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 June 30, 2004
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 (IRS Employer Identification No.)
of 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 |_|
Class Shares Outstanding Date
Common, $.001 par value 26,540,581 September 1, 2004
SKREEM ENTERTAINMENT CORPORATION
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Balance Sheets - June 30, 2004 (unaudited) and
March 31, 2004 .................................................................. 3
Consolidated Statements of Operations (unaudited) - For the three months
ended June 30, 2004 and 2003 and for the period from
inception (August 19, 1999) to June 30, 2004........................................ 4
Consolidated Statements of Cash Flows (unaudited) - For the three months ended
June 30, 2004 and 2003 and for the period from inception (August 19, 1999)
to June 30, 2004 ................................................................. 5
Notes to Consolidated Financial Statements (unaudited)............................. 6
Item 2.Management's Discussion and Analysis of Financial Condition and Results
of Operations....................................................................... 8
Item 3. Controls and Procedures............................................................. 9
PART II - OTHER INFORMATION........................................................................... 9
Item 1. Legal Proceedings................................................................... 9
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds......................... 9
Item 3. Defaults Upon Senior Securities..................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders................................. 9
Item 5. Other Information................................................................... 9
Item 6. Exhibits and Reports on Form 8-K.................................................... 10
SIGNATURES............................................................................................ 10
Skreem Entertainment Corporation
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
June 30, 2004 March 31, 2004
------------- --------------
(Unaudited)
Current Assets
Cash and cash equivalents $ 63,061 $2,914
------ ------
Total Current Assets 63,061 2,914
Property and Equipment, net 5,623 6,895
Deposits 19,920 19,921
------ ------
Total assets $ 88,604 $29,730
======= =======
LIABILITIES AND SHAREHOLDERS ' DEFICIT
Current Liabilities
Accounts payable and accrued liabilities $ 36,908 $43,141
Accrued interest payable to affiliates 26,647 15,658
Notes payable - other 100,000
Notes payable - shareholders 75,000
Notes payable -affiliates 480,592 525,592
------- -------
Total Current Liabilities 719,147 584,391
Shareholders' Deficit Preferred stock,
par value $0.001, 1,000,000 shares
authorized, no shares issued and outstanding
Common stock, par value $0.001,
50,000,000 shares authorized, 26,540,581
shares issued and outstanding 26,541 26,007
Additional Paid In Capital 1,822,290 1,555,996
Accumulated deficit (2,479,374) (2,136,664)
----------- ----------
Total Shareholders' Deficit (630,543) (554,661)
---------
Total liabilities & shareholders
Deficit $ 88,604 $ 29,730
======== =========
These accompanying notes are an integral part of
these financial statements.
3
Skreem Entertainment Corporation
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
August 19, 1999
3 Months Ended 3 Months Ended (Inception) to
June 30, 2004 June 30, 2003 June 30, 2004
------------- ------------- -------------
Revenues $ - $ 176 $ 2,926
Expenses
Operating expenses 238,172 69,887 1,338,102
General and administrative 78,761 11,247 336,722
Salaries and benefits 14,789 20,622 437,498
Impairment of loan receivable - - 130,000
------ ----- -------
Total expenses 331,722 101,756 2,242,322
------- ------- ---------
Loss from Operations (331,722) (101,580) (2,239,396)
Other Income (Expenses)
Interest expense (10,989) (24,944) (239,978)
-------- ------- ---------
Net Loss $ (342,711) $ (126,524) $(2,479,374)
======== ======== ==========
Weighted Average Shares
Outstanding 26,244,100 7,000,000 (1)
========== =========
Basic and diluted
Loss Per Share $ (0.01) $ (0.02)
========== =========
(1) Weighted average shares outstanding for three months ended June 30, 2003
reflects equivalent shares issued for reverse merger transaction and is for
comparative purposes only.
These accompanying notes are an integral part of
these financial statements.
