SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2006
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934
From the transition period from ____________ to ___________.
Commission File Number 0-22236
SKREEM ENTERTAINMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 33-0565710
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11637 Orpington Street, Orlando, Florida 32817
(Address of principal executive offices)
(407) 207-0400
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (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 |_|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes I I No IXI
Class Shares Outstanding Date
Common, $.001 par value 25,576,292 October --, 2006
Transitional Small Business Disclosure Format (Check one): Yes I I No IXI
TABLE OF CONTENTS
SKREEM ENTERTAINMENT CORPORATION
Part I. Financial Information
Item 1. Consolidated Financial Statements
Unaudited Consolidated Balance Sheet - September 30, 2006 3
Unaudited Consolidated Statements of Operations for the six and three
months ended September 30, 2006 and 2005 and for the period from
inception, August 19, 1999, to September 30, 2006 4
Unaudited Consolidated Statement of Changes in Shareholders' Deficit
for the period from inception, August 19, 1999, to September 30, 2006 6
Unaudited Consolidated Statements of Cash Flows for the six months ended
September 30, 2006 and 2005 and for the period from inception, August 19,
1999, to September 30, 2006 7
Notes to the Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of Operation 11
Item 3. Controls and Procedures 13
Part II. Other Information
Item 1. Legal Proceedings 14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits 14
Signatures 15
Certifications 16
2
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED BALANCE SHEET
September 30, 2006
ASSETS
Current assets:
Cash and Cash equivalents $ 6,008
Interest receivable 1,093
-----------------
Total current assets 7,101
Note receivable 100,000
Property and equipment, net 6,966
Debt issuance costs 5,000
---------------
Total assets $ 119,067
===============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 215,038
Related party payable 9,254
Deferred revenue 27,212
Notes payable - shareholder 154,519
---------------
Total current liabilities 406,023
---------------
Shareholders' deficit:
Preferred shares - $0.001 par value; 1,000,000
authorized, no shares issued or outstanding -
Common shares - $0.001 par value; 50,000,000
authorized; 25,576,292 shares issued and
outstanding 25,576
Additional paid - in capital 5,863,471
Losses accumulated in the development stage (6,176,003)
---------------
Total shareholders' deficit (286,956)
---------------
Total liabilities and shareholders' deficit $ 119,067
===============
The accompanying notes are an integral part of these consolidated
financial statements
3
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended September 30, 2006 and 2005 and for the Period From
Inception, August 19, 1999, to September 30, 2006
Six Months Ended Inception to
------------------------------ -----------------
September 30, September 30, September 30,
2006 2005 2006
--------------- ------------- -----------------
Revenue $ 31,447 $ 24,397 $ 220,172
Revenue - related party 126,100 - 126,100
--------------- ------------ ----------------
Total Revenue 157,547 24,397 346,272
Expenses
Operating (921,152) (564,505) (4,246,514)
General and administrative (257,975) (217,660) (1,614,394)
Impairment of loan receivable - - (130,000)
-------------- ------------- ----------------
Total expenses (1,179,127) (782,165) (5,990,908)
-------------- ------------- ----------------
Loss from operations (1,021,580) (757,768) (5,644,636)
Interest expense (48,760) (77,092) (531,367)
-------------- ------------- ---------------
Net loss $ (1,070,340) $ (834,860) $ (6,176,003)
============== ============= ===============
Weighted Average Shares Outstanding -
basic and diluted 24,726,300 23,107,856
============== ============
Loss Per Share -
basic and diluted $ (0.04) $ (0.04)
============== ============
