form10ksb_a123107.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB/A
(1st
Amendment)
ANNUAL
REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR
THE YEAR ENDED DECEMBER 31, 2007
0-50742
(Commission
file number)
INTERNATIONAL
CONSOLIDATED COMPANIES, INC.
(Name of
small business issuer in its charter)
Florida 02 - 0555904
(State or
other jurisdiction of incorporation or organization) (I.R.S. Employer Identification
Number)
2100 19th Street,
Sarasota, FL 34234
(Address
of principal executive offices) (Zip
Code)
Issuer’s
telephone number is: (941)
330-0336
SIGN
MEDIA SYSTEMS, INC.
(Former
name or former address, if changed since last report)
Securities
registered under Section 12(b) of the Exchange Act: None
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock, No Par Value
(Title of
Class)
Check
whether the issuer is not required to file reports pursuant to Section 13 of
15(d) of the Exchange Act. [ ]
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this from, and no disclosure will be
contained to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10KSB
or any amendment to this Form 10KSB. [X]
Indicate
by check mark whether the issuer is an accelerated filer (as defined in Exchange
Act Rule 12b-2). Yes [ ] No [X]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes [ ] No [ X ]
The
issuer’s revenues for the most recent fiscal year were $24,784.
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and ask price of such equity as of a specified dated
within the past 60 days. As of March 28, 2008, the aggregate market value of the
voting common equity held by non-affiliates was $631,547.
The
number of shares outstanding of the issuer’s common equity as of December 31,
2007, was 12,566,549, No Par Value.
Documents
Incorporated by reference: Exhibits 3.1, 3.2, 4.1, 14.1, and 21.1 from the
Issuer’s Form 10-SB filed as of May 4, 2004. Exhibits 10.1, 10.2, 10.3, and 10.4
from the Issuer’s Form 10-SB/A Third Amendment filed as of February 9, 2005.
Exhibits 10.5, and 10.6, from the Issuer’s Form 10-SB/A Fourth Amendment filed
as of April 1, 2005. Exhibit 16.4 form the Issuer’s Form 10-SB/A Sixth Amendment
filed as of September 12, 2005.
Transitional
Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
ITEM
1. DESCRIPTION OF
BUSINESS
Our
History.
We
started business as E Signs Plus.com, LLC, a Florida limited liability company
on June 20, 2000. We were engaged in the business of manufacturing
and selling signage of all types. We were also in the business of
selling advertising space on the sides of trucks. We would rent space
on the sides of trucks and sell that space to other businesses that wished to
advertise their products in that manner (“third party
advertising”). We also printed the advertising materials
(“graphics”). At that time we were purchasing truck side mounting
systems from third parties to attach to the truck sides in which to insert the
graphics.
It soon
became apparent that the third party advertising business would not be
profitable if we had to purchase mounting systems from third
parties. In August of 2001, we began developing our own proprietary
truck side mounting systems for the display of graphics on the sides of
trucks. We also determined that there was another market for our
mounting systems and graphics; businesses that wished to advertise their
products on their own fleet of trucks. At that time we decided to
limit our business to developing, manufacturing and marketing mobile billboard
mounting systems which are primarily mounted on trucks, to printing the graphics
that are inserted into the mounting systems and to third party
advertising. On August 27, 2001, we changed E Signs Plus.com’s name
to GO! Agency, LLC.
On
January 28, 2002, we incorporated Sign Media Systems, Inc. in the State of
Florida. GO! Agency continued in the business of marketing its
proprietary truck side mounting systems, the sale of third party advertising and
the printing and sale of graphics. Sign Media Systems engaged the
business of developing, manufacturing and marketing the mounting
systems.
In
December, 2002, we determined that it would be in our best interest to operate
the truck side mounting system, third party advertising and graphics business
through one entity rather than two entities. Therefore, effective
January 1, 2003, GO! Agency contributed all of its assets to Sign Media Systems,
in exchange for Sign Media Systems common stock and Sign Media Systems became a
subsidiary of GO! Agency. GO! Agency owns 97% of our shares of common
stock. At that time, GO! Agency ceased conducting the truck side
mounting system, third party advertising and graphics business and all of those
business activities are conducted through Sign Media Systems. Both
GO! Agency and Sign Media Systems are “small business issuers” as that term is
defined in Section 228.10 of Regulation S-B promulgated by the Securities and
Exchange Commission. Please refer to Note 1 of the Consolidated
Financial Statements contained in Part F/S hereof and to Item 7, Certain
Relationships and Related Transactions for more information concerning our
relationship with GO! Agency.
Antonio
F. Uccello, III, is the manager and the 51% owner, the control person and
promoter of GO! Agency formerly known as E Signs Plus.com and, therefore,
pursuant the terms of GO! Agency’s Operating Agreement, has the sole power,
subject to his fiduciary duties to the other GO! Agency members, to vote, or
dispose of or direct the disposition of all the shares of Sign Media System’s
common stock beneficially owned by GO! Agency. Antonio F. Uccello,
III, has absolute control of us by virtue of his voting control of 7,960,000
shares of our common stock.
On
November 17, 2003, we entered into a merger agreement with American Powerhouse,
Inc., a Delaware corporation and its wholly owned subsidiary, Sign Media Systems
Acquisition Company,
Inc., a Florida corporation. Pursuant to the merger agreement, we
merged with Sign Media Systems Acquisition Company. 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 we became the surviving corporation. Some time prior to the
merger, American Powerhouse had acquired certain technology for the manufacture
of a water machine in the form of a water cooler that manufactures water from
ambient air. American Powerhouse was not engaged in the business of
manufacturing and distributing the water machine but was engaged in the
licensing of that right to others. Prior to the merger, American
Powerhouse granted a license to Sign Media Systems Acquisition to use that
technology and to manufacture and sell the water machines. The
acquisition of this license was the business purpose of the
merger. The license agreement is attached hereto as Exhibit 10.5.
Material terms of the license agreement include the following:
·
|
We
have right to utilize certain proprietary technology for the manufacture,
design, creation, sale or use of a water cooler (“Water Machine”) which
manufactures distilled water from ambient
air;
|
·
|
The
term of the license is in
perpetuity;
|
·
|
The
territory in which we are allowed to exploit the license is all countries
in the world;
|
·
|
The
license in non-exclusive; and
|
·
|
We
do not have the right to sublicense the technology to
others.
|
As
consideration for the merger, we issued 300,000 shares of our common stock to
American Powerhouse. The 300,000 shares of stock were valued at $1.50
per share based on recent private sales of our stock. There were no
other material costs of the merger. Please refer to Note 1 of the
Notes to Consolidated Financial Statements for December 31, 2003 and 2002
contained elsewhere herein for more information on the merger. Due to
problems with our plans for marketing and distribution of the water machine
subsequent to the merger, the license has no carrying or book value for the year
ended December 31, 2003 in our Consolidated Financial Statements for December
31, 2004 and 2003. There was and is no relationship between American Powerhouse
and either Sign Media Systems or GO! Agency. To the best of our
knowledge, the only control person of American Powerhouse is Robert F.
Rood.
On
October 16, 2007 the Company changed its name to International Consolidated
Companies.
Our
Business.
As of
year ending December 31st, 2007
we are in the business of developing, manufacturing and marketing mobile
billboard mounting systems which are mounted primarily on truck sides, rear
panels and breaking panel roll up doors. We also produce digitally
created outdoor, full color vinyl images (“graphics”) which are inserted into
the mounting systems and displayed primarily on trucks. We have
developed mounting systems which allow graphics to easily slide into an aluminum
alloy extrusion with a cam-lever that snaps closed stretching the image tight as
a drum, and that also easily opens to free the image for fast removals and
change outs without damaging the truck body or the graphics. We are
also in the business of selling third party advertising on truck sides utilizing
our mounting systems.
In
November, 2003, we acquired a license to certain proprietary technology for the
manufacture, design, creation, sale or use of a water cooler which manufactures
distilled water from ambient air. It was our intent to sell this
product in Central and South America. At that time we were in
negotiations with independent dealers in Central America who sold United States
products in Central and South America who expressed a desire to market this
product in that territory. Ultimately, we were unable to come to a
satisfactory agreement with these dealers for the sale of this
product. Accordingly, we are not currently engaged in the business of
manufacturing and sale of this product. We will not become engaged in
the business of manufacturing and selling this product until we can identify and
come to a satisfactory agreement with an independent dealer or dealers in that
territory for the sale of this product. We cannot currently predict
when or if we will identify and come to a satisfactory agreement with an
independent dealer or dealers in this territory for the sale of this
product.
Our
Products and Services.
We
currently have five mounting systems; two for the sides of truck bodies and
trailers of all sizes, one for the rear of side roll up beverage body trailers,
one for the rear garage style roll up doors of trailers and one for the sides of
commercial cargo vans. Our “Profile I” mounting system utilizes our
proprietary Cam Lever technology to evenly tension images across wide surface
areas and allows graphics to be inserted on both sides of truck bodies and
trailers of all sizes. Our “Profile II” mounting system utilizes our
proprietary Omega Lock and Insert technology combined with our grommeted
floating rail/zip tie technology to evenly tension images across wide surface
areas and allows graphics to be inserted on both sides of truck bodies and
trailers of all sizes. Our Hotswap Lite mounting system evenly
tensions images across small surface areas and allows graphics to be inserted on
the rear panels of side roll up beverage trucks and trailers. Our
Hotswap Stretch mounting system utilizes our proprietary stretch technology to
evenly tension images across breaking panel garage type roll up doors,
seamlessly allowing images to roll up with those doors and allows graphics to be
changed and reused. Our VanGo mounting system utilizes our
proprietary cap and insert technology to evenly tension images on curved
surfaces such as the sides of commercial cargo van bodies.
With five
products to cover key visible surface areas of trucks and trailers, we offer
economical and easy image change-outs for semi and beverage trailers, urban box
trucks, and cargo vans.
We are
also in the digital printing and graphic design business, which allows us not
only to market our mounting systems, but also to design and produce the graphics
which are inserted in mounting systems. Graphics are high-resolution
full digital color prints, produced in heavy weight outdoor
vinyl. They are mounted on truck sides, rear panels and roll-up doors
utilizing our mounting systems. Whether a customer’s advertising
campaign reaches from coast to coast, or changes seasonally, our mounting
systems will allow the customer to exchange and reuse images over and over
again. Images can be “swapped” for a fraction of what it costs to remove, paint,
and apply pressure sensitive adhesive vinyl to truck sides, with downtime
measured in minutes, rather than days. Downtime for trucks is an
extremely important consideration as the trucks generate no revenue and provide
no services when not on the road.
