U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
         OF 1934

         For the fiscal year ended July 29, 2006
                                   -------------

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM _______________ TO
         _________________.

                         Commission file number 0-26617

                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                   -------------------------------------------
                 (Name of Small Business Issuer in its Charter)

                   Florida                                  65-0794113
                   -------                                  ----------
     (State or Other Jurisdiction of                    (I.R.S. Employer
      Incorporation or Organization)                   Identification No.)

               3391 S. E. 14th Avenue, Port Everglades, FL 33316
               -------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                 (954) 523-8985
                                 --------------
                           (Issuer's Telephone Number)

              Securities registered under Section 12(b) of the Act:

          Title of Each Class        Name of Each Exchange on Which Registered
          --------------------------------------------------------------------

                                      None

         Securities registered under Section 12(g) of the Exchange Act:

          Title of Each Class        Name of Each Exchange on Which Registered
          --------------------------------------------------------------------

                                  Common Stock

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act [ ]

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

State issuer's revenues for its most recent fiscal year. $15,150,389

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. ($0.18 on October 4, 2006) $1,352,326.

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: October 20, 2006: 18,863,861 Shares
of Common Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

- None -

Transitional Small Business Disclosure Format (Check One).   Yes [ ]    No [X]
<PAGE>
<TABLE>
<CAPTION>



                                                 Table of Contents


                                                                                                          Page
                                                                                                          ----
<S>           <C>                                                                                         <C>
Item 1.       Description of Business............................................................          3

Item 2.       Description of Property............................................................          7

Item 3.       Legal Proceedings..................................................................          8

Item 4        Submission of Matters to a Vote of Security Holders................................          8

PART II

Item 5.       Market for Common Equity, Related Stockholder Matters
              and Small Business Issuer Purchases of Equity Securities...........................          8

Item 6.       Management's Discussion and Analysis or Plan of Operation..........................          9

Item 7.       Financial Statements...............................................................          15

Item 8.       Changes in and Disagreements With Accountants
              on Accounting and Financial Disclosure.............................................          16

Item 8A.      Controls and Procedures............................................................          16

Item 8B.      Other Information..................................................................          16

PART III

Item 9.       Directors, Executive Officers, Promoters and Control Persons;
              Compliance with Section 16(a) of the Exchange Act..................................          16

Item 10.      Executive Compensation.............................................................          18

Item 11.      Security Ownership of Certain Beneficial
              Owners and Management and Related Stockholder Matters..............................          22

Item 12.      Certain Relationships and Related Transactions.....................................          23

Item 13.      Exhibits...........................................................................          24

Item 14.      Principal Accountant Fees and Services.............................................          25
</TABLE>














                                       2
<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Business

         Jupiter Marine International Holdings, Inc. (JMIH), a Florida
corporation, was incorporated on May 19, 1998. On May 26, 1998, JMIH acquired
all of the outstanding shares of common stock of Jupiter Marine International,
Inc. (JMI), a boat manufacturing company, which was incorporated under the laws
of the State of Florida on November 7, 1997. JMIH and JMI will sometimes be
collectively referred to as the "Company". The Company's principal offices and
manufacturing facilities are located in Fort Lauderdale, Florida. The Company's
web site address is www.jupitermarine.com.

         The Company designs, manufactures and markets a diverse mix of high
quality sport fishing boats under the Jupiter name. The product line currently
consists of five models:

         29' Forward Seating Center Console
         31' Open Center Console
         31' Cuddy Cabin
         31' Forward Seating Center Console
         38' Forward Seating Center Console

Products

         The list prices for the Jupiter 38' model range from $223,850 to
$269,540. The Jupiter 31 models range from $156,340 to $162,350 and the Jupiter
29 ranges from $139,990 to $144,140. Optional equipment specified by the
customer is additional. The Company provides each boat purchaser with a limited
lifetime hull structure warranty and a 12-month warranty on any other part
manufactured by the Company.

         38' Forward Seating Center Console
         ----------------------------------

         The 38' has been developed to satisfy boaters who require a larger
vessel which incorporates the performance features, and comforts of the 31'. The
Eurostyle motor well is designed to accommodate either twin or triple outboard
installations. The wide beam, centerline fuel tanks and ample freeboard aft make
this an extremely stable boat.

         31' Open Center Console
         -----------------------

         The 31' Open Center Console is designed for the more serious fisherman
and provides more open angling space and fuel capacity than our other models.
Fishing amenities include optional dual station tower, dual livewells and
twin-oversized fishboxes. This model includes a private stand up compartment
with 6'2" headroom containing a vanity with sink and shower and room for
optional marine head.

                                        3
<PAGE>
         31' Cuddy Cabin Center Console
         ------------------------------

         The 31' Cuddy Cabin fits the perfect balance between fish and fashion.
The 31' Cuddy is designed with the family fisherman in mind. The spacious
forward cabin has room for get-away weekends or overnighting. Topside, there is
ample room for fishing and generous seating areas for cruising. A fishbox,
baitwell, rod holders and rod storage are standard, as is the large stand-up
console with room for an optional marine head.

         31' Forward Seating Center Console
         ----------------------------------

         The 31' Forward Seating model is designed for serious anglers who also
need the additional seating for family and friends when cruising or
entertaining. The U-shaped, cushioned forward area provides comfortable seating
for six adults and is roomy enough for lounging and sunbathing.

         29' Forward Seating Center Console
         ----------------------------------

         The 29' Forward Seating model is a completely new design, conceived by
the Jupiter staff and designed with the assistance of renowned naval architect
Donald Blount. The 29' was developed for those boaters who desire the
performance, features and comforts for which Jupiter's are known in a midsize
package. Powered by twin 250 horsepower outboards, the 29' caters to the ardent
fisherman with standard items such as walk-through transom door, rod storage
lockers and fishboxes. The standard rocket launcher/tackle center features a
45-gallon stand up livewell, fresh water sink and shower, tackle storage,
cushions and footrest. There is ample room in the in the step-down center
console for a marine toilet.

Manufacturing

Facilities
----------

         The Company's manufacturing plants are set up with full-length assembly
lines. Each line operates at a rate that is determined by sales demand. It is
Management's intent that each assembly line run at a consistent line rate so
that the workstations become repetitive and components can be assembled in
quantity at a most efficient rate. A line rate can generally be increased or
decreased by simply adding or subtracting workers and material on the line.
Construction of a Jupiter outboard model, depending on size, takes approximately
four to six weeks to complete.

         The Company built 83 boats at its Ft. Lauderdale facility during fiscal
year 2006, which was approximately full capacity. The Company added additional
manufacturing capacity when it opened its Palmetto manufacturing facility in
February 2006. Ten boats were built at this facility from February 2006 through
July 29, 2006. When this facility becomes fully operational it will have the
capacity to build in excess of 100 boats per year. Additional manpower,
equipment and tooling is required. Management believes the Palmetto facility
will be fully operational by October 2007.

                                       4
<PAGE>
Production
----------

         The first phase of manufacturing involves creating the hulls and decks
of the boats. This is accomplished by the hand "laying-up" (taking sheets of
fiberglass material and laying them in place along the bottom and up the hull of
a mold) of high quality resins and fiberglass material over a foam core in the
molds. Fiberglass is a fabric type material that is made of fiberglass strands
and distributed in rolls, much the same as cotton fabrics. There are many types
and styles of fiberglass cloth, the most common being bi-directional, which
means the structural strands of material are woven in two directions normally at
right angles to each other. Tri-directional fiberglass is basically the same
material as bi-directional fiberglass with the difference being that the
structural strands of fiberglass are woven or knitted in three different
directions in a variety of combinations. This procedure and components combine
to create a composite structure with strong outer and inner skins with a
thicker, lighter core in between. The laying-up of fiberglass by hand, rather
than using chopped fiberglass and mechanical applicators, results in a more
uniform consistency and superior strength and appearance.

         During the second phase of manufacturing, the fuel tanks and inner
liner (or deck), which is made of the same material as the hull, are installed
in the hull. Decks are bonded to the hulls using bonding agents, screws and
fiberglass to achieve a strong, unitized construction.

         The third phase involves installing the console, wiring, electrical
components, various accessories and engines. The final segment involves
installing custom accessories, upholstery, seating, electronics and navigational
aids.

Design

         The Company's deep-v hulls are specifically designed to perform at high
speeds in offshore sea conditions, while providing their passengers a smooth,
comfortable and dry ride. There is no lean or cavitation (vibration and
inefficiencies caused by boat propeller slippage occurring when a boat propeller
does not have solid contact with the water) in a turn.

          Performance characteristics result from the "posi-stern" hull design,
developed by JMI, which reduces drag, planes faster, turns sharper, and
increases fuel economy. This hull design, combined with stern lifting strakes,
creates a variable dynamic lift that provides a level, stable, and soft ride.

         The additional increase in stern lift balances the hull on its lines
and allows the boat to raise on plane very quickly without a loss of visibility
from the helm. The resulting running angle allows the bow to cut through the
water at a sharper angle, which results in deflecting spray out, not up and for
a softer and drier ride that reduces pounding or hopping commonly associated
with boats.

         Design and tooling for new boat models and improvements to existing
models is an integral part of the Company's business and will be ongoing. Time
involved will be dependent on the magnitude of the project and could range from

                                       5
<PAGE>
three to twelve months. The anticipated cost in planning and designing a new
boat is approximately $500,000. It is anticipated that the costs of these
projects will be funded with additional financing as well as from cash flows
from operations.

JMI Sales and Marketing

         JMI's marketing efforts continues to focus on Carl Herndon's name and
reputation in the boat manufacturing industry. Mr. Herndon has over 30 years of
marine experience. His background includes building high quality boats ranging
in length from 16' up to 80' in length and serving as the chief executive
officer of Blackfin Yacht Corporation and Bertram Yachts, two highly regarded
companies within the marine industry. In addition to his boat building
expertise, Herndon has served as the President of the Marine Industries
Association of South Florida, was appointed to the Boating Advisory Council by
Florida's Governor, has served on numerous committees for the National Marine
Manufacturers Association, and has lobbied in Washington, DC on behalf of the
marine industry.

         JMI markets its product lines in nationally circulated magazines and
trade publications including Boating Magazine, Sports Fishing, Florida
Sportsman, Motor Boating and Saltwater Sportsman. JMI intends to attend most
major boat shows and exhibitions within its market area, as well as sponsoring
boats in selected fishing tournaments.

         The marketing of boats to retail customers is the direct responsibility
of authorized dealers, whose efforts are supplemented by the Company through
advertising in boating magazines and participation in boat shows. The Company`s
dealers are located in the United States along the East Coast and Gulf of
Mexico. These dealers are not exclusive to the Company and may carry the boats
of other companies. The Company uses discretion in locating new dealers in an
effort to protect the interests of the existing dealers. The Company normally
does not manufacture boats for inventory. Most boats are pre-sold to a dealer
when entering the production line. The Company currently has agreements with 10
boat dealers. The Company is in the process of seeking additional qualified boat
retailers to act as dealers.

         The Company sells all of its boats through retail dealers with payment
due at time of delivery. However, approximately 52% of Company shipments are
made pursuant to commercial dealer floor plan financing programs. Under these
arrangements, a dealer establishes lines of credit with one or more, Company
approved third-party lenders for the purchase of inventory. When a dealer
purchases a boat pursuant to a floor plan arrangement, it draws against its line
of credit and the lender pays the invoice cost of the boat directly to the
Company usually within five days.

         The Company has agreed to repurchase boats with unencumbered titles
from an approved third-party lender, which have been repossessed from a dealer
and returned to the Company in new or like new condition. Since its inception
and through July 29, 2006, the Company has not been required to repurchase any
boats. However, the Company is contingently liable for approximately $1,938,532

                                       6
<PAGE>
under terms of these agreements as of July 29, 2006. Except as noted above, the
Company has no other obligation to repurchase boats from its dealers.

Competition

         The market for sport fishing boats is extremely competitive. The
Jupiter line competes directly with many other manufacturers in its market
segment including but not limited to: Intrepid Powerboats, Inc., Contender
Boats, Inc., Grady-White Boats, Pursuit (a Division of S2 Yachts), and
Regulator.

Employees

         Gevity HR (Gevity) has been engaged by JMIH to provide all personnel
and human resource management services. The Company employs approximately 73
full-time personnel at its Ft. Lauderdale facility, including 12 administrative
and executive personnel and 47 at its Palmetto facility, including 2
administrative and executive personnel. The agreement with Gevity may be
terminated upon 30 days written notice. Management believes its relationship
with its employees is good and does not foresee any difficulties in hiring
additional employees.

ITEM 2.  DESCRIPTION OF PROPERTY

         The Company leases a 32,140 square foot facility located at 3391 S.E.
14th Avenue, Fort Lauderdale, Florida for its Ft. Lauderdale boat manufacturing
operation and executive offices. The Company leases the facility from Carl
Herndon, the Company's President and Chief Executive Officer. The lease was
renewed on July 31, 2006 for an additional three years or through July 2009. The
renewed lease requires the Company to pay initial monthly lease payments of
$18,356.44 per month plus applicable real estate and sales taxes. The lease
payments are subject to a 5% annual increase.

         Three additional buildings of 6,250, 3,240 and 5,000 square feet, which
are located adjacent to the Fort Lauderdale manufacturing facility, are leased
from an independent lessor. The monthly rent for these buildings is $4,194,
$2,542 and $3,276. Two of theses leases expire on July 31, 2008. The other lease
expires on September 30, 2008.

