of the Company. Effective January 1, 2003, the Company issued
7,959,000 shares of common stock in exchange of $55,702 of net
assets of GO! Agency, LLC, a Florida limited liability company
("Go Agency"), a company formed on June 20, 2000, as E Signs
Plus.com, LLC., a Florida limited liability company. In this
exchange, the Company assumed some debt of Go Agency and the
exchange qualified as a tax free exchange under IRC Section
351. The net assets received were valued at historical cost.
The net assets of Go Agency that were exchanged for the shares
of stock were as follows:
Accounts receivable $30,668
Fixed assets, net of depreciation 112,214
Other assets 85,264
Accounts payable (29,242)
Notes payable (27,338)
Other payables (115,864)
---------
Total $55,702
=======
Go Agency was formed to pursue third party truck side
advertising. The principal of Go Agency invested approximately
$857,000 in Go Agency pursuing this business. It became
apparent that a more advanced truck side mounting system would
be required and that third party truck side advertising alone
would not sustain an ongoing profitable business. Go Agency
determined to develop a technologically advanced mounting
system and focused on a different business plan. Go Agency
pre-exchange transaction was a company under common control of
the major shareholder of SMS. Post-exchange transactions have
not differed. Go Agency still continues to operate and is
still under common control.
Go Agency and the Company developed a new and unique truck
side mounting system which utilizes a proprietary cam lever
technology which allows an advertising image to be stretched
tight as a drum. Following the exchange, the Company had
7,960,000 shares of common stock issued and outstanding. The
Company has developed and filed an application for a patent on
its mounting systems. The cam lever technology is considered
an intangible asset and has not been recorded as an asset on
the Company's consolidated balance sheet. This asset was not
recorded due to the fact that there was no historic recorded
value on the books of Go Agency for this asset.
On November 17, 2003, the Company entered into a merger
agreement by and among American Powerhouse, Inc., a Delaware
corporation and its wholly owned
F-5
SIGN MEDIA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2004 AND 2003
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
subsidiary, Sign Media Systems Acquisition Company, Inc., a
Florida corporation and Sign Media Systems, Inc. Pursuant to
the merger agreement, Sign Media Systems merged with Sign
Media Systems Acquisition Company with Sign Media Systems
being the surviving corporation. The merger was completed on
December 8, 2003 with the filing of Articles of Merger with
the State of Florida at which time Sign Media Systems
Acquisition ceased to exist and Sign Media Systems became the
surviving corporation. Some time prior to the merger, American
Powerhouse had acquired certain technology for the manufacture
of a water machine in the form of a water cooler that
manufactures water from ambient air. However, American
Powerhouse was not engaged in the business of manufacturing
and distributing the water machine but was engaged in the
licensing of that right to others. Prior to the merger,
American Powerhouse granted a license to Sign Media Systems
Acquisition to use that technology and to manufacture and sell
the water machines. The acquisition of this license was the
business purpose of the merger. As consideration for the
merger, Sign Media Systems issued 300,000 shares of its common
stock to American Powerhouse, 100,000 shares in the year
ending December 31, 2002, and 200,000 shares in the year
ending December 31, 2004. The 300,000 shares of stock were
valued at $1.50 per share based on recent private sales of
Sign Media Systems common stock. There were no other material
costs of the merger. There was and is no relationship between
American Powerhouse and either Sign Media Systems or GO!
AGENCY. The Company recorded this license as an intangible
asset for $400,000 for and subsequently impaired the entire
amount.
The Company has reclassified its March 31, 2004 condensed
consolidated financial statements to reflect certain
reclassifications on the condensed consolidated balance sheet.
These reclassifications had no effect on any income or
expenses for the three months ended March 31, 2004.
Principles of Consolidation
The condensed consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary. All
significant intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated 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 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 those
estimates.
F-6
SIGN MEDIA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2004 AND 2003
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Cost Recognition
Currently, the Company has three primary sources of revenue:
(1) The sale and installation of their mounting system
(2) The printing of advertising images to be inserted on
trucks utilizing the Company's mounting systems.
(3) Third party advertising
The Company's revenue recognition policy for these sources of
revenue is as follows. The Company relies on Staff Accounting
Bulletin Topic 13, in determining when recognition of revenue
occurs. There are four criteria that the Company must meet
when determining when revenue is realized or realizable and
earned. The Company has persuasive evidence of an arrangement
existing; delivery has occurred or services rendered; the
price is fixed or determinable; and collectibility is
reasonably assured. Typically, the Company recognizes revenue
when orders are placed and they receive deposits on those
orders. In regard to the revenue recognition of third party
advertising, the Company recognizes the revenue once they have
completed the task for which the consumer paid.
In addition, the Company offers manufacturer's warranties.
These warranties are provided by the Company and not sold.
Therefore, no income is derived from the warranty itself.
Cost is recorded on the accrual basis as well, when the
services are incurred rather than when payment is made.
Costs of goods sold are separated by components consistent
with the revenue categories. Mounting systems, printing and
advertising costs include purchases made, and payroll costs
attributable to those components. Payroll costs is included
for sales, engineering and warehouse personnel in cost of
goods sold. Cost of overhead is diminimus. The Company's
inventory consists of finished goods, and unassembled parts
that comprise the framework for the mounting system placed on
trucks for their advertising. All of these costs are included
in costs of goods sold for the three months ended March 31,
2004 and 2003.
F-7
SIGN MEDIA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2004 AND 2003
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments and
other short-term investments with an initial maturity of three
months or less to be cash equivalents.
