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 December 31, 2005
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 is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X ]
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 23,121,856 December 31, 2005
Transitional Small Business Disclosure Format Yes [ ] No [ X ]
TABLE OF CONTENTS
SKREEM ENTERTAINMENT CORPORATION
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Part I. Financial Information
Page
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Item 1. Consolidated Financial Statements
Unaudited Consolidated Condensed Balance Sheet at December
31, 2005 3
Unaudited Consolidated Condensed Statements of Operations for
the three months and nine months ended December 31, 2005
and 2004 and for the period from inception, August 19, 1999,
to December 31, 2005 4
Unaudited Consolidated Condensed Statement of Changes in
Shareholders' Deficit for the period from inception, August 19,
1999, to December 31, 2005 5
Unaudited Consolidated Condensed Statements of Cash Flows
for the nine months ended December 31, 2005 and 2004 and for
the period from inception, August 19, 1999, to December 31, 2005 6
Notes to the Unaudited Consolidated Condensed Financial Statements 7
Item Management's Discussion and Analysis or Plan of Operation 11
2.
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 16
Certifications
2
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEET
December 31, 2005
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ASSETS
Current assets:
Cash and Cash equivalents $ 22,940
Prepaid expenses and deposits 26,708
---------------
---------------
Total current assets 49,648
Property and equipment, net 7,973
---------------
Total assets $ 57,621
===============
===============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 252,402
Related party payable 9,254
Deferred revenue 24,915
Accrued interest - shareholder and affiliates 177,776
Notes payable - shareholder 1,556,770
Notes payable - affiliates 933,620
Notes payable - other 70,000
---------------
---------------
Total current liabilities 3,024,737
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---------------
Commitments and contingencies
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; 23,121,856 shares issued and
outstanding 23,122
Additional paid - in capital 1,874,809
Losses accumulated in the development stage (4,865,047 )
---------------
---------------
Total shareholders' deficit (2,967,116 )
---------------
---------------
Total liabilities and shareholders' deficit $ 57,621
===============
===============
The accompanying notes are an integral part of these consolidated
condensed financial statements
3
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended December 31, 2005 and 2004 and for
the Period
From Inception, August 19, 1999, to December 31, 2005
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Three Months Ended Nine Months Ended Inception to
December 31, December 31, December 31,
----------------------------------- --------------------------------
----------------------------------- ---------------- --------------
2005 2004 2005 2004 2005
----------------- ---------------- ---------------- -------------- ------------
Revenue $ 39,590 $ 13,961 $ 63,987 $ 13,961 $ 187,774
-------------- ---------------- ---------------- ---------------- -------------
Expenses:
Operating 229,434 348,217 793,939 942,706 3,204,802
General and
administrative 66,634 54,071 284,294 224,031 1,283,114
Impairment of loan
receivable - - - - 130,000
-------------- -------------- ---------------- ---------------- ----------------
-------------- -------------- ---------------- ---------------- ----------------
Total expenses 296,068 402,288 1,078,233 1,166,737 4,617,916
-------------- -------------- ---------------- ---------------- ----------------
Loss from operations (256,478 ) (388,327 ) (1,014,246 ) (1,152,776 ) (4,430,142 )
Interest expense 44,576 24,342 121,668 51,282 434,905
-------------- -------------- ---------------- ---------------- ----------------
Net loss $ (301,054 ) $ (412,669 ) $ (1,135,914 ) $ (1,204,058 ) $ (4,865,047 )
============== ============== ================ ================ ================
Weighted Average Shares
Outstanding - basic and
diluted 23,107,856 23,298,232 23,107,856 23,371,995
================= ============== ================ ================
================= ============== ================ ================
Loss Per Share -
basic and diluted $ (0.01 ) $ (0.02 $ (0.05 ) $ (0.05 )
================= ============== ================ ================
================= ============== ================ ================
The accompanying notes are an integral part of these consolidated
condensed financial statements
4
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
