**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **FORM
        10-QSB**
 (Mark
        One)
 [
                  X
                  ]
              QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934For the quarterly period ended June 30, 2006[
                  ]
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACTFor
                  the transition period from ________________ to
                  _________________Commission file number 0-50742
 
 **SIGN
                  MEDIA SYSTEMS, INC**.
                _____________________________________________________________________________
                (Exact
                  name of small business issuer as specified in its
                  charter)FLORIDA
                ________________________________________________
                (State
                  or other jurisdiction of incorporation or organization)
              02-0555904
                ____________________________
                (IRS
                  Employer Identification No.)2100
                  19thStreet, Sarasota FL 34234
                _____________________________________________________________________________
                (Address
                  of principal executive offices)(941)
                  330-0336
                _____________________________________________________________________________
                (Issuer's
                  telephone number)_____________________________________________________________________________
                (Former
                  name, former address and former fiscal year, if changed since last
                  report)
 
 
  **APPLICABLE
        ONLY TO CORPORATE ISSUERS**
  State
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of the latest practicable date: 8,460,000 Common Shares no par value as
        of
        June 30, 2006.
 
 Transitional
        Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
  1
  **PART
        I — FINANCIAL INFORMATION**
 
 **Item
        1. Financial Statements.**
 
 **SIGN
          MEDIA SYSTEMS, INC.**
 **CONDENSED
          CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005**
 **(UNAUDITED)**
 2
 
 
 **SIGN
          MEDIA SYSTEMS, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
          30, 2006 AND 2005**
  **SIGN
            MEDIA SYSTEMS, INC.**
 
 
 **INDEX
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 Condensed
            Consolidated Balance Sheet at June 30, 2006
            (Unaudited) 4
 
 Condensed
            Consolidated Statements of Operations for the Six and Three 5
 Months
            Ended June 30, 2006 and 2005 (Unaudited)
 
 Condensed
            Consolidated Statements of Cash Flows for
            the 6
 Six
            Months Ended June 30, 2006 and 2005 (Unaudited)
 
 Notes
            to
            the Condensed Consolidated Financial
            Statements 7-20
 (Unaudited)
 
 
 
 
 
 3
 
 **SIGN
                      MEDIA SYSTEMS, INC.****CONDENSED
                      CONSOLIDATED BALANCE SHEET****JUNE
                      30, 2006****(UNAUDITED)****ASSETS****2006****CURRENT
                      ASSETS**Cash
                      and cash equivalents
                  
                  $
                  4,163Accounts
                      receivable, net
                  
                  
                  724,575Inventory,
                      net
                  
                  
                  17,460746,198**PROPERTY
                      AND EQUIPMENT - Net**
                  
                  
                  143,839**OTHER
                      ASSETS**Due
                      from related parties
                  
                  
                  594,746594,746**TOTAL
                      ASSETS**
                  
                  $
                  1,484,783**LIABILITIES
                      AND STOCKHOLDERS' EQUITY****CURRENT
                      LIABILITIES**Current
                      portion of long-term debt
                  
                  $
                  7,397Accounts
                      payable and accrued expenses
                  
                  
                  305,545Liability
                      for stock to be issued
                  
                  
                  224,900537,842**LONG-TERM
                      DEBT - Net of Current Portion**
                  
                  
                  32,765**TOTAL
                      LIABILITIES**
                  
                  
                  570,607**STOCKHOLDERS'
                      EQUITY**Common
                      stock, no par value, 100,000,000 shares authorized atJune
                      30, 2006; 8,460,000 shares issued and outstandingat
                      June 30 2006
                  
                  
                  5,000Additional
                      paid-in capital
                  
                  
                  671,700Retained
                      earnings
                  
                  
                  237,476914,176**TOTAL
                      LIABILITIES AND STOCKHOLDERS' EQUITY**
                  
                  $
                  1,484,783
 
 
 The
            accompanying notes are an integral part of these condensed consolidated
            financial statements.
 4
 
 
 **SIGN
                    MEDIA SYSTEMS, INC.****CONDENSED
                    CONSOLIDATED STATEMENTS OF INCOME****FOR
                    THE SIX AND THREE MONTHS ENDED JUNE 30, 2006 AND 2005
                    (UNAUDITED)****SIX
                    MONTHS ENDED**
                
                
                
                **THREE
                    MONTHS ENDED****June
                    30,**
                
                **June
                    30,**
                
                **June
                    30,**
                
                **June
                    30,****2006**
                
                **2005**
                
                **2006**
                
                **2005****(restated)**
                
                
                
                **(restated)****REVENUE**
                
                
                728,679
                
                $
                511,385
                
                
                426,427
                
                $
                489,114Other
                    revenue**-**recovery
                    of bad debt
                
                
                -
                
                
                500,000
                
                
                -
                
                
                500,000728,679
                
                
                1,011,385
                
                
                426,427
                
                
                989,114**COST
                    OF GOODS SOLD**
                
                
                15,820
                
                
                13,396
                
                
                6,469
                
                
                10,889**GROSS
                    PROFIT**
                
                
                712,859
                
                
                997,989
                
                
                419,958
                
                
                978,225**OPERATING
                    EXPENSES**Professional
                    fees and administrative payroll
                
                
                157,386
                
                
                223,180
                
                
                78,003
                
                
                111,297General
                    and administrative expenses
                
                
                63,522
                
                
                154,472
                
                
                22,971
                
                
                88,481Depreciation
                
                
                32,938
                
                
                24,941
                
                
                23,938
                
                
                13,050253,846
                
                
                402,593
                
                
                124,912
                
                
                212,828**NET
                    INCOME BEFORE OTHER INCOME (EXPENSE)**
                
                
                459,013
                
                
                595,396
                
                
                295,046
                
                
                765,397**OTHER
                    INCOME (EXPENSE)**Interest
                    income and other
                
                
                18,000
                
                
                103
                
                
                7,296
                
                
                101Interest
                    expense
                
                
                (583
                )
                
                (918
                )
                
                (316
                )
                
                (615
                )17,417
                
                
                (815
                )
                
                6,980
                
                
                (514
                )**NET
                    INCOME BEFORE PROVISION FOR INCOME TAXES**
                
                
                476,430
                
                
                594,581
                
                
                302,026
                
                
                764,883Provision
                    for income taxes
                
                
                (101,775
                )
                
                -
                
                
                (96,175
                )
                
                -**NET
                    INCOME APPLICABLE TO COMMON SHARES**
                
                $
                374,655
                
                $
                594,581
                
                $
                205,851
                
                $
                764,883**NET
                    INCOME PER BASIC AND DILUTED SHARES**
                
                $
                0.04
                
                $
                0.07
                
                $
                0.02
                
                $
                0.09**WEIGHTED
                    AVERAGE NUMBER OF COMMON****SHARES
                    OUTSTANDING**
                
                
                8,460,000
                
                
                8,460,000
                
                
                8,460,000
                
                
                8,460,000
 
 The
            accompanying notes are an integral part of these condensed consolidated
            financial statements.
 