We are
also in the business of selling third party advertising on truck sides utilizing
our mounting systems and graphics.
Our
Target Markets and Marketing Strategy.
Currently,
we have three primary sources of revenue: (i) the sale and installation of our
mounting systems, (ii) third party advertising; and (iii) the printing of
graphics to be inserted on trucks utilizing our mounting systems
Our
Mounting Systems.
According
to Fleet Owner
magazine, the commercial trucking market consists of more than 10 million
vehicles - trucks, tractors, and trailers - of all types and sizes, from light
to heavy duty, serving all segments of the nation’s
economy. Commercial trucking fleets in the U.S. operate more than 7
million trucks and 3.4 million trailers. Trucking is a large and diverse
business. It hauls roughly 80% of America’s freight and serves
virtually every sector of the nation’s economy. Truckers fall into
two basic categories: for-hire carriers and private fleets. For-hire truckers
haul freight and provide transportation services for others. Trucking is their
primary business. Private fleets, on the other hand, are the proprietary
transport, distribution, or service arms of companies that are not in the
trucking business. A private fleet’s primary function is to haul its
own company’s goods or perform a service in support of its company’s main
business. Private fleets make up over two-thirds of the trucking market. In the
trucking industry, fleets are defined as trucking operations of five or more
vehicles. The “5+” truck-fleet segment is the heart of the trucking
market, accounting for close to 80% of the total commercial vehicle
population. The private fleet one the market where we are initially
focused.
We are
focusing on three primary channels for distribution of our mounting systems to
the private fleet market: (i) developing a nation wide dealer base; (ii)
strategic alliances with reselling partners, including truck body and trailer
manufacturers, truck dealers and the traditional retail sign industry; and (iii)
direct sales to existing fleets. We believe these three channels of
distribution offer the opportunity for future growth and expansion.
Third
Party Advertising.
Private fleets also offer a third
source of revenue; third party advertising. We identify fleet owners
who are willing to lease space on their trucks for advertising from third
parties. We enter into a lease agreement with a fleet owner for truck
side space that provides that so long as there is third party advertising on that
space, we will pay the fleet owner a monthly lease fee. We identify
third parties who wish to advertise their good or services in the area in which
the fleet owners utilize their fleets and sell the third party advertiser space
on the truck sides. We obtain revenue from the graphics we produce
for the advertising and from the advertising fee. In this segment of our
business, we do not sell the mounting systems and therefore derive no revenue
from a sale of the mounting systems.
We are
focusing on three primary channels for third party advertising: (i) developing a
nation wide dealer base; (ii) alliances with advertising agencies; and (iii)
direct sales to third parties seeking advertising space using our sales and
marketing staff.
Graphics.
We
believe that sales of graphics will be made in conjunction with sales of our
mounting systems and sales of third party advertising.
Competition.
Our
market for our products is based on the cost-effective use and re-use of
graphics in conjunction with our mounting systems without damaging either the
graphics or the truck sides to reach large and diverse adult
audiences.
The truck
side advertising business is fragmented into two segments; pressure sensitive
applied vinyl and mounting systems that allow graphics to be attached to the
sides of trucks.
Our
primary competition is pressure sensitive applied vinyl (“PSAV”). PSAV is vinyl
that adheres directly to the truck side. The initial cost of our
mounting systems with graphics is about the same as applying PSAV to truck
sides. However, removal of PSAV is extremely labor and time intensive
and destroys the Fleet Graphic. The benefit of the our mounting
systems is that the Fleet Graphic can be “swapped” for a fraction of what it
costs to remove and re-apply PSAV, with downtime for the truck measured in
minutes, rather than days. Our mounting systems also allow the Fleet
Graphic to be reused at a later date.
The major
manufacturers and marketers of PSAV are 3M Company and Avery Dennison
Corporation. 3M and Avery Dennison are multi-billion dollar companies
with established and successful sales and marketing organizations.
Nevertheless, we believe that the advantages of our mounting systems will
allow us to effectively compete in this industry.
There are
other companies that design and manufacture some type of mounting system for
attached graphics to vehicles. None of these competitors has a system that
is substantially similar to our mounting systems and we believe that the
functionality and cost-effectiveness of our mounting systems make them
competitive in the market. However, some of our potential competitors
may have larger advertising and marketing budgets than we do and may be better
able to establish a market presence.
We do not
rely on any particular customer. In 2006 we received the majority of
our revenues from Applied Advertising. However, we did not do
business with Applied in 2007, and we have written off our accounts receivable
from them. See Note 2 to our Financial Statements.
Sources
and Availability of Raw Materials.
Raw
material for the manufacture of the mounting systems consists primarily of
extruded aluminum and fasteners which are readily available throughout the
county. Raw material for the manufacture of the graphics consists
primarily of vinyl billboard banner material which is readily available through
the county.
Our
success may depend in large part upon our ability to preserve our trade secrets,
obtain and maintain patent protection for our technologies, products and
processes, and operate without infringing the proprietary rights of other
parties. However, we may rely on certain proprietary technologies,
trade secrets, and know-how that are not patentable. Although we do
take action to protect our trade secrets and our proprietary information, in
part, by the use of confidentiality and non-compete agreements with our
employees, consultants and dealers, we cannot guaranty that:
These
agreements will not be breached;
· We would
have adequate remedies for any breach; or
·
|
Our
proprietary trade secrets and know-how will not otherwise become known or
be independently developed or discovered by
competitors
|
On
January 14, 2003, we filed a United States patent application for our sign and
awing attachment system and method of use for image mounting systems and that
patent was allowed by the U.S. Patent Office under serial number
10/341.471. Since then we have filed for two separate patents each
relating to the mounting of images, one being a beadless signage system and
method of use for image mounting systems and the other being an apparatus and
method for attaching signs to vehicular surfaces and we therefore own a pending
United States patent application that contains claims covering those two
additional mounting systems. We believe that these new patent applications will
reduce our cost of mounting images. The patent applications are being
prosecuted by the intellectual property law firm of Fish & Richardson, PC of
New York City. We believe that the additional patent application
claims which are on file are sufficiently broad to cover not only the specific
systems, but also similar systems; and that, if granted, will be infringed by
systems that employ the fundamentals of our system. However, at this time
our patent attorneys cannot advise as to the likelihood of obtaining allowance
of the claims on file or other claims sufficiently broad to provide a
competitive advantage.
We cannot
guaranty that our actions will be sufficient to prevent imitation or duplication
of either our products and services by others or prevent others from claiming
violations of their trade secrets and proprietary rights.
On
December 16, 2002, we filed a United States application for a trademark for the
words “HOTSWAPROFILE” which we use to describe our mounting system for trucks of
all sizes. That trade mark has been registered under registration number
2,963,602.
Research
and Development Activities.
In the
year ended December 31, 2007, we did not incur research and development
costs.
In June
2007 the board of directors voted to diversify the company's business by
acquiring businesses internationally. In August 2007 the board of
directors voted to change the company’s proposed name to International
Consolidated Companies, Inc. Since that time the Company has engaged in
the evaluating certain Chinese businesses for acquisition.
Employees.
As of the
date of this Report, we have three full time employees and one part time
employee for a total of three (3) employees.
ITEM
2. DESCRIPTION OF
PROPERTY
On
November 1, 2002, we entered into a lease as the lessee with Hawkeye Real
Estate, LLC, a Florida limited liability company and a related party, as lessor
of 6,300 square feet of mixed office and warehouse space at 2100 19th Street,
Sarasota, FL 34234 for a period of five years beginning December 1,
2002 and continuing until November 30, 2007 for a fixed monthly rental of $2,500
per month. Effective January 1, 2005, we amended the lease to obtain access to
additional parking for our vehicles, employee vehicles and customer
vehicles. The amended lease provided for a fixed monthly rental of
$4,195 per month.
In
December, 2005, Hawkeye Real Estate, LLC asked us to relocate to smaller
premises in the same complex as it had found a buyer for the existing
premises. As an inducement to vacate the existing premises described
above, Hawkeye Real Estate agreed to temporarily provide a 2,000 square foot
facility of mixed office and warehouse space and 5,000 square feet of outside
storage space at the same address in the same complex for a $0.00 monthly rental
until it could obtain the necessary permits and construct new custom premises
for us in the same complex and lease us the newly constructed space on terms
substantially similar to the original lease. The company is currently
paying approximately $1,400 a month on month to month basis.
Our
executive offices and manufacturing facility are located at these
premises. We believe the premises are adequate for our
purposes.
ITEM
3. LEGAL
PROCEEDINGS
There are
no pending or threatened legal proceedings to which we are a party or of which
any of our property is the subject. To our knowledge, there are no
proceedings contemplated by governmental authorities.
ITEM
4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS
No
matters were submitted to a vote of security holders.
PART
II
ITEM 5. MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
On
November 30, 2006, our common stock was accepted for quotation on the OTC
Bulletin Board under the stock symbol “SGNM.” Trading did not
commence until after the close of our fiscal year ended December 31, 2006, and
therefore, there was no bid or ask price for our common stock on the OTC
Bulletin Board during the last quarter of 2006. Concurrent with our
name change in October 2007, our symbol changed to INCC.
None of
our common stock is subject to outstanding options or warrants to purchase, or
securities convertible into, our common equity.
The
following table represents the high and low price for each quarter for the year
ended December 31, 2007.
Quarter
|
High
|
Low
|
January
1, 2007 to March 31, 2007
|
$.50
|
$.18
|
April
1, 2007 to June 30, 2007
|
$1.00
|
$.35
|
July
1, 2007 to September 30, 2007
|
$1.01
|
$.51
|
October
1, 2007 to December 31, 2007
|
$1.01
|
$.35
|
Holders
There are
approximately 228 holders of our common stock.
Dividends
We have
never paid any cash dividends on our common stock and do not anticipate paying
cash dividends in the foreseeable future. The future payment of
dividends is directly dependent upon our future earnings, our financial
requirements and other factors to be determined by our Board of Directors, in
its sole discretion. For the foreseeable future, it is anticipated
that any earnings that may be generated from our operations will be used to
finance our growth, and that cash dividends will not be paid to common
stockholders.
