· |
we
have right to utilize certain proprietary technology for the manufacture,
design, creation, sale or use of a water cooler (“Water Machine”) which
manufactures distilled water from ambient
air;
|
· |
the
term of the license is in perpetuity;
|
· |
the
territory in which we are allowed to exploit the license is all countries
in the world;
|
· |
the
license in non-exclusive; and
|
· |
we
do not have the right to sublicense the technology to
others.
|
· |
The
term of the agreement is one year and can be renewed by the mutual
agreement of
the parties. The agreement was renewed in 2006 and does not expire
until
December 2007.
|
· |
The
agreement grants Applied Advertising the territory of the United
States of
America and Central America which means that it can sell our products
in
those areas.
|
· |
The
agreement allows Applied Advertising to appoint one or more dealers
in its
territory but only with our consent.
|
· |
The
agreement obligates Applied Advertising to use its best efforts to
actively promote market and sell our products in its
territory.
|
· |
The
agreement obligates Applied Advertising to maintain the formal name
of our
products, with their appropriate trademark, service mark, logo, or
trade
name designations, in all advertising and other printed materials
relating
to our products.
|
· |
The
agreement allows Applied Advertising to purchase our products at
specified
prices but also allows us to change the pricing in out sole discretion
upon fifteen days written notice. We considering our pricing arrangement
with Applied Advertising and all of our other customers to be a trade
secret.
|
Date
|
Name
|
Number
of Shares
|
Consideration
in Dollars
|
January
24, 2007
|
Marcus
Faller
|
150,000
|
Services
75,000
|
February
8, 2007
|
Evelyn
P. Silva
|
300,000
|
Services
37,500
|
Total
|
$112,500(1)
|
2006
|
2005
|
||||||
Total
Revenue
|
$
|
726,812
|
$
|
1,491,854
|
|||
Total
Cost of Goods Sold
|
189,131
|
204,211
|
|||||
Gross
Profit
|
537,681
|
1,287,643
|
|||||
Total
Operating Expenses
|
288,634
|
887,307
|
|||||
Net
Income Before Other Income
(Expense)
|
249,047
|
400,336
|
|||||
Other
Income (Expense)
|
26,998
|
24,672
|
|||||
Income
Before Provision For Income Tax
|
276,045
|
425,008
|
|||||
Provision
For Income Taxes
|
45,007
|
-
|
|||||
Net
Income (Loss) Applicable To
Common
Shares
|
$
|
231,038
|
$
|
425,008
|
|||
Net
Income (Loss) Per Basic And Diluted Shares
|
$
|
0.03
|
$
|
0.05
|
|||
Weighted
Average of Common Shares Outstanding
|
8,508,000
|
8,460,000
|
|||||
Total
Assets
|
$
|
1,217,026
|
$
|
1,040,195
|
|||
Total
Liabilities
|
221,567
|
500,674
|
|||||
Stockholders’
Equity (Deficit)
|
995,459
|
539,521
|
|||||
Total
Liabilities and Stockholders’ Equity (Deficit)
|
$
|
1,217,026
|
$
|
1,040,145
|
AT
DECEMBER 31:
|
2006
|
2005
|
|||||
Current
assets
|
$
|
705,424
|
$
|
27,252
|
|||
Current
liabilities
|
221,567
|
467,909
|
|||||
Working
capital
|
$
|
483,857
|
$
|
(440,657
|
)
|
||
Current
ratio
|
1.46
|
0.06
|
FOR
THE YEARS ENDED DECEMBER 31:
|
2006
|
2005
|
|||||
Net
cash provided by/(used in):
|
|
|
|||||
Operating
activities
|
$
|
(110,434
|
)
|
$
|
1,118,599
|
||
Investing
activities
|
422,157
|
(946,156
|
)
|
||||
Financing
activities
|
(9,848
|
)
|
(176,543
|
)
|
|||
Net
increase (decrease) in cash and cash equivalents
|
$
|
301,875
|
$
|
(4,100
|
)
|
AT
DECEMBER 31:
|
2006
|
2005
|
|||||
Current
assets
|
$
|
705,454
|
$
|
27,252
|
|||
Current
Liabilities
|
$
|
221,567
|
$
|
467,909
|
|||
AT
DECEMBER 31, 2006:
|
|
|
|
|
|
|||||||||||
|
1-30
|
31-60
|
61-90
|
>90
|
TOTAL
|
|||||||||||
TOTALS
|
$
|