 5
 **SIGN
                        MEDIA SYSTEMS, INC.****CONDENSED
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (UNAUDITED)****FOR
                        THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005****(restated)****2006**
                    
                    **2005****CASH
                        FLOWS FROM OPERATING ACTIVITIES:**Net
                        income
                    
                    $
                    374,655
                    
                    $
                    594,581**Adjustments
                        to reconcile net income****to
                        net cash (used in) provided by operating
                        activities:**Depreciation
                    
                    
                    32,938
                    
                    
                    24,941Recovery
                        of allowance for accounts receivable
                    
                    
                    -
                    
                    
                    (500,000
                    )**Changes
                        in assets and liabilities:**(Increase)
                        decrease in accounts receivable
                    
                    
                    (724,575
                    )
                    
                    1,041,649Decrease
                        in inventory
                    
                    
                    7,540
                    
                    
                    7,536Decrease
                        in prepaid expenses and other current assets
                    
                    
                    -
                    
                    
                    4,000Increase
                        in accounts payable and accrued expenses
                    
                    
                    89,275
                    
                    
                    52,834Increase
                        in deferred revenue
                    
                    
                    -
                    
                    
                    250,000**Total
                        adjustments**
                    
                    
                    (594,822
                    )
                    
                    880,960**Net
                        cash (used in) provided by operating activities**
                    
                    
                    (220,167
                    )
                    
                    1,475,541**CASH
                        FLOWS FROM INVESTING ACTIVITIES:**Acquisition
                        of property and equipment
                    
                    
                    (1,984
                    )
                    
                    (86,913
                    )Increase
                        in interest receivable - related party
                    
                    
                    (17,594
                    )
                    
                    -Proceeds
                        from related parties
                    
                    
                    260,998
                    
                    
                    -**Net
                        cash provided by (used in) investing activities**
                    
                    
                    241,420
                    
                    
                    (86,913
                    )**CASH
                        FLOWS FROM FINANCING ACTIVITIES:**Increase
                        in liability for stock to be issued
                    
                    
                    -
                    
                    
                    24,900(Payments)
                        on long-term debt
                    
                    
                    (11,023
                    )
                    
                    (9,209
                    )(Payments)
                        on debt-related party
                    
                    
                    (8,319
                    )
                    
                    (1,396,966
                    )**Net
                        cash (used in) financing activities**
                    
                    
                    (19,342
                    )
                    
                    (1,381,275
                    )**NET
                        INCREASE IN CASH AND CASH EQUIVALENTS**
                    
                    
                    1,911
                    
                    
                    7,353**CASH
                        AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
                    
                    
                    2,252
                    
                    
                    6,352**CASH
                        AND CASH EQUIVALENTS - END OF PERIOD**
                    
                    $
                    4,163
                    
                    $
                    13,705**SUPPLEMENTAL
                        DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                        paid during the year for interest
                    
                    $
                    583
                    
                    $
                    -
 The
            accompanying notes are an integral part of these condensed consolidated
            financial statements.
 
 
 
 
  6
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
  **NOTE
          1-**  **ORGANIZATION
          AND BASIS OF PRESENTATION**
  
 The
          condensed consolidated unaudited interim financial statements included
          herein
          have been prepared, without audit, pursuant to the rules and regulations
          of the
          Securities and Exchange Commission. The condensed consolidated unaudited
          financial statements and notes are presented as permitted on Form 10-QSB
          and do
          not contain information included in the Company’s annual condensed consolidated
          unaudited statements and notes. Certain information and footnote disclosures
          normally included in the financial statements prepared in accordance with
          accounting principles generally accepted in the United States of America
          have
          been condensed or omitted pursuant to such rules and regulations, although
          the
          Company believes that the disclosures are adequate to make the information
          presented not misleading. It is suggested that these condensed consolidated
          unaudited financial statements be read in conjunction with the December
          31, 2005
          audited consolidated financial statements and the accompanying notes thereto.
          While management believes the procedures followed in preparing these condensed
          consolidated unaudited financial statements are reasonable, the accuracy
          of the
          amounts are in some respects dependent upon the facts that will exist,
          and
          procedures that will be accomplished by the Company later in the
          year.
 
 These
          condensed consolidated unaudited financial statements reflect all adjustments,
          including normal recurring adjustments which, in the opinion of management,
          are
          necessary to present fairly the consolidated operations and cash flows
          for the
          periods presented.
 
 The
          Company was incorporated on January 28, 2002 as a Florida corporation.
          Upon
          incorporation, an officer of the Company contributed $5,000 and received
          1,000
          shares of common stock of the Company. Effective January 1, 2003, the Company
          issued 7,959,000 shares of common stock in exchange of $55,702 of net assets
          of
          Go! Agency, LLC, a Florida limited liability company (“Go Agency”), a company
          formed on June 20, 2000, as E Signs Plus.com, LLC, a Florida limited liability
          company. In this exchange, the Company assumed some debt of Go Agency and
          the
          exchange qualified as a tax-free exchange under IRC Section 351. The net
          assets
          received were valued at historical cost. The net assets of Go Agency that
          were
          exchanged for the shares of stock were as follows:
  Accounts
          receivable  $ 30,668
 Fixed
          assets, net of depreciation 112,214
 Other
          assets 85,264
 Accounts
          payable (29,242)
 Notes
          payable (27,338)
 Other
          payables (115,864)
 
 Total  $ 55,702
 7
 ****SIGN
              MEDIA SYSTEMS, INC.****
 ****NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              (UNAUDITED)****
 ****JUNE
              30, 2006 AND 2005****
 ****
 **NOTE
            1-**  **ORGANIZATION
            AND BASIS OF PRESENTATION** **(CONTINUED)**
 Go
          Agency
          was formed to pursue third party truck side advertising. The principal
          of Go
          Agency invested approximately $857,000 in Go Agency pursuing this business.
          It
          became apparent that a more advanced truck side mounting system would be
          required and that third party truck side advertising alone would not sustain
          an
          ongoing profitable business. Go Agency determined to develop a technologically
          advanced mounting system and focused on a different business plan. Go Agency
          pre-exchange transaction was a company under common control of the major
          shareholder of SMS. Post-exchange transactions have not differed. Go Agency
          still continues to operate and is still under common control.
 
