**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 March 31, 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
      March 31, 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 THREE MONTHS ENDED MARCH 31, 2006 AND 2005**


**(UNAUDITED)**

















2





**SIGN
      MEDIA SYSTEMS, INC.**




**INDEX
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





Condensed
      Consolidated Balance Sheet at March 31, 2006
      (Unaudited)                                                                                                        
4





Condensed
      Consolidated Statements of Operations for the Three Months
      Ended March 31, 2006 and 2005
      (Unaudited)                    
5





Condensed
      Consolidated Statements of Cash Flows for the Three
      Months Ended March 31, 2006 and 2005
      (Unaudited)                    6





Notes
      to
      the Condensed Consolidated Financial Statements (Unaudited)                                                                                                 7-23





3









**SIGN
                  MEDIA SYSTEMS, INC.****CONDENSED
                  CONSOLIDATED BALANCE SHEET (UNAUDITED)****March
                  31, 2006****ASSETS****2006****CURRENT
                  ASSETS**Cash and cash equivalents
              
              $
              3,103Accounts receivable, net
              
              
              700,632Inventory, net
              
              
              17,464721,199**PROPERTY
                  AND EQUIPMENT - Net**
              
              
              167,565**OTHER
                  ASSETS**Due from related parties
              
              
              727,952727,952**TOTAL
                  ASSETS**
              
              $
              1,616,716**LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                  LIABILITIES**Current portion of long-term debt
              
              $
              13,815Accounts payable and accrued expenses
              
              
              234,426Current portion of debt - related parties
              
              
              2,485Deferred revenue
              
              
              400,000Liability for stock to be issued
              
              
              224,900875,626**LONG-TERM
                  DEBT - Net of Current Portion**
              
              
              32,765**TOTAL
                  LIABILITIES**
              
              
              908,391**STOCKHOLDERS'
                  EQUITY (DEFICIT)**Common stock, no par value, 100,000,000 shares authorized
                  atMarch 31, 2006; 8,460,000 shares issued and outstandingat March 31 2006
              
              
              5,000Additional paid-in capital
              
              
              671,700Retained Earnings
              
              
              31,625708,325**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
              
              $
              1,616,716







4








**SIGN
                  MEDIA SYSTEMS, INC.****CONDENSED
                  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)****FOR
                  THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005****2006**
              
              
              **2005****REVENUE
                  - SALES, net**
              
              $
              302,252
              
              $
              22,271**COSTS
                  OF GOODS SOLD**
              
              
              9,351
              
              
              2,507**GROSS
                  PROFIT**
              
              
              292,901
              
              
              19,764**OPERATING
                  EXPENSES**Professional fees and administrative payroll
              
              
              79,383
              
              
              111,884General and administrative expenses
              
              
              40,551
              
              
              65,989Depreciation
              
              
              9,000
              
              
              11,892128,934
              
              
              189,765**NET
                  INCOME (LOSS) BEFORE OTHER INCOME (EXPENSE)**
              
              
              163,967
              
              
              (170,001
              )**OTHER
                  INCOME (EXPENSE)**Interest income and other
              
              
              10,704
              
              
              2Interest (expense)
              
              
              (267
              )
              
              (303
              )**Total
                other income (expense)**
              
              
              10,437
              
              
              (301
              )**NET
                  INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES**
              
              
              174,404
              
              
              (170,302
              )Provision for income taxes
              
              
              (5,600
              )
              
              -**NET
                  INCOME (LOSS) APPLICABLE TO COMMON SHARES**
              
              $
              168,804
              
              $
              (170,302
              )**NET
                  INCOME (LOSS) PER BASIC AND DILUTED SHARES**
              
              $
              0.02
              
              $
              (0.02
              )**WEIGHTED
                  AVERAGE NUMBER OF COMMON****SHARES
                  OUTSTANDING**
              
              
              8,460,000
              
              
              8,460,000







5






**SIGN
                  MEDIA SYSTEMS, INC.****CONDENSED
                  CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)****FOR
                  THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005****2006**
              
              
              **2005****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net income (loss)
              
              $
              168,804
              
              $
              (170,302
              )**Adjustments
                  to reconcile net income (loss)****to
                  net cash (used in) operating activities:**Depreciation
              
              
              9,000
              
              
              11,892**Changes
                  in assets and liabilities:**(Increase) decrease in accounts receivable
              
              
              (700,632
              )
              
              7,340Decrease in inventory
              
              
              7,536
              
              
              -Increase in accounts payable and accrued expenses
              
              
              18,156
              
              
              90,711Increase in deferred revenue
              
              
              400,000
              
              
              -**Total adjustments**
              
              
              (265,940
              )
              
              109,943**Net cash (used in) operating activities**
              
              
              (97,136
              )
              