The Company maintains cash and cash equivalent balances at
several financial institutions that are insured by the Federal
Deposit Insurance Corporation up to $100,000.
Property and Equipment
Property and equipment are stated at cost. Depreciation is
computed primarily using the straight-line method over the
estimated useful life of the assets.
Furniture and fixtures 5 years
Equipment 5 years
Trucks 5 years
Advertising
Costs of advertising and marketing are expensed as incurred.
Advertising and marketing costs were $2,733 and $16,309 for
the three months ended March 31, 2004 and 2003, respectively
Fair Value of Financial Instruments
The carrying amount reported in the balance sheets for cash
and cash equivalents, accounts receivable, accounts payable
and accrued expenses approximate fair value because of the
immediate or short-term maturity of these financial
instruments.
Earnings per Share of Common Stock
Historical net income per common share is computed using the
weighted-average number of common shares outstanding. Diluted
earnings per share (EPS) include additional dilution from
common stock equivalents, such as stock issuable pursuant to
the exercise of stock options and warrants.
F-8
SIGN MEDIA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2004 AND 2003
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings per Share of Common Stock (Continued)
The following is a reconciliation of the computation for basic
and diluted EPS:
March 31,
2004 2003
--------- --------
Net income (loss) $ 47,338 $ (164,030)
========= ==========
Weighted-average common shares
outstanding
Basic 8,222,222 8,000,000
Weighted-average common stock
equivalents
Stock options - -
Warrants - -
---------- ---------
Weighted-average common shares
outstanding
Diluted 8,222,222 8,000,000
========= =========
NOTE 3- PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31,
2004 and 2003:
2004 2003
--------- --------
Equipment $ 39,217 $ 18,032
Furniture and Fixtures 35,947 29,552
Transportation Equipment 54,621 8,860
--------- ---------
129,785 56,444
Less: accumulated depreciation 18,534 2,363
--------- ---------
Net Book Value $ 111,521 $ 54,081
========= =========
Depreciation expense for the three months ended March 31, 2004
and 2003 was $4,500 and $2,363, respectively.
F-9
SIGN MEDIA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2004 AND 2003
NOTE 4- COMMITMENTS AND CONTINGENCIES
The Company entered into a lease agreement on November 1, 2002
with Hawkeye Real Estate, LLC, a related entity, to lease
warehouse and office space. The lease expires on December 30,
2007, and provides that SMS pay all applicable sales and use
tax, insurance and maintenance. The total minimum rental
commitments at March 31, 2004 under this lease are as follows:
2004 $ 30,000
2005 30,000
2006 30,000
2007 27,500
--------
$117,500
========
Rent expense for the three months ended March 31, 2004 and
2003 was $11,781, and $8,643, respectively.
NOTE 5- RELATED PARTY TRANSACTIONS
On January 28, 2002, Sign Media Systems, Inc. was formed as
a Florida Corporation but did not begin business operations
until April 2002. Most of the revenue that Sign Media Systems,
Inc. earned was contract work with Go! Agency, LLC., a
Florida limited liability company, a related party. Sign
Media Systems, Inc. would contract Go! Agency, LLC. to
handle and complete jobs. There was no additional revenue or
expense added from one entity to the other.
On January 3, 2003, the Company entered into a loan agreement
with Olympus Leasing Company, a related party, and in
connection therewith executed a promissory note with a future
advance clause in favor of Olympus Leasing, whereby Olympus
Leasing agreed to loan the Company up to a maximum of
$1,000,000 for a period of three years, with interest accruing
on the unpaid balance at 18% per annum, payable interest only
monthly, with the entire unpaid balance due and payable in
full on January 3, 2006. As of March 31, 2004 there was
$265,244 due. Other due to related party advances were
$212,461. Due to related parties totaled $477,705 at March 31,
2004.
NOTE 6- LONG-TERM DEBT
Long-term debt consists of two installment notes with GMAC
Finance. As discussed in Note 1, the Company assumed debt from
Go! Agency as of January 28, 2002. On June 18, 2003, the
Company acquired a truck in the amount of $45,761 financed by
GMAC over a period of 5 years. Monthly payments are $763. The
loan carries no interest charges.
F-10
SIGN MEDIA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2004 AND 2003
NOTE 7- PROVISION FOR INCOME TAXES
The net deferred tax assets in the accompanying condensed
consolidated balance sheets include the following components
at March 31, 2004:
Deferred tax assets $ 172,401
Deferred tax valuation allowance (172,401)
---------
$ -
=========
Due to the uncertainty of utilizing the approximate $630,373
in net operating losses, and recognizing the deferred tax
assets, an offsetting valuation allowance has been
established.
NOTE 8- STOCKHOLDERS' DEFICIT
As of March 31, 2004 and 2003, there were 100,000,000 shares
of common stock authorized.
As of March 31, 2004 and 2003, there were 8,460,000 and
7,960,000 shares of common stock issued and outstanding.
During the three months ended March 31, 2004 the Company had
the following stock transactions:
The company issued 216,000 shares of common stock in
conversion of a liability for stock to be issued in 2003.
NOTE 9- PRIOR PERIOD ADJUSTMENT
During the three months ended March 31, 2004, the Company
issued 216,000 shares of common stock in conversion of a
liability for stock to be issued. This conversion had no
effect on any income or expenses for the three months ended
March 31, 2004. Income was not effected in 2004 for the 2003
changes. Net income remained at $47,338 and EPS at $.006.
Deficit, restated at December 31, 2003 ($554,272)
Net income for the three months ended
March 31, 2004 $47,338
----------
Deficit, March 31, 2004, restated ($506,934)
==========
F-11