 Go
          Agency
          and the Company developed a new and unique truck side mounting system,
          which
          utilizes a proprietary cam lever technology, which allows an advertising
          image
          to be stretched tight as a drum. Following the exchange, the Company had
          7,960,000 shares of common stock issued and outstanding. The Company has
          developed and filed an application for a patent on its mounting systems.
          The cam
          lever technology is considered an intangible asset and has not been recorded
          as
          an asset on the Company’s consolidated balance sheet. This asset was not
          recorded due to the fact that there was no historic recorded value on the
          books
          of Go Agency for this asset.
 
 On
          November 17, 2003, the Company entered into a merger agreement by and among
          American Power House, Inc., a Delaware corporation and its wholly owned
          subsidiary, Sign Media Systems Acquisition Company, Inc., a Florida corporation
          and Sign Media Systems, Inc. Pursuant to the merger agreement, Sign Media
          Systems merged with Sign Media Systems Acquisition Company with Sign Media
          Systems being the surviving corporation. The merger was completed on December
          8,
          2003, with the filing of Articles of Merger with the State of Florida at
          which
          time Sign Media Systems Acquisition ceased to exist and Sign Media Systems
          became the surviving corporation. American Powerhouse was not actively
  8
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
  **NOTE
          1-**  **ORGANIZATION
          AND BASIS OF PRESENTATION (CONTINUED)**
  
 engaged
          in any business at the time of the merger. However, sometime prior to the
          merger, American Power House had acquired certain technology for the manufacture
          of a water machine in the form of a water cooler that manufactures water
          from
          ambient air. Prior to the merger, American Power House granted a license
          to Sign
          Media Systems Acquisition to use that technology and to manufacture and
          sell the
          water machines. The acquisition of this license was the business purpose
          of the
          merger. As consideration for the merger, Sign Media Systems issued 300,000
          shares of its common stock to American Power House, 100,000 shares in the
          year
          ending December 31, 2003, and 200,000 shares in the year ending December
          31,
          2004. The 300,000 shares of stock were valued at $1.50 per share based
          on recent
          private sales of Sign Media Systems common stock. At the time of the merger
          the
          Company was in negotiations with independent dealers in Central America
          who sold
          United States products in Central and South America and who had expressed
          a
          desire to market this product in that territory. Ultimately, the Company
          was
          unable to come to a satisfactory agreement with these dealers for the sale
          of
          this product. Accordingly, the Company is not currently engaged in the
          business
          of manufacturing and sale of this product. The Company will not become
          engaged
          in the business of manufacturing and selling this product until it can
          identify
          and come to a satisfactory agreement with an independent dealer or dealers
          in
          that territory for the sale of this product. The Company cannot currently
          predict when or if it will identify and come to a satisfactory agreement
          with an
          independent dealer or dealers in this territory for the sale of this product.
          Due to these problems with the Company’s plans for marketing and distribution of
          the water machine subsequent to the merger, the license has no carrying
          or book
          value for the years ended December 31, 2005 and 2004 in the Company’s
          consolidated financial statements for December 31, 2005 and 2004. There
          were no
          other material costs of the merger. There was and is no relationship between
          American Powerhouse and either Sign Media Systems or GO! AGENCY. The Company
          recorded this license as an intangible asset for $150,000 for the 100,000
          shares
          of stock issued in 2003 and subsequently
 impaired
          the entire amount. The Company issued the remaining 200,000 shares in 2004,
          and
          recorded a liability for stock to be issued at $300,000. There is a $450,000
          charge against income reflected in the consolidated statements of income
          for the
          year ended December 31, 2003.
  9
 **SIGN
                MEDIA SYSTEMS, INC.**
 **NOTES
                TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
                30, 2006 AND 2005**
   
 **NOTE
          2-**  **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Principles
          of Consolidation**
 
 The
          condensed consolidated unaudited financial statements include the accounts
          of
          the Company and its wholly owned subsidiary. All significant intercompany
          accounts and transactions have been eliminated in consolidation.
 
 **Use
          of Estimates**
 
 The
          preparation of condensed consolidated unaudited financial statements in
          conformity with accounting principles generally accepted in the United
          States of
          America requires management to make estimates and assumptions that affect
          the
          reported amounts of assets and liabilities and disclosures of contingent
          assets
          and liabilities at the date of the financial statements and the reported
          amounts
          of revenues and expenses during the reporting period. Actual results could
          differ from those estimates.
 
 **Revenue
          and Cost Recognition**
 
 Currently,
          the Company has three primary sources of revenue:
 
 (1)
              The
                  sale and installation of their mounting
                  system; (2)
              The
                  printing of advertising images to be inserted on trucks utilizing
                  the
                  Company’s mounting systems; and (3)
              Third
                  party advertising. 
 The
          Company’s revenue recognition policy for these sources of revenue is as follows.
          The Company relies on Staff Accounting Bulletin Topic 13, in determining
          when
          recognition of revenue occurs. There are four criteria that the Company
          must
          meet when determining when revenue is realized or realizable and earned.
          The
          Company has persuasive evidence of an arrangement existing; delivery has
          occurred or services rendered; the price is fixed or determinable; and
          collectibility is reasonably assured. The Company recognizes revenue from
          the
          sale of its mounting systems and images when it completes the work and
          either
          ships or installs the products. The Company recognizes revenue from third
          party
          advertising.
 
 **Revenue
          and Cost Recognition (continued)**
 
 only
          when
          it has the contractual right to receive such revenue. The Company does
          retain a
          liability to maintain systems and images that are installed for purposes
          of
          third party advertising. However, any damage caused by the operator of
          the truck
          is the responsibility of the lessor of the
  10
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
 **NOTE
          2-**  **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES**
 **(CONTINUED)**
 
 space
          and
          is not the Company’s liability. To date the Company has experienced no cost for
          maintaining these leased systems. All deposits are non-refundable.
 