The accompanying notes are an integral part of these consolidated
financial statements
4
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended
September 30, 2006 and 2005
Three Months Ended
---------------------------------
September 30, September 30,
2006 2005
------------- -------------
Revenue $ 1,753 $ 1,637
Revenue - related party 89,100 -
------------- -------------
Total Revenue 90,853 1,637
Expenses
Operating (598,047) (201,682)
General and administrative (108,624) (111,493)
Impairment of loan receivable - -
------------- -------------
Total expenses (706,671) (313,175)
------------- -------------
Loss from operations (615,818) (311,538)
Interest expense (20,985) (40,585)
------------- -------------
Net loss $ (636,803) $ (352,123)
============= =============
Weighted Average Shares Outstanding -
basic and diluted 24,838,907 23,107,856
============= =============
Loss Per Share -
basic and diluted $ (0.03) $ (0.02)
============= =============
The accompanying notes are an integral part of these consolidated
financial statements
5
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT For the
period from inception, August 19, 1999, to September 30, 2006
Common Stock Additional During the Losses
------------------------- Paid-In Development Accumulated
Shares Amount Capital Stage Total
---------- ---------- ----------- ------------ -------------
Balance at Inception,
August 19,1999 - $ - $ - $ - $ -
Issuance of common stock 20,000 20 - - 20
Net loss - - - (84,021) (84,021)
------------ ------------ ----------- ------------ ------------
Balance at December 31, 1999 20,000 20 - (84,021) (84,001)
Net loss - - - (230,879) (230,879)
------------ ------------ ----------- ------------ ------------
Balance at December 31, 2000 20,000 20 - (314,900) (314,880)
Net loss - - - 494,816) (494,816)
------------ ------------ ----------- ------------ ------------
Balance at December 31, 2001 20,000 20 - (809,716) (809,696)
Net loss - - - (384,590) (384,590)
------------ ------------ ----------- ------------ ------------
Balance at December 31, 2002 20,000 20 - (1,194,306) (1,194,286)
Reclassification of debt to equity 43,000 43 1,581,940 - 1,581,983
Net loss - - - (736,364) (736,364)
------------ ------------ ----------- ------------ ------------
Balance at December 31, 2003 63,000 63 1,581,940 (1,930,670) (348,667)
Effect of issuance of common
stock and recapitalization
in a reverse acquisition
transaction 25,943,925 25,944 (25,944) - -
Net loss - - - (205,994) (205,994)
------------- ------------ ----------- ------------ ------------
Balance at March 31, 2004 26,006,925 26,007 1,555,996 (2,136,664) (554,661)
Proceeds from issuance of
common stock 603,856 604 301,324 - 301,928
Cancellation of shares (3,502,925) (3,503) 3,503 - -
Net loss - - - (1,592,469) (1,592,469)
------------- ------------- ----------- ------------ -------------
Balance at March 31, 2005 23,107,856 23,108 1,860,823 (3,729,133) (1,845,202)
Proceeds from issuance
of common stock 276,400 276 276,124 - 276,400
Stock issued for accounts
payable 50,000 50 49,950 - 50,000
Stock issued for conversion
of debt 1,050,000 1,050 1,048,950 - 1,050,000
Net loss - - - (1,376,529) (1,376,529)
------------ -------------- ------------ ------------- -------------
Balance at March 31, 2006 24,484,256 24,484 3,235,847 (5,105,662) (1,845,331)
Proceeds from issuance
of common stock 24,694 25 24,670 - 24,695
Stock issued for services 250,000 250 249,750 - 250,000
Net loss - - - (433,538) (433,538)
------------ -------------- ------------ ------------- -------------
Balance at June 30, 2006 24,758,950 24,759 3,510,267 (5,539,200) (2,004,174)
Stock issued for conversion
of debt 817,342 817 1,838,204 - 1,839,021
Expense paid by shareholder - - 515,000 - 515,000
Net loss - - - (636,803) (636,803)
------------ ------------- ------------ ------------- -------------
Balance at September 30, 2006 25,576,292 $ 25,576 $5,863,471 $(6,176,003) $ (286,956)
============ ============= ============ ============= =============
The accompanying notes are an integral part of these consolidated
financial statements.