Recent
Sales of Unregistered Securities
The
following information is furnished with regard to all securities sold by us
within the past three years that were not registered under the Securities
Act. The issuances described hereunder were made in reliance upon the
exemptions from registration set forth in Section 4(2) of the Securities Act
relating to sales by an issuer not involving any public offering. All securities
sold by us within the past three years were shares of common stock, no par
value. No underwriter was used in any of these transactions and there
were no underwriting discounts or commissions paid.
Date
|
Name
|
Number
of Shares
|
Consideration
in Dollars
|
|
|
|
|
January
10, 2007
|
Marcus
Faller
|
150,000
|
Services
$75,000
|
January
12, 2007
|
Henry
Plantagenet, LLC
|
2,000,000
|
Services
$1,000,000
|
February
8, 2007
|
Evelyn
P. Silva
|
300,000
|
Services
$90,000
|
July
12, 2007
|
Colby
Butcher
|
14,706
|
$10,000
|
July
23, 2007
|
Scott
Dyer
|
36,765
|
$25,000
|
July
31, 2007
|
The
Thomas F. Pepin
Pension
Limited
Partnership
|
110,294
|
$75,000
|
August
13, 2007
|
John
Burden
|
73,529
|
$50,000
|
August
16, 2007
|
Clif
Mitchell
|
148,897
|
$101,250
|
August
17, 2007
|
North
America
Life
Insurance
|
148,897
|
$101,250
|
November
17, 2007
|
Richard
Dorfman
|
73,529
|
$50,000
|
December
13, 2007
|
Kenneth
Davidson
|
300,000
|
Services
$180,000
|
December
21, 2007
|
James
Kordomenos
|
110,294
|
$50,000
|
December
27, 2007
|
Michael
Caruana
|
55,555
|
$25,000
|
|
|
|
|
All of
the above purchasers, and all of the purchasers referred to in footnote (1)
immediately above, were Accredited Investors at the time of the sale of shares
of stock to the purchasers listed in the foregoing table, we provided all of the
with our non-financial statement and financial statement information described
in Section 502(b)(2) of Regulation D promulgated by the Securities and Exchange
Commission. None of the offers or sales to these purchasers involved
any form of general solicitation or general advertising. Prior to
each sale, each of these purchasers was afforded the opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering and to obtain additional information we possessed or could acquire
without unreasonable effort or expense to verify the accuracy of the information
provided them pursuant to Section502 (b)(2). We took reasonable care
to insure that the shares of stock sold to these purchasers could not be resold
without registration under the Securities Act of 1933 (the “Act”) or an
exemption there from and that these purchasers were not underwriters under that
Act and in connection there with: (a) made reasonable inquiry to insure that
these purchasers were acquiring the shares of stock for themselves and not for
any other persons; (b) provided written disclosure to each purchaser that the
shares of stock had not been registered under the Act and therefore could not be
resold unless registered under the Act or unless an exemption from registration
is available; and (c) placed a restrictive legend on the shares of stock stating
that they had not been registered under the act and setting forth restrictions
on their transferability and sale. Finally, we made reasonable
inquiry to insure that each of these purchasers had such knowledge and
experience in financial and business matters that each purchaser was capable of
evaluating the merits and risks of investment in the shares of stock and of
making an informed investment decision with respect thereto or had consulted
with advisors who possess such knowledge and experience.
ITEM
6. MANAGEMENT’S
DISCUSSION AND ANALYSIS
Management
Discussion Snapshot.
The
following table sets forth certain of our summary selected operating and
financial data. The following table should be read in conjunction with all other
financial information and analysis presented herein including the Audited
Financial Statements for the Years Ended December 31, 2007 and
2006.
Summary
Selected Statements of Profits and Losses and
Financial
Data which is Derived from Our Audited Financial Statements
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
24,784 |
|
|
|
726,812 |
|
|
|
|
|
|
|
|
|
|
COSTS
OF GOODS SOLD
|
|
|
3,446 |
|
|
|
189,131 |
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
21,338 |
|
|
|
537,681 |
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Professional
fees and administrative payroll
|
|
|
1,519,013 |
|
|
|
146,262 |
|
General
and administrative expenses
|
|
|
211,501 |
|
|
|
83,679 |
|
Bad
debt expense
|
|
|
382,525 |
|
|
|
- |
|
Inventory
impairment
|
|
|
- |
|
|
|
- |
|
Depreciation
|
|
|
58,693 |
|
|
|
58,693 |
|
|
|
|
2,171,732 |
|
|
|
288,634 |
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE OTHER INCOME (EXPENSE)
|
|
|
(2,150,394 |
) |
|
|
49,047 |
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
8,818 |
|
|
|
7,503 |
|
Other
income
|
|
|
- |
|
|
|
- |
|
Interest
expense
|
|
|
(5,103 |
) |
|
|
(505 |
) |
|
|
|
23,715 |
|
|
|
26,998 |
|
|
|
|
|
|
|
|
|
|
INCOME
BEFORE INCOME (LOSS) TAXES
|
|
|
(2,126,679 |
) |
|
|
276,045 |
|
Provision
for income taxes
|
|
|
- |
|
|
|
45,007 |
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) APPLICABLE TO COMMON SHARES
|
|
$ |
(2,126,679 |
) |
|
$ |
231,038 |
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) PER BASIC AND DILUTED SHARES
|
|
$ |
(0.18 |
) |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING
|
|
|
11,628,563 |
|
|
|
8,508,606 |
|
Revenue and
Expenses.
For the
year ended December 31, 2006, we had total revenue of $726,812 total costs of
goods sold of $189,131, gross profit of $537,681, net income applicable to
common shares of $231,038 and net income per basic and diluted shares of $0.03
based on a weighted average of 8,508,606 common shares outstanding.
For the
year ended December 31, 2007, we had total revenue of $24,784, total costs of
goods sold of $3,446, gross profit of $21,338, net income (loss) applicable to
common shares of ($2,126,679), and net income (loss) per basic and diluted
shares of ($0.18) based on a weighted average of 11,628,563 common shares
outstanding.
Most of
our revenue was derived from business with one customer with whom we ceased
doing business. Thus, we experienced a significant decline in our
revenue.
During
the years ended December 31, 2006, a material part of our business was dependent
upon one key customer, Applied Advertising Network, LLC of Lake Mary, Florida.
During the year ended December 31, 2006, our sales to this customer were
approximately $700,632 of 96% of revenue. During the year ended
December 31, 2005, our sales to this customer were approximately $1,401,265 or
94% of revenue including a provision for bad debt in the amount of
$207,565.
Our
revenue in the year ended December 31, 2007, was $24,784 compared to revenue in
the preceding period of $726,812. This is a decrease from period to period of
$702,028. This decreased in revenue is attributable to decreased
sales of mounting systems to one key customer, Applied Advertising Network, LLC
of Lake Mary, Florida. Applied Advertising Network is not a related
party.
In the
year ended December 31, 2007, our cost of goods sold was $3,446 or 14% of
revenue. In the year ended December 31, 2006, our cost of goods sold
was 189,131 which is 26% of revenue.
In the
year ended December 31, 2007, our professional fees and administrative payroll
was $1,519,013. In the year ended December 31, 2006, of professional
fees and administrative payroll was $146,262. This increase of
$1,372,751 in professional fees and administrative payroll from the pervious
period is primarily due to stock issued at Fair Market Value for professional
services.
In the
year ended December 31, 2007, our general and administrative expenses were
$211,501. In the year ended December 31, 2006, our general and
administrative expenses were $83,679. The increase of $127,822 in
general and administrative expenses from the previous period to period is
primarily due to our decision to begin looking at the acquisition of Chinese
companies.
In the
years ended December 31, 2006 and 2007, our depreciation expense was
$58,693.
In the
year ended December 31, 2007 our other income (expenses) was
$23,715. In the year ended December 31, 2006, our other income
(expense) was 26,998. The difference is related to an increase in our
interest expense to ($5,103).
Working
Capital.
The
following table sets forth a summary of our working capital.
AT
DECEMBER 31:
|
|
2007
|
|
|
2006
|
|
Current
assets
|
|
$ |
9,994 |
|
|
$ |
705,424 |
|
Current
liabilities
|
|
|
115,300 |
|
|
|
221,567 |
|
Working
capital
|
|
$ |
(105,306 |
) |
|
$ |
483,857 |
|
|
|
|
|
|
|
|
|
|
Cash
Flow.
Our cash
flow from operating, investing and financing activities, as reflected in the
Consolidated Statement of Cash Flows is summarized in the table
below.
FOR
THE YEARS ENDED DECEMBER 31:
|
|
2007
|
|
|
2006
|
|
Net
cash provided by/(used in):
|
|
|
|
|
|
|
Operating
activities
|
|
$ |
(604,315 |
) |
|
$ |
(110,434 |
) |
Investing
activities
|
|
|
(203,677
|
) |
|
|
422,157 |
|
Financing
activities
|
|
|
512,913 |
|
|
|
(9,848
|
) |
Net
increase (decrease) in cash and cash equivalents
|
|
$ |
(295,079 |
) |
|
$ |
301,875 |
|
Net cash
provided by operating activities for the year ended December 31, 2007, increased
significantly compared to the preceding period due to our decision to begin
looking at the acquisition of Chinese companies
Assets
and Debt.
Our
current assets and current liabilities are summarized in the table
below.
AT
DECEMBER 31:
|
|
2007
|
|
|
2006
|
|
Current
assets
|
|
$ |
9,994 |
|
|
$ |
705,454 |
|
Current
Liabilities
|
|
$ |
115,300 |
|
|
$ |
221,567 |
|
|
|
|
|
|
|
|
|
|
Current
assets for the year ended December 31, 2007, decreased compared to the preceding
period. Current assets for the year ended December 31, 2007, consists
of $9,048 of cash and cash equivalents and $946 of accounts
receivable. The decrease in current assets was due primarily to a
decrease of in cash on hand and the decision to consider the accounts receivable
from our primary customer to be un-collectable.
Current
liabilities for the year ended December 31, 2007, decreased compared to the
preceding period. The decrease in current liabilities was primarily
due to a reduction in accounts payable and a decrease in the liability for stock
to be issued.
Our
non-current assets and long-term debt are summarized in the table
below.
AT
DECEMBER 31:
|
|
2007
|
|
|
2006
|
|
Non-current
assets
|
|
$ |
616,527 |
|
|
$ |
511,602 |
|
|
|
|
|
|
|
|
|
|
Off
Balance Sheet Arrangements.