 In
          addition, the Company offers manufacturer’s warranties. These warranties are
          provided by the Company and not sold. Therefore, no income is derived from
          the
          warranty itself.
 
 Cost
          is
          recorded on the accrual basis as well, when the services are incurred rather
          than when payment is made.
 
 Costs
          of
          goods sold are separated by components consistent with the revenue categories.
          Mounting systems, printing and advertising costs include purchases made,
          and
          payroll costs attributable to those components. Payroll costs is included
          for
          sales, engineering and warehouse personnel in cost of goods sold. Cost
          of
          overhead is de minimus. The Company’s inventory consists of finished goods, and
          unassembled parts that comprise the framework for the mounting system placed
          on
          trucks for their advertising. All of these costs are included in costs
          of goods
          sold for the six months ended June 30, 2006 and 2005.
 
 **Warranties**
 
 The
          Company offers manufacturers warranties that covers all manufacturer defects.
          The Company accrues warranty costs based on historical experience and
          management’s estimates. The Company has not experienced any losses in the past
          two years with respect to the warranties, therefore has not accrued any
          liability for the six months ended June 30, 2006 and 2005. The following
          table
          represents the Company’s losses in the past two years with respect to
          warranties.
 
 **Warranties
          (continued)**
 
 **Balance**
                
                **Charged**
                
                
                
                **Balance****at
                    Beginning**
                
                **to
                    Costs and**
                
                
                
                **at
                    End of****of
                    Period**
                
                **Expenses**
                
                **Deductions**
                
                **Period**Six
                    Months ended June 30, 2006
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -Six
                    Months ended June 30, 2005
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -
   11
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
 **Provision
          for Bad Debt**
 
 Under
          SOP
          01-6 "Accounting for Certain Entities (including Entities with Trade
          Receivables) That Lend to or Finance the Activities of Others” the Company has
          intent and belief that all amounts in accounts receivable are collectible.
          The
          Company extends unsecured credit to its customers in the ordinary course
          of
          business but mitigates the associated credit risk by performing credit
          checks
          and actively pursuing past due accounts over 90 days. The Company's major
          customer at June 30, 2006 and 2005, was uncharacteristically slow in paying
          their outstanding invoices during June 30, 2006 and 2005.
 
 Management's
          policy is to vigorously attempt to collect its receivables monthly. The
          Company
          estimated the amount of the allowance necessary based on a review of the
          aged
          receivables from the major customer. Management additionally instituted
          a policy
          for recording the recovery of the allowance if any in the period where
          it is
          recovered.
 
 Bad
          debt
          expense for the six months ended June 30, 2006 and 2005 was $-0- and $-0-,
          respectively.
 
 **Cash
          and Cash Equivalents**
 
 The
          Company considers all highly liquid debt instruments and other short-term
          investments with an initial maturity of three months or less to be cash
          equivalents.
 
 The
          Company maintains cash and cash equivalent balances at several financial
          institutions that are insured by the Federal Deposit Insurance Corporation
          up to
          $100,000.
 
 **Accounts
          Receivable**
 
 Accounts
          receivable are presented at face value, net of the allowance for doubtful
          accounts. The allowance for doubtful accounts is established through provisions
          charged against income and is maintained at a level believed adequate by
          management to absorb estimated bad debts based on current economic conditions.
  12
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  **NOTE
          2-**  **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES**
 **(CONTINUED)**
 
 **Property
          and Equipment**
 
 Property
          and equipment are stated at cost. Depreciation is computed primarily using
          the
          straight-line method over the estimated useful life of the assets.
 
 Furniture
          and fixtures 5
          years
 Equipment 5
          years
 Trucks 3
          years
 
 **Advertising**
 
 Costs
          of
          advertising and marketing are expensed as incurred. Advertising and marketing
          costs were $1,200 and $1,800 for the six months ended June 30, 2006 and
          2005,
          respectively.
 
 **Fair
          Value of Financial Instruments**
 
 The
          carrying amount reported in the balance sheets for cash and cash equivalents,
          accounts receivable, accounts payable and accrued expenses approximate
          fair
          value because of the immediate or short-term maturity of these financial
          instruments.
 
 **Inventory**
 
 Inventory
          at June 30, 2006 and 2005 consists of raw materials. Included in these
          raw
          materials are top rails, side rails, floating rails, fixed pivot rails,
          lever
          rails and right and left end caps. Inventory is stated at the lower of
          cost or
          market, utilizing the first in, first out method, “FIFO”, to determine which
          amounts are removed from inventory.
 
 **Income
          Taxes**
 
 The
          provision for income taxes includes the tax effects of transactions reported
          in
          the financial statements. Deferred taxes would be recognized for differences
          between the basis for assets and liabilities for financial statement and
          income
          tax purposes. The major difference relates to the net operating loss carry
          forwards generated by sustaining deficits.
 
 **Reclassifications**
 
 Certain
          balances in the 2005 condensed consolidated unaudited financial statements
          have
          been reclassified for comparative purposes to conform to
  13
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
 **NOTE
          2-**  **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES**
 **(CONTINUED)**
 
 the
          presentation in the 2006 condensed consolidated unaudited financial statements.
          These reclassifications have not had any impact on net income.
 
 **Stock-Based
          Compensation**
 
 Employee
          stock awards under the Company's compensation plans are accounted for in
          accordance with Accounting Principles Board Opinion No. 25 (“APB 25”),
“ *Accounting
          for Stock Issued to Employees* ”,
          and
          related interpretations. The Company provides the disclosure requirements
          of
          Statement of Financial Accounting Standards No. 123, “ *Accounting
          for Stock-Based Compensation* ”
(“SFAS
          123”), and related interpretations. Stock-based awards to non-employees are
          accounted for under the provisions of SFAS 123 and has adopted the enhanced
          disclosure provisions of SFAS No. 148 “Accounting for Stock-Based Compensation-
          Transition and Disclosure, an amendment of SFAS No. 123”.
 