6
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 2006 and 2005 and for the Period From
Inception, August 19, 1999, to September 30, 2006
Six months Ended
------------------------------ Inception to
September 30, September 30, September 30,
2006 2005 2006
------------ --------------- --------------
Cash Flows from Operating Activities:
Net loss $(1,070,340) $ (834,860) $ (6,176,003)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation expense 2,094 1,819 46,678
Impairment of loan receivable - - 130,000
Accrued interest converted to equity 33,439 - 459,035
Expenses paid by shareholder and affiliate 515,000 35,000 636,796
Stock issued for services 250,000 - 250,000
Changes in operating assets and liabilities:
Increase in interests receivable (1,093) - (1,093)
Decrease in accounts receivable - 114,257 -
Decrease in prepaid expenses and deposits - 8,908 -
Increase in accounts payable and
accrued liabilities 41,629 177,555 274,294
(Decrease) increase in interest payable to affiliates - 54,309 -
Increase (decrease) in deferred revenue 2,712 (9,520) 27,212
----------- ----------- ----------
Net cash used in operating activities (226,559) (452,532) (4,353,081)
----------- ----------- ----------
Cash Flows from Investing Activities
Payments for purchase of property and equipment (2,030) (864) (53,644)
Loan receivable (100,000) - (230,000)
----------- ----------- ----------
Net cash used in investing activities (102,030) (864) (283,644)
----------- ----------- ----------
Cash Flows from Financing Activities
Proceeds from issuance of common stock 24,695 - 603,023
Proceeds from notes payable - other - - 385,000
Proceeds from notes payable - shareholder 191,700 448,000 1,714,700
Proceeds from notes payable - affiliate 63,000 - 2,502,191
Principal payments on notes payable - affiliate - (50,000) (140,000)
Principal payments on notes payable - other - 15,000 (335,000)
Principal payments on notes payable - shareholder (2,181) - (82,181)
Debt issuance costs (5,000) - (5,000)
------------ ----------- ---------
Net cash provided by financing activities 272,214 413,000 4,642,733
------------ ----------- ---------
Net increase (decrease) in cash and cash equivalents (56,375) (40,396) 6,008
Cash and cash equivalents, beginning of period 62,383 52,195 -
------------ ----------- ---------
Cash and cash equivalents, end of period $ 6,008 $ 11,799 $ 6,008
============ =========== =========
The accompanying notes are an integral part of these unaudited
consolidated financial statements
7
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of Skreem
Entertainment Corporation have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10QSB and Item 310(b) of
Regulation S-B. They do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation, have been included in the accompanying
unaudited consolidated financial statements. Operating results for the periods
presented are not necessarily indicative of the results that may be expected for
the full year.
These unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements and footnotes, which are included as
part of consolidated financial statements as of March 31, 2006 included in
Skreem's Form 10KSB.
Note 2 - ACCOUNTING POLICY FOR REVENUE RECOGNITION
Revenue is recognized when persuasive evidence of an arrangement exists, the
price to the buyer is fixed or determinable; delivery has occurred or services
have been rendered or the license period has begun; and collect ability is
reasonably assured.
Revenue from the distribution of recordings under license and distribution
agreements is recognized as earned under the criteria established by Statement
of Financial Accounting Standard No 50. Revenue is generally recognized when
Skreem receives an "accounting" of recordings sold with payment from the
licensee. In the event Skreem has not received an "accounting" from the licensee
and if Skreem has information related to the licensed use of recordings that
would result in the revenue being fixed and determinable, and collection is
reasonably assured, then revenue is recognized in the periods in which the
license revenue is earned. Minimum guarantees (advances) received from licensees
are recorded as deferred revenue and are amortized over the performance period,
which is generally the period covered by the agreement.
Note 3 - NOTES PAYABLE - RELATED PARTIES
Shareholder
During the quarter ended June 30, 2006, Jeffrey D. Martin, a major stockholder
loaned Skreem $30,000 with two promissory notes of $20,000 and $10,000. The
notes are payable on demand and bear interest at the rate of 8% and 17.49%,
respectively.
Interest on the notes begins to accrue on July 1, 2006. The notes are secured by
the assets of Skreem.
During the quarter ended September 30, 2006, Jeffrey D. Martin, a major
stockholder loaned Skreem $146,700 with two promissory notes. The notes are
payable on demand. The $126,700 note bears interest at the rate of 8% and
interest on this note begins to accrue on October 1, 2006. The $20,000 note
bears interest at approximately 17.49% per annum. The notes are secured by the
assets of Skreem.
On August 31, 2006, notes payable to Jeffrey Martin totaling $591,770 and
related interest payable of $79,164 were converted to 298,193 shares of common
stock at $2.25 per share. Due to the related party mature of the transaction, no
gain was recorded for the difference between the conversion price and the market
price at the date of conversion.