         On December 6, 2005, the Company entered into a lease with Carl
Herndon, the Company's President and Chief Executive Officer for its Palmetto
boat manufacturing facility located at 1103 12th Avenue East, Palmetto, Florida
34221 consisting of three buildings totaling 53,648 square feet. The term of the
lease is for five years with three additional renewal periods of five years
each. Landlord may terminate the lease prior to the commencement of any renewal
periods. The lease requires the Company to pay initial monthly lease payments of
$30,700.00 per month plus applicable real estate and sales taxes. The lease
payments are subject to a 5% annual increase. The Company has a "right of first
refusal" to purchase the facility in the event the facility is sold during the
term of the agreement.

                                       7
<PAGE>
ITEM 3.  LEGAL PROCEEDINGS

         There are no significant material legal proceedings filed, or to the
Company's knowledge, threatened against the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market for Common Equity

         Effective July 28, 2004, the Company's common stock is quoted on the
Over the Counter Bulletin Board (OTCBB) under the symbol "JMIH". The following
table sets forth the high and low bid quotations for the Company's common stock
as traded on the OTCBB for the calendar year periods indicated. The Company's
common stock is thinly traded. On October 4, 2006 the closing bid price of the
Company's common stock was $.18. Quotations, as supplied by the OTCBB, reflect
prices between dealers, do not include retail mark-ups, markdowns, commissions
and may not necessarily represent actual transactions.

Calendar Period                                  High             Low
---------------                                  ----             ---

Quarter ended September 30, 2004                 $.35             $.14
Quarter ended December 31, 2004                  $.36             $.28
Quarter ended March 31, 2005                     $.43             $.27
Quarter ended June 30, 2005                      $.33             $.25
Quarter ended September 30, 2005                 $.32             $.26
Quarter ended December 31, 2005                  $.225            $.225
Quarter ended March 31, 2006                     $.29             $.29
Quarter ended June 30, 2006                      $.24             $.24
Quarter ended September 30, 2006                 $.205            $.17

         As of the date of this report there are approximately 100 holders of
record of the Company's common stock.

         The Company has never paid cash dividends on its common stock. The
Company presently intends to retain future earnings, if any, to finance the
expansion of its business and does not anticipate that any cash dividends will
be paid in the foreseeable future. The future dividend policy will depend on the
Company's earnings, capital requirements, expansion plans, financial condition
and other relevant factors. The Company has paid stock dividends on shares of
its preferred stock of which no shares of preferred stock are currently
outstanding.

                                       8
<PAGE>
Securities Authorized for Issuance Under Equity Compensation Plans

         The table below provides information as of July 29, 2006, pertaining to
all compensation plans under which equity securities of the Company are
authorized for issuance: All outstanding options were issued under the Company's
2004 Management and Director Equity Incentive and Compensation Plan, which is
summarized within the notes to the Company's financial statements contained
herein.
<TABLE>
<CAPTION>

                                                                                         Number of securities
                                     Number of securities                               remaining available for
                                       to be issued upon         Weighted-average        future issuance under
                                          exercise of            exercise price of        equity compensation
                                     outstanding options,      outstanding options,   plans (excluding securities
                                      warrants and rights       warrants and rights    reflected in column (a))
                                              (a)                        (b)                      (c)
                                     --------------------      --------------------   ---------------------------
<S>                                      <C>                           <C>                       <C>
Equity compensation plans
   approved by security holders          3,300,000                     $.25                      1,800,000

Equity compensation plans not
   approved by security holders                ---                     ----                           None

         Total                           3,300,000
</TABLE>
Related Stockholder Matters

         Information relating to all equity securities of the Company sold by
the Company during fiscal year ended July 29, 2006 has been previously reported
under Form 10-QSB and Form 8-K filed during the period covered by this report.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

         Management's discussion and analysis contains various "forward-looking
statements" within the meaning of the Securities and Exchange Act of 1934. Such
statements consist of any statement other than a recitation of historical fact
and can be identified by the use of forward-looking terminology such as "may",
"expect", "anticipate", "estimate" or "continue" or use of negative or other
variations or comparable terminology.

         Management cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those contained in the forward-looking statements, that these forward-looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements.

                                       9
<PAGE>
Plan of Operations

         The Company plans to grow the business by the addition of new features
on present models and the introduction of new models. The Company would consider
an acquisition candidate if their products would complement those offered by the
Company and the result would enhance the service level provided by the Company.
There are no discussions with any potential candidates at this time, nor has the
Company identified any acquisition candidates.

         The effects of higher fuel prices, higher interest rates, increases in
costs of other raw materials and lower consumer confidence may contribute to a
slow down of the economy, which may temper our sales growth. While we have had
limited success in controlling our operational expenses we continue to examine
ways to reduce costs on a going-forward basis, as a public company we are
constantly faced with increasing costs and expenses to comply with SEC reporting
obligations. We may be required in fiscal 2007 to comply with the new annual
internal control certification pursuant to Section 404 of the Sarbanes-Oxley Act
of 2002 and the related SEC rules. We expect that these and other compliance
costs of a public company will increase significantly. In addition, our stock
has been historically been, and continues to be, relatively thinly traded,
providing little liquidity for our shareholders. As result of the foregoing, we
have, from time-to-time considered, and expect from time-to-time to continue to
consider strategic alternatives to maximize shareholder value.

Results of Operations

Net Sales
---------

         The Company's net sales for the fiscal year ended July 29, 2006 were
$15,150,389 an increase of $3,687,154 (or 32.2%) as compared to $11,463,235 for
the fiscal year ended July 30, 2005. The Palmetto facility contributed
approximately $1,200,000 to this sales increase.

          Dealer inventory at July 29, 2006 was slightly less than a two-month
supply compared to about a one month supply at July 30, 2005. This increase is
attributable to a slow down in retail sales. Order backlog was at approximately
two months at July 29, 2006 compared to six months at July 30, 2005. Order
backlog since July has continued to deteriorate to approximately one month. The
marine industry has recently been experiencing a softening in sales with some
major companies reporting production cuts. We continually monitor activity at
our dealerships and will, if necessary, adjust production to consumer demand.

         The average selling price per boat for fiscal year 2006 was
approximately $164,000 compared to $128,000 during fiscal year 2005. 92 boats
were sold during fiscal year 2006 as compared to 88 boats in fiscal year 2005.
The introduction of the new 38' in to the product line contributed to the
average selling price increase as well as the overall sales increase.


                                       10
<PAGE>
         The Company has been able to offset increased cost of materials by,
among other things, raising selling prices without sacrificing unit sales.
However, there can be no assurances that selling prices can continue to increase
in the future without a unit sales drop off. Additionally, the effects of higher
fuel prices and lower consumer confidence may contribute to a slow down of the
economy, which may temper our sales growth trends.

Cost of Sales
-------------

         Cost of sales for the year ended July 29, 2006 was $11,458,709
resulting in $3,691,680 of gross profit or 24.4% of net sales. For last fiscal
year ended July 30, 2005 cost of sales was $8,594,446 and gross profit was
$2,868,789 or 25.0% of net sales. The increase in cost of sales is directly
attributable to the increase in net sales. Inefficiencies, primarily labor,
associated with the Palmetto operation negatively impacted gross margin by
approximately 1.8%.

         While there has been an increase in the cost of raw materials such as
petroleum based resin, the Company has partially offset the increase with (1)
selling price increases, (2) seeking out less expensive alternative materials
and raw material sources without sacrificing quality, (3) improved manufacturing
efficiencies, and (4) better utilization of overhead. Although the Company has
been able to offset some of the increased cost of raw materials in the past,
there can be no assurance that the Company will be able to do so in the future.

Operating Expenses
------------------

         Selling and marketing expenses were $511,706 or 3.4% of net sales, for
the fiscal year ended July 29, 2006 compared to $485,820 or 4.2% of net sales
for the fiscal year ended July 30, 2005, an increase of $25,886. The Company was
present at the same boat shows in fiscal year 2006 as it was in fiscal year 2005
however expenses were down by approximately $27,000. Advertising expenditures
increased by approximately $14,000. Salaries increased by approximately $34,000
due to normal yearly increases, new employees hired for the Palmetto facility,
the addition of a new customer service representative and not accruing bonuses
for fiscal year 2006. The Company also added a vice president of engineering and
an inventory control special during the year. Travel and related expenses were
approximately the same.

         General and administrative expenses were $ 1,883,715 or 12.4% of net
sales, for the fiscal year ended July 29, 2006 compared to $1,423,899 or 12.4%
of net sales, for the fiscal year ended July 30, 2005, an increase of $ 459,816.
During the fourth quarter of fiscal year 2006 the Company adopted the provision
of Financial Accounting Standards No. 123 (SFAS No. 123R), Share-Based Payment.
As a result of adopting this accounting pronouncement the Company recorded
$118,813 of compensation costs from employee stock options that vested in fiscal
year 2006. In conjunction with new employment agreements the Company issued its
chief executive officer and chief financial officer 500,000 shares and 300,000
shares respectively of its shares of common stock. Additionally the Company

                                       11
<PAGE>
issued 200,000 shares of its common stock to its outside director. These
transactions were recorded as an administrative expense in the amount of
$190,000. No management incentive bonuses were accrued for fiscal year 2006.
Employee benefit expenses, primarily health insurance, and general insurance
were up compared to last fiscal year by approximately $50,000 and $76,000
respectively, due to standard rate increases.

         The Company incurred approximately $475,276 in cost related to the
start up of the Palmetto facility prior to commencing production.

Other Income (Expense)
----------------------

         Interest expense for fiscal year 2006 was $70,645 compared to $66,763
for fiscal year 2005.

         During the year ended July 29, 2006, Company issued its chief executive
officer an aggregate of 562,219 shares of its common stock in consideration of
its chief executive officer providing personnel guarantees for the Company. Such
guarantees were required to secure lines of credit up to $950,000. Additionally,
the Company issued its chief executive officer 270,073 shares of common stock
and issued its chief financial officer 90,012 shares of common stock in
consideration for extending the secured promissory note through February 28,
2008. These transactions were recorded as an Other Expense - Loan Guarantee at
$159,552.

         The Company decided during fiscal year 2006 that it would no longer
manufacture its 27' Forward Seating model and also discontinued the use of other
small part molds. As a result a provision for loss on disposition of assets in
the amount of $78,844 was recorded. A gain of $35,000 was recorded from the sale
of Phoenix boat molds previously written off.

Liquidity and Capital Resources

         At July 29, 2006, the Company had cash and cash equivalents of $315,235
and working capital of $1,339,465.

         The Company increased its $500,000 revolving line of credit with a
financial institution to $750,000 and extended it through February 28, 2007. The
note on the line of credit bears interest at the financial institution's index
rate plus 1.5% (9.75% at July 29, 2006). The note is collateralized by all of
the Company's assets and is personally guaranteed by Carl Herndon, president of
the Company.

         Net cash provided by operating activities was $985,135 for fiscal 2006
and $455,330 for fiscal year 2005.

         Inventory levels at July 29, 2006 were $2,775,674 an increase of
$1,331,937 compared to July 30, 2005. This increase is primarily due to starting
up the production line at the new Palmetto facility and more outboard engines on
hand. This increase in inventory was offset by a $1,017,799 increase in accounts
payable.

                                       12
<PAGE>
         During February 2002, the Company negotiated a $150,000 revolving line
of credit with a financial institution for the purchase of outboard engines. The
note on the line of credit was subsequently extended through February 1, 2007
and increased to $200,000. The note is personally guaranteed by Carl Herndon,
president of the Company.

         Property and equipment purchases for fiscal year 2006 amounted to $
1,303,694. Expenditures for new boat molds was approximately $640,000 and
equipment purchases related to the new Palmetto facility were approximately
$600,000 during fiscal year 2006. Approximately $250,000 will be needed to
complete the initial Palmetto build-out.

         The Company anticipates that cash generated from operations and the
availability under the Company's credit line should be sufficient to satisfy the
Company's contemplated cash requirements for its current operations for at least
the next twelve months. The Company does not anticipate any significant
purchases of equipment during fiscal year 2007 except as noted above.

         Some of the Company's dealers use third party financing for the
purchase of their boats. These third party financing companies pay within five
business days of shipment. At July 29, 2006, accounts receivable was $ 175,992,
an increase of $ 3,683 compared to July 30, 2005, as boats shipped at year-end
were not yet paid by the financing company.

         Pursuant to the Company's development and operations plan for the
Palmetto facility, certain of the Company's administrative and operations
personnel have been relocated from the Company's Fort Lauderdale facility to the
Palmetto facility. In order to facilitate the relocation of such personnel, the
Company has provided interest free advances solely to cover the costs of such
personnel to relocate. At July 29, 2006, $132,570 was outstanding for such
advances.

         During the year ended July 29, 2006, the Company increased the amount
outstanding under the line of credit by $310,000.

         During the year ended July 29, 2006, the Company had sales to a dealer
representing 21% of fiscal year 2006 net sales, to another dealer representing
15% of fiscal year 2006 net sales and to three other dealers representing 12%
each of fiscal year 2006 net sales. During the year ended July 29, 2005 the
Company had sales to three dealers representing 28%, 17% and 13%.

         The number and level of employees at July 29, 2006 should be adequate
to fulfill the anticipated production schedule.

Recent Accounting Pronouncements

         In September 2006, the Financial Accounting Standards Board, ("FASB")
issued FAS 157 (SFAS 157), Fair Value Measurements. This standard defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.