 The
          Company measures compensation expense for its employee stock-based compensation
          using the intrinsic-value method. Under the intrinsic-value method of accounting
          for stock-based compensation, when the exercise price of options granted
          to
          employees is less than the estimated fair value of the underlying stock
          on the
          date of grant, deferred compensation is recognized and is amortized to
          compensation expense over the applicable vesting period. In each of the
          periods
          presented, the vesting period was the period in which the options were
          granted.
          All options were expensed to compensation in the period granted rather
          than the
          exercise date.
 
 The
          Company measures compensation expense for its non-employee stock-based
          compensation under the Financial Accounting Standards Board (FASB) Emerging
          Issues Task Force (EITF) Issue No. 96-18, “ *Accounting
          for Equity Instruments that are Issued to Other Than Employees for Acquiring,
          or
          in Conjunction with Selling, Goods or Services* ”.
 
 The
          fair
          value of the option issued is used to measure the transaction, as this
          is more
          reliable than the fair value of the services received. The fair value is
          measured at the value of the Company’s common stock on the date that the
          commitment for performance by the counterparty has been reached or the
          counterparty’s performance is complete. The fair value of the equity instrument
          is charged directly to compensation expense and additional paid-in
          capital.
  14
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
 **NOTE
          2-**  **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES**
 **(CONTINUED)**
 
 **Loss
          per Share of Common Stock**
 
 Historical
          net (loss) per common share is computed using the weighted-average number
          of
          common shares outstanding. Diluted earnings per share (EPS) include additional
          dilution from common stock equivalents, such as stock issuable pursuant
          to the
          exercise of stock options and warrants. Common stock equivalents are not
          included in the computation of diluted earnings per share when the Company
          reports a loss because to do so would be antidilutive for the periods
          presented.
 
 The
          following is a reconciliation of the computation for basic and diluted
          EPS:
  **June
                      30,****2006**
                  
                  **2005**Net
                      income
                  
                  $
                  374,655
                  
                  $
                  594,581Weighted-average
                      common shares outstandingBasic
                  
                  
                  8,460,000
                  
                  
                  8,460,000Weighted-average
                      common stock equivalentsStock
                      options
                  
                  
                  -
                  
                  
                  -Warrants
                  
                  
                  -
                  
                  
                  -Weighted-average
                      common shares outstandingDiluted
                  
                  
                  8,460,000
                  
                  
                  8,460,000
 **Recent
          Accounting Pronouncements**
 
 In
          September 2001, the Financial Accounting Standards Board issued Statements
          of
          Financial Accounting Standards No. 141, *Business
          Combinations,* and
          No.
          142, *Goodwill
          and Other Intangible Assets,* effective
          for fiscal years beginning after December 15, 2001. Under the new rules,
          the
          pooling of interests method of accounting for business combinations are
          no
          longer allowed and goodwill and intangible assets deemed to have indefinite
          lives will no longer be amortized but will be subject to annual impairment
          tests
          in accordance with the Statements. Other intangible assets will continue
          to be
          amortized over their useful lives. The Company adopted these new standards
          effective January 1, 2002.
  15
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
 **NOTE
          2-**  **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES**
 **(CONTINUED)**
 
 **Recent
          Accounting Pronouncements (continued)**
 
 On
          October 3, 2001, the FASB issued Statement of Financial Accounting Standards
          No.
          144, “ *Accounting
          for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
          Disposed
          Of,”* and
          portions of Accounting Principles Board Opinion 30, “Reporting the Results of
          Operations.” This Standard provides a single accounting model for long-lived
          assets to be disposed of and significantly changes the criteria that would
          have
          to be met to classify an asset as held-for-sale. Classification as held-for-sale
          is an important distinction since such assets are not depreciated and are
          stated
          at the lower of fair value and carrying amount. This Standard also requires
          expected future operating losses from discontinued operations to be displayed
          in
          the period(s) in which the losses are incurred, rather than as of the
          measurement date as presently required. The Company has applied the provisions
          of FASB 144, with respect to the sale of Zingo Sales.
 
 In
          May
          2003, the FASB issued SFAS No. 150, “Accounting for certain Financial
          Instruments with Characteristics of both Liabilities and Equity” (“SFAS No.
          150”). SFAS 150 requires that certain financial instruments issued in the form
          of shares that are mandatorily redeemable as well as certain other financial
          instruments be classified as liabilities in the financial statements. SFAS
          No.
          150 is effective for financial instruments entered into or modified after
          May
          31, 2003. The adoption of SFAS No. 150 did not have a material affect on
          the
          Company’s reported financial results.
 
 On
          December 16, 2004, the Financial Accounting Standards Board ("FASB") published
          Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based
          Payment ("SFAS 123R"). SFAS 123R requires that compensation cost related
          to
          share-based payment transactions be recognized in the financial statements.
          Share-based payment transactions within the scope of SFAS 123R include
          stock
          options, restricted stock plans, performance-based awards, stock appreciation
          rights, and employee share purchase plans. The provisions of SFAS 123R
          are
          effective for small business issuers as of the first interim period that
          begins
          after December 15, 2005. Accordingly, the Company will implement the revised
          standard in the first quarter of fiscal year 2006. Currently, the Company
          accounts for its share-based payment transactions under the provisions
          of APB
          25, which does not necessarily require the recognition of compensation
          cost in
          the financial statements (note 3(d)). The adoption of SFAS No. 153 did
          not have
          a material effect on the Company’s reported financial results.
  16
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
 **NOTE
          3-**  **ACCOUNTS
          RECEIVABLE**
 
 Accounts
          receivable consists of the following at June 30, 2006:
 
 **2006**Accounts
                      receivable
                  
                  $
                  1,432,140Less
                      allownace for doubtful accounts
                  
                  
                  (707,565
                  )Total
                      accounts receivable, net
                  
                  $
                  724,575
 
 **NOTE
          4-**  **PROPERTY
          AND EQUIPMENT**
 
 Property
          and equipment consists of the following at June 30, 2006:
  **2006**Equipment
                  
                  $
                  127,311Furniture
                      and Fixtures
                  
                  
                  112,022Transportation
                      Equipment
                  
                  
                  54,621293,954Less:
                      Accumulated Depreciation
                  
                  
                  150,115Net
                      Book Value
                  
                  $
                  143,839
 Depreciation expense for the six months ended June 30, 2006 was
          $32,938.
 