Affiliates
During the quarter needed June 30, 2006, Skreem borrowed $40,000 from Martin
Consultants, Inc. The note is payable on demand and bears interest at a rate of
8% per annum. Interest on this note begins to accrue on July 1, 2006. Martin
Consultants, Inc. is 100% owned by Jeffery D. Martin.
On August 31, 2006, notes payable to affiliates (Martin Consultants, Inc., JT
Investments, and AM-PAC Investments) totaling $996,620 and related interest
payable of $171,466 were converted to 519,149 shares of common stock at $2.25
per share. Due to the related party nature of the transaction, no gain was
recorded for the difference between the conversion price and the market price at
the date of conversion.
8
Note 4 - GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. Skreem sustained losses of $
1,070,340 for the six-months ended September 30, 2006. Skreem had an accumulated
deficit of $6,176,003 at September 30, 2006. These factors raise substantial
doubt about the ability of Skreem to continue as a going concern for a
reasonable period of time. Skreem is highly dependent on its ability to continue
to obtain investment capital and loans from a major shareholder and an affiliate
in order to fund the current and planned operating levels. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should Skreem be unable to continue as a
going concern. Skreem's continuation as a going concern is dependent upon its
ability to continue receiving investment capital from a shareholder and an
affiliate and obtaining loans to complete promotion of Skreem's artists,
continue production of music and achieve a level of success that will enable it
to sustain its operations. No assurance can be given that Skreem will be
successful in these efforts.
Note 5 - PRODUCTION AGREEMENT
On June 13, 2006, Skreem entered into an agreement with 1171 Productions (1171)
for the purpose of creating interest in and securing meeting opportunities of
the "Star Maker" reality series. Skreem shall pay a commission of 5% of the net
profits of the "Star Maker" series worldwide. In addition, Skreem agrees to use
1171 in the production of the series. Skreem has not recorded any transactions
related to this agreement.
Note 6 - LICENSE AGREEMENT
During the quarter ended June 30, 2006, Skreem hired Zero Degrees Entertainment
(Zero) under a 5-year agreement which grants Zero certain exclusive rights to
distribute and sell recordings of the artist "3rd Wish" in France. Skreem shall
receive royalties of 17% to 20% calculated on 100% net sales. In addition,
Skreem may earn third party and other income as defined in the agreement. Skreem
has not recorded any transactions related to this agreement.
Note 7 - ADVERTISING AND PROMOTIONAL SERVICE AGREEMENT
On May 24, 2006, Skreem hired Hobson, Bowerstock, & Associates, LLC (HLB) under
a one-year agreement to prepare and implement a promotional campaign in exchange
for 1,000,000 shares of common stock. During the quarter ended June 30, 2006,
Skreem issued 250,000 shares and recorded advertising expense of $250,000 in
accordance with EITF 96-18. During the quarter ended September 30, 2006,
Skreem's shareholder paid the shares directly and Skreem recorded advertising
expense with an offset to paid-in capital of $515,000 in accordance with EITF
96-18 and SAB 107 Topic 5.T.
Note 8 - RELATED PARTY REVENUE
During the quarter ended June 30, 2006, there were unsold recordings returned to
Skreem by Cheyenne Records. Am-Pac Investment purchased these remaining
recordings and Skreem recorded this sale as related party revenue during the
quarters ended June 30, 2006 and September 30, 2006. Am-Pac is owned by Jeffery
Martin.
Note 9 -STRATEGIC RESEARCH & ANALYSIS AGREEMENT
On July 1, 2006, Skreem hired Sterling LLC under a 2-year agreement to do
research, market review and strategic analysis and to provide review and
planning services in exchange for 3,000 shares per month for year one and 5,000
shares per month for year two, and additional incentives as described in the
agreement. In accordance with EITF 96-18, Skreem recorded total expense of
$17,550 for the quarter ended September 30, 2006.
9
Note 10 - DISTRIBUTION AGREEMENT
On July 7, 2006, Skreem hired MD Lavert & Associates dba Nothing Else Works
(NEW) which grants NEW exclusive rights to distribute designated albums for
Skreem in the U.S. and Canada. NEW shall retain a retail marketing and
distributing fee of 25% per artist of Skreem's whole sale price from sales of
albums. Skreem has not recorded any transactions related to this agreement.