                                       13
<PAGE>
This statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007. Earlier application is encouraged. The
adoption of this accounting pronouncement is not expected to have a material
effect on the consolidated financial statements.

         In July 2006, the FASB issued Interpretation No. 48 (FIN No. 48),
Accounting for Uncertainty in Income Taxes. This interpretation requires
recognition and measurement of uncertain income tax positions using a
"more-likely-than-not" approach. The provisions of FIN 48 are effective for
fiscal years beginning after December 15, 2006. The adoption of this accounting
pronouncement is not expected to have a material effect on the consolidated
financial statements.

         In March 2006, the FASB issued FAS 156 (SFAS No. 156), Accounting for
Servicing of financial Assets - an amendment of FASB Statement No. 140. This
standard clarifies when to separately account for servicing rights, requires
servicing rights to be separately recognized initially at fair value, and
provides the option of subsequently accounting for servicing rights at either
fair value or under the amortization method. The standard is effective for
fiscal years beginning after September 15, 2006 but can be adopted early as long
as financial statements for the fiscal year in which early adoption is elected,
including interim statements, have not yet been issued. The adoption of this
accounting pronouncement is not expected to have a material effect on the
consolidated financial statements.

         In February 2006, the FASB issued FAS 155 (SFAS No. 155), Accounting
for Certain Hybrid Financial Instruments - an amendment of FASB Statements No.
133 and 140. This statement permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that would otherwise
have to be accounted for separately. The new statement also requires companies
to identify interests in securitized financial assets that are freestanding
derivatives or contain embedded derivatives that would have to be accounted for
separately, clarifies which interest-and principal-only strips are subject to
Statement 133, and amend Statement 140 to revise the conditions of a qualifying
special purpose entity due to the new requirement to identify whether interests
in securitized financial assets are freestanding derivatives or contain embedded
derivates. This statement is effective for all financial instruments acquired or
issued after the beginning of an entity's first fiscal year that begins after
September 15, 2006, but can be adopted early as long as financial statements for
the fiscal year in which early adoption is elected, including interim
statements, have not yet been issued. The adoption of this accounting
pronouncement is not expected to have a material effect on the consolidated
financial statements.

         In May 2005, the FASB issued FAS 154 (SFAS no. 154), Accounting Changes
and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement
No. 3. This Statement provides guidance on the accounting for and reporting of
accounting changes and error corrections. It establishes, unless impracticable,
retrospective application as the required method for reporting a change in
accounting principle in the absence of explicit transition requirements specific

                                       14
<PAGE>
to the newly adopted accounting principle. This Statement also provides guidance
for determining whether retrospective application of a change in accounting
principle is impracticable and for reporting a change when retrospective
application is impracticable. The correction of an error in previously issued
financial statements is not an accounting change. However, the reporting of an
error correction involves adjustments to previously issued financial statements
similar to those generally applicable to reporting an accounting change
retrospectively. Therefore, the reporting of a correction of an error by
restating previously issued financial statements is also addressed by this
Statement. This statement is effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. The adoption of
this accounting pronouncement is not expected to have a material effect on the
consolidated financial statements.

         In March 2005, the FASB issued Interpretation No. 47 (FIN No. 47),
Accounting for Conditional Asset Retirement Obligations, and Interpretation of
FASB Statement No. 143. This interpretation clarifies the timing for recording
certain asset retirement obligations required by FASB Statement No. 143,
Accounting for Asset Retirement Obligations. The provisions of FIN No. 47 are
effective for years ending after December 15, 2005. The adoption of this
accounting pronouncement is not expected to have a material effect on the
consolidated financial statements.

         In December 2004, the FASB issued revised FAS No. 123 (SFAS No. 123R),
Share-Based Payment. This standard eliminates the ability to account for
share-based compensation transactions using the intrinsic value-based method
under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and requires instead that such transactions be accounted for using a
fair-value-based method. SFAS No. 123R is effective for financial statements
issued for the first interim period beginning after December 15, 2005 for small
business issuers. The adoption of this accounting pronouncement resulted in an
expense of $118,813 for the fiscal year ended July 29, 2006.

         In December 2004, the FASB issued FAS 153, Exchanges of Nonmonetary
Assets. The provisions of this Statement are effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The
provisions of this Statement should be applied prospectively, and eliminates the
exception from fair value measurement for nonmonetary exchanges of similar
productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for
Nonmonetary Transactions, and replaces it with an exception for exchanges that
do not have commercial substance. The adoption of this accounting pronouncement
is not expected to have a material effect on the consolidated financial
statements.

ITEM 7.  FINANCIAL STATEMENTS

         See the financial statements listed in the accompanying index to the
Financial Statements on Page F-1.

                                       15
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES

         None.

ITEM 8A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

         As of the end of the period covered by this report, the Company carried
out an evaluation of the effectiveness of the design and operation of its
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. This
evaluation was done under the supervision and with the participation of the
Company's Principal Executive Officer and Principal Financial Officer. Based
upon that evaluation, the Principal Executive Officer and Principal Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in gathering, analyzing and disclosing information needed to satisfy
the Company's disclosure obligations under the Exchange Act.

Changes in internal controls
----------------------------

         There were no significant changes in the Company's internal controls or
in other factors that could significantly affect those controls since the most
recent evaluation of such controls.

ITEM 8B. OTHER INFORMATION

         None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

         The following table sets forth the names, positions with JMIH and ages
of the executive officers and directors of JMIH. Directors are elected at JMIH'S
annual meeting of shareholders and serve for one year or until their successors
are elected and qualify. Officers are elected by the Board and their terms of
office are, except to the extent governed by employment contract, at the
discretion of the Board of Directors.













                                       16
<PAGE>
<TABLE>
<CAPTION>
Name                                  Age            Position Held
----                                  ---            -------------
<S>                                   <C>            <C>
Carl Herndon, Sr.                     67             Director, President and Chief Executive Officer
Lawrence S. Tierney                   60             Director, Vice President and Chief Operating and Financial
                                                     Officer and Secretary
Kerry Clemmons                        61             Director, Audit Committee
Carl Herndon, Jr.                     40             Vice President & General Manager Palmetto
</TABLE>
         Carl Herndon, Sr. - Mr. Herndon has been president, chief executive
officer and a director of JMIH since its inception on May 19, 1998. Mr. Herndon
has also served as president, chief executive officer and a director of JMI
since May 15, 1998. Between 1973 and 1997, Mr. Herndon was president, chief
executive officer, director and sole shareholder of Blackfin Yacht Corporation,
a Fort Lauderdale, Florida based designer, manufacturer and seller of sport
fishing boats. Between 1993 and 1995, Mr. Herndon was president and chief
executive officer of Bertram Yacht Corporation in Miami, Florida. During Mr.
Herndon's tenure as officer and director of Blackfin, Blackfin filed for Chapter
11 Bankruptcy Reorganization protection. The bankruptcy proceeding was
subsequently converted to a Chapter 7 proceeding. Carl Herndon is the father of
Carl Herndon, Jr., the vice president and general manager of the Palmetto
facility.

         Lawrence Tierney - On July 27, 2001, Mr. Tierney joined JMIH as vice
president, chief financial officer and secretary. Mr. Tierney served JMIH as a
director and consultant from January 1999 through his appointment as an
executive officer and director. From April 1997 to July 2001, Mr. Tierney was
the owner of Aamco Transmissions of Plant City, Florida. From March 1995 to
March 1997, Mr. Tierney was chief financial officer of Mako Marine
International, Inc., a manufacturer of high quality offshore fishing boats. From
June of 1993 to March of 1995, Mr. Tierney served as chief financial officer of
Chris Craft Boats, a wholly owned subsidiary of Outboard Marine Corporation
(OMC) a full line manufacturer of power boats. From June 1991 to June 1993, Mr.
Tierney held the position of chief operating officer of Chris Craft Boats. From
August 1986 to June 1991, Mr. Tierney was senior vice president of finance for
Chris Craft. Mr. Tierney is a certified public accountant.

         Kerry Clemmons -- On February 2, 2004, Mr. Clemmons was elected to the
Board of Directors. For ten years Mr. Clemmons has served the American Red Cross
of Greater Miami and the Florida Keys in various capacities, including board
member, chairman (1999-2001) and CEO (2002-2003). From 1999 through 2001 he was
a consultant for Arthur Anderson in mergers and acquisitions. He also served as
senior vice president of John Alden Financial Corporation from 1982 through 1990
and senior vice president of MasTec from 1998 through 1999. Mr. Clemmons holds a
masters and doctorate degrees from Nova Southern University.

         Carl Herndon Jr. - Mr. Herndon joined the Company in June 1998 as vice
president of sales and currently serves as vice president and general manager of
the Palmetto facility. He is the son of Carl Herndon and has spent his
professional working career in the marine industry. He was employed by Blackfin
Yacht Corporation from 1984 to 1997, initially working on the shop floor. During
his tenure at Blackfin, he progressed through the ranks from laminator to plant

                                       17
<PAGE>
manager and ultimately became chief operating officer. He also served as vice
president of sales and was instrumental in doubling Blackfin's dealer base
resulting in record sales.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's outstanding Common Stock to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock. Such persons are required by SEC regulation to
furnish the Company with copies of all such reports they file.

         To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners have been
complied with for the period which this report relates.

Committees

         The audit committee consists of Kerry Clemmons. Mr. Clemmons qualifies
as an independent director and is considered a "financial expert" as defined
under Item 401(e) of Regulation S-B.

         The nominating committee consists of Carl Herndon and Lawrence Tierney.

Code of Ethics

         The Company has adopted a Code of Ethics that applies to the Company's
executive officers and directors. The Code of Ethics provides written standards
that are reasonably designed to deter wrongdoing and to promote: (i) honest and
ethical conduct, including the ethical handling of actual or parent conflicts of
interests between personal and professional relationships; (ii) full, fair,
accurate, timely and understandable disclosure in reports and documents that the
Company files with, or submits to, the SEC and in other public communications
made by the Company; (iii) compliance with applicable governmental laws, rules
and regulations; (iv) the prompt internal reporting of violations of the Code to
an appropriate person or persons identified in the Code; and (v) accountability
for adherence to the Code.

ITEM 10. EXECUTIVE COMPENSATION

         The following table sets forth information relating to the compensation
paid by the Company during the last three fiscal years to: the Company's
president and chief executive officer and each of the Company's executive
officers who earned more than $100,000 during any fiscal year.

                                       18
<PAGE>
<TABLE>
<CAPTION>

                                                SUMMARY COMPENSATION TABLE

-------------------------------------------------------------------------------------------------------------------------------


                                             Annual Compensation                       Long-Term Compensation
-------------------------------------------------------------------------------------------------------------------------------
                                                                                  Awards                      Payouts
-------------------------------------------------------------------------------------------------------------------------------
                                                                                        Securities
                                                                  Other                   Under-
                                                                  Annual    Restricted     Lying
                                                                 Compen-      Stock       Options/      LTIP       All Other
   Name and Principal               Salary           Bonus        sation     Award(s)       SARs       Payouts   Compensation
        Position          Year       ($)              ($)          ($)          ($)          (#)         ($)          ($)
-------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>     <C>              <C>             <C>          <C>      <C>             <C>           <C>
Carl Herndon, Sr. CEO
and President             2006    $244,307              ---        ---          ---      1,000,000        ---          (2)
-------------------------------------------------------------------------------------------------------------------------------
                          2005    $215,086         $41,350(1)      ---          ---           ----        ---
-------------------------------------------------------------------------------------------------------------------------------
                          2004    $181,576         $27,927(1)      ---          ---        250,000        ---          ---
-------------------------------------------------------------------------------------------------------------------------------
Lawrence Tierney
CFO & COO                 2006    $150,808              ---        ---          ---        500,000        ---          (2)
-------------------------------------------------------------------------------------------------------------------------------
                          2005    $127,858         $20,675(1)      ---          ---           ----        ---          ---
-------------------------------------------------------------------------------------------------------------------------------
                          2004    $104,223         $13,964(1)      ---          ---        200,000        ---          ---
-------------------------------------------------------------------------------------------------------------------------------
Carl Herndon, Jr.,
Vice President            2006    $132,891              ---        ---          ---            ---        ---          ---
-------------------------------------------------------------------------------------------------------------------------------
                          2005    $113,693         $20,675(1)      ---          ---        200,000        ---          ---
-------------------------------------------------------------------------------------------------------------------------------
                          2004    $      0(3)           ---        ---          ---        100,000        ---          ---
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)      Bonus was paid in shares of common stock in lieu of cash.
(2)      Received shares of common stock as inducement for entering into new
         employment agreement dated March 31, 2006. See "Employment Agreements"
         below.
(3)      Mr. Herndon, Jr. took a temporary leave of absence during fiscal year
         2004.