0.00
|
$
|
135
|
$
|
0.00
|
$
|
393,700
|
$
|
393,835
|
AT
DECEMBER 31, 2005:
|
|
|
|
|
|
|||||||||||
|
1-30
|
31-60
|
61-90
|
>90
|
TOTAL
|
|||||||||||
TOTALS
|
$
|
(707,565
|
)
|
$
|
681
|
$
|
702,160
|
$
|
4,724
|
$
|
0
|
AT
DECEMBER 31:
|
2006
|
2005
|
|||||
Non-current
assets
|
$
|
511,602
|
$
|
1,012,943
|
|||
Long-term
debt
|
$
|
0.00
|
$
|
32,765
|
AT
DECEMBER 31:
|
2006
|
|
2005
|
|||
Current
debt due to related parties
|
$
|
17,177
|
$
|
8,319
|
||
Long-term
debt due to related parties
|
$
|
-
|
|
$
|
-
|
|
Total
debt due to related parties
|
$
|
17,177
|
$
|
8,319
|
AT
DECEMBER 31:
|
2006
|
2005
|
|||||
Current
portion of long term debt
|
$
|
11,988
|
$
|
18,420
|
|||
Long-term
debt
|
$
|
-
|
32,765
|
||||
Total
debt due to unrelated parties
|
$
|
11,988
|
$
|
51,185
|
AT
DECEMBER 31:
|
2006
|
|
2005
|
|||
Current
portion of debt due to related parties
|
$
|
17,177
|
$
|
8,319
|
||
Long-term
debt due to related parties
|
$
|
-
|
|
-
|
|
|
Current
portion of long term debt due to unrelated parties
|
$
|
11,988
|
18,420
|
|||
Long-term
debt due to unrelated parties
|
$
|
-
|
|
32,765
|
||
Total
Debt
|
$
|
29,165
|
$
|
59,504
|
AT
DECEMBER 31:
|
2006
|
2005
|
|||||
Stockholders’
equity (deficit)
|
$
|
995,459
|
$
|
539,521
|
FOR
THE YEARS ENDED DECEMBER 31:
|
2006
|
2005
|
|||||
Net
cash provided by/(used in):
|
|
|
|||||
Operating
activities
|
$
|
(110,434
|
)
|
$
|
1,118,599
|
||
Investing
activities
|
422,157
|
(946,156
|
)
|
||||
Financing
activities
|
(9,848
|
)
|
(176,543
|
)
|
|||
Net
increase (decrease) in cash and cash equivalents
|
$
|
301,875
|
$
|
(4,100
|
)
|
CONTRACTUAL
OBLIGATIONS
|
TOTAL
CONTRACTUAL
PAYMENT
STREAM
|
2007
|
2008
|
2009
|
2010
|
|||||||||||
Current
portion of long term debt
|
$
|
11,185
|
$
|
11,185
|
-
|
-
|
-
|
|||||||||
Operating
Lease
Obligations
|
$
|
151,020
|
-
|
$
|
50,340
|
$
|
50,340
|
$
|
50,340
|
|||||||
Total
|
$
|
162,205
|
ASSETS
|
|||||||
2006
|
2005
|
||||||
CURRENT
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
304,127
|
$
|
2,252
|
|||
Accounts
receivable, net
|
393,835
|
-
|
|||||
Inventory,
net
|
7,462
|
25,000
|
|||||
705,424
|
27,252
|
||||||
PROPERTY
AND EQUIPMENT - net
|
95,471
|
174,793
|
|||||
OTHER
ASSETS
|
|||||||
Due
from related parties
|
416,131
|
838,150
|
|||||
416,131
|
838,150
|
||||||
|
|||||||
TOTAL
ASSETS
|
$
|
1,217,026
|
$
|
1,040,195
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Current
portion of long-term debt
|
$
|
11,988
|
$
|
18,420
|
|||
Accounts
payable and accrued expenses
|
147,395
|
216,270
|
|||||
Current
portion of debt - related parties
|
17,177
|
8,319
|
|||||
Liability
for stock to be issued
|
-
|
224,900
|
|||||
Income
tax payable
|
45,007
|
-
|
|||||
221,567
|
467,909
|
||||||
LONG-TERM
DEBT - net
of current portion
|
-
|
32,765
|
|||||
TOTAL
LIABILITIES
|
221,567
|
500,674
|
|||||
STOCKHOLDERS'
EQUITY (DEFICIT)
|
|||||||
Common
stock, no par value, 100,000,000 shares authorized
|
|||||||
9,043,267
and 8,460,000 shares issued
|
|||||||
and
outstanding at December 31, 2006 and 2005
|
229,900
|
5,000
|
|||||
Additional
paid-in capital
|
671,700
|
671,700
|
|||||
Retained
earnings (deficit)
|
93,859
|
(137,179
|
)
|
||||
TOTAL
STOCKHOLDERS' EQUITY (DEFICIT)
|
995,459
|
539,521
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
$
|
1,217,026
|
$
|
1,040,195
|
2006
|
2005
|
||||||
REVENUE
|
726,812
|
1,491,854
|
|||||
COSTS
OF GOODS SOLD
|
189,131
|
204,211
|
|||||
GROSS
PROFIT
|
537,681
|
1,287,643
|
|||||
OPERATING
EXPENSES
|
|||||||
Professional
fees and administrative payroll
|
146,262
|
342,545
|
|||||
General