Note 11 - NOTE RECEIVABLE
On September 12, 2006, Skreem agreed to loan $500,000 to
Weaver Interactive, Inc. Skreem advanced $100,000 immediately and promised
another $400,000 within five(5) days of Skreem's receipt of a US GAAP audit of
Weaver. The note bears interest at 21% and shall be payable at the maturity date
of September 12, 2008. As of November 9, 2006, no audit of Weaver has been
received.
Note 12 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
During the six months ended September 30, 2006 and 2005, approximately $15,000
and $22,000 was paid for interest, respectively. No cash was paid for income
taxes during these periods.
During the six months ended September 30, 2006, Skreem issued 817,342 shares of
common stock for the conversion of related party debt of $1,839,021 to equity.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operation
The Company plans to continue operations by developing current acts into
successful music performing and recording acts. The Company has been actively
promoting three acts, "3rd Wish", "Pat Moe" and "Willie Will". These three acts
will tour, perform, make public appearances, and continue to record as
opportunities are located. The Company is uncertain as to when these acts may
enter the U.S. market. As of September 30, 2006, none of the Company's acts has
received gold records for album sales.
The countries in which the Company has been promoting its acts are as follows:
Pat Moe 3rd Wish
-------- ----------
Germany, Switzerland, Austria Germany, Switzerland and Austria
UK, Eire, Australia,
New Zealand, France
Andorra, Monaco, Belgium, Russia, Azerbaijan,
Armenia, Georgia,
Moldova
Kazakstan, Krygyzstan, Tajikistan, Uzbekistan,
Turkmenistan,
Ukraine, Republic of Belarus, Lithuania, Latvia,
Estonia,
Israel, Portugal
The Company's cash balance is insufficient to satisfy the Company's cash
requirements for the next 12 months. The Company believes it can satisfy it's
cash requirements for 6 months with current cash and receivables. The Company is
dependent on continued receipt of revenues and will need outside funding from
the sale of shares or debt financing in order to continue operations beyond
that.
The Company does not anticipate acquiring any significant equipment during the
next twelve months.
The Company does not anticipate any significant changes in the number of
employees in the next twelve months. The Company has two full time employees.
The Company has entered into various license agreements that grant certain
exclusive rights to sell and distribute certain recordings by "3rd Wish".
Approximately 18% of the Company's revenue for the quarter ended September 30,
2006 came from the Cheyenne Records agreement. During the quarter ended
September 30, 2006, there were unsold recordings returned to the Company by
Cheyenne Records. A related party purchased these remaining recordings which
represent approximately 80% of the total revenue. The remaining contracts
represent, individually, less than 1% of revenue.
The table below sets forth the parties, material terms, and territories covered
by these license agreements:
Party(Licensee) Territories
Cheyenne Records Germany, Switzerland and Austria
Our agreement with Cheyenne Records provide that Cheyenne will market and sell
3rd Wish's recordings for a period of 5 years beginning in March 2004. Cheyenne
will retain approximately 25% to 45% of revenue from distribution and sales and
the Company will pay the costs of production. The term of the contract is 5.5
years from May 2004.
Three 8 Music Limited UK, Eire
Our agreement with Three 8 provides that they will receive royalties from 3rd
Wish's first three singles released. Royalties are 19% on record sales and 50%
on third party licensing. The term of the contract is 15 years from October
2004.
Shock Records Pty Ltd Australia, New Zealand
Our agreement with Shock Records provides for royalties of 18-22% on album sales
and 50% to Shock for third party licensing. The term of the contract is
approximately 5 years from January 2005.
NRJ Music France, Andorra, Monaco, Belgium
Our agreement with NRJ provides for royalties of 13-22% for record sales. The
Company will bear the costs of production, the term is 5 years from January
2005.
11
Megaliner Records Russia, Azerbaijan, Armenia, Georgia,
Moldova, Kazakstan, Kyrgyzstan,
Tajikistan, Uzbekistan, Turkmenistan,
Ukraine, Republic of Belarus, Lithuania, Latvia,
Estonia
Our agreement with Megaliner provides Megaliner with 20% of income from record
sales and 60% of third party licensing and broadcasting revenue. The term is
three years.