We have
not entered into any off-balance sheet arrangements as defined by SEC Final Rule
67 (FR-67) “Disclosure in Management’s Discussion and Analysis about Off-Balance
Sheet Arrangements and Aggregate Contractual Obligations,”
Liquidity
and Capital Resources.
For the
reported periods, cash flow from operating activities has not been sufficient to
cover our working capital requirements or to finance expansion of our sales and
marketing activities. We have utilized cash flows from financing
activities to provide working capital and to expand sales and marketing
activities. Financing has been provided primarily by loans from related parties
and from the issuance of common stock. We do not have any
institutional financing in place and do not anticipate being able to arrange any
institutional financing for the foreseeable future.
The
following table summarizes our cash flow provided by or used in operating
activities, investing activities and financing activities.
FOR
THE YEARS ENDED DECEMBER 31:
|
|
2007
|
|
|
2006
|
|
Net
cash provided by/(used in):
|
|
|
|
|
|
|
Operating
activities
|
|
$ |
(604,315 |
) |
|
$ |
(110,434 |
) |
Investing
activities
|
|
|
(203,677
|
) |
|
|
422,157 |
|
Financing
activities
|
|
|
512,913 |
|
|
|
(9,848
|
) |
Net
increase (decrease) in cash and cash equivalents
|
|
$ |
(295,079 |
) |
|
$ |
301,875 |
|
The
current portion of long-term debt consists of one installment note with GMAC
Finance for the purchase of one truck in the original amount of
$45,761. The final payment on this installment note is $4,578, all of
which is due in the fiscal year ending December 31, 2007.
Operating
lease obligations consists of one lease for our corporate offices. In
December, 2005, Hawkeye Real Estate, LLC, the owner of our previous premises,
requested that we relocate to smaller premises in the same complex as it had
found a buyer for the existing premises. As an inducement to vacate
the existing premises, Hawkeye Real Estate agreed to temporarily provide a 2,000
square foot facility of mixed office and warehouse space and 5,000 square feet
of outside storage space at the same address in the same complex for a $0.00
monthly rental until it could obtain the necessary permits and construct new
custom premises for us in the same complex and lease us the newly constructed
space on terms substantially similar to the original lease. We
estimate we will not be obligate to pay rent until the beginning of the fiscal
year ending December 31, 2008 and until that time we are occupying our premises
rent-free. See Item 12, Certain Relationships and Related
Transactions contained elsewhere herein.
We believe, but cannot guarantee, that
sales of our products will generate sufficient cash flow to meet our firm
contractual commitments. If cash flow from sales is insufficient, we
will be required to raise money through financing activities including loans
from related parties and sales of common stock. We cannot guarantee
that we will be able to obtain loans or sell stock in sufficient
amounts to meet our firm contractual commitments and our budgeted
expenses.
Critical
Accounting Policy and Estimates
Looking
Forward.
Water
Machine
For the
reasons set forth in Part 1, Item 1 above, we are not currently engaged in the
business of manufacturing and selling the Water Machine. When and if
we become engaged in this business, we believe that the Water Machines can be
manufactured at a cost that will allow their sale to be competitive with bottled
water products. Because we are not currently engaged in this
business, we cannot predict the impact of this product on our results of
operation and financial condition going forward.
Our Truck
Side Mounting Systems, Advertising and Digital Printing Business
Our
emphasis in the coming months is to increase our dealer network. We
are actively pursuing the securing more qualified dealers. We believe
that securing a larger dealer base will result in additional
sales. There can be no guarantee that we will be successfully in
securing additional dealers and if we do secure additional dealers that they
will increase sales.
In
addition to securing additional dealers, we are working to improve our truck
side mounting systems to reduce their cost and improve their
quality. We have an in-house engineer working on this
project.
Additionally,
as set forth in Part I above, the Company has been actively looking at the
acquisition of Chinese companies.
There can
be no guarantee that we will continue to be profitable or that our revenue or
net income will increase sufficiently to support expansion. Unless
and until our marketing activities succeed and we sell our products on a
wide-scale commercial basis, we may not have enough revenue to cover our
operating expenses and may incur losses. We do not expect to generate
significant revenue until such time, if ever, that sales increase substantially
from their present levels. Accordingly, we cannot assure anyone that
we will generate sufficient revenue to profitably operate in the
future.
Our operations have consumed and will
continue to consume substantial amounts of capital, which, up until now, have
been largely financed from loans from related parties and sales of stock to
private investors. We expect capital and operating expenditures to
increase. Although we believe that we will be able to attract
additional capital through private investors and as a result thereof our cash
reserves and cash flows from operations will be adequate to fund our 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 us. If adequate funds are not available to
satisfy either short or long-term capital requirements, we may be required to
limit our operations significantly or discontinue our operations. Our
capital requirements are dependent upon many factors including, but not limited
to, the rate at which we develop and introduce our 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 our products and services.
We
believe that we have assembled an experienced team of senior
management. We believe that it is an essential part of our strategy
to continue to aggressively strengthen the breadth, depth and industry expertise
of our executive team. Our growth depends to a substantial degree on
Antonio F. Uccello, III, the Chairman, President, Chief Executive Officer and
Chief Financial Officer as well as other executive officers and key management
personnel. Our loss of the services of any of these key personnel
could have a material adverse effect on our business. There is
currently no “key person” life insurance on the life of any of our executive
officers, and no plans are underway to secure adequate key man
coverage. Our continued growth will also be dependent upon our
ability to attract and retain additional skilled management and sales
personnel. We may not be successful, which could adversely affect our
business. Our inability to retain key personnel or attract new high
quality senior management could materially adversely affect our results of
operations.
We offer
several warranties on our products, for five years, covering the functionality
of the mounting systems and the ultraviolet protection of the graphics where we
do the printing of the graphics. There can be no guarantee that we
will be able to afford to process all of the warranted maintenance if more
legitimate repairs are requested than we have forecasted.
We have
begun training outside parties to become certified installers of our
products. We anticipate that having more installers will make repairs
and change-outs of graphics convenient and cost effective for our
customers. However, we may not be able to train enough installers to
handle the potential demand for our products. This would result in
delays in service, which could affect customer satisfaction and adversely affect
our business. Currently, we believe that we have sufficient numbers
of trained installers to handle the potential demand and expect to be able to
continue to train additional installers to keep pace with the anticipated growth
of our business. However, there can be no guarantee that this will
occur.
Once we
train outside independent installers to install our products, we will not be
supervising each of them on a continuing basis. Although each
certified independent installer is anticipated to be under contract with us to
install our products only according to our specifications, we cannot guarantee
that this level of installation will occur in every case, and it is possible
that we may face liability for the installers’ actions if our products injure or
damage other people or their property. We intend to procure
indemnification agreements from our certified independent installers to avoid
this potential problem.
ITEM
7. FINANCIAL
STATEMENTS
INTERNATIONAL
CONSOLIDATED COMPANIES, INC.
(FORMELY
KNOWN AS SIGN MEDIA SYSTEMS, INC.)
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2007 AND 2006
INTERNATIONAL
CONSOLIDATED COMPANIES, INC.
(FORMELY
KNOWN AS SIGN MEDIA SYSTEMS, INC.)
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE(S)
Report of
Independent Registered Public Accounting
Firm
11
Consolidated
Balance Sheet at December 31,
2007
12
Consolidated
Statements of Operations for the Years
Ended
December 31, 2007 and
2006 13
Consolidated
Statements of Changes in Stockholders’ Equity (Deficit)
for the
Years Ended December 31, 2007 and
2006
14
Consolidated
Statements of Cash Flows for the Years Ended
December
31, 2007 and
2006
15
Notes to
the Consolidated Financial
Statements
16-20
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Stockholders of
International
Consolidated Companies, Inc.
Sarasota,
FL
We have
audited the accompanying consolidated balance sheet of International
Consolidated Companies, Inc., (the “Company”) as of December 31, 2007, and the
related consolidated statements of operations, changes in stockholders’ equity
(deficit) and cash flows for each of the years in the two-year period ended
December 31, 2007. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of International Consolidated
Companies, Inc., as of December 31, 2007 and 2006, and the results of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 2007 in conformity with accounting principles generally accepted in
the United States of America.
BAGELL,
JOSEPHS, LEVINE & COMPANY, L.L.C.
Bagell,
Josephs, Levine & Company, L.L.C.
Marlton,
NJ 08053
March 24,
2008
INTERNATIONAL CONSOLIDATED COMPANIES, INC.
(FORMELY KNOWN AS SIGN MEDIA SYSTEMS, INC.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2007 AND 2006
ASSETS
|
|
|
|
|
|
|
|
2007
|
|
CURRENT
ASSETS
|
|
|
|
Cash
and cash equivalents
|
|
$ |
9,048 |
|
Accounts
receivable, net
|
|
|
946 |
|
|
|
|
9,994 |
|
|
|
|
|
|
PROPERTY AND EQUIPMENT -
net
|
|
|
40,059 |
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
Due
from related parties
|
|
|
616,527 |
|
|
|
|
616,527 |
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
666,580 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
Current
portion of long-term debt
|
|
$ |
4,578 |
|
Accounts
payable and accrued expenses
|
|
|
60,722 |
|
Liability
for stock to be issued
|
|
|
50,000 |
|
|
|
|
115,300 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
115,300 |
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY (DEFICIT)
|
|
|
|
|
Common
stock, no par value, 100,000,000 shares authorized
|
|
|
|
|
at
December 31, 2007; 12,566,549 shares issued
|
|
|
|
|
and
outstanding at December 31, 2007
|
|
|
2,062,400 |
|
Additional
paid-in capital
|
|
|
671,700 |
|
Prepaid
expenses
|
|
|
(150,000 |
) |
Retained
earnings (deficit)
|
|
|
(2,032,820 |
) |
TOTAL
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
551,280 |
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
$ |
666,580 |
|
The accompanying notes are an integral part of
these consolidated financial statements.
INTERNATIONAL
CONSOLIDATED COMPANIES, INC.
(FORMELY
KNOWN AS SIGN MEDIA SYSTEMS, INC.)