Stock Option and SAR Issuances

         The table below provides a summary of individual grants of stock
options and SARs made during the last fiscal year to each of the named officers
included in the Summary Compensation Table.
<TABLE>
<CAPTION>
                                OPTIONS/SAR GRANTS IN THE LAST FISCAL YEAR
--------------------------------------------------------------------------------------------------------------------
                                    Number of Shares    Percentage of
                                    of Common Stock     Total Options
               Name                Underlying Options      Granted         Exercise Price       Expiration Date
--------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                   <C>                <C>                 <C>  <C>
Carl Herndon, Sr.                       1,000,000             67%                $.32                3/30/11
--------------------------------------------------------------------------------------------------------------------
Lawrence Tierney                         500,000              33%                $.29                3/30/11
--------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       19
<PAGE>
Option Exercises and Holdings

         The table below provides a summary of each exercise of stock options or
SARs during the last fiscal year by each person named in the Summary
Compensation Table and the unexercised options held as of the end of the fiscal
year. The closing sale price of the Company's Common Stock on July 29, 2006, as
reported by the OTCBB was $0.22 per share. The value of unexercised in the money
options is calculated by multiplying the difference between $0.22 and the option
exercise price by the number of shares of Common Stock underlying the options.
<TABLE>
<CAPTION>
         AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
                                OPTION/SAR VALUES
--------------------------------------------------------------------------------------------------------------------

                                                                          Number of
                                                                         Securities                  Value Of
                                                                         Underlying                Unexercised
                                                                         Unexercised               In-The-Money
                                                                         Options/SARs              Options/SARs
                                                                     at Fiscal Year-End         at Fiscal Year-End
                                   Shares            Value                   (#)                        ($)
                                Acquired On         Realized             Exercisable/               Exercisable/
            Name                Exercise (#)          ($)               Unexercisable               Unexercisable
--------------------------------------------------------------------------------------------------------------------
<S>                                <C>               <C>             <C>      <C>                  <C>      <C>
Carl Herndon                        ----              ----           250,000/ 1,000,000(1)         $17,500/-0-
--------------------------------------------------------------------------------------------------------------------
Lawrence Tierney                    ----              ----             200,000/ 500,000(2)         $16,000/-0-
--------------------------------------------------------------------------------------------------------------------
Carl Herndon, Jr.                   ----              ----                    300,000/0(3)         $ 8,000/-0-
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)      During fiscal year 2004 Mr. Herndon received options to purchase
         250,000 shares of common stock exercisable at $.15 per share through
         May 6, 2009. During fiscal year 2006 Mr. Herndon received options to
         purchase 1,000,000 shares of common stock exercisable at $.32 per share
         through March 30, 2011.
(2)      During fiscal year 2004 Mr. Tierney received options to purchase
         200,000 shares of common stock exercisable at $.14 per share through
         May 6, 2006. During fiscal year 2006 Mr. Tierney received options to
         purchase 500,000 shares of common stock exercisable at $.29 per share
         through March 30, 2011.
(3)      During fiscal year 2004 Mr. Herndon, Jr. received options to purchase
         100,000 shares of common stock exercisable at $.14 per share through
         May 6, 2006. During fiscal year 2005 Mr. Herndon received options to
         purchase 200,000 shares of common stock at $.30 per share through
         January 13, 2010.

Compensation of Directors

         Independent members of the Company's Board of Directors receive $1,667
per month and are reimbursed for their expenses in attending Board meetings.

Employment Agreements

         Carl Herndon, Sr., CEO. Effective March 31, 2006 the Company entered
into a five-year executive employment agreement with Carl Herndon, Sr. In
consideration for serving as president a chief executive officer, the Company
will pay Mr. Herndon an initial base salary of $250,000. The base salary is
subject to annual automatic incremental increases of the greater of the
percentage increase in the consumer price index or 6% of the previous year's
base salary. In addition the Company issued Mr. Herndon incentive stock options
under the Company's 2004 Management and Director Equity Incentive Plan to
purchase 1,000,000 shares of common stock, which are exercisable at $0.32 per
share. The stock options vest in five equal installments over the initial term

                                       20
<PAGE>
and are exercisable for a period of five years from vesting date. However,
certain events, such as a change of control of the company, reverse merger, or
sale of all of the Company's assets, shall cause the options to vest
immediately. Mr. Herndon is also entitled to a performance-based bonus and to
participate in all Company benefit programs. As an additional inducement for Mr.
Herndon entering into the employment agreement, the Company has issued Mr.
Herndon 500,000 shares of common stock. Mr. Herndon has the right to purchase a
boat each year at the Company's manufacturing cost. The employment agreement
includes non-compete and confidentiality provisions.

         Lawrence Tierney, CFO. Effective March 31, 2006 the Company entered
into a five-year executive employment agreement with Lawrence Tierney. In
consideration for serving as chief financial officer and chief operation
officer, the Company will pay Mr. Tierney an initial base salary of $175,000.
The base salary is subject to annual automatic incremental increases of the
greater of the percentage increase in the consumer price index or 6% of the
previous year's base salary. In addition the Company issued Mr. Tierney
incentive stock options under the Company's 2004 Management and Director Equity
Incentive Plan to purchase 500,000 shares of common stock, which are exercisable
at $0.29 per share. The stock options vest in five equal installments over the
initial term and are exercisable for a period of five years from vesting date.
However, certain events, such as a change of control of the company, reverse
merger, or sale of all of the Company's assets, shall cause the options to vest
immediately. Mr. Tierney is also entitled to a performance-based bonus and to
participate in all Company benefit programs. As an additional inducement for Mr.
Tierney entering into the employment agreement, the Company has issued Mr.
Tierney 300,000 shares of common stock. Mr. Tierney has the right to purchase a
boat each year at the Company's manufacturing cost. The employment agreement
includes non-compete and confidentiality provisions.



















                                       21
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding the
Company's common stock beneficially owned on September 30, 2006 by: (1) each
shareholder known by the Company to be the beneficial owner of five (5%) percent
or more of the Company's outstanding common stock, (2) each of the Company's
executive officers and directors, and (3) all executive officers and directors
as a group. Unless otherwise disclosed, the address for the shareholders below
is 3391 S.W. 14th Avenue, Fort Lauderdale, Florida 33316. On September 30, 2006,
there were approximately 18,863,861 shares of common stock outstanding.
<TABLE>
<CAPTION>

                                                 Number of Beneficially        Percentage of Outstanding
Name and Address                                      Owned Shares             Shares Beneficially Owned
----------------                                      ------------             -------------------------
<S>                                                  <C>                                <C>
Carl Herndon, Sr.                                    10,975,533(1)                      52.9%

Lawrence Tierney                                      2,439,781(2)                      12.5%

Carl Herndon, Jr.                                       827,481(3)                       4.3%

Kerry Clemmons                                          475,000(4)                       2.5%

Officers and Directors as a Group                    14,717,795(1)(2)(3)(4)             66.3%
(4 persons)
</TABLE>
----------------
(1) Includes (i) 250,000 shares of Common Stock issuable upon the exercise of
options at an exercise price of $0.15 per share expiring May 6, 2009, (ii)
1,000,000 shares of common stock issuable upon the exercise of options at an
exercise price of $0.32 per share expiring March 30, 2011, (iii) 1,291,725 of
shares of common stock owned by Mr. Herndon's immediate family members and (iv)
950,000 shares of common stock issuable upon the conversion of options held by
Mr. Herndon's immediate family members at an exercise price between $0.30 and
$0.14 per share expiring between May 6, 2009 and January 13, 2010.

(2) Includes (i) 220,000 shares of Common Stock issuable upon the exercise of
options at an exercise price of $0.14 per share expiring May 6, 2009, (ii)
500,000 shares of common stock issuable upon the exercise of options at an
exercise price of $0.29 per share expiring March 30, 2011

(3) Includes (i) 100,000 shares of Common Stock issuable upon the exercise of
options at an exercise price of $0.14 per share expiring May 6, 2009 and (ii)
200,000 shares of Common Stock issuable upon exercise of options at an exercise
price of $0.30 per share expiring January 13, 2010.

(4) Includes 150,000 shares of Common Stock issuable upon the exercise of
options at an exercise price of $0.14 per share expiring May 6, 2009.

                                       22
<PAGE>
ITEM 12. INTEREST OF MANAGEMENT AND OTHER CERTAIN TRANSACTIONS

         Mr. Herndon personally owns the Company's manufacturing facility in
Fort Lauderdale, Florida. On July 27, 2001, the Company entered into a new lease
agreement with Mr. Herndon in which the Company leases the manufacturing
facility for a period of five years. On July 27, 2006, the parties extended the
term of the lease for an additional three years or until July 27, 2009. All of
the other terms of the lease agreement remain in effect. The Company believes
that the lease agreement between the Company and Mr. Herndon was consummated on
terms no less favorable than with an unrelated party. On December 6, 2005, the
Company entered into a lease with Carl Herndon, the Company's President and
Chief Executive Officer for its Palmetto boat manufacturing facility located at
1103 12th Avenue East, Palmetto, Florida 34221 consisting of three buildings
totaling 53,648 square feet. The term of the lease is for five years with three
additional renewal periods of five years each. Landlord may terminate the lease
prior to the commencement of any renewal periods. The lease requires the Company
to pay initial monthly lease payments of $30,700.00 per month plus applicable
real estate and sales taxes. See "Item 2. Property".

         During November 2001, the Company negotiated a $250,000 revolving line
of credit with a financial institution, which expired November 2002 and was then
extended through January 2006 and increased to $500,000. The line of credit was
subsequently extended to February 2007 and increased to $750,000.The note on the
line of credit bears interest at the financial institution index rate plus 1.5%
(9.75% at July 29, 2006). The note is collateralized by all of the Company's
assets and is personally guaranteed by Carl Herndon, president of the Company.
In consideration for providing a personal guarantee on the renewed note, Mr.
Herndon received 562,219 shares of common stock during fiscal year 2006. The
Company believes the compensation paid to Mr. Herndon was on terms equal to, or
better than, terms that could have been obtained from an independent third
party.

         During February 2002 the Company negotiated a $150,000 revolving line
of credit with a financial institution for the purchase of outboard engines. The
note on the line of credit was subsequently extended through February 1, 2007
and increased to $200,000. The note is personally guaranteed by Carl Herndon,
president of the Company.

         On November 21, 2002 Triton International Holdings, Inc. sold a
$350,000 Secured Promissory Note issued by the Company in January 1998 to Carl
Herndon and Lawrence Tierney. The Note, which was originally due on February 14,
2003, was sold by Triton to Messrs. Herndon and Tierney after the Company was
unable to satisfy payment of the Note, despite seeking financing from unrelated
third parties on the same or similar terms. In connection with the purchase of
the Note, Herndon and Tierney extended the term of the Note through February 14,
2004 and subsequently agreed to extend to February 14, 2006 and then again to
February 14, 2008. The Note is secured by a first mortgage on real estate owned

                                       23
<PAGE>
by Mr. Herndon and leased to the Company. At July 29, 2006, the amount
outstanding on the Note, including accrued interest, is $489,510.

         On March 14, 2006, the Company issued to its chief executive officer
and its chief financial officer 360,049 restricted shares of its common stock in
consideration for these officers extending the due date of the Note payable to
February 28, 2008.

         During fiscal year ended July 30, 2005, Mr. Tierney purchased a boat
from the Company at cost.

         Pursuant to the Company's development and operations plan for the
Palmetto facility, certain of the Company's administrative and operations
personnel have been relocated from the Company's Fort Lauderdale facility to the
Palmetto facility. In order to facilitate the relocation of such personnel, the
Company has provided interest free advances to cover the costs of such personnel
to relocate. At July 29, 2006, $132,570 was outstanding. Such amount was due
from a non executive employee who is related to the Company's President.

ITEM 13. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.       Description
-----------       -----------
<S>               <C>
3.1               Articles of Incorporation(2)
3.2               Articles of Amendment(2)
10.1              Employment Agreement with Carl Herndon, Sr. dated March 31, 2006(5)
10.2              Employment Agreement with Carl Herndon, Jr. dated July 27, 2001(1)
10.3              Management Agreement with Triton Holdings International Corp.(2)
10.4              Secured Promissory Note with Triton Holdings International Corp.(2)
10.5              Port Everglades Lease Agreement with Herndon(1)
10.55             Addendum to Port Everglades Lease Agreement dated July 27, 2007(4)
10.6              Employment Agreement with Lawrence Tierney dated March 31, 2006(5)
10.7              Lease Agreement for Palmetto, Florida Facilities
14                Code of Ethics(3)
21                Subsidiaries(1)
31.1              Rule 13a-14(a)/15d-4(a) Certification Principal Executive Officer
31.2              Rule 13a-14(a)/15d-4(a) Certification Principal Financial Officer
32.1              Section 1350 Certification Principal Executive Officer
32.2              Section 1350 Certification Principal Financial Officer
</TABLE>
(1)   Previously filed on Form 10-KSB for the fiscal year ended July 28, 2001.
(2)   Previously filed on Form 10-SB Registration Statement.
(3)   Previously filed on Form 10-KSB for the fiscal year ended July 29, 2006.
(4)   Previously filed on Form 8-K Current Report dated August 31, 2006
(5)   Previously filed on Form 8-K Current Report dated April 3, 2006.








                                       24
<PAGE>
ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees to Auditors Fiscal Year ended July 29, 2006.

         Audit Fees: The aggregate fees, including expenses, billed by Spicer,
Jeffries LLP for professional services rendered for the audit of the Company's
consolidated financial statements during the fiscal year ending July 29, 2006
and for the review of the Company's financial information included in its
quarterly reports on Form 10-QSB during the fiscal year ending July 29, 2006 or
services that are normally provided in connection with statutory and regulatory
filings or engagements during the fiscal year ending July 29, 2006 was $27,150.

         Audit Related Fees: The aggregate fees, including expenses, billed by
Spicer, Jeffries LLP for assurance and related services reasonably related to
the performance of the Company's audit or review of the Company's financial
statements were $1,500.