NMC Music Ltd. Israel
NMC will receive royalties of approximately 18% of all record sales. The
contract expires in December 2009.
Vidisco Portugal
Vidisco will receive a royalty of approximately 18% of all record sales. The
contract expires in January of 2010.
Zero Degrees France
Zero will receive a royalty of approximately 17-20% of record sales. The
contract Expires in 2011.
Revenue is recognized in accordance with Staff Accounting Bulleting No. 104 (SAB
104) when persuasive evidence of an arrangement exists, the price to the buyer
is fixed or determinable; delivery had occurred or services have been rendered
or the license period has begun; and collect ability is reasonably assured.
Revenue from the distribution of recordings under license and distribution
agreements is recognized as earned under the criteria established by Statement
of Financial Accounting Standard No. 50. Revenue is generally recognized when
the Company receives an "accounting" of recordings sold with payment from the
licensee. In the event the Company has not received an "accounting" from the
licensee and if the Company has information related to the licensed use of
recordings that would result in the revenue being fixed and determinable, and
collection is reasonably assured, then revenue is recognized in the periods in
which the license revenue is earned. Minimum guarantees (advances) received from
licensees are recorded as deferred revenue and are amortized over the
performance period, which is generally the period covered by the agreement.
Results of Operations for the Six Months Ended September 30, 2006
as Compared to the Six Months Ended September 30, 2005
Revenues - The Company recorded revenue of $157,547 and $24,397 for the six
months ended September 30, 2006 and September 30, 2005, respectively. The
revenue for the six months ended September 30, 2006 consists of earnings of
$31,447 from Licensing agreements to distribute 3rd Wish's music and sales of
recordings to a related party of $126,100. Revenue for the six months ended
September 30, 2005 consists of earnings from licensing agreements to distribute
"3rd Wish" consists of $23,415 and live performances of $982.
Operating expenses - Operating expenses for the six months ended September 30,
2006 were $921,152, an increase of $356,647 or 63% from $564,505 for the
corresponding period ended September 30, 2005. The increase is primarily due to
the significant increase in advertising expense of $768,238 offset by a net
decrease in touring, travel, promotion and support for artist of approximately
$412,000.
General and Administrative Expenses - General and administrative expenses
increased by $40,315 or 19% to $257,975 for the six months ended September 30,
2006 from $217,660 for the corresponding period ended September 30, 2005. This
increase is primarily attributable to an increase in salaries, delivery expense,
and other general and administrative expenses offset by a decrease in
professional fees and miscellaneous expenses.
Interest Expense - Interest expense decreased by $28,332 or 36.75% to $48,760
for the six months ended September 30, 2006 from $77,092 for the corresponding
period of the prior year. This decrease is attributable to having less debt
outstanding during the six months ended September 30, 2006 and the Company's
major shareholder and his affiliate converted a substantial amount of loans to
equity.
Results of Operations for the Three Months Ended September 30, 2006
as Compared to the Three Months Ended September 30, 2005
12
Revenues - The Company recorded revenue of $90,853 and $1,637 for the three
months ended September 30, 2006 and September 30, 2005, respectively. The
revenue for the three months ended September 30, 2006 consists of earnings from
Licensing agreements to distribute 3rd Wish's music of $1,753 and sales of
recordings to a related party of $89,100.
Operating expenses - Operating expenses for the three months ended September 30,
2006 were $598,047, an increase of $396,365 or 197% from $201,682 for the
corresponding period ended September 30, 2005. The increase is primarily due to
the significant increase in advertising expense of $516,812 offset by a net
decrease in touring, travel, promotion, and support for artists of approximately
$315,000.
General and Administrative Expenses - General and administrative expenses
decreased by $2,869 or 3% to $108,624 for the three months ended September 30,
2006 from $111,493 for the corresponding period ended September 30, 2005. This
decrease is attributable to a decrease in overall general and administrative
expenses.