              (60,359
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Acquisition of property and equipment
              
              
              (1,772
              )
              
              (17,461
              )Increase in interest receivable - related party
              
              
              (10,300
              )
              
              -Proceeds from related parties
              
              
              120,498
              
              
              -**Net cash provided by (used in) investing
                  activities**
              
              
              108,426
              
              
              (17,461
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Increase in liability for stock to be issued
              
              
              -
              
              
              24,900(Payments) on long-term debt
              
              
              (4,605
              )
              
              (4,605
              )Proceeds (Payments) on debt-related party
              
              
              (5,834
              )
              
              62,046**Net cash provided by (used in) financing
                  activities**
              
              
              (10,439
              )
              
              82,341**NET
                  INCREASE IN CASH AND CASH EQUIVALENTS**
              
              
              851
              
              
              4,521**CASH
                  AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
              
              
              2,252
              
              
              6,352**CASH
                  AND CASH EQUIVALENTS - END OF PERIOD**
              
              $
              3,103
              
              $
              10,873**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:**Cash paid during the year for interest
              
              $
              267
              
              $
              -








6





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 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:











7





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**




**NOTE
      1-**  **ORGANIZATION
      AND BASIS OF PRESENTATION (CONTINUED)**





Accounts
      receivable $ 30,668


Fixed
      assets, net of
      depreciation 112,214


Other
      assets 85,264


Accounts
      payable (29,242)


Notes
      payable (27,338)


Other
      payables (115,864)





Total $ 55,702





Go
      Agency
      was formed to pursue third party truck side advertising. The principal of Go
      Agency invested approximately $857,000 in Go Agency pursuing this business.
      It
      became apparent that a more advanced truck side mounting system would be
      required and that third party truck side advertising alone would not sustain
      an
      ongoing profitable business. Go Agency determined to develop a technologically
      advanced mounting system and focused on a different business plan. Go Agency
      pre-exchange transaction was a company under common control of the major
      shareholder of SMS. Post-exchange transactions have not differed. Go Agency
      still continues to operate and is still under common control.





Go
      Agency
      and the Company developed a new and unique truck side mounting system, which
      utilizes a proprietary cam lever technology, which allows an advertising image
      to be stretched tight as a drum. Following the exchange, the Company had
      7,960,000 shares of common stock issued and outstanding. The Company has
      developed and filed an application for a patent on its mounting systems. The
      cam
      lever technology is considered an intangible asset and has not been recorded
      as
      an asset on the Company’s consolidated balance sheet. This asset was not
      recorded due to the fact that there was no historic recorded value on the books
      of Go Agency for this asset.





On
      November 17, 2003, the Company entered into a merger agreement by and among
      American 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





8





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**




**NOTE
      1-**  **ORGANIZATION
      AND BASIS OF PRESENTATION (CONTINUED)**





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 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





9





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**NOTE
      1-**  **ORGANIZATION
      AND BASIS OF PRESENTATION (CONTINUED)**





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.








**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





10





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**





**Revenue
      and Cost Recognition (continued)**





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 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
      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 three months ended March 31, 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,





11





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**





**Warranties
      (continued)**





therefore
      has not accrued any liability for the three months ended March 31, 2006 and
      2005. The following table represents the Company’s losses in the past two years
      with respect to warranties.








**Balance**
            
            **Charged**
            
            
            
            **Balance****at
                Beginning**
            
            **to
                Costs and**
            
            
            
            **at
                End of****of
                Period**
            
            **Expenses**
            
            **Deductions**
            
            **Period**Three
                Months ended March 31, 2006
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Three
                Months ended March 31, 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 March 31, 2006 and 2005, was uncharacteristically slow in paying
      their outstanding invoices during March 31, 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 three months ended March 31, 2006 and 2005 was $-0- and $-0-,
      respectively.





12





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**








**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**





**Cash
      and Cash Equivalents**





The
      Company considers all highly liquid debt instruments and other short-term
      investments with an initial maturity of three months or less to be cash
      equivalents.





The
      Company maintains cash and cash equivalent balances at several financial
      institutions that are insured by the Federal Deposit Insurance Corporation
      up to
      $100,000.





**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.





**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 y ears


Equipment 5
      years


Trucks 3
      years





**Advertising**





Costs
      of
      advertising and marketing are expensed as incurred. Advertising and marketing
      costs were $-0- and $1,800 for the three months ended March 31, 2006 and 2005,
      respectively.





13





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**





**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 March 31, 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 the presentation in
      the
      2006 condensed consolidated unaudited financial statements. These
      reclassifications have not had any impact on net income.





14





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**





**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.





15





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 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:





**March
                31,****2006**
            
            
            **2005**Net
                income (loss)
            
            $
            168,804
            
            $
            (170,302
            )Weighted-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





16





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**





**Recent
      Accounting Pronouncements**





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.