         Tax Fees: The aggregate fees, including expenses, billed by Spicer,
Jeffries LLP for tax compliance, tax advice and tax planning during year 2006
was $3,795.

         All Other Fees: The aggregate fees, including expenses, billed for all
other services rendered to the Company by Spicer, Jeffries LLP during year 2006
was $-0-.

Fees to Auditors Fiscal Year ended July 30, 2005.

         Audit Fees: The aggregate fees, including expenses, billed by Spicer,
Jeffries LLP for professional services rendered for the audit of the Company's
consolidated financial statements during fiscal year ending July 29, 2006 and
for the review of the Company's financial information included in its quarterly
reports on Form 10-QSB during the fiscal year ending July 30, 2005 or services
that are normally provided in connection with statutory and regulatory filings
or engagements during the fiscal year ending July 30, 2005 was $25,190.

         Audit Related Fees: The aggregate fees, including expenses, billed by
Spicer, Jeffries LLP for assurance and related services reasonably related to
the performance of the Company's audit or review of the Company's financial
statements during the year ended July 30, 2005 were $1,625.

         Tax Fees: The aggregate fees, including expenses, billed by Spicer,
Jeffries LLP for tax compliance, tax advice and tax planning during year 2005
was $3,537.

         All Other Fees: The aggregate fees, including expenses, billed for all
other services rendered to the Company by Spicer, Jeffries LLP during year 2005
was $-0-.

         The Audit Committee has considered whether the provisions of the
services covered above under the captions is compatible with maintaining the
auditor's independence. All services were approved by the Audit Committee prior
to the completion of the respective audit.

                                       25
<PAGE>
                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on October 20, 2006.

                                        JUPITER MARINE INTERNATIONAL
                                        HOLDINGS, INC.


                                        By:/s/ Carl Herndon, Sr.
                                           -------------------------------------
                                           Carl Herndon, Sr., Director,
                                             Chief Executive Officer and
                                             President

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.


Dated:  October 20, 2006                By:/s/ Carl Herndon, Sr.
                                           -------------------------------------
                                           Carl Herndon, Sr., Director,
                                             Chief Executive Officer and
                                             President



Dated:  October 20, 2006                By:/s/ Lawrence Tierney
                                           -------------------------------------
                                           Lawrence Tierney,  Director,
                                             Chief Financial Officer and
                                             Secretary



















                                       26
<PAGE>

















                          JUPITER MARINE INTERNATIONAL
                         HOLDINGS, INC. AND SUBSIDIARIES

                              FINANCIAL STATEMENTS

                            YEARS ENDED JULY 29, 2006
                                AND JULY 30, 2005



































                                      F-1
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES


                                TABLE OF CONTENTS
                                -----------------

<TABLE>
<CAPTION>

                                                                                       Page
                                                                                       ----
<S>                                                                                     <C>
Report of Independent Registered Public Accounting Firm                                 F-3

Consolidated Balance Sheets                                                             F-4

Consolidated Statements of Income                                                       F-5

Consolidated Statements of Changes in Shareholders' Equity                              F-6

Consolidated Statements of Cash Flows                                                   F-7

Notes to Consolidated Financial Statements                                           F-8-F-26
</TABLE>




































                                       F-2
<PAGE>
                                                             Spicer Jeffries LLP
                                                    Certified Public Accountants

                                                        5251 SOUTH QUEBEC STREET
                                                                       SUITE 200
                                               GREENWOOD VILLAGE, COLORADO 80111
                                                       TELEPHONE: (303) 753-1959
                                                             FAX: (303) 753-0338
                                                          www.spicerjeffries.com


   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors of
Jupiter Marine International Holdings, Inc.


We have audited the accompanying consolidated balance sheets of Jupiter Marine
International Holdings, Inc. and Subsidiaries as of July 29, 2006 and July 30,
2005, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Jupiter Marine
International Holdings, Inc. and Subsidiaries as of July 29, 2006 and July 30,
2005, and the results of their operations and their cash flows for the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.
                                                         /s/ Spicer Jeffries LLP
                                                         -----------------------
                                                             Spicer Jeffries LLP
Greenwood Village, Colorado
September 15, 2006












                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                         JULY 29, 2006 AND JULY 30, 2005
                         -------------------------------

                                     ASSETS                                         2006                       2005
                                     ------                                     --------------            ---------------
<S>                                                                                <C>                       <C>
     CURRENT ASSETS:
        Cash and cash equivalents (Note 6)                                         $   315,235                $   356,361
        Accounts receivable                                                            175,992                    172,309
        Employee receivables (Note 10)                                                 134,570                         --
        Inventory (Notes 2 and 4)                                                    2,775,674                  1,443,737
        Prepaid expenses                                                                82,960                    119,861
                                                                               ---------------            ---------------
              Total current assets                                                   3,484,431                  2,092,268

     PROPERTY AND EQUIPMENT, net (Note 5)                                            1,951,284                  1,069,241

     OTHER ASSETS                                                                       34,957                     19,160
                                                                               ---------------            ---------------
              TOTAL ASSETS                                                         $ 5,470,672                $ 3,180,669
                                                                               ===============            ===============
                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

     CURRENT LIABILITIES:
        Accounts payable                                                           $ 1,164,070                $   146,271
        Accrued expenses                                                               209,625                    269,929
        Accrued interest due to shareholders (Note 6)                                       --                    117,259
        Customer deposits                                                               96,466                     48,201
        Warranty reserve                                                               100,118                     73,937
        Current portion of capital lease obligation (Note 9)                            24,687                         --
        Notes payable (Note 6)                                                         550,000                    590,000
                                                                               ---------------            ---------------
              Total current liabilities                                              2,144,966                  1,245,597
                                                                               ---------------            ---------------
     LONG-TERM LIABILITIES:
        Accrued interest due to shareholders (Note 6)                                  143,351                         --
        Note payable to shareholders (Notes 6 and 10)                                  350,000                         --
        Capital lease obligation, less current maturities (Note 9)                      42,315                         --
                                                                               ---------------            ---------------
                                                                                       535,666                         --
                                                                               ---------------            ---------------
              TOTAL LIABILITIES                                                      2,680,632                  1,245,597
                                                                               ---------------            ---------------

     COMMITMENTS AND CONTINGENCIES  (Note 9)                                                --                         --

     SHAREHOLDERS EQUITY (Note 7):
        Cumulative convertible preferred stock, $.001 par value,
           5,000,000 shares authorized, ($-0- liquidation preference):
              Series A:  -0- shares issued and outstanding                                  --                         --
              Series B:  -0- shares issued and outstanding                                  --                         --
              Series C:  -0- shares issued and outstanding                                  --                         --
        Common stock, $.001 par value, 50,000,000 shares authorized,
           18,863,861 and 15,555,525 shares issued and outstanding                      18,864                     15,556
        Additional paid-in capital                                                   4,105,197                  3,490,157
        Deficit                                                                     (1,334,021)                (1,570,641)
                                                                               ---------------            ---------------
              TOTAL SHAREHOLDERS' EQUITY                                             2,790,040                  1,935,072
                                                                               ---------------            ---------------
              TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $ 5,470,672                $ 3,180,669
                                                                               ===============            ===============
</TABLE>
        The accompanying notes are an integral part of these statements.
                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

               FOR THE YEARS ENDED JULY 29, 2006 AND JULY 30, 2005
               ---------------------------------------------------

                                                                         2006                      2005
                                                                     ------------             -------------
<S>                                                                  <C>                       <C>
NET SALES                                                            $ 15,150,389              $ 11,463,235

COST OF SALES (exclusive of depreciation)                              11,458,709                 8,594,446
                                                                     ------------             -------------
         GROSS PROFIT                                                   3,691,680                 2,868,789
                                                                     ------------             -------------
OPERATING EXPENSES:
   Selling and marketing                                                  511,706                   485,820
   General and administrative                                           1,883,715                 1,423,899
   Depreciation and amortization                                          342,806                   309,408
   New plant start up costs                                               475,276                        --
                                                                     ------------             -------------
         Total operating expenses                                       3,213,503                 2,219,127
                                                                     ------------             -------------
OTHER INCOME (EXPENSE):
   Interest expense                                                       (70,645)                  (66,763)
   Other expense - loan guarantee                                        (159,552)                  (91,000)
   Impairment of assets                                                   (78,844)                  (99,490)
   Other income                                                            67,484                    28,134
                                                                     ------------             -------------
         Total other income (expense)                                    (241,557)                 (229,119)
                                                                     ------------             -------------
NET INCOME BEFORE INCOME TAXES                                            236,620                   420,543
INCOME TAX EXPENSE (Note 8)                                                    --                        --
                                                                     ------------             -------------
NET INCOME                                                                236,620                   420,543
   Dividends on preferred stock                                                --                   (34,197)
                                                                     ------------             -------------
NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS                                                         $    236,620              $    386,346
                                                                     ============             =============
BASIC AND DILUTED NET INCOME
   PER COMMON SHARE (Note 2):
         Basic                                                       $       0.01              $       0.03
                                                                     ============             =============
         Diluted                                                     $       0.01              $       0.02
                                                                     ============             =============
WEIGHTED AVERAGE NUMBER OF SHARES
   OF COMMON STOCK OUTSTANDING
         Basic                                                         17,127,164                14,693,321
                                                                     ============             =============
         Diluted                                                       18,127,164                16,237,277
                                                                     ============             =============
</TABLE>
        The accompanying notes are an integral part of these statements.
                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

               FOR THE YEARS ENDED JULY 29, 2006 AND JULY 30, 2005
               ---------------------------------------------------



                                              Preferred Stock                Common Stock         Additional
                                        ---------------------------   -------------------------     Paid In
                                           Shares        $.001 Par       Shares      $.001 Par      Capital         Deficit
                                        ----------     ------------   ----------   ------------   -------------  -------------
<S>                                        <C>        <C>             <C>          <C>              <C>           <C>
BALANCES, July 31, 2004                    998,722    $       999     11,825,563   $    11,826      $ 3,153,400   $(1,956,987)

Preferred stock dividend declared
        and issuable                        34,197             34             --            --           34,163       (34,197)

Issuance of stock for services                  --             --        460,000           460           63,940            --

Issuance of stock for officer
        bonuses (Note 10)                       --             --        209,351           209           41,682            --

Issuance of common stock  related
        to stockholder's loan
        guarantee (Note 10)                     --             --        454,773           455           90,545            --

Issuance of common stock for
        management bonuses (Note 10)            --             --        540,000           540          107,460            --

Conversion of Series C preferred
        Stock                           (1,032,919)        (1,033)     2,065,838         2,066           (1,033)           --

Net income                                      --             --             --            --               --       420,543
                                        ----------    -----------   ------------   -----------      -----------   ------------
BALANCES, July 30, 2005                         --             --     15,555,525        15,556        3,490,157    (1,570,641)

Issuance of stock for services                  --             --      1,000,000         1,000          189,000            --

Issuance of stock for officer
        bonuses (Note 10)                       --             --        774,925           775           81,925            --

Issuance of common stock  related
        to stockholder's loan
        guarantee and extension of
        note payable (Note 10)                  --             --        922,268           922          158,630            --

Issuance of common stock for
        management bonuses (Note 10)            --             --        611,143           611           66,672            --

Option expense                                  --             --             --            --          118,813            --

Net income                                      --             --             --            --               --       236,620
                                        ----------    -----------   ------------   -----------      -----------   ------------
BALANCES, July 29, 2006                         --    $        --     18,863,861   $    18,864      $ 4,105,197   $(1,334,021)
                                        ==========    ===========   ============   ===========      ===========   ===========
</TABLE>
        The accompanying notes are an integral part of these statements.
                                      F-6
<PAGE>
<TABLE>
<CAPTION>
                   JUPITER MARINE INTERNATIONAL HOLDINGS INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

               FOR THE YEARS ENDED JULY 29, 2006 AND JULY 30, 2005
               ---------------------------------------------------


                                                                                        2006           2005
                                                                                     ------------   -----------
<S>                                                                                  <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                           $   236,620    $   420,543
Adjustments to reconcile net income to
   net cash provided by operating activities:
   Depreciation and amortization                                                         342,806        309,408
   Impairment of assets                                                                   78,844         99,490
   Gain on asset disposition                                                             (35,000)            --
   Issuance of common shares to pay expenses                                             499,535        305,291
   Options issued as compensations                                                       118,813             --
   Decrease (increase) in:
         Accounts receivable                                                              (3,683)      (155,687)
         Inventory                                                                    (1,331,937)      (308,528)
         Prepaid expenses                                                                 36,901        (78,473)
         Other assets                                                                    (15,797)          (500)
   Increase (decrease) in:
         Accounts payable                                                              1,017,799        (82,885)
         Accrued expenses                                                                (60,304)       (57,879)
         Customer deposits                                                                48,265         20,199
         Warranty reserve                                                                 26,181        (15,649)
         Accrued interest payable                                                         26,092             --
                                                                                     -----------    -----------
                Net cash provided by operating activities                                985,135        455,330
                                                                                     -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Increase in employee receivables                                                     (134,570)            --
   Proceeds from sale of equipment                                                        35,000             --
   Purchases of property and equipment                                                (1,230,186)      (574,468)
                                                                                     -----------    -----------
                Net cash used in investing activities                                 (1,329,756)      (574,468)
                                                                                     -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings on notes payable and long term debt                                        790,000        690,000
   Payment on notes payable and long term debt                                          (480,000)      (817,437)
   Payments on capital lease obligation                                                   (6,505)            --
                                                                                     -----------    -----------
                Net cash provided by (used in) financing activities                      303,495       (127,437)
                                                                                     -----------    -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                                (41,126)      (246,575)

CASH AND CASH EQUIVALENTS, beginning of year                                             356,361        602,936
                                                                                     -----------    -----------
CASH AND CASH EQUIVALENTS, end of year                                               $   315,235    $   356,361
                                                                                     ===========    ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
         Cash paid for interest                                                      $    70,645    $    60,659
                                                                                     ===========    ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
   FINANCING ACTIVITIES:
         Preferred stock dividends declared and payable
           in shares of Series B and C preferred stock                               $        --    $    34,197
                                                                                     ===========    ===========
         Common stock issued for services                                            $   190,000    $    64,000
                                                                                     ===========    ===========
         Common stock issued in payment of liabilities
           to shareholders                                                           $   309,536    $   240,891
                                                                                     ===========    ===========
         Purchase of property and equipment via
           capital lease obligation                                                  $    73,508    $        --
                                                                                     ===========    ===========
</TABLE>
        The accompanying notes are an integral part of these statements.
                                      F-7
<PAGE>
                   JUPITER MARINE INTERANTIONAL HOLDINGS INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND BUSINESS

Jupiter Marine International Holdings, Inc. ("JMIH"), a Florida corporation, was
incorporated May 19, 1998 to enter the boat manufacturing industry and on May
26, 1998, acquired Jupiter Marine International, Inc. ("JMI"), a Florida
corporation engaged in manufacturing "Jupiter" brand outboard sport fishing
boats. JMIH is a publicly owned company and its common shares are currently
traded on the Over The Counter Bulletin Board under the symbol JMIH.