and administrative expenses
|
83,679
|
279,429
|
|||||
Bad
debt expense - net of recovery
|
-
|
207,565
|
|||||
Depreciation
|
58,693
|
57,768
|
|||||
288,634
|
887,307
|
||||||
INCOME
BEFORE OTHER INCOME (EXPENSE)
|
249,047
|
400,336
|
|||||
OTHER
INCOME (EXPENSE)
|
|||||||
Interest
income
|
27,503
|
26,757
|
|||||
Interest
expense
|
(505
|
)
|
(2,085
|
)
|
|||
26,998
|
24,672
|
||||||
INCOME
BEFORE INCOME TAXES
|
276,045
|
425,008
|
|||||
Provision
for income taxes
|
45,007
|
-
|
|||||
NET
INCOME APPLICABLE TO COMMON SHARES
|
$
|
231,038
|
$
|
425,008
|
|||
NET
INCOME PER BASIC AND DILUTED SHARES
|
$
|
0.03
|
$
|
0.05
|
|||
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|||||||
SHARES
OUTSTANDING
|
8,508,606
|
8,406,000
|
Additional
|
Retained
|
||||||||||||||||||||||||
Common
Stock
|
Paid-In
|
Earnings
|
|||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
(Deficit)
|
Total
|
|||||||||||||||||||||
Balance,
January 1, 2005
|
8,460,000
|
$
|
5,000
|
$
|
671,700
|
$
|
(562,187
|
)
|
$
|
114,513
|
|||||||||||||||
Net
income
|
-
|
-
|
-
|
425,008
|
425,008
|
||||||||||||||||||||
Balance,
December 31, 2005
|
8,460,000
|
#
|
5,000
|
#
|
671,700
|
#
|
(137,179
|
)
|
539,521
|
||||||||||||||||
Issuance
of common stock for
|
|||||||||||||||||||||||||
liability
for stock to be issued
|
583,267
|
224,900
|
-
|
-
|
224,900
|
||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
231,038
|
231,038
|
||||||||||||||||||||
Balance,
December 31, 2006
|
9,043,267
|
$
|
229,900
|
$
|
671,700
|
$
|
93,859
|
$
|
995,459
|
2006
|
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
income
|
$
|
231,038
|
$
|
425,008
|
|||
Adjustments
to reconcile net income
|
|||||||
to
net cash provided by (used in) operating
activities:
|
|||||||
Depreciation
|
58,693
|
57,768
|
|||||
Provision
for losses on accounts receivable
|
-
|
707,565
|
|||||
Changes
in assets and liabilities:
|
|||||||
(Increase)
in accounts receivable
|
(393,835
|
)
|
(156,987
|
)
|
|||
Decrease
in inventory
|
17,538
|
60,572
|
|||||
(Increase)
decrease in prepaid expenses and other current assets
|
-
|
4,000
|
|||||
Increase
(decrease) in accounts payable and accrued expenses
|
(23,868
|
)
|
20,673
|
||||
Total
adjustments
|
(341,472
|
)
|
693,591
|
||||
Net
cash provided by (used in) operating activities
|
(110,434
|
)
|
1,118,599
|
||||
|
|||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Acquisition
of property and equipment
|
138
|
(108,006
|
)
|
||||
Increase
in interest receivable - related party
|
(27,500
|
)
|
(26,650
|
)
|
|||
Reduction
from related parties
|
449,519
|
551,918
|
|||||
Payments
to related parties
|
-
|
(1,363,418
|
)
|
||||
Net
cash provided by (used in) investing activities
|
422,157
|
(946,156
|
)
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Increase
(decrease) in liability for stock to be issued
|
-
|
24,900
|
|||||
Payments
on long-term debt
|
(18,706
|
)
|
(18,419
|
)
|
|||
Increase
(decrease) on debt-related party
|
8,858
|
(183,024
|
)
|
||||
Net
cash (used in) financing activities
|
(9,848
|
)
|
(176,543
|
)
|
|||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
301,875
|
(4,100
|
)
|
||||
|
|||||||
CASH
AND CASH EQUIVALENTS - BEGINNING OF YEAR
|
2,252
|
6,352
|
|||||
|
|||||||
CASH
AND CASH EQUIVALENTS - END OF YEAR
|
$
|
304,127
|
$
|
2,252
|
|||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|||||||
Cash
paid during the year for interest
|
$
|
505
|
$
|
2,085
|
|||
Debt
reduced to trade in on vehicle
|
$
|
20,491
|
$
|
-
|
(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; and
|
(3) |
Third
party advertising.