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
24,784 |
|
|
|
726,812 |
|
|
|
|
|
|
|
|
|
|
COSTS
OF GOODS SOLD
|
|
|
3,446 |
|
|
|
189,131 |
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
21,338 |
|
|
|
537,681 |
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Professional
fees and administrative payroll
|
|
|
1,519,013 |
|
|
|
146,262 |
|
General
and administrative expenses
|
|
|
211,501 |
|
|
|
83,679 |
|
Bad
debt expense
|
|
|
382,525 |
|
|
|
- |
|
Depreciation
|
|
|
58,693 |
|
|
|
58,693 |
|
|
|
|
2,171,732 |
|
|
|
288,634 |
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE OTHER INCOME (EXPENSE)
|
|
|
(2,150,394 |
) |
|
|
249,047 |
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
28,818 |
|
|
|
27,503 |
|
Interest
expense
|
|
|
(5,103 |
) |
|
|
(505 |
) |
|
|
|
23,715 |
|
|
|
26,998 |
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
|
|
(2,126,679 |
) |
|
|
276,045 |
|
Provision
for income taxes
|
|
|
- |
|
|
|
45,007 |
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) APPLICABLE TO COMMON SHARES
|
|
$ |
(2,126,679 |
) |
|
$ |
231,038 |
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) PER BASIC AND DILUTED SHARES
|
|
$ |
(0.18 |
) |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING
|
|
|
11,628,563 |
|
|
|
8,508,606 |
|
The accompanying notes are an integral part of
these consolidated financial statements.
INTERNATIONAL
CONSOLIDATED COMPANIES, INC.
(FORMELY
KNOWN AS SIGN MEDIA SYSTEMS, INC.)
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
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Additional
|
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Retained
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|
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|
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Common
Stock
|
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Paid-In
|
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|
Earnings
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Prepaid
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|
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|
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Shares
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Amount
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Capital
|
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|
(Deficit)
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Expenses
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Total
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2005
|
|
|
8,460,000 |
|
|
$ |
5,000 |
|
|
$ |
671,700 |
|
|
$ |
(137,179 |
) |
|
|
- |
|
|
$ |
539,521 |
|
|
|
|
|
|
|
|
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|
|
|
|
|
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Issuance
of common stock for
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
liability
for stock to be issued
|
|
|
583,267 |
|
|
|
224,900 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
224,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the year
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
231,038 |
|
|
|
|
|
|
|
231,038 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Balance,
December 31, 2006
|
|
|
9,043,267 |
|
|
|
229,900 |
|
|
|
671,700 |
|
|
|
93,859 |
|
|
|
- |
|
|
|
995,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services
|
|
|
2,450,000 |
|
|
|
1,255,000 |
|
|
|
- |
|
|
|
- |
|
|
|
(150,000 |
) |
|
|
1,105,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Issuance
of common stock for compensation
|
|
|
300,000 |
|
|
|
90,000 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
90,000 |
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Issuance
of common stock for cash
|
|
|
773,282 |
|
|
|
487,500 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
487,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net
(loss) for the period
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,126,679 |
) |
|
|
|
|
|
|
(2,126,679 |
) |
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|
|
|
|
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|
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Balance,
December 31, 2007
|
|
|
12,566,549 |
|
|
$ |
2,062,400 |
|
|
$ |
671,700 |
|
|
$ |
(2,032,820 |
) |
|
$ |
(150,000 |
) |
|
$ |
551,280 |
|
|
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The accompanying notes are an integral part of these
consolidated financial statements.
INTERNATIONAL
CONSOLIDATED COMPANIES, INC.
(FORMELY
KNOWN AS SIGN MEDIA SYSTEMS, INC.)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
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|
2007
|
|
|
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
income
|
|
$ |
(2,126,679 |
) |
|
$ |
231,038 |
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income
|
|
|
|
|
|
|
|
|
to
net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
58,693 |
|
|
|
58,693 |
|
Bad
debt expense
|
|
|
382,525 |
|
|
|
- |
|
Issuance
of common stock for services
|
|
|
1,255,000 |
|
|
|
- |
|
Issuance
of common stock for compensation
|
|
|
90,000 |
|
|
|
- |
|
Impairment
of inventory
|
|
|
7,462 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
|
10,364 |
|
|
|
(393,835 |
) |
Decrease
in inventory
|
|
|
- |
|
|
|
17,538 |
|
(Increase)
decrease in prepaid expenses and other current assets
|
|
|
(150,000 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
(86,673 |
) |
|
|
(68,875 |
) |
Increase
(decrease) in income tax payable
|
|
|
(45,007 |
) |
|
|
45,007 |
|
Total
adjustments
|
|
|
1,522,364 |
|
|
|
(341,472 |
) |
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
|
(604,315 |
) |
|
|
(110,434 |
) |
|
|
|
|
|
|
|
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|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Acquisition
of property and equipment
|
|
|
(3,281 |
) |
|
|
138 |
|
Increase
in interest receivable - related party
|
|
|
(200,396 |
) |
|
|
(27,500 |
) |
Reduction
from related parties
|
|
|
- |
|
|
|
449,519 |
|
Net
cash provided by (used in) investing activities
|
|
|
(203,677 |
) |
|
|
422,157 |
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Increase
(decrease) in liability for stock to be issued
|
|
|
50,000 |
|
|
|
- |
|
Payments
on long-term debt
|
|
|
(7,410 |
) |
|
|
(18,706 |
) |
Issuance
of common stock for cash
|
|
|
487,500 |
|
|
|
- |
|
Increase
(decrease) on debt-related party
|
|
|
(17,177 |
) |
|
|
8,858 |
|
Net
cash (used in) financing activities
|
|
|
512,913 |
|
|
|
(9,848 |
) |
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(295,079 |
) |
|
|
301,875 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - BEGINNING OF YEAR
|
|
|
304,127 |
|
|
|
2,252 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - END OF YEAR
|
|
$ |
9,048 |
|
|
$ |
304,127 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid during the year for interest
|
|
$ |
5,103 |
|
|
$ |
505 |
|
Debt
reduced to trade in on vehicle
|
|
$ |
- |
|
|
$ |
20,491 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON CASH INFORMATION:
|
|
|
|
|
|
|
|
|
Common
stock issued for compensation
|
|
$ |
90,000 |
|
|
$ |
- |
|
Common
stock issued for consulting
|
|
$ |
1,255,000 |
|
|
$ |
- |
|
Bad
dedt expense
|
|
$ |
382,525 |
|
|
$ |
- |
|
The accompanying notes are an integral part of these
consolidated financial statements.
NOTE 1- ORGANIZATION
AND BASIS OF PRESENTATION
International
Consolidation Companies, Inc (the “Company”) was previously known Sign Media
Systems Inc. The Company was incorporated on January 28, 2002 as a
Florida corporation. Upon incorporation, an officer of the Company contributed
$5,000 and received 1,000 shares of common stock of the Company. Effective
January 1, 2003, the Company issued 7,959,000 shares of common stock in exchange
of $55,702 of net assets of Go! Agency, LLC, a Florida limited liability company
(“Go Agency”), a company formed on June 20, 2000, as E Signs Plus.com, LLC, a
Florida limited liability company. In this exchange, the Company
assumed some debt of Go Agency and the exchange qualified as a tax-free exchange
under IRC Section 351. The net assets received were valued at
historical cost. The net assets of Go Agency that were exchanged for the shares
of stock were as follows:
Accounts
receivable
$30,668
Fixed
assets, net of depreciation
112,214
Other
assets
85,264
Accounts
payable
(29,242)
Notes
payable
(27,338)
Other
payables
(115,864)
Total $55,702
Go Agency
was formed to pursue third party truck side advertising. The
principal of Go Agency invested approximately $857,000 in Go Agency pursuing
this business. It became apparent that a more advanced truck side
mounting system would be required and that third party truck side advertising
alone would not sustain an ongoing profitable business. Go Agency
determined to develop a technologically advanced mounting system and focused on
a different business plan. Go Agency pre-exchange transaction was a
company under common control of the major shareholder of
SMS. Post-exchange transactions have not differed. Go
Agency still continues to operate and is still under common
control.
Go Agency
and the Company developed a new and unique truck side mounting system, which
utilizes a proprietary cam lever technology, which allows an advertising image
to be stretched tight as a drum. Following the exchange, the Company
had 7,960,000 shares of common stock issued and outstanding. The
Company has developed and filed an application for a patent on its mounting
systems. The cam lever technology is considered an intangible asset
and has not been recorded as an asset on the Company’s consolidated balance
sheet. This asset was not recorded due to the fact that there was no
historic recorded value on the books of Go Agency for this asset.
On
November 17, 2003, the Company entered into a merger agreement by and among
American 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 engaged in any engaged in any business engaged in any 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 periods ended December 31, 2007 and 2006 in
the Company’s consolidated financial statements for December 31, 2007 and
2006. 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.
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
The
Company had three primary sources of revenue in 2007 and 2006:
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 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 is contemplating new
source of revenue.
Warranties
The
Company offers manufacturers warranties that cover 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 nine months ended December 31,
2007 and 2006. The following table represents the Company’s losses in
the past two years with respect to warranties.
NOTE 2- SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Warranties
(continued)
|
|
Balance
|
|
Charged
|
|
|
|
Balance
|
|
|
|
at
Beginning
|
|
to
Costs and
|
|
|
|
at
End of
|
|
|
|
of
Period
|
|
Expenses
|
|
Deductions
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2007
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2006
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
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.
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 years ended December 31, 2007 and 2006 was $382,525 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 are 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
years
Equipment 5
years
Trucks 3
years
Advertising
Costs of
advertising and marketing are expensed as incurred. Advertising and
marketing costs were $8,925 and $0 for the year ended December 31, 2007 and
2006, 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.
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.
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.
NOTE 2- SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income (Loss) per Share of Common Stock
Historical
net income (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:
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(2,126,679 |
) |
|
$ |
231,038 |
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,628,563 |
|
|
|
8,508,606 |
|
|
|
|
|
|
|
|
|
|
Weighted-average
common stock equivalents
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
- |
|
|
|
- |
|
Warrants
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
11,628,563 |
|
|
|
8,508,606 |
|
Recent Accounting
Pronouncements
In
February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
Financial Instruments,” an amendment of FASB Statements No. 133 and
140. SFAS No. 155 resolves issues addressed in SFAS No. 133
Implementation Issue No. D1, “Application of Statement 133 to Beneficial
Interests in Securitized Financial Assets,” and permits fair value measurement
for any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation, clarifies which interest-only strips and
principal-only strips are not subject to the requirements of SFAS No. 133.
establishes a requirement to evaluate interests in securitized financial assets
to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring bifurcation,
clarifies that concentrations of credit risk in the form of subordination are
not embedded derivatives and amends SFAS No. 140 to eliminate the prohibition on
a qualifying special-purpose entity from holding a derivative financial
instrument that pertains to a beneficial interest other than another derivative
financial instrument. SFAS No. 155 is effective for all financial
instruments acquired or issued after the beginning of the first fiscal year that
begins after September 15, 2006. The implementation of this standard
did not have a material impact on the Company’s financial position, results of
operations, or cash flows.