The Company's principal offices and manufacturing facilities are located in Fort
Lauderdale, Florida. During the year ended July 29, 2006, the Company began
operating an additional manufacturing facility in Palmetto, Florida (see Note
10). The Company designs, manufactures and markets a diverse mix of high quality
hand constructed sport fishing boats under the Jupiter name. It sells its line
of boats through authorized dealers in the United States on the East Coast and
the Gulf of Mexico.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Fiscal Years and Reclassifications
----------------------------------

The Company reports its financial position and results of operations using a 52
week fiscal year ending the last Saturday of July of each calendar year. Certain
prior year amounts have been reclassified to conform to the current year
presentation. The accompanying financial statements present the consolidated
financial position and results of operations of JMIH and JMI, collectively
referred to as the "Company". All material intercompany accounts and
transactions have been eliminated in consolidation.

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 disclosure of contingent assets and liabilities at the date of
the financial statements as well as the reported amounts of revenue and expenses
during the period. Actual results could differ from those estimates and such
differences could be material to the consolidated financial statements.

Cash Equivalents
----------------

For purposes of reporting cash and cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.

Accounts Receivable
-------------------

The Company sells its boats and accessory products and services on credit terms
widely used in its industry. It uses the allowance method to recognize bad debts
by providing an allowance for uncollectible accounts receivable and charging
                                      F-8
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounts Receivable (continued)
-------------------

actual write offs to the allowance. As of July 29, 2006 and July 30, 2005, the
Company does not have an allowance for uncollectible accounts as management
believes all receivables are collectible.

Inventories
-----------

Inventories are stated at the lower of cost or market. The first-in, first-out
method is used to cost raw materials. The cost of boats in process and finished
boats includes actual raw materials, direct labor and allocated production
overhead. Provision is made to reduce excess or obsolete inventory to the
estimated net realizable value considering a reasonable sales gross margin.

Property and Equipment
----------------------

Property and equipment are recorded at cost. Depreciation and amortization are
computed using the straight-line method over an estimated useful life of five
years or, in the case of leasehold improvements, the term of the lease, if
greater.

Long-Lived Assets
-----------------

The Company reviews its long-lived assets for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of long-lived assets,
the recoverability test is performed using undiscounted net cash flows estimated
to be generated by the asset. If such review indicates that the asset is
impaired, the asset's carrying amount is written down to fair value. Long-lived
assets to be disposed of are reported at the lower of carrying amount or fair
value less cost to sell. During the years ended July 29, 2006 and July 30, 2005,
the Company recognized impairment losses of $78,844 and $99,490, respectively.

Warranty Reserves
-----------------

The Company provides a limited warranty on all boat components for a period of
twelve months from date of purchase. In addition, it provides a limited lifetime
structural warranty on the fiberglass hull of each of its boats. The Company
provides for anticipated warranty expenses through an allowance determined as a
percentage of net sales based on actual historical experience. Increases to the
reserve for allowances were $125,818 and $64,000 for the years ended July 29,
2006 and July 30, 2005, respectively. For these same periods, warranty expenses
charged to the reserve were $99,636 and $79,649, respectively.

                                      F-9
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition
-------------------

Revenue from the sale of boats is recognized at the time of physical delivery
and transfer of legal title to its authorized dealers. The Company does not
provide any right of return for the boats sold to its dealers but, as discussed
in Note 9, it provides certain guarantees to some lenders who provide floor plan
financing to some of its dealers.

Advertising Costs
-----------------

The Company purchases print advertising in industry publications and
participates with its authorized dealers on a co-op basis in such advertising to
promote its brand name and line of boats. Such costs are charged to operations
as incurred without regard to any expected future benefit. Advertising costs
were approximately $113,000 and $99,000 for 2006 and 2005, respectively.

Income Taxes
------------

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under the asset and
liability method of Statement 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled.

Stock-Based Compensation
------------------------

Prior to January 29, 2006, the Company accounted for its share-based
compensation plan under the measurement and recognition provisions of Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related Interpretations, as permitted by the Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123).
Accordingly, share-based compensation was included as a pro forma disclosure in
the financial statement footnotes.

Effective January 29, 2006, the Company adopted the fair value recognition
provisions of the Statement of Financial Accounting Standards No. 123R,
Share-Based Payments using the modified-prospective transition method. In
accordance with this transition method, the Company's consolidated financial
statements for prior periods have not been restated to reflect the impact of
SFAS 123R. Under the modified prospective transition method, share-based
compensation expense for the Company's third fiscal quarter beginning January
29, 2006 includes compensation expense for all share-based compensation awards
granted prior to, but for which the requisite service has not yet been performed

                                      F-10
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock-Based Compensation (continued)
------------------------

as of January 29, 2006, based on the grant date fair value estimated in
accordance with the original provisions of SFAS 123. Share-based compensation
expense for all share-based compensation awards granted after January 29, 2006
is based on the grant date fair value estimated in accordance with the
provisions of SFAS 123R. The Company recognizes compensation for options
expected to vest on a straight-line basis over the requisite service period of
the award.

The Company uses a Black-Scholes option-pricing model (Black-Scholes model) to
estimate the fair value of stock options granted. See Note 7 herein for
additional information.

The following table reflects the pro forma information regarding the Company's
employee stock option grants for the years ended July 29, 2006 and July 30,
2005.
<TABLE>
<CAPTION>

                                                                                  July 29, 2006         July 30, 2005
                                                                                  -------------         -------------
<S>                                                                                   <C>                    <C>
              Net income applicable to common shareholders                            $ 236,620              $ 386,346
              Add:  Stock based employee compensation
                       expense recognized per SFAS 123R for
                       periods after January 29, 2006                                   118,813                      -
              Less: Annual stock based employee compensation
                       expense determined under fair value method                      (183,641)               (79,919)
                                                                                      ---------              ---------
              Pro forma net income                                                    $ 171,792              $ 306,427
                                                                                      =========              =========
              Net income per share - basic:
                        As reported                                                   $    0.01              $    0.03
                                                                                      =========              =========
                        Pro forma                                                     $    0.01              $    0.02
                                                                                      =========              =========
              Net income per share - diluted:
                        As reported                                                   $    0.01              $    0.02
                                                                                      =========              =========
                        Pro forma                                                     $    0.01              $    0.02
                                                                                      =========              =========
</TABLE>







                                      F-11
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Net Income Per Share of Common Stock
------------------------------------

Net income per common share is calculated in accordance with SFAS No. 128,
"Earnings Per Share" requiring companies to report basic and diluted earnings
per share. Basic net income per common share is computed using the weighted
average number of common shares issued and outstanding during the period.
Diluted net income per common share is computed using the weighted average
number of common shares issued and outstanding plus any dilutive potential
common shares outstanding during the period. The effects of dilutive potential
shares outstanding during the years ended July 29, 2006 and July 30, 2005 are
shown in the following table.
<TABLE>
<CAPTION>
                                                                                  July 29, 2006         July 30, 2005
                                                                                  -------------         -------------
<S>                                                                                  <C>                    <C>
              Basic weighted average shares outstanding                             17,127,164             14,693,321
                 Effect of dilutive employee stock options                           1,000,000              1,543,956
                                                                                    ----------             ----------
              Diluted weighted average shares outstanding                           18,127,164             16,237,277
                                                                                    ==========             ==========
</TABLE>
Business Segments
-----------------

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" establishes standards for public enterprises to report information
about their operating segments in annual financial statements. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers.

SFAS No. 131 defines operating segments as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing operating performance. Management has determined that the Company
currently operates in only one business segment, sport fishing boat
manufacturing. Therefore, the Company does not have any separate operating
segment information to report other than the amounts reflected in its financial
statements.

Fair Value of Financial Instruments
-----------------------------------

SFAS No. 107 requires the disclosure of fair value of financial instruments. The
estimated fair value amounts have been determined by the Company's management
using available market information and other valuation methods. However,
considerable judgment is required to interpret market data in developing the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current

                                      F-12
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments (continued)
-----------------------------------

market exchange. The carrying amounts reported in the consolidated balance
sheets were used in estimating fair value disclosure for cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses and notes
payable because of the short maturity of those instruments. For the long-term
portion of notes payable, the Company believes that the estimated fair value
does not vary substantially from the amounts reported in the consolidated
balance sheets due to the effect of the interest rate.

Recent Accounting Pronouncements
--------------------------------

In September 2006, the Financial Accounting Standards Board, ("FASB") issued FAS
157 (SFAS 157), Fair Value Measurements. This standard defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
This statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007. Earlier application is encouraged. The
adoption of this accounting pronouncement is not expected to have a material
effect on the consolidated financial statements.

In July 2006, the FASB issued Interpretation No. 48 (FIN No. 48), Accounting for
Uncertainty in Income Taxes. This interpretation requires recognition and
measurement of uncertain income tax positions using a "more-likely-than-not"
approach. The provisions of FIN 48 are effective for fiscal years beginning
after December 15, 2006. The adoption of this accounting pronouncement is not
expected to have a material effect on the consolidated financial statements.

In March 2006, the FASB issued FAS 156 (SFAS No. 156), Accounting for Servicing
of Financial Assets - an amendment of FASB Statement No. 140. This standard
clarifies when to separately account for servicing rights, requires servicing
rights to be separately recognized initially at fair value, and provides the
option of subsequently accounting for servicing rights at either fair value or
under the amortization method. The standard is effective for fiscal years
beginning after September 15, 2006 but can be adopted early as long as financial
statements for the fiscal year in which early adoption is elected, including
interim statements, have not yet been issued. The adoption of this accounting
pronouncement is not expected to have a material effect on the consolidated
financial statements.

In February 2006, the FASB issued FAS 155 (SFAS No. 155), Accounting for Certain
Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140.
This statement permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that would otherwise have to be
accounted for separately. The new Statement also requires companies to identify
interests in securitized financial assets that are freestanding derivatives or
contain embedded derivatives that would have to be accounted for separately,
clarifies which interest- and principal-only strips are subject to Statement
133, and amends Statement 140 to revise the conditions of a qualifying special
purpose entity due to the new requirement to identify whether interests in
                                      F-13
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements (continued)
--------------------------------

securitized financial assets are freestanding derivatives or contain embedded
derivatives. This statement is effective for all financial instruments acquired
or issued after the beginning of an entity's first fiscal year that begins after
September 15, 2006, but can be adopted early as long as financial statements for
the fiscal year in which early adoption is elected, including interim
statements, have not yet been issued.. The adoption of this accounting
pronouncement is not expected to have a material effect on the consolidated
financial statements.

In May 2005, the FASB issued FAS 154 (SFAS no. 154), Accounting Changes and
Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3.
This Statement provides guidance on the accounting for and reporting of
accounting changes and error corrections. It establishes, unless impracticable,
retrospective application as the required method for reporting a change in
accounting principle in the absence of explicit transition requirements specific
to the newly adopted accounting principle. This Statement also provides guidance
for determining whether retrospective application of a change in accounting
principle is impracticable and for reporting a change when retrospective
application is impracticable. The correction of an error in previously issued
financial statements is not an accounting change. However, the reporting of an
error correction involves adjustments to previously issued financial statements
similar to those generally applicable to reporting an accounting change
retrospectively. Therefore, the reporting of a correction of an error by
restating previously issued financial statements is also addressed by this
Statement. This statement is effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. The adoption of
this accounting pronouncement is not expected to have a material effect on the
consolidated financial statements.

In March 2005, the FASB issued Interpretation No. 47 (FIN No. 47), Accounting
for Conditional Asset Retirement Obligations, and Interpretation of FASB
Statement No. 143. This interpretation clarifies the timing for recording
certain asset retirement obligations required by FASB Statement No. 143,
Accounting for Asset Retirement Obligations. The provisions of FIN No. 47 are
effective for years ending after December 15, 2005. The adoption of this
accounting pronouncement is not expected to have a material effect on the
consolidated financial statements.