 **NOTE
          5-**  **RELATED
          PARTY TRANSACTIONS**
 
 On
          January 28, 2002, Sign Media Systems, Inc. was formed as a Florida Corporation
          but did not begin business operations until April 2002. Most of the revenue
          that
          Sign Media Systems, Inc. earned was contract work with Go! Agency, LLC.,
          a
          Florida limited liability company, a related party. Sign Media Systems,
          Inc.
          would contract Go! Agency, LLC. to handle and complete jobs. There was
          no
          additional revenue or expense added from one entity to the other.
 
 On
          January 3, 2003, the Company entered into a loan agreement with Olympus
          Leasing
          Company, a related party, and in connection therewith executed a promissory
          note
          with a future advance clause in favor of Olympus Leasing, whereby Olympus
          Leasing agreed to loan the Company
  17
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
 **NOTE
          5-**  **RELATED
          PARTY TRANSACTIONS (CONTINUED)**
 
 up
          to a
          maximum of $1,000,000 for a period of three years, with interest accruing
          on the
          unpaid balance at 18% per annum, payable interest only monthly, with the
          entire
          unpaid balance due and payable in full on January 3, 2006. As of June 30,
          2006
          and 2005, there was $0 and $0 due to Olympus, respectively.
 
 On
          September 15, 2004, the Company entered into a loan agreement with Go!
          Agency,
          LLC and in connection therewith executed a promissory note with a future
          advance
          clause in favor of Go! Agency whereby Go! Agency agreed to loan the Company
          up
          to a maximum of $100,000 for a period of three years, with interest accruing
          on
          the unpaid balance at 18% per annum, payable interest only monthly, with
          the
          entire unpaid balance due and payable in full on September 24, 2005. At
          June 30,
          2006 and 2005, the Company was indebted to Go! Agency in the amount of
          $0 and
          $19,985, respectively and interest expense on this note was $0 and $918
          for the
          six months ended June 30, 2006 and 2005, respectively.
 
 On
          June
          28, 2005, the Company loaned $1,200,000 to Olympus Leasing Company, a related
          party. At June 28, 2005, Antonio F. Uccello, III, was, and is now the President,
          Chairman, a minority owner of the issued and outstanding shares of stock
          of
          Olympus Leasing and reports to its board of directors. Antonio F. Uccello,
          III,
          was and is one of the Company’s officers and directors and an indirect
          shareholder of Sign Media Systems, Inc. The loan is for a period of five
          years
          with interest accruing on the unpaid balance at 5.3% per annum payable
          annually,
          with the entire principle and unpaid interest due and payable in full on
          June
          28, 2010.
 
 There
          is
          no prepayment penalty. The purpose of the loan was to obtain a higher interest
          rate than is currently available at traditional banking institutions. Olympus
          Leasing’s primary business is making secured loans to chiropractic physicians
          throughout the United States for the purchase of chiropractic adjustment
          tables.
          The loans are generally for less than $3,000 each and are secured by a
          first
          lien on each chiropractic adjustment table. The chiropractic physician
          personally guarantees each loan. The rate of return on the Olympus Leasing
          loans
          is between 15% and 25% per annum. To date, Olympus Leasing has suffered
          no loss
          from any loan to a chiropractic physician for the purchase of a chiropractic
          adjustment table. There is an excellent market for the re-sale of tables,
          which
          may be the subject of a foreclosure. Olympus Leasing currently has in excess
          of
          $1,000,000 in outstanding finance receivables from chiropractic physicians
          secured by a first lien on each chiropractic adjustment table.
  18
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
 **NOTE
          5-**  **RELATED
          PARTY TRANSACTIONS (CONTINUED)**
 
 Since
          the
          making of the loan by the Company to Olympus Leasing, Olympus Leasing has
          made
          payments to the Company of $649,500 pursuant to the note.
 
 **NOTE
          6-**  **LONG-TERM
          DEBT**
 
 Long-term
          debt consists of two installment notes with GMAC Finance. On June 18, 2003,
          the
          Company acquired a truck financed by GMAC over a period of 5 years. Monthly
          payments are $763. The remaining balance on this loan is $18,312. The loan
          carries no interest charges. Additionally on December 4, 2003, the Company
          entered into another truck loan in the amount of $46,860. The payments
          will be
          for a period of 5 years at $772 per month. The loan carries no interest
          charges.
          The remaining balance on this loan is $21,850.
 
 The
          following represents maturities over the next five years and in the
          aggregate:
 
 For
          the years ending December 31:
 
 2006 $ 9,156
 2007 18,420
 2008 12,532
 $40,162
 
 **NOTE
          7-**  **PROVISION
          FOR INCOME TAXES**
 
 **2006**Current
                      tax expense
                  
                  $
                  142,929Benefit
                      of loss carry forward
                  
                  $
                  (41,154
                  )Net
                      current expense
                  
                  $
                  101,775
  19
 **SIGN
              MEDIA SYSTEMS, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
              30, 2006 AND 2005**
  
 **NOTE
          8-**  **COMMITMENTS
          AND CONTINGENCIES**
 
 The
          Company entered into a lease agreement on November 1, 2002 with Hawkeye
          Real
          Estate, LLC, a related entity, to lease warehouse and office space. The
          lease
          expires on December 30, 2007, and provides that SMS pay all applicable
          sales and
          use tax, insurance and maintenance. The total minimum rental commitments
          at June
          30, 2006 under this lease are as follows:
 
 2006
                  
                  $
                  21,9752007
                  
                  
                  15,000$
                  36,975
 
 Rent
          expense for the six months ended June 30, 2006 and 2005 was $8,025, and
          $16,050,
          respectively.
 
 
 **NOTE
          9-**  **CONCENTRATION
          OF CREDIT RISK**
 
 A
          material part of the Company’s business was dependent upon one key customer
          during the six months ended June 30, 2006 and 2005. Sales to this customer
          were
          approximately 99% and 94%, respectively.
 
 Approximately
          99% of the Company’s accounts receivable at June 30, 2006 are due from this one
          customer.
 
 **NOTE
          10-**  **STOCKHOLDERS’
          EQUITY**
 
 As
          of
          June 30, 2006 and 2005, there were 100,000,000 shares of common stock
          authorized.
 