In March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of
Financial Assets,” an amendment of FASB Statement No.
140. SFAS No. 156 requires an entity to recognize a servicing asset
or liability each time it undertakes an obligation to service a financial asset
by entering into a service contract under a transfer of the servicer’s financial
assets that meets the requirements for sale accounting, a transfer of the
servicer’s financial assets to a qualified special-purpose entity in a
guaranteed mortgage securitization in which the transferor retains all of the
resulting securities and classifies them as either available-for-sale or trading
securities in accordance with SFAS No. 115, “Accounting for Certain Investments
in Debt and Equity Securities” and an acquisition or assumption of an
obligation to service a financial asset that does not relate to financial assets
of the servicer or its consolidated affiliates. Additionally, SFAS
No. 156 requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, permits an entity to choose
either the use of an amortization or fair value method for subsequent
measurements, permits at initial adoption a one-time reclassification of
available-for-sale securities to trading securities by entities with recognized
servicing rights and requires separate presentation of servicing assets and
liabilities subsequently measured at fair value and additional disclosures for
all separately recognized servicing assets and liabilities. SFAS No.
156 is effective for transactions entered into after the beginning of the first
fiscal year that begins after September 15, 2006. The implementation
of this standard did not have a material impact on the Company’s financial
position, results of operations, or cash flows.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,”
which provides a definition of fair value, establishes a framework for measuring
fair value and requires expanded disclosures about fair value
measurements. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The provisions of SFAS No. 157 should be
applied prospectively. Management is assessing the potential impact
on its financial condition and results of operations.
In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans,” which amends SFAS No. 87,
“Employers’ Accounting for Pensions,” SFAS No. 88, “Employers’ Accounting for
Settlements and Curtailments of Defined Benefit Plans and for Termination
Benefits,” SFAS No. 106, “Employers’ Accounting for Postretirement Benefits
Other Than Pensions,” and SFAS No. 132R, “Employers’ Disclosures about Pensions
and Other Postretirement Benefits (revised 2003).” This statement
requires companies to recognize an asset or liability for the overfunded or
underfunded status of their benefit plans in their financial
statements. SFAS No. 158 also requires the measurement date for plan
assets and liabilities to coincide with the sponsor’s year-end. The
standard provides two transition alternatives related to the change in
measurement date provisions. The recognition of an asset and
liability related to the funded status provision is effective for fiscal years
ending after December 15, 2006 and the change in measurement date provisions is
effective for fiscal years ending after December 15, 2008. This
pronouncement has no effect on the Company at this time
In
February, 2007 the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Liabilities,” including an amendment to SFAS No. 115, “Accounting for Certain Investments
in Debt and Equity Securities,” applicable to all entities with
available-for-sale and trading securities. SFAS No. 159 permits
entities to measure many financial instruments and certain other items at fair
value. Eligible items include recognized financial assets and
liabilities other than investments or interests which an entity is required to
consolidate, financial assets or liabilities recognized under leases, deposit
liabilities of financial institutions, or financial instruments that are
classified by the issuer as a component of shareholders’ equity. Also
eligible are firm commitments that would otherwise not be recognized at
inception and that involve only financial instruments, non-financial insurance
contracts and warranties that the issuer can settle by paying a third party to
provide those goods or services, and host financial instruments that result from
separation of an embedded non-financial derivative instrument from a
non-financial hybrid instrument. SFAS No. 159 is effective as of the
beginning of an entity’s fiscal year that begins after November 15,
2007. This pronouncement has no effect on the Company at this
time.
NOTE 3- ACCOUNTS
RECEIVABLE
Accounts
receivable consists of the following at December 31, 2007:
|
|
2007
|
|
Accounts
receivable
|
|
$ |
946 |
|
|
|
|
|
|
Less
allownace for doubtful accounts
|
|
|
- |
|
|
|
|
|
|
Total
accounts receivable, net
|
|
$ |
946 |
|
NOTE 4- PROPERTY
AND EQUIPMENT
Property
and equipment consists of the following at December 31, 2007:
|
|
2007
|
|
Equipment
|
|
$ |
128,745 |
|
Furniture
and Fixtures
|
|
|
112,022 |
|
Transportation
Equipment
|
|
|
24,621 |
|
|
|
|
265,388 |
|
Less:
Accumulated Depreciation
|
|
|
225,329 |
|
|
|
|
|
|
Net
Book Value
|
|
$ |
40,059 |
|
NOTE 5- PREPAID
EXPENSES
The
company issued 300,000 shares of stock to a consultant for services amortized
over a six-month period. The services were recognized at FMV of the
stock ($180,000). At December 31, 2007 $150,000 was considered
prepaid.
NOTE 6- 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 December 31, 2007 and 2006, there was
$0 and $0 due to Olympus, 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.
The
remaining balance that was due from related party on the balance sheet was
$616,527 including interest on December 31, 2007.
NOTE 7- SHORT-TERM
DEBT
Short-term
debt consists of an installment note with GMAC Finance. Balance due on December
31, 2007 was $4,578.
NOTE 8- PROVISION FOR INCOME
TAXES
There was
no provision for income taxes during the year ended December 31,
2007.
In
conformity with SFAS No. 109, deferred tax assets and liabilities are classified
based on the financial reporting classification of the related assets and
liabilities, which give rise to temporary book/tax
differences. Deferred taxes were immaterial at December 31,
2007.
At
December 31, 2007, the deferred tax assets consist of the
following:
|
|
2007
|
|
|
|
|
|
Deferred
taxes due to net operating loss
|
|
|
|
carryforwards
|
|
$ |
(609,846 |
) |
|
|
|
|
|
Less: Valuation
allowance
|
|
|
609,846 |
|
|
|
|
|
|
Net
deferred tax asset
|
|
$ |
- |
|
Additionally,
the Company established a valuation allowance equal to the full amount of the
deferred tax assets due to the uncertainty of the utilization of the operating
losses in future periods.
NOTE 9- COMMITMENTS AND
CONTINGENCIES
Rent
expense paid to a related party for the year ended December 31, 2007 and 2006
was $21,806, and $30,000, respectively. There is no formal lease as
it expired in November of 2007 - lease payments are month to month.
NOTE 10- CONCENTRATION OF CREDIT
RISK
A
material part of the Company’s business was dependent upon one key customer
throughout its history. The Company is no longer doing business with
that customer which represented 99% of their revenue.
NOTE 11- STOCKHOLDERS’
EQUITY
As of
December 31, 2007 and 2006, there were 100,000,000 shares of common stock
authorized.
As of
December 31, 2007 and 2006, there were 12,566,549 and 8,460,000 shares of common
stock issued and outstanding, respectively.
The
following is a list of the common stock transactions during the year ended
December 31, 2007:
On
January 10, 2007, the Company issued 150,000 shares of its common stock at a
fair market value of $75,000, for services provided to the Company.
On
January 12, 2007, the Company issued 2,000,000 shares of its common stock at a
fair market value of $1,000,000, for consulting services provided to the
Company.
On
February 8, 2007, the Company issued 300,000 shares of its common stock at a
fair market value of $90,000, as additional compensation for an employee’s past
services to the Company.
On July
12, 2007, the Company issued 14,706 shares of its common stock for $10,000 in
cash.
On July
23, 2007, the Company issued 36,765 share of its common stock for $25,000 in
cash.
On July
31, 2007, the Company issued 110,294 shares of its common stock for $75,000 in
cash.
On August
13, 2007, the Company issued 73,529 shares of its common stock for $50,000 in
cash.
On August
16, 2007, the Company issued 148,897 shares of its common stock for $101,250 in
cash.
On August
17, 2007, the Company issued 148,897 share of its common stock for $101,250 in
cash.
On
November 15, 2007, the Company issued 73,529 share of its common stock for
$50,000 in cash.
On
December 13, 2007, the Company issued 300,000 shares of its common stock at a
fair market value of $180,000, for consulting services provided to the
Company.
On
December 21, 2007, the Company issued 110,294 shares of its common stock for
$50,000 in cash.
On
December 21, 2007, the Company issued 55,555 shares of its common stock for
$25,000 in cash.
There
were no options or warrants granted during the period beginning on January 28,
2002 (inception) ending December 31, 2007.
NOTE 12- SUBSEQUENT
EVENTS
The
Company raised $250,000 in 2008 through the sale of its common
stock.
ITEM
8A(T). CONTROLS AND
PROCEDURES
Evaluation
of Disclosure Controls and Procedures
An
evaluation was performed under the supervision and with the participation of
management, including the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures as defined in Rules 13a-15(E) or
240.15d-15(e) of the Securities Exchange Act of 1934, as amended, as of December
31, 2007. Based on that evaluation, management, including the Chief
Executive Office and the Chief Financial Officer, concluded that the Company’s
disclosure controls and procedures were effective.
Management's Report on
Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Under the supervision and with the participation of our
management, including the Chief Executive Officer and the Chief Financial
Officer, we conducted an evaluation of the effectiveness of our internal control
over financial reporting as of December 31, 2007 based on the criteria set forth
in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation
under the criteria set forth in Internal Control Over Financial Reporting –
Guidance for Small Public Companies, our management concluded that our internal
control over financial reporting was effective as December 31,
2007.
This
Annual Report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. We were not required to have, nor have we engaged our
independent registered public accounting firm to perform, an audit on our
internal control over financial reporting pursuant to the rules of the
Securities and Exchange Commission that permit us to provide only management’s
report in this Annual Report.
Change in internal controls.
Management
of the Company has also evaluated, with the participation of the Chief Executive
Officer of the Company, any change in the Company’s internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the fiscal year covered by this Annual Report
on Form 10KSB. There was no change in the Company’s internal control
over financial reporting identified in that evaluation that occurred during the
fiscal year covered by this Annual Report on Form 10KSB that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
ITEM
8B.
OTHER
INFORMATION
None.
PART
III
ITEM
9.