Interest Expense - Interest expense decreased by $19,600 or 48.3% to $20,985 for
the three months ended September 30, 2006 from $40,585 for the corresponding
period of the prior year. This decrease is attributable to having less debt
outstanding during the three months ended September 30, 2006 and the Company's
major shareholder and his affiliate converted a substantial amount of loans to
equity.
Liquidity and Capital Resources
As of September 30, 2006, the Company had cash of $6,008 and a deficit in
working capital of $398,922. This compares with cash of $62,383 and a deficit in
working capital of $1,852,361 as of March 31, 2006.
Cash used in operations decreased by $225,973 to $226,559 for the six months
ended September 30, 2006 from $452,532 for the corresponding period of the prior
year. The decrease is attributable to a significant increase in non-cash
expenses of $763,714, offset by a decrease in changes in operating assets and
liabilities of $302,261 and an increase in net loss of $235,480.
Cash used in investing activities for the six months ended September 30, 2006
was $102,030, which is due to a loan to Weaver Interactive, Inc. of $100,000 and
the equipment purchases of $2,030.
Cash provided financing activities for the six months ended September 30, 2006
was $272,214, which is primarily from the issuance of promissory notes of
$254,700 and common stock of $24,695. This compares with $413,000 of cash being
provided from financing activities during the six months ended September 30,
2005, all from the issuance of promissory notes.
Historically, the Company has been funded by the sale of its shares and loans
from its Shareholders. However, the Company's continuation as a going concern is
dependent upon its ability to continue receiving investment capital and
obtaining loans to complete promotion of the Company's artists, continue
production of music and achieve a level of success that will enable it to
sustain its operations. No assurance can be given that the Company will be
successful in these efforts.
ITEM 3. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures under the supervision of and with the participation of our Chief
Executive Officer ("CEO") and our Chief Financial Officer ("CFO"). Based on this
evaluation, our management, including our CFO and CEO, concluded that our
disclosure controls and procedures were effective, and that there have been no
significant changes in our internal controls or in other factors that could
significantly affect internal controls subsequent to the evaluation.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
Number Description
------ -----------
31.1**Certification of Chief Executive Officer of Skreem Entertainment
Corporation Required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2**Certification of Chief Financial Officer of Skreem Entertainment
Corporation Required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1**Certification of Chief Executive Officer of Skreem Entertainment
Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and Section 1350 Of 18 U.S.C. 63
32.2**Certification of Chief Financial Officer of Skreem Entertainment
Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and Section 1350 Of 18 U.S.C. 63
* Previously filed
** To be filed
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
SKREEM ENTERTAINMENT CORPORATION
Date: November 14, 2006 By: /s/ Charles Camorata
----------------------------
Charles Camorata
Principal Executive Officer
Date: November 14, 2006 By: /s/ Karen Pollino
----------------------------
Karen Pollino
Chief Financial Officer
15
Exhibit31.1
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
I, Charles Camorata, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Skreem
Entertainment Corporation
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: November 14, 2006
By: /s/ Charles Camorata
Charles Camorata
Chief Executive Officer
16
Exhibit31.2
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
I, Karen Pollino, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Skreem
Entertainment Corporation
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: November 14, 2006
By: /s/ Karen Pollino
Karen Pollino
Chief Financial Officer
17
Exhibit 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
--------------------------------------------------------------------------------
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF TEHE SARBANES-OXLEY ACT OF 2002
I, Charles Camorata, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Skreem Entertainment Corporation on Form 10-QSB for the quarterly
period ended September 30, 2006 fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Form 10-QSB fairly presents in all material respects the
financial condition and results of operations of Skreem Entertainment
Corporation
By: /s/ Charles Camorata
Name: Charles Camorata
Title: Chief Executive Officer
November 14, 2006
18
Exhibit 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
--------------------------------------------------------------------------------
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF TEHE SARBANES-OXLEY ACT OF 2002
I, Karen Pollino, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Skreem Entertainment Corporation on Form 10-QSB for the quarterly
period ended September 30, 2006 fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Form 10-QSB fairly presents in all material respects the
financial condition and results of operations of Skreem Entertainment
Corporation
----------------------------
By: /s/ Karen Pollino
Name: Karen Pollino
Title: Chief Financial Officer
November 14, 2006
19