 As
          of
          June 30, 2006 and 2005, there were 8,460,000 shares of common stock issued
          and
          outstanding, respectively.
 20
 
 **Item
        2. Management's Discussion and Analysis or Plan of
        Operation.**
 
 THE
        FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        OF THE
        COMPANY SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES
        THERETO INCLUDED ELSEWHERE IN THIS REPORT.
 
 THIS
        DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
        UNCERTAINTIES, AND THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
        THOSE
        ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
        INCLUDING, BUT NOT LIMITED TO COMPETITION AND OVERALL MARKET AND ECONOMIC
        CONDITIONS.
 
 RESULTS
        OF CONTINUING OPERATIONS
 
 The
        following tables sets forth certain of our summary selected unaudited operating
        and financial data. The following table should be read in conjunction with
        all
        other financial information and analysis presented herein.
 
 Six
        Months Ended
 June
        30
 
 2006
              
              2005
                (restated)Revenue
              
              $
              728,679
              
              $
              1,011,385Cost
                  of Goods Sold
              
              
              15,820
              
              
              13,396Gross
                  profit
              
              
              712,859
              
              
              997,989Total
                  Operating Expenses
              
              
              253,846
              
              
              402,593Net
                  Income (Loss) Before
                Other
                  Income (Expense)
              
              
              459,013
              
              
              595,396Total
                  Other Income
                (Expense)
              
              
              17,417
              
              
              (815)Net
                  Income (Loss)Before
                Provision
                  For Income
                Taxes
              
              
              476,430
              
              
              594,581Provision
                  For Income
                Taxes
              
              
              (101,775)
              
              
              -Net
                  Income (Loss)
                Applicable
                  To Common
                Shares
              
              $
              374,655
              
              $
              594,581Net
                  Income (Loss) Per
                Basic
                  And Diluted Shares
              
              $
              0.04
              
              $
              0.07Weighted
                  Average
                Number
                  OF Common
                Shares
                  Outstanding
              
              
              8,460,000
              
              
              8,460,000Gross
                  profit margin
              
              
              98%
              
              
              99%
 
 The
        Company restated its June 30, 2005 financial statements to reclassify $500,000
        that was posted directly to additional paid-in capital that should have been
        posted as a recovery of bad debt. The
  21
  $500,000
        recovery of bad debt is now included in revenue for the period ended June
        30,
        2005. The effect of this restatement did not effect total stockholders’ equity.
        The effect did increase net income from $511,385 to $1,011,385 and earnings
        per
        share from .011 to .070. The recovery of the $500,000 of bad debt was due
        entirely to a cash payment to the Company by one key customer that contributes
        the bulk of the Company’s revenue.
 
 For
        the
        six months ended June 30, 2006, the Company had Total Revenue of $728,689,
        Cost
        of Goods Sold of $15,820, Gross profit of $712,859, Total Operating Expenses
        of
        $253,846, Net Income (Loss) Before Other Income (Expense) of $459,013, Total
        Other Income (Expense) of $17,417, Net Income (Loss) Before Provision For
        Income
        Taxes of $476,430, a Provision For Income Taxes of $(101,775), Net Income
        (Loss)
        Applicable To Common Shares of $374,655 and Net Income (Loss) Per Basic and
        Diluted Shares of $0.04 based on 8,460,000 Weighted Average Number Of Common
        Shares Outstanding.
 
 For
        the
        six months ended June 30, 2005, the Company had Total Revenue of $1,011,385
        which included a $500,000 recovery of bad debt, Cost of Goods Sold of $13,396,
        Gross profit of $997,989, Total Operating Expenses of $402,593, Net Income
        (Loss) Before Other Income (Expense) of $595,396, Total Other Income (Expense)
        of $(815), Net Income (Loss) Before Provision For Income Taxes of $594,581,
        a
        Provision For Income Taxes of $-, Net Income (Loss) Applicable To Common
        Shares
        of $594,581 and Net Income (Loss) Per Basic and Diluted Shares of $0.07 based
        on
        8,460,000 Weighted Average Number Of Common Shares Outstanding.
 
 Three
        Months Ended
 June
        30
 
 2006
              
              2005Revenue
              
              $
              426,427
              
              $
              989,114Cost
                  of Goods Sold
              
              
              6,469
              
              
              10,889Gross
                  profit
              
              
              419,958
              
              
              978,225Total
                  Operating Expenses
              
              
              124,912
              
              
              212,828Net
                  Income (Loss) Before
                Other
                  Income (Expense)
              
              
              295,046
              
              
              765,397Total
                  Other Income
                (Expense)
              
              
              6,980
              
              
              (514)Net
                  Income (Loss)Before
                Provision
                  For Income
                Taxes
              
              
              302,026
              
              
              764,883Provision
                  For Income
                Taxes
              
              
              (96,175)
              
              
              -Net
                  Income (Loss)
                Applicable
                  To Common
                Shares
              
              $
              205,851
              
              $
              764,883Net
                  Income (Loss) Per
                Basic
                  And Diluted Shares
              
              $
              0.02
              
              $
              0.09Weighted
                  Average
                Number
                  of Common
                Shares
                  Outstanding
              
              
              8,460,000
              
              
              8,460,000Gross
                  profit margin
              
              
              98%
              
              
              99%
 
 For
        the
        three months ended June 30, 2006, the Company had Total Revenue of $426,427,
        Cost of Goods Sold of $6,469, Gross profit of $419,958, Total Operating Expenses
        of $124,912, Net Income (Loss) Before Other Income (Expense) of $295,046,
        Total
        Other Income (Expense) of $6,980, Net Income (Loss) Before Provision For
        Income
        Taxes of $302,026, a Provision For Income Taxes of $(96,175), Net Income
        (Loss)
        Applicable To Common Shares of $205,851 and Net Income (Loss) Per Basic and
        Diluted Shares of $0.02 based on 8,460,000 Weighted Average Number Of Common
        Shares Outstanding.
  22
  For
        the
        three months ended June 30, 2005, the Company had Total Revenue of $989,114,
        Cost of Goods Sold of $10,889, Gross profit of $978,225, Total Operating
        Expenses of $212,828, Net Income (Loss) Before Other Income (Expense) of
        $765,397, Total Other Income (Expense) of $(514), Net Income (Loss) Before
        Provision For Income Taxes of $764,883, a Provision For Income Taxes of $-,
        Net
        Income (Loss) Applicable To Common Shares of $764,883 and Net Income (Loss)
        Per
        Basic and Diluted Shares of $0.09 based on 8,460,000 Weighted Average Number
        Of
        Common Shares Outstanding.
 