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The
Company’s executive officers, directors and key employees and their business
experience follows:
Name and
Age
Position
Term
Antonio
F. Uccello,
III
Chairman/President/Chief
Executive
January 28, 2002
Age
38
Officer/Chief Financial
Officer
to present
Dennis
Derr
Director
August 14, 2007 to present
Age
49
Richard
Dorfman
Director
March 19, 2008 to present
Age
56
Antonio F. Uccello,
III
Mr.
Uccello is the founder, President, Chief Executive Officer, Chairman of the
Board of Directors and the Chief Financial Officer of the Company. Mr. Uccello
attended college at the University of Connecticut and took graduate courses at
Hunter College in New York City. Mr. Uccello has been in the securities
industry for the last 13 years. Mr. Uccello holds a Series 65, Registered
Investment Advisor license from the National Association of Securities Dealers.
From June, 1996, to February, 2001, Mr. Uccello was a branch manager for
Brookstreet Securities. Brookstreet Securities is a registered broker-dealer.
Mr. Uccello left Brookstreet Securities in February, 2001, to establish
Chelsea Capital Management, LLC where he acts a registered investment advisor.
Both Chelsea and Mr. Uccello are registered as investment advisors with
The State of Florida, Department of Banking and Finance and the State of
Connecticut Department of Banking, Division of Securities and Business
Investments. Mr. Uccello is the owner of 99% of the membership interests and the
sole manager of Chelsea and as such is the sole owner and sole control person of
Chelsea. Mr. Uccello is a minority member and the manager of Hawkeye Real
Estate, LLC and is the President of and a minority shareholder in Olympus
Leasing Company, both of which are related parties to us. Hawkeye Real Estate is
a real estate developer and Olympus Leasing is engage in the business of making
commercial loans. Mr. Uccello will devote 80% of his time to us. Mr.
Uccello has extensive experience in finance and is responsible for the over all
profitability of the Company.
Dennis D.
Derr
Mr. Derr
is a Director of the Company. Mr. Derr received a Bachelor of Science in
Finance from Colorado State University in 1980 and a Master of Science in
Finance from Colorado State University in 1984. From 2004 to present, Mr.
Derr has been an independent consultant to various businesses in the areas of
strategic planning, business capture and market development. Mr. Derr
served as Executive Vice President of Avisys, Incorporated, located in Austin,
TX from 1996 2004. As a corporate officer and major shareholder at Avisys,
Incorporated, Mr. Derr was involved in all aspects of corporate management and
governance. He was responsible to the President to formulate effective
business development strategies within defense and commercial markets and across
diverse aircraft, avionics, information and electronic warfare products for
Avisys, Incorporated. He assisted in directing and implementing overall
corporate strategy and culture and had primary responsibility for identification
and acquisition of corporate resources. Mr. Derr also had responsibility
for the management of contracts and legal matters. He developed, executed
and administered corporate policies with respect to legal, contractual,
business, and personnel matters. Mr. Derr also performed as Vice President
of Business Development and was the corporate lead during the 2004 acquisition
of L-3 Communications by Avisys, Incorporated. From 1992 to 1996, Mr. Derr
served as Director of Business Development for Marconi Tracor Flight Systems. As
Vice President of Business Development for Marconi Tracor Flight Systems, Mr.
Derr promoted expansion of new product base and customer base while continuing
to effectively market and capture follow-on business. He led an electronic
warfare products capture. Mr. Derr led successful proposal teams for programs of
all sizes and technologies, from $50,000 change orders to $50,000,000
systems. As part of a team assigned to special programs work, Mr. Derr
performed a dual role with the management and administration of a $20,000,000
portfolio of electronic warfare hardware.
Richard
Dorfman
From 2003
to the present, Mr. Dorfman has worked as an independent consultant specializing
in the maximization of media rights, primarily in the sports and entertainment
fields. Consulting services include strategic planning, marketing, sales
and servicing of television, 3G/Wireless and other media rights for sports
rights holders, governing bodies and media outlets on a local or global
basis. Mr. Dorfman is also on the board of Energem Natural Resources
Company.
During
2007 Mr. Stephen MacNamara and Mr. Stephen Seidensticker served as directors.
Mr. MacNamara resigned effective May 5, 2007, for personal reasons. Mr.
Seidensticker resigned March 24, 2008. Neither Mr. MacNamara nor Mr.
Seidensticker had any disputes with the Company.
Family
Relationships
There are
no current family relationships among the Company’s officers and directors.
Prior to February 2, 2004 Abraham Uccello was our President and Chief Executive
Officer and Salvatore Uccello was our Vice President of Engineering.
Antonio F. Uccello, the current President and Chief Executive Officer and
Abraham Uccello are brothers and Salvatore Uccello is their father.
Abraham Uccello and Salvatore Uccello resigned on February 2,
2004.
Employment
Agreements
There are
no employment agreements between us and our executive officers and key
personnel.
Code of
Ethics
We have
adopted a code of ethics which is a document of conduct we establish for
ourselves to help us and our employees comply with laws and good ethical
practices.
ITEM
10.
EXECUTIVE
COMPENSATION
Set forth
below are the annual cash compensation and restricted stock grants paid to the
Company’s executive officers for the period ended December 31,
2006.
Summary
Compensation Table 2006
|
|
|
|
Annual
Compensation
|
|
Long
Term
Compensation
|
Name
and Principal
Position
|
|
Year
|
|
Salary
$
|
|
Bonus
$
|
|
Other
Annual Compensation $
|
|
Stock
Grants #
|
|
All
Other
Compensation
$ (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antonio
F. Uccello, III
Chief
Financial
Officer
|
|
|
2006
|
|
125,000
|
|
|
0
|
|
0
|
|
|
0
|
|
11,194
|
Andrei
A. Troubeev
Vice
President,
Engineering
|
|
|
2006
|
|
41,200
|
|
|
0
|
|
0
|
|
|
|
|
11,721
|
(1)
All Other Compensation consists solely of health insurance.
Summary
Compensation Table 2007
|
|
|
|
Annual
Compensation
|
|
Long
Term
Compensation
|
Name
and Principal
Position
|
|
Year
|
|
Salary
$
|
|
Bonus
$
|
|
Other
Annual Compensation $
|
|
Stock
Grants #
|
|
All
Other
Compensation
$ (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antonio
F. Uccello, III
Chief
Financial
Officer
|
|
|
2007
|
|
122,000
|
|
|
0
|
|
0
|
|
|
0
|
|
11,194
|
Andrei
A. Troubeev
Vice
President,
Engineering
|
|
|
2007
|
|
27,235
|
|
|
0
|
|
0
|
|
|
|
|
-0-
|
None of
the directors have been paid any fees for acting as such and we do not
anticipate paying any directors’ fees in the foreseeable future.
Other
than as set forth in the foregoing table, with footnotes, there is no other
plan, contract, authorization or arrangement, whether or not set forth in any
formal documents, pursuant to which the following may be received by any or our
officers or directors: cash, stock, restricted stock or restricted stock units,
phantom stock, stock options, stock appreciation rights (“SARs”), stock options
in tandem with SARs, warrants, convertible securities, performance units and
performance shares, and similar instruments.
ITEM
11.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following tables set forth the security ownership as of December 31,
2007 by: (i) each person (or group of affiliated persons) who, to our
knowledge, is the beneficial owner of five percent or more of our outstanding
common stock, (ii) each named director and each named executive officer who, to
out knowledge, is the beneficial owner of our outstanding common stock, and each
of the foregoing as a group.
SECURITY
OWNERSHIP
OF
CERTAIN BENEFICIAL OWNERS
Title
of Class
|
Name
and Address
Of
Beneficial Owner
|
Amount
and Nature
Of
Beneficial Owner
|
Percent
of Class
|
Common
Stock, No
Par
Value
|
Antonio
F. Uccello, III(1)
2100
19th
Street
Sarasota,
FL 34234
|
4,059,600(1)
|
32%(1)
|
Common
Stock, No
Par
Value
|
Abraham
Uccello(1)
637
Mecca Dr.
Sarasota,
FL 34234
|
2,388,000(1)
|
19%(1)
|
Common
Stock, No
Par
Value
|
Estate
of Salvatore Uccello(1)(2)
6527
Waterford Circle
Sarasota,
FL 34238
|
716,400(1)
|
6%(1)
|
Common
Stock, No
Par
Value
|
Roger
P. Nelson(1)
14
Giovanni Drive
Waterford,
CT 06385
|
796,000
|
6%(1)
|
Totals
for Class as a
Whole
|
|
7,960,000(1)
|
63%
|
(1)
Pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition) with
respect to a security whether through a contract, arrangement, understanding,
relationship or otherwise. All of the shares described in the foregoing table
are owned by GO! Agency, LLC, a Florida limited liability company whose address
is 4744 Spinnaker Drive Bradenton, FL 34208. The individuals listed are the
members of GO! Agency and the shares of common stock reflected for each person
in the foregoing table reflect each such person’s percentage ownership of GO!
Agency. Antonio F. Uccello, III, is the
manager and the 51% owner of GO! Agency and, therefore, pursuant the terms of
GO! Agency’s Operating Agreement, has the sole power, subject to his fiduciary
duties to the other GO! Agency members, to vote, or dispose of or direct the
disposition of all the shares of Sign Media System,
Inc.’s common stock beneficially owned by GO! Agency. Antonio F. Uccello, III,
has absolute control of us by virtue of his voting control of 7,960,000 shares
of our common stock.
(2) The Estate of Salvatore
Uccello was established due to his passing in February of 2007.
SECURITY
OWNERSHIP
OF
MANAGEMENT
(1)
Title
of Class
|
(2)
Name
and Address
Of
Beneficial Owner
|
(3)
Amount
and Nature
Of
Beneficial Owner
|
(4)
Percent
of Class
|
Common
Stock, No
Par
Value
|
Antonio
F. Uccello, III(1)
2100
19th
Street
Sarasota,
FL 34234
|
4,059,600(1)
|
45%(1)
|
Common
Stock, No
Par
Value
|
Stephen
R. MacNamara(2)
1071
Meyers Park Drive
Tallahassee,
FL 32301
|
30,000
|
.003%
|
Common
Stock, No
Par
Value
|
Thomas
Bachman(3)
2960
S. McCall Road, Ste 210
Inglewood,
FL 34224
|
-
|
-
|
Common
Stock, No
Par
Value
|
Andrei
A. Troubeev(4)
7736
37th
Court E.
Sarasota,
FL
|
-
|
-
|
Common
Stock, No
Par
Value
|
Charles
A. Pearson, III(5)
6138
Turnbury Park Dr.