In December 2004, the FASB issued revised FAS No. 123 (SFAS No. 123R),
Share-Based Payment. This standard eliminates the ability to account for
share-based compensation transactions using the intrinsic value-based method
under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and requires instead that such transactions be accounted for using a
fair-value-based method. SFAS No. 123R is effective for financial statements
issued for the first interim period beginning after December 15, 2005 for small
business issuers. The adoption of this accounting pronouncement is described
under in heading "Stock-Based Compensation".

                                      F-14
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements (continued)
--------------------------------

In December 2004, the FASB issued FAS 153, Exchanges of Nonmonetary Assets. The
provisions of this Statement is effective for nonmonetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. The provisions of
this Statement should be applied prospectively, and eliminates the exception
from fair value measurement for nonmonetary exchanges of similar productive
assets in paragraph 21(b) of APB Opinion No. 29, Accounting for Nonmonetary
Transactions, and replaces it with an exception for exchanges that do not have
commercial substance. The adoption of this accounting pronouncement did not have
a material effect on the consolidated financial statements.

In November, 2004, SFAS 151, "Inventory Costs, an Amendment of ARB No. 43,
Chapter 4" was issued by the Financial Accounting Standards Board. This
statement amends prior accounting pronouncements to conform certain inventory
accounting with international principles by clarifying the accounting for
abnormal amounts of idle facility expense, freight, handling costs and wasted
material. The statement requires that such costs be treated as current period
charges regardless of their classification as abnormal in nature. In addition,
the statement requires that fixed production overhead amounts be allocated to
the costs of conversion based on the normal capacity of production facilities.
The statement is effective for years beginning on or after June 15, 2005,
although earlier application is allowed. The adoption of SFAS 151 did not effect
the Company's financial position or results of operations.

NOTE 3 - SIGNIFICANT CUSTOMER CONCENTRATIONS

During the years ended July 29, 2006 and July 30, 2005, the Company's sales to
major customers were approximately 73% (five customers ) and 60% (three
customers) of its net sales, respectively. The Company's accounts receivable at
each year end are substantially due from these customers.

NOTE 4 - INVENTORY

The Company's inventory consists of the following as of each year end indicated:
<TABLE>
<CAPTION>
                                             July 29, 2006             July 30, 2005
                                             -------------             -------------
<S>                                            <C>                         <C>
Raw materials                                 $ 1,559,239               $   569,463
Work in process                                 1,078,729                   874,274
Finished goods                                    137,706                         -
                                              -----------               -----------
                                              $ 2,775,674               $ 1,443,737
                                              ===========               ===========
</TABLE>

                                      F-15
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following for each year end indicated:
<TABLE>
<CAPTION>
                                             July 29, 2006             July 30, 2005
                                             -------------             -------------
<S>                                             <C>                       <C>
Boat molds                                     $ 2,432,762               $ 1,919,763
Leasehold improvements                             683,270                   322,254
Machinery and equipment                            605,576                   307,160
Office furniture and equipment                     103,950                   100,393
                                               -----------               -----------
                                                 3,825,558                 2,649,570
Accumulated depreciation                        (1,874,274)               (1,580,329)
                                               -----------               -----------
                                               $ 1,951,284               $ 1,069,241
                                               ===========               ===========
</TABLE>
NOTE 6-  NOTES PAYABLE AND REVOLVING LINES OF CREDIT

At each year end, the Company has the following notes payable outstanding:
<TABLE>
<CAPTION>
                                                                               July 29, 2006           July 30, 2005
                                                                               -------------           -------------
<S>                                                                              <C>                     <C>
              Note payable to shareholders, interest at 10%, due in
                   full February 28, 2008, subordinated to bank line
                   of credit, collateralized by substantially all of the
                   Company's assets.                                             $ 350,000 (a)           $ 350,000 (a)

              Note payable to bank, revolving line of credit (unused
                   portion of facility is $200,000 at July 29, 2006),
                   interest payable monthly at bank's prime rate plus 1.5%
                   (9.75% at July 29, 2006), due February 28, 2007,
                   collateralized by all of the Company's assets and
                   personally guaranteed by its President.                         550,000                 240,000
                                                                                 ---------               ---------

                               Total notes payable                               $ 900,000               $ 590,000
                               Less: Current maturities                            550,000                 590,000
                                                                                 ---------               ---------
                               Long term portion of notes payable                $ 350,000               $       -
                                                                                 =========               =========
</TABLE>
(a)           During the year ended July 29, 2006, the due date of this note was
              extended until February 2008. This note was purchased from it's
              the original lender during the year ended July 26, 2003, by two
              officers of the Company in a private transaction. See note 10 for
              additional disclosures regarding these transactions. At July 29,
              2006 and July 30, 2005, there was accrued interest on this note of
              $143,351 and $117,259, respectively.

                                      F-16
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 6-  NOTES PAYABLE AND REVOLVING LINES OF CREDIT (continued)

The Company has a $400,000 line of credit with a financial institution for the
purchase of outboard engines, collateralized by a $30,000 certificate of
deposit. At July 29, 2006, this line was fully utilized and is included in
accounts payable in the consolidated balance sheets. This line of credit is
personally guaranteed by the Company's president.

NOTE 7 -  SHAREHOLDERS' EQUITY

Preferred Stock
---------------

The Company has authorized 5,000,000 shares of convertible preferred stock and
had previously issued 315,000 shares of Series A Preferred and 452,500 shares of
Series B Preferred. During 2004, the total outstanding Series A and Series B
preferred shares were automatically converted to 2,302,500 common shares on a 3
common shares for each preferred share basis. The Company had issued 998,722 of
shares of Series C preferred at July 31, 2004. During 2005, the Company issued
34,197 shares of Series C preferred shares for payment of declared dividends of
$34,197, then the total 1,032,919 outstanding Series C preferred shares were
automatically converted to 2,065,838 common shares on a 2 common shares for each
preferred share basis. The features, rights and obligations of each series is
described as follows.

Series A. The company has authorized 500,000 shares of Series A convertible
preferred stock. When and if declared by the Board of Directors, dividends
accrue quarterly based on 10% per annum, are cumulative and are payable in
shares of Series B preferred stock valued at $1.00 per share. Each Series A
share is convertible into three shares of Common Stock of the Company at any
time at the option of the holder. In addition, each share will automatically
convert into three shares of Common Stock of the Company (a) five years from the
date of issue, or (b) at such time as a registration statement registering the
shares of the Company's common stock issuable upon such conversion of Series A
preferred convertible is declared effective by the Securities and Exchange
Commission. Each preferred share is entitled to votes equal to the number of
shares of Common Stock into which the Series A preferred stock is convertible.
The Company may redeem the Series A preferred stock at a price of $1.20 per
share upon 120 days written notice to the holders thereof. In the event of
liquidation, dissolution or winding up of the Company, Series A preferred stock
has rights to the assets of the Company superior to those of Series B and C
preferred stock and Common Stock equal to $1.00 per share.

                                      F-17
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 7 -  SHAREHOLDERS' EQUITY (continued)

Preferred Stock (continued)
---------------

Series B. The Company has authorized 500,000 shares of Series B convertible
preferred stock. The features, rights and obligations of this series are
identical to Series A preferred stock except that Series B preferred stock is
subordinate to Series A.

Series C. The Company has authorized 1,500,000 shares of Series C convertible
preferred stock. The features, rights and obligations of this series are
identical to Series A and Series B preferred stock, except that: (a) Series C
preferred stock is subordinate to Series A and Series B preferred stock, (b)
each share of Series C preferred stock is convertible into two shares of the
Common Stock of the Company, and (c) dividends are payable at 8% per annum in
additional shares of Series C preferred stock.

Common Stock
------------

During the year ended July 30, 2005, the Company issued 2,065,838 common shares
in connection with the conversions of preferred stock discussed above. In
connection with the payment of certain amounts due to officers and for the
guarantee of a bank line of credit and extending the due date of a note payable
to officers as discussed in Note 10, it issued 922,268 and 454,773 common shares
during the years ended July 29, 2006 and July 30, 2005, respectively. During the
years ended July 29, 2006 and July 30, 2005, the Company issued 1,000,000 and
460,000 common shares as payment for services. In addition, the Company issued
774,925 shares as payment of 2005 officer bonuses and 611,143 common shares as
payment of 2005 management bonuses during the year ended July 29, 2006 and
209,351 common shares as payment of 2004 officer bonuses, and 540,000 common
shares as payment of 2004 management bonuses during the year ended July 30,
2005.

Stock Options and Warrants
--------------------------

The Company's Board of Directors grants options for the purchase of its common
shares on a discretionary basis. In 2004, the Company adopted the 2004
management and director equity incentive and compensation plan. The Plan
encourages and enables key employees, directors and consultants to participate
in the company's future prosperity and growth by providing them with incentives
and compensation based on the Company's performance, development and financial
success. Options granted under this plan may be in the form of incentive stock
options ("ISOs"), which are intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended, or stock options that are not
intended to qualify as ISOs ("NQSOs"). The maximum shares which may be issued
under the Plan was initially 3,300,000 shares and was increased to 5,300,000

                                      F-18
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 7 -  SHAREHOLDERS' EQUITY (continued)

Stock Options and Warrants (continued)
--------------------------

shares in November 2004. At July 29, 2006, 3,500,000 options have been issued
under this plan and 3,300,000 are outstanding. The following table summarizes
such grants and its outstanding options as of each year end indicated.
<TABLE>
<CAPTION>
                                                            Non-Qualified Options                    Qualified Options
                                                     -----------------------------------    -----------------------------------
                                                                            Weighted                               Weighted
                                                        Number of           Average            Number of           Average
                                                         Options         Exercise Price         Options         Exercise Price
                                                     -----------------   ---------------    -----------------   ---------------
<S>                                                         <C>               <C>                  <C>               <C>
                 BALANCE, July 31, 2004                     1,356,200         0.7                  1,000,000         0.14

                      Granted                                       -           -                  1,000,000         0.30
                      Exercised                                     -           -                          -            -
                      Forfeited                              (256,200)        0.6                          -            -
                                                     -----------------   ---------------    -----------------   ---------------

                 BALANCE, July 30, 2005                     1,100,000        0.72                  2,000,000         0.22

                      Granted                                       -           -                  1,500,000         0.31
                      Exercised                                     -           -                          -            -
                      Forfeited                            (1,100,000)       0.72                   (200,000)        0.31
                                                     -----------------   ---------------    -----------------   ---------------
                 BALANCE, July 29, 2006                             -           -                  3,300,000         0.26
                                                     =================   ===============    =================   ===============

                 Number of options exercisable
                      at July 30, 2005                      1,100,000        0.72                  1,000,000         0.14
                                                     =================   ===============    =================   ===============
                 Number of options exercisable
                      At July 29, 2006                              -           -                  1,150,000         0.17
                                                     =================   ===============    =================   ===============
</TABLE>
The Company's issuances of options and warrants for the purchase of its common
shares are generally described below (as adjusted for stock splits). In
connection with a private placement of the Company's Series C preferred stock in
1999, the Company issued 256,200 warrants to placement agents, each redeemable
for one share of common stock at a price of $.60 for a period of five years.
These placement agent warrants expired in fiscal 2005. In May 2004, the Company
awarded ISOs for the purchase of 1,000,000 shares at a price of $.14 to $.15 per
share to various officers and key employees in recognition of their service to
the Company. In January 2005, the company awarded ISOs for the purchase of
1,000,000 shares at a price of $.30 per share to six key employees as inducement
for them to relocate to central Florida. These options vest once the relocation
has taken place.

On July 27, 2001, the Company entered into employment agreements with its
President, Vice President and Chief Financial Officer, with the officers
receiving options to purchase a total of 1,100,000 shares of the Company's
common stock exercisable in four increments of 275,000 shares at $.50 per share,
$.625 per share, $.75 per share and $1.00 per share. The options are fully
vested and are exercisable for a period of five years. These options expired in
fiscal 2006.

                                      F-19
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 7 -  SHAREHOLDERS' EQUITY (continued)

Stock Options and Warrants  (continued)
--------------------------

On March 31, 2006, the Company entered into new employment agreements with its
President and Chief Financial Officer. The President received 1,000,000 options
with an exercise price of $.32 per share and the Chief Financial Officer
received 500,000 options with an exercise price of $.29. These options vest in
equal installments over five years and are exercisable for a period of five
years from the vesting date.