4
Skreem Entertainment Corporation
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
August 19, 1999
3 Months Ended 3 Months Ended (Inception) to
June 30, 2004 June 30, 2003 June 30, 2004
------------- ------------- --------------
Cash Flows from Operating
Activities
Net Loss $ (342,711) $ (126,524) $(2,479,374)
Adjustments to Reconcile
Net Loss to Net Cash
Used in Operating Activities:
Depreciation and amortization 1,271 899 33,687
Impairment of loan receivable - - 130,000
(Increase) Decrease in Operating
Assets:
Other assets - - (19,920)
Increase (Decrease) in Operating
Liabilities
Accounts payable (6,231) - 36,908
Accrued interest payable 10,989 24,944 235,032
-------- ------- --------
Net Cash Used in Operating
Activities (336,682) (100,681) (2,063,667)
-------- -------- ----------
Cash Flows from Investing
Activities
Payments for purchase of equipment - (701) (39,311)
Loan receivable - - (130,000)
-------- -------- -----------
Net Cash Used in Investing
Activities - (701) (169,311)
-------- -------- ------------
Cash Flows from Financing Activities
Proceeds from issuance of stock 266,828 - 266,848
Proceeds from notes payable 195,000 108,000 2,144,191
Principal payments on notes
payable to affiliates (65,000) - (115,000)
-------- -------- ------------
Net Cash Provided by Financing
Activites 396,828 108,000 2,296,039
------- ------- ------------
Net increase in cash
and cash equivalents 60,146 6,618 63,061
Cash and cash equivalents at
beginning of period 2,915 1,936 -
-------- -------- ------------
Cash and cash equivalents at
end of period $ 63,061 $ 8,554 $ 63,061
======== ======== ============
These accompanying notes are an integral part of
these financial statements.
5
Skreem Entertainment Corporation
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
From August 19, 1999 (Date of Inception) to June 30, 2004
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated 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, 2004 included in the
Company's Form 10KSB.
Note 2 -NOTES PAYABLE -SHAREHOLDER AND OTHER
On May 24, 2004 Jeffrey D. Martin, a major stockholder, loaned the Company
$75,000. The note is payable on demand and bears interest at the rate of 8% per
annum. Accrued interest at June 30, 2004 was $493.
On May 26, 2004 the Company borrowed $100,000 from Sugarcreek Capital, LLC. The
terms of the note call for repayment of $104,000 on or before July 30, 2004. As
security for the loan, Jeffrey D. Martin, a major stockholder, put up his 1/3
interest in Osceola Partners. (See Note 7)
Note 3 -GOING CONCERN
The accompanying financial statement has been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company sustained losses of $342,711 at
June 30, 2004. The Company had an accumulated deficit of $2,479,374 at June 30,
2004. These factors raise substantial doubt about the ability of the Company to
continue as a going concern for a reasonable period of time. The Company is
highly dependent on its ability to continue to obtain investment capital from 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 the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to continue receiving investment capital
from an affiliate 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.
6
Skreem Entertainment Corporation
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
Note 4 -PRIVATE PLACEMENT MEMORANDUM
The Company has offered a Private Placement Memorandum ("PPM") which offers for
sale a maximum of 3,000,000 and a minimum of 1,000,000 shares of its common
stock, $.001 par value at $.50 per share ("the Offering"). The shares are
offered on a "best efforts" basis. The Offering will be made in reliance upon an
exemption from registration under the federal securities laws provided by
Regulation D as promulgated by the United States Securities and Exchange
Commission ("SEC" ). The Offering will terminate upon the earlier of (i) the
sale of the 3,000,000 shares or (ii) May 31, 2004 unless extended by the Company
for sixty days. The Company has issued 533,656 shares with proceeds of $266,828
during the three months ended June 30, 2004.
Note 5 - DISTRIBUTION AND SERVICE AGREEMENT
During May 2004, the company entered into a 5.5 year Distribution and Service
Agreement with Cheyenne Records GmbH (Cheyenne). The agreement grants Cheyenne
certain exclusive rights to distribute and sell recordings. In addition,
Cheyenne will perform certain services in accordance with the agreement.
Note 6 -MUSIC VIDEO PRODUCTION AGREEMENT
During May 2004, the Company entered into a Music Video Production agreement
with 1171 Production Group (Production Company). Production Company will produce
a music video embodying the performance by "3rd Wish". In consideration for
services rendered by Production Company, the Company agrees to pay $100,000 upon
the terms and conditions set forth in the agreement. In connection with the
music video, the Company has agreed to pay $40,000 to a third party for the
performance of "Baby Bash" in the music video.
Note 7 - SUBSEQUENT EVENTS
On August 19, 2004 the note payable to Sugarcreek Capital, LLC described in Note
2 was transferred to Jeffrey D. Martin,a major stockholder, in exchange for his
1/3 interest in Osceola Partners.