Apt.
6301
Sarasota,
FL 34234
|
-
|
-
|
Totals
for Class as a
Whole
|
|
4,089,600
|
45%
|
(1)
Antonio F. Uccello, III is our Chairman, President, Chief Executive Officer, and
Chief Financial Officer. Antonio F. Uccello, III is the 51% owner and manager of
GO! Agency, LLC, a Florida limited liability company. GO! Agency owns 7,960,000
shares of the common stock of Sign Media Systems, Inc. which represents 94% of
the total of the issued and outstanding shares of common stock. Antonio F.
Uccello, III, as the manager and the 51% owner of GO! Agency, pursuant the terms
of GO! Agency’s Operating Agreement, has the sole power, subject to his
fiduciary duties to the other GO! Agency members, to vote, or dispose of or
direct the disposition of all the shares of Sign Media System, Inc.’s common
stock beneficially owned by GO! Agency. Antonio F. Uccello, III, has absolute
control of us by virtue of his voting control of 7,960,000 shares of our common
stock.
(2)
Stephen R. MacNamara resigned as a director.
(3)
Thomas Bachman resigned as a Director.
(4)
Andrei A. Troubeev is no longer with the Company.
(5)
Charles A. Pearson, III is our Vice President of Sales and Marketing. Mr.
Pearson resigned effective August 5, 2005, for personal reasons.
ITEM
12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We were
formed as a Florida corporation with the name Sign Media Systems, Inc. on
January 28, 2002, but did not begin business operations until April 2002. Most
of the revenue that we earned was contract work with GO! Agency, LLC, a Florida
limited liability company, a related party. We would contract with GO! Agency to
handle and complete jobs. There was no additional revenue or expense added from
one entity to the other. Throughout 2002, we maintained Due To/From accounts
with GO! Agency to properly reflect the related party transactions. As of
December 31, 2003, we had an outstanding liability in the amount of $4,739 due
to GO! Agency and this amount is reflected in our consolidated balance sheet for
the year ended December 31, 2003, as current portion of debt-related parties.
As of December 31, 2004, we had an outstanding liability in the amount of
$12,878 due to GO! Agency and this amount is reflected in our consolidated
balance sheet for the year ended December 31, 2004, as current portion of
debt-related parties. No payment or repayment terms had been established as of
December 31, 2004. The total revenue derived from GO! Agency for the
period January 28, 2002 (Inception) through December 31, 2002 was
$143,775.
In
January, 2002, Antonio F. Uccello, III, who is considered one of our promoters,
and is a related party, contributed $5,000 to us as our initial paid-in capital
in exchange for 1,000 shares of our common stock. Subsequently, in January 2003,
Antonio F. Uccello, III, transferred his 1,000 shares of our common stock to GO!
Agency, LLC.
On
September 24, 2002, we entered into a Loan Agreement with GO! AGENCY, LLC, a
related party, and in connection therewith executed a Promissory Note with a
future advance clause (1) in favor of GO! Agency whereby GO! Agency agreed to
loan us 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 15, 2005. At
September 24, 2002, Antonio F. Uccello, III, was our sole shareholder, one of
our officers and directors and was the owner of 51% of the economic interest of
GO! Agency. GO! Agency is the owner of 94% of the issued and outstanding shares
of our stock. At December 31, 2004, GO! Agency had loaned us a total of $96,883
pursuant to the Loan Agreement and the Promissory Note and we were indebted to
GO! Agency in such amount as of that date and that amount is reflected in our
consolidated balance sheet for the year ended December 31, 2004, as current
portion of debt-related parties. As a result of payments to GO! Agency, the
balance due on the debt to GO! Agency is $8,319.
On
November 1, 2002, we entered into a lease as the lessee with Hawkeye Real
Estate, LLC, a Florida limited liability company, as lessor for 6,300 square
feet of mixed office and warehouse space at 2100 19th Street, Sarasota, FL 34234
for a period of five years beginning December 1, 2002 and continuing until November 30, 2007 for
a fixed monthly rental of $2,500 per month. Effective January 1, 2005 we amended
the lease to obtain access to additional parking for our vehicles, employee
vehicles and customer vehicles. The amended lease now provides for a fixed
monthly rental of $4,195 per month. Antonio F. Uccello, III, is the manager and
a member of Hawkeye Real Estate, LLC and is one of our officers and directors
and an indirect shareholder of Sign Media Systems, Inc. We believe that we are
paying fair market value for the rent on this property. Hawkeye Real Estate is a
real estate developer. In December, 2005, Hawkeye Real Estate, LLC, the owner of
our previous premises, requested that we relocate to smaller premises in the
same complex as it had found a buyer for the existing premises. As an inducement
to vacate the existing premises, Hawkeye Real Estate agreed to temporarily
provide a 2,000 square foot facility of mixed office and warehouse space and
5,000 square feet of outside storage space at the same address in the same
complex for a $0.00 monthly rental until it could obtain the necessary permits
and construct new custom premises for us in the same complex and lease us the
newly constructed space on terms substantially similar to the original lease. We
estimate it will take two years to obtain the necessary permits and build out
the custom premises and during that two-year period we are occupying our
premises rent-free.
Effective
January 1, 2003, GO! AGENCY, LLC, which is considered one of our promoters, and
is a related party, transferred all of its assets which together had an original
cost basis of $300,000, to us in exchange for us issuing it 7,959,000 shares of
our common stock. We valued the assets at $55,702 which was their historical
cost. Please refer to Note 1 of our consolidated financial statements for the
years ended December 31, 2003 and 2002 contained elsewhere in this report. GO!
AGENCY, LLC is controlled by Antonio F. Uccello, III which means Mr. Uccello has
absolute control of us by virtue of his voting control of 7,960,000 of our
shares of common stock.
On
January 3, 2003, we 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 (1) in favor of Olympus Leasing, whereby Olympus Leasing
agreed to loan us 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. At December 31, 2003, Olympus Leasing had loaned us a total of $350,521
pursuant to the Loan Agreement and the Promissory Note and we were indebted to
Olympus Leasing in such amount as of that date. At December 31, 2004 we were
indebted to Olympus Leasing in the amount of $107,190 and that amount is
reflected in our consolidated balance sheet for the year ended December 31,
2004, as long-term debt-related parties. At January 3, 2003, Antonio F. Uccello,
III, was, and is today, the President, Chairman and owner of 45% of the issued
and outstanding shares of stock of Olympus Leasing. Antonio F. Uccello, III, and
was and is one of our officers and directors and an indirect shareholder of Sign
Media Systems, Inc. Olympus Leasing is engaged in the business of providing
commercial financing. Olympus Leasing has outstanding financing agreements with
numerous other unrelated parties. The liability to Olympus Leasing Company as of
the end of the year ending December 31, 2005 has been fully
satisfied.
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.
(1)
A future advance clause as used herein is a provision in a promissory
note that allows for an additional advance of funds by the lender to the
borrower and for future advances of funds by the lender to the borrower up to
the maximum amount stated in the promissory note all of which advances of funds
are subject to the terms and conditions of the promissory note.
ITEM
13.
EXHIBITS
INDEX
TO EXHIBITS.
Exhibit
Number
|
Description
of Exhibit
|
|
|
3.1
|
Amended
Articles of Incorporation of Sign Media Systems, Inc. Incorporated by
reference from our Form 10-SB filed as of May 4, 2004.
|
|
|
3.2
|
By-Laws
of Sign Media Systems, Inc. Incorporated by reference from our Form 10-SB
filed as of May 4, 2004.
|
|
|
4.1
|
Specimen
Certificate of the Common Stock of Sign Media Systems, Inc. Incorporated
by reference from our Form 10-SB filed as of May 4,
2004.
|
|
|
10.1
|
Agreement
and Plan of Merger Among American Powerhouse, Inc., Sign Media Systems
Acquisition Company, Inc. and Sign Media Systems, Inc. Incorporated by
reference from our Form 10-SB/A Third Amendment filed as of February 9,
2005.
|
|
|
10.2
|
Distribution
Agreement between Sign Media Systems, Inc. and Applied Advertising
Network, LLC. Incorporated by reference from our Form 10-SB/A Third
Amendment filed as of February 9, 2005.
|
10.3
|
Promissory
Note and Loan Agreement between GO! AGENCY, LLC and Sign Media Systems,
Inc. Incorporated by reference from our Form 10-SB/A Third Amendment filed
as of February 9, 2005.
|
|
|
10.4
|
Promissory
Note and Loan Agreement between Olympus Leasing Company and Sign Media
Systems, Inc. Incorporated by reference from our Form 10-SB/A Third
Amendment filed as of February 9, 2005.
|
|
|
10.5
|
License
Agreement for the acquisition of technology. Incorporated by reference
from our Form 10-SB/A Fourth amendment filed as of April 1,
2005.
|
|
|
10.6
|
Contribution
Agreement. Incorporated by reference from our Form 10-SB/A Fourth
amendment filed as of April 1, 2005.
|
|
|
14.1
|
Code
of Ethics. Incorporated by reference from our Form 10-SB filed as of May
4, 2004.
|
|
|
16.4
|
Letter
on change in certifying accountant. Incorporated by reference from our
Form 10-SB/A Sixth Amendment filed as of September 9,
2005.
|
|
|
21.
|
Our
Subsidiaries. Incorporated by reference from our Form 10-SB filed as of
May 4, 2004.
|
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND
SERVICES
The
aggregate fees billed by our independent auditors, Bagell Josephs & Company,
LLC, for the years ended December 31, 2007 and 2006, are as
follows:
|
|
2007 |
|
|
2006 |
|
Audit
Fees |
|
$ |
76,000 |
|
|
$ |
41,000 |
|
Audit Related
Fees |
|
$ |
-0- |
|
|
$ |
-0- |
|
Tax
Fees |
|
$ |
-0- |
|
|
$ |
-0- |
|
All Other
Fees |
|
$ |
-0- |
|
|
$ |
-0- |
|
SIGNATURES
In
accordance with the requirements Section 15 or 15(d) of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERNATIONAL
CONSOLIDATED COMPANIES, INC.
(formerly known as Sign Media Systems, Inc.)
(Registrant)
/s/ Antonio F. Uccello,
III
Antonio
F. Uccello, III
Chief
Executive Officer, President, Chief Financial Officer,
Chairman
of the Board of Directors
March 31,
2008