|
Balance
at
|
Charged
to
|
Balance
at
|
|||||||||||
Beginning
of
|
Costs
and
|
End
of
|
|||||||||||
Year
|
Expenses
|
Deductions
|
Year
|
||||||||||
Year
ended
|
|||||||||||||
December
31, 2005
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
Year
ended
|
|||||||||||||
December
31, 2005
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
December
31,
|
|||||||
2006
|
2005
|
||||||
Net
income
|
$
|
231,038
|
$
|
425,008
|
|||
Weighted-average
common shares outstanding
|
|||||||
Basic
|
8,508,606
|
8,406,000
|
|||||
Weighted-average
common stock equivalents
|
|||||||
Stock
options
|
-
|
-
|
|||||
Warrants
|
-
|
-
|
|||||
Weighted-average
common shares outstanding
|
|||||||
Diluted
|
8,508,606
|
8,406,000
|
2006
|
2005
|
||||||
Accounts
receivable
|
$
|
573,835
|
$
|
707,565
|
|||
Less
allowance for doubtful accounts
|
(180,000
|
)
|
(707,565
|
)
|
|||
Total
accounts receivable
|
$
|
393,835
|
$
|
-
|
2006
|
2005
|
||||||
Equipment
|
$
|
125,465
|
$
|
125,327
|
|||
Furniture
and Fixtures
|
112,022
|
112,022
|
|||||
Transportation
Equipment
|
24,621
|
54,621
|
|||||
262,108
|
291,970
|
||||||
Less:
accumulated depreciation
|
166,637
|
117,177
|
|||||
Net
Book Value
|
$
|
95,471
|
$
|
174,793
|
Current:
|
2006
|
2005
|
|||||
Federal
|
$
|
37,407
|
$
|
-
|
|||
State
|
7,600
|
-
|
|||||
Total
Current Tax
|
45,007
|
-
|
|||||
Deferred:
|
|||||||
Federal
|
-
|
-
|
|||||
State
|
-
|
-
|
|||||
Total
Deferred Tax
|
-
|
-
|
|||||
Total
provision for income taxes
|
45,007
|
0
|
Annual
Compensation
|
Long
Term
Compensation
|
||||||||||||||||||
Name
and Principal
Position
|
Year
|
Salary
$
|
Bonus
$
|
Other
Annual Compensation $
|
Stock
Grants #
|
All
Other
Compensation
$ (1)
|
|||||||||||||
Antonio
F. Uccello, III
Chief
Financial
Officer
|
2006
|
125,000
|
0
|
0
|
0
|
11,194
|
|||||||||||||
Andrei
A. Troubeeg
Vice
President,
Engineering
|
2006
|
41,200
|
0
|
0
|
11,721
|
Title
of Class
|
Name
and Address
Of
Beneficial Owner
|
Amount
and Nature
Of
Beneficial Owner
|
Percent
of Class
|
Common
Stock, No
Par
Value
|
Antonio
F. Uccello, III(1)
2100
19th
Street
Sarasota,
FL 34234
|
4,059,600(1)
|
45%(1)
|
Common
Stock, No
Par
Value
|
Abraham
Uccello(1)
637
Mecca Dr.