7
Item 2. Management's Discussion and Analysis or Plan of Operation
Revenues - The Company had no revenues for the three months ended June 30, 2004.
For the three months ended June 30, 2003, the Company had revenues of $176.
Operating expenses - Operating expenses for the three months ended June 30, 2004
were $238,172, an increase of $168,285 or 240.8% from the $69,887 for the
corresponding period of the prior year. This increase primarily resulted from
production costs related to a CD and Video shoot of approximately $150,000 and
an increase in travel expenses incurred by "Third Wish" Artists and Managers of
approximately $23,000.
General and Administrative Expenses - General and administrative expenses
increased by $67,514 or 600% to $78,761 for the three months ended June 30, 2004
from $11,247 for the corresponding period of the prior year. This increase is
primarily attributable to an increase in legal and accounting fees.
Salaries and Benefits - Salaries and benefits decreased by $5,833 or 28.3% to
$14,789 for the three months ended June 30, 2004 from $20,622 for the
corresponding period of the prior year. This decrease is attributable to having
fewer employees during the three months ended June 30, 2004.
Interest Expense - Interest expense decreased by $13,955 or 55.9% to $10,989 for
the three months ended June 30, 2004 from $24,944 for the corresponding period
of the prior year. This decrease is attributable to having more debt outstanding
for the three months ended June 30, 2003.
As a result of the foregoing, the company's net operating loss increased by
$216,187 to $342,711 for the three months ended June 30, 2004 from $126,524 for
the corresponding period of the prior year.
Liquidity and Capital Resources
As of June 30, 2004, the Company had cash of $63,061 and a deficit in working
capital of $656,086. This compares with cash of $2,914 and a deficit in working
capital of $581,477 as of March 31,2004.
Cash used in operations increased by $236,001 to $336,682 for the three months
ended June 30,2004 from $100,681 for the corresponding period of the prior year.
The increase is principally attributable to an increase in the net operating
loss of $216,187 and changes in the current accounts of $20,186 which was
partially offset by an increase in depreciation and amortization of $372.
There was no cash provided or used by investing activities for the three months
ended June 30, 2004. For the three months ended June 30, 2003 the Company used
$701 for the purchase of equipment.
For the three months ended June 30, 2004, $396, 828 of cash was provided to the
company from financing activities; $266,828 from the sale of shares, and
$130,000, net from the issuance of promissory notes. This compares with $108,000
of cash being provided during the three months ended June 30, 2003, all from the
issuance of promissory notes.
Historically, the company has generated net operating losses which jeopardized
its ability to continue as a going concern. However, "Third Wish" a group under
contract to the company released its first recording in Germany during the
second quarter of the Company's fiscal year. This recording has risen to number
2 on a chart in Germany which should produce a revenue stream for the
Company. "Third Wish" will be releasing a second recording in Germany during
September and an album before the end of the year. Assuming the continued
success of "Third Wish", the company should generate sufficient funds to execute
its business plan for the next twelve months.
8
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 2004, the Company sold 533,656 shares of
its common stock for a net of $266,828. All of the proceeds have been used to
fund working capital.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
None
b) Reports on Form 8-K
1. Form 8-K dated May 3, 2004 reported a change in the Company's certifying
accountants from David T. Thomsom PC to Thomas Leger & Co. LLP
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 capacitites and on the date indicated.
SKREEM ENTERTAINMENT CORPORATION
Date: September 7, 2004 By: /s/ Charles Camorata
-----------------------
Charles Camorata
Principal Executive Officer
Date: September 7, 2004 By: /s/Karen Pollino
------------------------
Karen Pollino
Chief Financial Officer
10
CERTIFICATIONS
I, Charles Camorata, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Skreem Entertainment
Corporation Systems, Inc.
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: September 7, 2004
By: /s/ Charles Camorata
Charles Camorata
Principal Executive Officer
11
CERTIFICATIONS
I, Karen Pollino, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Skreem Entertainment
Corporation Systems, Inc.
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: September 7, 2004
By: /s/ Karen Pollino
--------------------
Karen Pollino
Chief Financial Officer
12
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL 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 March 31, 2004 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: Principal Executive Officer
September 7, 2004
13
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL 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 March 31, 2004 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
September 7, 2004
14