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





17





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**





**Recent
      Accounting Pronouncements**





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.





**NOTE
      3-**  **ACCOUNTS
      RECEIVABLE**





Accounts
      receivable consists of the following at March 31, 2006:


**2006**Accounts
                    receivable
                
                $
                1,408,197Less
                    allownace for doubtful accounts
                
                
                (707,565
                )Total
                    accounts receivable, net
                
                $
                700,632








**NOTE
      4-**  **PROPERTY
      AND EQUIPMENT**





Property
      and equipment consists of the following at March 31, 2006 and 2005:

















18





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**NOTE
      4-**  **PROPERTY
      AND EQUIPMENT** **(CONTINUED)**





**2006**Equipment
              
              $
              127,099Furniture
                  and Fixtures
              
              
              112,022Transportation
                  Equipment
              
              
              54,621293,742Less:
                  Accumulated Depreciation
              
              
              126,177Net
                  Book Value
              
              $
              167,565


Depreciation
      expense for the three months ended March 31, 2006 was $9,000.








**NOTE
      5-**  **RELATED
      PARTY TRANSACTIONS**





On
      January 28, 2002, Sign Media Systems, Inc. was formed as a Florida Corporation
      but did not begin business operations until April 2002. Most of the revenue
      that
      Sign Media Systems, Inc. earned was contract work with Go! Agency, LLC., a
      Florida limited liability company, a related party. Sign Media Systems, Inc.
      would contract Go! Agency, LLC. to handle and complete jobs. There was no
      additional revenue or expense added from one entity to the other.





On
      January 3, 2003, the Company entered into a loan agreement with Olympus Leasing
      Company, a related party, and in connection therewith executed a promissory
      note
      with a future advance clause in favor of Olympus Leasing, whereby Olympus
      Leasing agreed to loan the Company up to a maximum of $1,000,000 for a period
      of
      three years, with interest accruing on the unpaid balance at 18% per annum,
      payable interest only monthly, with the entire unpaid balance due and payable
      in
      full on January 3, 2006. As of March 31, 2006 and 2005, there was $0 and
      $109,761 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





19





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**NOTE
      5-**  **RELATED
      PARTY TRANSACTIONS** **(CONTINUED)**





annum,
      payable interest only monthly, with the entire unpaid balance due and payable
      in
      full on September 24, 2005. At March 31, 2006 and 2005, the Company was indebted
      to Go! Agency in the amount of $0 and $96,883, respectively and interest expense
      on this note was $0 and $303 for the three months ended March 31, 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.





Since
      the
      making of the loan by the Company to Olympus Leasing, Olympus Leasing has made
      payments to the Company of $509,000 pursuant to the note.








20





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**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 $20,294. 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 $26,286.





The
      following represents maturities over the next five years and in the
      aggregate:





For
      the years ending December 31:





2006 $ 13,815


2007 18,420


2008 14,345


$46,580





**NOTE
      7-**  **PROVISION
      FOR INCOME TAXES**




**2006**Current
                  tax expense
              
              $
              5,600Benefit
                  of loss carry forward
              
              $
              -Net
                  current expense
              
              $
              5,600





21





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 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
      March 31, 2006 under this lease are as follows:





2006
              
              $
              21,9752007
              
              
              15,000$
              36,975


Rent
      expense for the three months ended March 31, 2006 and 2005 was $8,025, and
      $8,025, respectively.





**NOTE
      9-**  **CONCENTRATION
      OF CREDIT RISK**





A
      material part of the Company’s business was dependent upon one key customer
      during the three months ended March 31, 2006 and 2005. Sales to this customer
      were approximately 96% and 89%, respectively.





Approximately
      99% of the Company’s accounts receivable at March 31, 2005 are due from this one
      customer.





**NOTE
      10-**  **STOCKHOLDERS’
      DEFICIT**





As
      of
      March 31, 2006 and 2005, there were 100,000,000 shares of common stock
      authorized.





As
      of
      March 31, 2006 and 2005, there were 8,460,000 shares of common stock issued
      and
      outstanding, respectively.





The
      Company issued 134,000 shares of common stock for $160,500. The Company pursuant
      to a Board resolution was to issue another 16,000 shares of common stock. This
      issuance did not occur until 2004. The Company recorded a $24,000 liability
      for
      stock to be issued in 2003, which was reclassified to equity upon the issuance
      of the shares.





22





**SIGN
      MEDIA SYSTEMS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**MARCH
      31, 2006 AND 2005**





**NOTE
      10-**  **STOCKHOLDERS’
      DEFICIT** **(CONTINUED)**





The
      Company issued 100,000 shares of common stock but authorized 300,000 shares
      to
      be issued in connection with the merger of SMA. The Company valued this at
      $450,000 with $300,000 reflected as a liability for stock to be issued for
      200,000 shares. These shares were issued in 2004.