Sarasota,
FL 34234
|
2,388,000(1)
|
26%(1)
|
Common
Stock, No
Par
Value
|
Salvatore
Uccello(1)
6527
Waterford Circle
Sarasota,
FL 34238
|
716,400(1)
|
9%(1)
|
Common
Stock, No
Par
Value
|
Roger
P. Nelson(1)
14
Giovanni Drive
Waterford,
CT 06385
|
796,000
|
9%(1)
|
Totals
for Class as a
Whole
|
7,960,000(1)
|
97%
|
(1)
Title
of Class
|
(2)
Name
and Address
Of
Beneficial Owner
|
(3)
Amount
and Nature
Of
Beneficial Owner
|
(4)
Percent
of Class
|
Common
Stock, No
Par
Value
|
Antonio
F. Uccello, III(1)
2100
19th
Street
Sarasota,
FL 34234
|
4,059,600(1)
|
45%(1)
|
Common
Stock, No
Par
Value
|
Stephen
R. MacNamara(2)
1071
Meyers Park Drive
Tallahassee,
FL 32301
|
30,000
|
.003%
|
Common
Stock, No
Par
Value
|
Thomas
Bachman(3)
2960
S. McCall Road, Ste 210
Inglewood,
FL 34224
|
-
|
-
|
Common
Stock, No
Par
Value
|
Andrei
A. Troubeev(4)
7736
37th
Court E.
Sarasota,
FL
|
-
|
-
|
Common
Stock, No
Par
Value
|
Charles
A. Pearson, III(5)
6138
Turnbury Park Dr.
Apt.
6301
Sarasota,
FL 34234
|
-
|
-
|
Totals
for Class as a
Whole
|
4,089,600
|
45%
|
Exhibit
Number
|
Description
of Exhibit
|
3.1
|
Amended
Articles of Incorporation of Sign Media Systems, Inc. Incorporated
by
reference from our Form 10-SB filed as of May 4, 2004.
|
3.2
|
By-Laws
of Sign Media Systems, Inc. Incorporated by reference from our Form
10-SB
filed as of May 4, 2004.
|
4.1
|
Specimen
Certificate of the Common Stock of Sign Media Systems, Inc. Incorporated
by reference from our Form 10-SB filed as of May 4,
2004.
|
10.1
|
Agreement
and Plan of Merger Among American Powerhouse, Inc., Sign Media Systems
Acquisition Company, Inc. and Sign Media Systems, Inc. Incorporated
by
reference from our Form 10-SB/A Third Amendment filed as of February
9,
2005.
|
10.2
|
Distribution
Agreement between Sign Media Systems, Inc. and Applied Advertising
Network, LLC. Incorporated
by reference from our Form 10-SB/A Third Amendment filed as of February
9,
2005.
|
10.3
|
Promissory
Note and Loan Agreement between GO! AGENCY, LLC and Sign Media Systems,
Inc. Incorporated
by reference from our Form 10-SB/A Third Amendment filed as of February
9,
2005.
|
10.4
|
Promissory
Note and Loan Agreement between Olympus Leasing Company and Sign
Media
Systems, Inc. Incorporated
by reference from our Form 10-SB/A Third Amendment filed as of February
9,
2005.
|
10.5
|
License
Agreement for the acquisition of technology. Incorporated by reference
from our Form 10-SB/A Fourth amendment filed as of April 1,
2005.
|
10.6
|
Contribution
Agreement. Incorporated by reference from our Form 10-SB/A Fourth
amendment filed as of April 1, 2005.
|
14.1
|
Code
of Ethics. Incorporated by reference from our Form 10-SB filed as
of May
4, 2004.
|
16.4
|
Letter
on change in certifying accountant. Incorporated
by reference from our Form 10-SB/A Sixth Amendment filed as of September
9, 2005.
|
21.
|
Our
Subsidiaries. Incorporated by reference from our Form 10-SB filed
as of
May 4, 2004.
|
31.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
31.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
2006
|
2005
|
||||||
Audit
Fees
|
$41,000
|
$
23,000
|
|||||
Audit
Related Fees
|
$
|
-0-
|
$
|
-0-
|
|||
Tax
Fees
|
$
|
-0-
|
$
|
-0-
|
|||
All
Other Fees
|
$
|
-0-
|
$
|
-0-
|