A summary of the Company's outstanding and exercisable stock options as of July
29, 2006 is as follows:
<TABLE>
<CAPTION>
                                                                                 Weighted Average
                                                                Number        Remaining Contractual
         Exercise Price             Status                     of Options           Life (years)
         --------------             ------                     ----------           ------------
<S>             <C>                 <C>                           <C>                    <C>
                $0.14               Outstanding                  700,000                2.77
                 0.14               Exercisable                  700,000                2.77
                 0.15               Outstanding                  250,000                2.77
                 0.15               Exercisable                  250,000                2.77
                 0.29               Outstanding                  500,000                7.66
                 0.29               Exercisable                        -                7.66
                 0.30               Outstanding                  850,000                3.46
                 0.30               Exercisable                  200,000                3.46
                 0.32               Outstanding                1,000,000                7.66
                 0.32               Exercisable                        -                7.66
</TABLE>
In December 2004, the FASB issued Statement of Financial Accounting Standards
No. 123R, Share-Based Payments ("SFAS 123R"), which requires all companies to
measure compensation cost for all share-based payments at fair value and to
recognize cost over the vesting period. In March 2005, the SEC released Staff
Accounting Bulletin No. 107, Share-Based Payment ("SAB 107"). SAB 107 provides
the SEC staff position regarding the application of Statement 123R, including
interpretive guidance related to the interaction between Statement 123R and
certain SEC rules and regulations, and provides the staff's views regarding the
valuation of share-based payment arrangements for public companies. In April
2005, the SEC announced that companies should implement Statement 123R at the
beginning of their next interim or annual period beginning after December 15,
2005 for small business issuers. The Company's first interim period beginning
after December 15, 2005 was the quarter beginning January 29, 2006 at which date
the Company adopted the fair value recognition provisions of SFAS 123R using the
modified-prospective transition method. In accordance with this transition
method, the Company's consolidated financial statements for prior periods have
not been restated to reflect the impact of SFAS 123R. Under the modified
prospective transition method, share-based compensation expense for the
Company's third fiscal quarter beginning January 29, 2006 includes compensation
expense for all share-based compensation awards granted prior to, but for which
the requisite service has not yet been performed as of January 29, 2006, based
on the grant date fair value estimated in accordance with the original
provisions of SFAS 123. Share-based compensation expense for all share-based
compensation awards granted after January 29, 2006 is based on the grant date

                                      F-20
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)


NOTE 7 -  SHAREHOLDERS' EQUITY (continued)

Stock Options and Warrants  (continued)
--------------------------

fair value estimated in accordance with the provisions of SFAS 123R. The Company
recognizes compensation for options expected to vest on a straight-line basis
over the requisite service period of the award.

Total share-based compensation expense, for all of the Company's share-based
awards recognized for the year ended July 29, 2006, was $118,813 or $0.006 per
share basic and diluted.

The Company uses a Black-Scholes option-pricing model (Black-Scholes model) to
estimate the fair value of stock option grants. The use of a valuation model
requires the Company to make certain assumptions with respect to selected model
inputs. Expected volatility was calculated based on the historical volatility of
the Company's stock price. The average expected life is based on the contractual
term of the option and expected employee exercise and post-vesting employment
termination behavior. The risk-free interest rate is based on U.S. Treasury
zero-coupon issues with a remaining term equal to the expected life assumed at
the date of grant. The following were the inputs used in the Black-Scholes model
for the years ended July 29, 2006 and July 30, 2005.
<TABLE>
<CAPTION>
                                                                                  July 29, 2006         July 30, 2005
                                                                                  -------------         -------------
<S>                                                                                  <C>                    <C>
                          Stock price volatility                                     178.00%                212.00%
                          Risk-free rate of return                                     4.59%                  3.71%
                          Annual dividend yield                                        0.00%                  0.00%
                          Expected life (in years)                                        5                      5
</TABLE>
Prior to the adoption of SFAS 123R, the Company recognized share-based
compensation expense in accordance with APB25. The Company provided pro forma
disclosure amounts in accordance with SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure (SFAS 148), as if the fair value method
defined by SFAS 123 had been applied to its share-based compensation. The pro
forma table below reflects net earnings and basic and diluted net earnings per
share for the years ended July 29, 2006 and July 30, 2005, had the Company
applied the fair value recognition provisions of SFAS 123:

                                      F-21
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)


NOTE 7 -  SHAREHOLDERS' EQUITY (continued)

Stock Options and Warrants  (continued)
--------------------------

<TABLE>
<CAPTION>
                                                                         July 29, 2006         July 30, 2005
                                                                         -------------         -------------
<S>                                                                        <C>                    <C>
              Net income applicable to common shareholders                 $ 236,620              $ 386,346
              Add:  Stock based employee compensation
                       expense recognized per SFAS 123R for
                       periods after January 29, 2006                        118,813                      -
              Less: Annual stock based employee compensation
                       expense determined under fair value method           (183,641)               (79,919)
                                                                           ---------              ---------

              Pro forma net income                                         $ 171,792              $ 306,427
                                                                           =========              =========

              Net income per share  basic:
                        As reported                                        $    0.01              $    0.03
                                                                           =========              =========

                        Pro forma                                          $    0.01              $    0.02
                                                                           =========              =========

              Net income per share  diluted:
                        As reported                                        $    0.01              $    0.02
                                                                           =========              =========

                        Pro forma                                          $    0.01              $    0.02
                                                                           =========              =========
</TABLE>


















                                      F-22
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 8 - INCOME TAXES

At July 29, 2006 the Company has a remaining unused net operating loss
carryforward of approximately $1,053,000 for income tax purposes, of which
approximately $60,000 expires in 2012 and the remainder in the years 2018
through 2021. However, the ability to utilize such losses to offset future
taxable income is subject to various limitations imposed by the rules and
regulations of the Internal Revenue Service. The net operating loss
carryforwards may result in future income tax benefits of approximately
$396,000; however, because realization is uncertain at this time, a valuation
reserve in the same amount has been established. The valuation allowance for
deferred tax assets decreased approximately $79,000 and $134,000 for the years
ended July 29, 2006 and July 30, 2005, respectively. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.

The significant components of the Company's deferred tax assets and liabilities
as of July 29, 2006 and July 30, 2005 are presented in the following table:
<TABLE>
<CAPTION>
                                                            2006                       2005
                                                            ----                       ----
<S>                                                      <C>                        <C>
Deferred tax liabilities:
  Depreciation                                           $ (135,000)                $ (45,000)
Deferred tax assets:
  Net operating loss carryforwards                          396,000                   358,000
  Reserves for future costs and expenses                     38,000                    65,000
                                                         ----------                 ---------
Net deferred tax asset                                      299,000                   378,000
Valuation allowance for deferred tax assets                (299,000)                 (378,000)
                                                         ----------                 ---------
                                                         $        -                 $       -
                                                         ==========                 =========
</TABLE>
The Company's actual effective tax rate for these years is reconciled to the
expected statutory tax rate as follows:
<TABLE>
<CAPTION>
                                                             2006                       2005
                                                             ----                       ----
<S>                                                             <C>                         <C>
Expected Federal statutory tax (benefit) rate                   34.00%                      34.00%
Expected state tax (benefit) rate, net of Federal tax            3.60%                       3.60%
                                                        ---------------            ----------------

Expected combined statutory tax rate                            37.60%                      37.60%
Utilization of net operating loss carryforward                 (37.60)%                    (37.60)%
                                                        ---------------            ----------------
Effective income tax rate                                        0.00%                       0.00%
                                                        ===============            ================
</TABLE>
                                      F-23
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 9 - COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain equipment under operating and
capital leases expiring through December 2010. The manufacturing facility is
owned by the Company's president. Future minimum lease payments under the
non-cancelable leases with initial terms greater than one year, as of July 29,
2006 are approximately as follows:
<TABLE>
<CAPTION>
                                               Operating               Capital
                Year Ended July,                 Leases                  Lease
                ----------------                 ------                  -----
<S>                    <C>                    <C>                    <C>
                       2007                   $  680,109             $   28,153
                       2008                      699,143                 28,153
                       2009                      636,069                 16,531
                       2010                      440,685                      -
                       2011                      149,264                      -
                                              ----------             ----------

Total minimum lease payments                  $2,605,270               7072,837
                                              ==========
Less:  Amount representing interest                                      (5,835)
                                                                     ----------
Present value of net minimum
     lease payments                                                  $   67,002
                                                                     ==========
</TABLE>
At July 29, 2006, the Company had $73,508 included in machinery and equipment
which was purchased under a capital lease. There was no accumulated depreciation
on this equipment at July 29, 2006.

Total rental expense for the years ended July 29, 2006 and July 30, 2005 was
$534,153 and $303,533, respectively.

Beginning in 2002, the Company entered into employment agreements with three of
its principal executives for their services through July 27, 2006. Under the
terms of the agreements, the base salaries totaling $375,000 under these
agreements are automatically increased 5% annually. In addition, the executives
shall receive additional compensation of a combined 9% of the Company's net
income before income taxes annually, are reimbursed annually for their vehicle
expenses and may purchase one boat annually from the Company at its
manufacturing cost. These agreements can be terminated by the Company or the
executives without cause. They are renewable for two additional one-year
periods.

In March 2006, the Company entered into new employment agreements with two of
the principal executives for services through March 31, 2011, thereby
terminating the 2002 employment agreements. Under the terms of the agreements,
the base salaries totaling $425,000 are increased annually with the greater of
the percentage increase in the Consumer Price Index or 6%. In addition, the
executives shall receive additional performance-based bonuses in an amount
determined by the board of directors, receive auto allowances and may purchase
one boat annually from the Company at its manufacturing costs.

                                      F-24
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 9 - COMMITMENTS AND CONTINGENCIES (continued)

The Company sells its boats to independent dealers who, occasionally, finance
the purchase through floor plan financing arrangements with lenders. In
connection with this floor plan financing with certain dealers, the Company
guarantees directly to lenders that they will repurchase boats with unencumbered
titles that are in unused condition if the dealer defaults on its obligation to
repay the loan. Since its inception and through July 30, 2005, the Company has
not been required to repurchase any boats; however, the Company is contingently
liable for approximately $1,938,532 under terms of these agreements as of July
29, 2006.

The Company has deposits in banks in excess of the FDIC insured amount of
$100,000. At December 31, 2005, the Company had $211,621 in excess of this
requirement which is subject to loss should the bank cease operations.

NOTE 10 - RELATED PARTY TRANSACTIONS

The Company leases its Fort Lauderdale, Florida office and manufacturing
facilities from its President. Under the terms of the lease agreements, the
Company pays the agreed monthly rents, applicable sales taxes, property taxes
and it insures and maintains the buildings. For the years ended July 29, 2006
and July 30, 2005, the Company's President was paid rents of approximately
$210,000 and $190,000, respectively, on the Fort Lauderdale facilities.

On December 6, 2005, the Company entered into a lease agreement under which the
Company leases 53,648 square feet of manufacturing and warehouse facilities in
Palmetto, Florida from its President for $30,700 per month increasing 5% per
year. The Landlord may terminate the lease prior to the commencement of any
renewal periods. The initial term of the lease is five years with three renewal
terms for five years each. The Company has a "right of first refusal" to
purchase the facility in the event the facility is sold during the term of the
agreement. The Company's President was paid rents of approximately $237,000 for
the Palmetto facility for the year ended July 29, 2006.

In accordance with the terms of their employment agreements, one officer
purchased a boat from the Company in 2006 and two officers purchased boats from
the Company in 2005 at cost.

On November 21, 2002, the Company's President and its Chief Financial Officer
("buyers") entered into agreements with Triton International Holdings Corp.
("Triton") to acquire all rights, title and security interest in the Company's
note payable to Triton (see Note 6), including accrued interest. At the date of
the agreements, the note payable had a principal balance of $350,000 and accrued
interest of $102,025. The buyers extended these amounts plus accrued interest
since the date of their purchase to February 14, 2004. Pursuant to the terms of
the note to which the buyers succeeded, additional consideration was due to the
note holder as it was unpaid on its third anniversary. Under those terms, the
Company was obligated to issue common shares at the rate of 4 shares for each
dollar of the unpaid balance of the note (including accrued interest).
Therefore, the buyers received 1,808,098 common shares in accordance with these
terms. The fair value of these shares based on the shares purchased from Triton
was $36,162. On July 31, 2004, the Company issued 1,213,345 shares of common

                                      F-25
<PAGE>
                   JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (continued)

NOTE 10 - RELATED PARTY TRANSACTIONS (continued)

stock with a fair value of $146,601 to its President and Chief Financial Officer
as payment for extending the due date of this note payable until February, 2006
and for personally guaranteeing the Company's bank line of credit. On March 14,
2006, the Company issued 360,049 shares of common stock with a fair value of
$62,379 to its President and Chief Financial Officer as payment for extending
the due date of this note payable until February 28, 2008.

On December 6, 2005, the Company's President, Chief Financial Officer and Vice
President received 774,925 shares of its common stock, in lieu of cash, as
payment of bonuses in the amount of $82,700 earned pursuant to their respective
employment contracts during the year ended July 30, 2005. On January 13, 2005,
the Company's President and Chief Financial Officer received 209,351 shares of
its common stock, in lieu of cash, as payment of bonuses in the amount of
$41,891 earned pursuant to their respective employment contracts during the year
ended July 31, 2004.

The Company was unable to renew its existing line of credit without personal
guarantees from its President. As payment for his personal guarantees, on March
14, 2006, the Company issued the President 562,219 shares of its common stock
with a fair value of $97,263 to extend the line of credit to February 8, 2007
and on January 13, 2005, the Company issued the President 454,773 of its common
shares with a fair value of $91,000 to extend the line of credit to December 31,
2005.

As consideration for entering into new employment agreements with the Company on
March 31, 2006, the President and Chief Financial Officer received 800,000
shares of the Company's common stock with a fair value of $152,000. In addition,
on March 31, 2006, the Company issued a board member 200,000 shares of its
common stock with a fair value of $38,000.

Pursuant to the Company's development and operations plan for the Palmetto
facility, certain of the Company's administrative and operations personnel have
been relocated from the Company's Fort Lauderdale facility to the Palmetto
facility. In order to facilitate the relocation of such personnel, the Company
has provided interest free advances solely to cover the costs of such personnel
to relocate. Included in employee receivables, at July 29, 2006, is $132,570
advanced to an employee who is related to an officer of the company for costs
incurred in relocating to Palmetto.














                                      F-26