The
      Company received $200,000 in cash in 2004 for stock that has not been issued
      as
      of December 31, 2004. The Company has recorded this as a liability for stock
      to be
      issued as of December 31, 2004.


23





**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 table 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.





Three
      Months Ended


March
      31





2006
            
            2005Revenue-Sales,
                net
            
            $
            302,252
            
            $
            22,271Cost
                of Goods Sold
            
            
            9,351
            
            
            2,507Gross
                profit
            
            
            292,901
            
            
            19,764Total
                Operating Expenses
            
            
            128,934
            
            
            189,765Net
                Income (Loss) Before
              Other
                Income (Expense)
            
            
            163,967
            
            
            (170,001
            )Total
                Other Income
              (Expense)
            
            
            10,437
            
            
            (301
            )Net
                Income (Loss)Before
              Provision
                For Income
              Taxes
            
            
            174,404
            
            
            (170,302
            )Provision
                For Income
              Taxes
            
            
            (5,600
            )
            
            -Net
                Income (Loss)
              Applicable
                To Common
              Shares
            
            $
            168,804
            
            $
            (170,302
            )Net
                Income (Loss) Per
              Basic
                And Diluted Shares
            
            $
            0.02
            
            $
            (0.02
            )





24





Three
      Months Ended


March
      31





2006
            
            2005Weighted
                Average
              Number
                OF Common
              Shares
                Outstanding
            
            
            8,460,000
            
            
            8,460,000Gross
                profit margin
            
            
            97
            %
            
            89
            %





For
      the
      three months ended March 31, 2006, the Company had Total Revenue-Sales, net
      of
      $302,252, Cost of Goods Sold of $9,351, Gross profit of $292,901, Total
      Operating Expenses of $128,901, Net Income Before Other Income of $163,967,
      Total Other Income of $10,437, Net Income Before Provision For Income Taxes
      of
      $174,404, a Provision For Income Taxes of $(5,600), Net Income Applicable To
      Common Shares of $168,804 and Net Income Per Basic and Diluted Shares of $0.02
      based on 8,460,000 Weighted Average Number Of Common Shares
      Outstanding.





For
      the
      three months ended March 31, 2005, the Company had Total Revenue-Sales, net
      of
      $22,271, Cost of Goods Sold of $2,507, Gross profit of $19,764, Total Operating
      Expenses of 189,765, Net Loss Before Other Income of $(170,001), Total Other
      Expense of $(301), Net Income Applicable To Common Shares of $(170,302) and
      Net
      Loss Per Basic and Diluted Shares of $(0.02) based on 8,460,000 Weighted Average
      Number Of Common Shares Outstanding.





Revenue
      increased $279,981 from the same period last year. Cost of goods increased
      $6,844 from the same period last year. Total operating expenses decreased
      $60,831 from the same period last year. Net Income Before other Income (Expense)
      increased $333,968 from the same period last year. Total Other Income (Expense)
      increased $10,738 from the same period last year. Net Income (Loss) Before
      Provision For Income Taxes increased $344,706 from the same period last year.
      The Provision For Income Taxes increased $5,600 from the same period last year.
      Net Income (Loss) Applicable To Common Shares increased $339,106 from the same
      period last year. Net Income (Loss) Per Basic And Diluted Shares increased
      $0.04
      from the same period last year.





MANAGEMENT’S
      DISCUSSION





The
      Company attributes the increases in Revenue-Sales, net, Gross Profit, Net Income
      Before Other Income, Net Income Before Provision For Income tax, Net Income
      Applicable to Common Shares and Net Income Per Basic And Diluted Shares
      primarily to increased sales by one key customer.





The
      Company attributes the increase in Cost Of Goods Sold to increased sales.
      However, this increase was minimized due to three primary factors. First, the
      Company has re-engineered the manufacture of its original mounting system
      resulting in lowering the cost of manufacture and resulting the ability to
      use
      existing inventories of aluminum to manufacture more mounting systems. Second,
      the Company has introduced several lower cost mounting systems that can be
      manufactured from aluminum not used because of the re-engineering of its
      original mounting system. Third, the Company has purchased a grand format
      printer resulting in a reduction in printing costs.





The
      Company attributes the decrease in Total Operating Expenses due to reliance
      on
      out side dealers and reduction of in side sales persons.





The
      Company attributes the increase in Total Other Income to the reduction of debt
      and an investment loan to a related party which produces interest
      income.





25





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.





**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.**





NONE





26








**INDEX
      TO EXHIBITS.**





NONE





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:May
                19, 2006
            /s/Antonio
                F. Uccello, III
              Antonio
                F. Uccello, III
              Chief
                Executive Officer
              Chairman
                of the Board