 MANAGEMENT’S
        DISCUSSION
 
 Exclusive
        of the recovery of bad debt in the amount of $500,000 in the period ended
        June
        30, 2005, the Company’s revenue increased by $217,295. Exclusive of the recovery
        of bad debt, the Company attributes the increases in Revenue, Gross Profit,
        Net
        Income Before Other Income, Net Income Before Provision For Income tax, and
        Net
        Income Applicable to Common Shares primarily to increased sales by one key
        customer. The Company attributes the decrease in Net Income Per Basic And
        Diluted Shares to the provision for income taxes.
 
 The
        Company attributes the decrease in Total Operating Expenses due to reliance
        on
        out side dealers, reduction of in side sales persons, lower rental cost and
        lower insurance cost.
 
 The
        Company attributes the increase in Total Other Income to an investment loan
        to a
        related party which produces interest income.
 
 The
        Company attributes the increase in the Provision For Income Taxes to increased
        revenue from increased sales.
  The
        Company will require significant capital to implement both its short term
        and
        long-term business strategies.  However, there can be no assurance that
        such additional capital will be available or, if available, that the terms
        will
        be favorable to the Company.  The absence of significant additional capital
        whether raised through a public or private offering or through other means,
        including either private debt or equity financings, will have a material
        adverse
        effect on the Company's operations and prospects.
 The
        Company’s operations have consumed and will continue to consume substantial
        amounts of capital, which, up until now, have been largely financed internally
        through cash flows, from loans from related parties, and private investors.
        The
        Company expects capital and operating expenditures to increase. Although
        the
        Company believes that it will be able to attract additional capital through
        private investors and as a result thereof its cash reserves and cash flows
        from
        operations will be adequate to fund its operations through the end of calendar
        year 2006, there can be no assurance that such sources will, in fact, be
        adequate or that additional funds will not be required either during or after
        such period. No assurance can be given that any additional financing will
        be
        available or that, if available, it will be available on terms favorable
        to the
        Company. If adequate funds are not available to satisfy either short or
        long-term capital requirements, the Company may be required to limit its
        operations significantly or discontinue its operations. The Company’s capital
        requirements are dependent upon many factors including, but not limited to,
        the
        rate at which it develops and introduces its products and services, the market
        acceptance and competitive position of such products and services, the level
        of
        promotion and advertising required to market such products and services and
        attain a competitive position in the marketplace, and the response of
        competitors to its products and services.
 
 On
        June
        28, 2005, the Company loaned, $1,200,000 to Olympus Leasing Company, a related
        party. At June 28, 2005, Antonio F. Uccello, III, was, and is now the President,
        Chairman and a minority owner of the issued and outstanding shares of stock
        of
        Olympus Leasing and reports to its board of directors. Antonio F. Uccello,
        III,
        was and is one of the Company’s officers and directors and an indirect
        shareholder of Sign Media Systems, Inc. The loan is for a period of five
        years
        with interest accruing on the unpaid balance at 5.3% per annum payable annually,
        with the entire principal and unpaid interest due and payable in full on
        June
        28, 2010. There is no prepayment penalty. The purpose of the loan was to
        obtain
        a higher interest rate than is currently available at traditional banking
        institutions. Olympus
  23
  Leasing’s
        primary business is making secured loans to chiropractic physicians throughout
        the United States for the purchase of chiropractic adjustment tables. The
        loans
        are generally for less than $3,000 each and are secured by a first lien on
        each
        chiropractic adjustment table. Each loan is personally guaranteed by the
        chiropractic physician. The rate of return on the Olympus Leasing loans is
        between 15% and 25% per annum. To date, Olympus Leasing has suffered no loss
        from any loan to a chiropractic physician for the purchase of a chiropractic
        adjustment table. There is an excellent market for the re-sale of chiropractic
        adjustment tables which may be the subject of a foreclosure. Olympus Leasing
        currently has in excess of $1,000,000 in outstanding finance receivables
        from
        chiropractic physicians secured by a first lien on each chiropractic adjustment
        table. Since the making of the loan by the Company to Olympus Leasing, Olympus
        Leasing has made re-payments to the Company of $228,000 pursuant to the note
        attached hereto as Exhibit 10.6. Because of the foregoing facts, the Company
        believes that the probability of a default on the loan by it to Olympus Leasing
        is unlikely. The current principal balance due to the Company from Olympus
        Leasing is $594,746.
 
 **PART
        II — OTHER INFORMATION**
 
 **Item
        1. Legal Proceedings.**
 
 There
        are
        no pending or threatened legal proceedings against the Company or any of
        its
        subsidiaries.
 
 **Item
        2. Changes in Securities.**
 
 NONE
 
 **Item
        3. Defaults Upon Senior Securities** .
 
 NONE
 
 **Item
        4. Submission of Matters to a Vote of Security Holders.**
 
 NONE
 
 **Item
        5. Other Information.**
 
 NONE
 
 **Item
        6. Exhibits and Reports on Form 8-K.**
 
 **INDEX
        TO EXHIBITS.**
 
 **EXHIBIT**
 **NUMBER**  **DESCRIPTION
        OF EXHIBIT**
 -------------------------------------------------------------------------------------------------
 10.6
              Promissory
                  Note described in Part II, Item 5 above which is incorporated herein
                  by
                  reference from the Company’s Second Amended Form 10-QSB, Quarterly Report
                  under Section 13 or 15(d) of the Exchange Act for the period ended
                  June
                  30, 2005 and filed with the Securities and Exchange Commission
                  on November
                  22, 2005.
 
 31.1
              Certification
                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.
 
 31.2
              Certification
                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.
  24
  32.1
              Certification
                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.
 
 32.2
              Certification
                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.
 
 The
        Company filed no Forms 8K for the quarter ended June 30, 2005.
 
 The
        Company filed no Forms 8K for the quarter ended March 31, 2006.
   **SIGNATURES**
  In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 SIGN
                  MEDIA SYSTEMS, INC.
                (Registrant)Date:August
                  21, 2006
              /s/Antonio
                  F. Uccello, III
                Antonio
                  F. Uccello, III
                Chief
                  Executive Officer
                Chairman
                  of the Board


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