For the Period From Inception, August 19, 1999, to December 31, 2005
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Losses
Accumulated
Additional During the
Common Stock Paid-In Development
-----------------------------------
-----------------------------------
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 14,000 14 13,986 - 14,000
Net loss - - - (1,135,914 ) (1,135,914 )
-------------- ---------------- ---------------- ---------------- ----------------
Balance at December 31, 2005 23,121,856 $ 23,122 $ 1,874,809 $ (4,865,047 ) $ (2,967,116 )
============== ================ ================ ================ ================
The accompanying notes are an integral part of these consolidated
condensed financial statements
5
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended December 31, 2005 and 2004 and for the Period
From Inception, August 19, 1999, to December 31, 2005
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Nine Months Ended Inception to
December 31, December 31,
-----------------------------------
-----------------------------------
2005 2004 2005
---------------- ----------------
---------------- ---------------- ----------------
Cash Flows from Operating Activities:
Net loss $ (1,135,914 ) $ (1,204,058 ) $ (4,865,047 )
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation expense 2,763 9,334 43,643
Impairment of loan receivable - - 130,000
Accrued interest converted to equity - - 208,405
Expenses paid by shareholder and affiliate 68,770 - 121,796
Changes in operating assets and liabilities:
Decrease in accounts receivable 114,257 - -
Decrease (increase) in prepaid expenses and deposits 8,908 - (26,687
Increase in accounts payable and accrued liabilities 188,355 122,482 275,655
Increase in interest payable to affiliates 92,883 41,820 177,756
(Decrease) increase in deferred revenue (10,413 ) 31,094 24,915
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Net cash used by operating activities (670,391 ) (999,328 ) (3,909,564 )
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Cash Flows From Investing Activities
Payments for purchase of property and equipment (864 ) (11,440 ) (51,615 )
Loan receivable - - (130,000 )
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Net cash used by investing activities (864 ) (11,440 ) (181,615 )
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Cash Flows From Financing Activities
Proceeds from issuance of common stock 14,000 301,928 301,928
Proceeds from notes payable - other 20,000 265,000 385,000
Proceeds from notes payable - shareholder 643,000 459,000 1,523,000
Proceeds from notes payable - affiliate 15,000 75,000 2,439,191
Principal payments on notes payable - other (50,000 ) (3,112 ) (315,000 )
Principal payments on notes payable - shareholder - - (140,000 )
Principal payments on notes payable - affiliate - (65,000 ) (80,000 )
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Net cash provided by financing activities 642,000 1,032,816 4,114,119
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Net increase (decrease) in cash and cash equivalents (29,255 ) 22,048 22,940
Cash and cash equivalents, beginning of period 52,195 2,914 -
---------------- ---------------- ----------------
Cash and cash equivalents, end of period $ 22,940 $ 24,962 $ 22,940
================ ================ ================
The accompanying notes are an integral part of these consolidated
condensed financial statements
6
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED CONDENSED 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, 2005 included in the
Company's Form 10KSB.
NOTE 2 - ACCOUNTING POLICY FOR REVENUE RECOGNITION
Revenue is recognized in accordance with Staff Accounting Bulletin No. 104 (SAB
104) 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 collection 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.
NOTE 3 - NOTES PAYABLE
Shareholder
During the quarters ended December 31, 2003, September 30, 2005 and June 30,
2005, Jeffrey D. Martin, a major stockholder of the Company, loaned the Company
$228,700, $264,000 and $219,000, respectively. These notes are payable on demand
and bear interest at 8% per year. Each note begins accruing interest on the
first day of the quarter after funding.
Affiliates
During the quarter ended June 30, 2005, the Company borrowed $15,000 from Am-Pac
Investments. The note is payable on demand and bears interest at a rate of 8%
per year. Interest on this note began to accrue on July 1, 2005. Am-Pac
Investments is 100% owned by Jeffrey D. Martin, a major shareholder of the
Company.
Others
On December 6, 2005, the Company borrowed $20,000 from an unrelated party. The
note was payable on demand and bore interest at a rate of 10% per annum.
Interest on the note began to accrue on December 7, 2005. The note and accrued
interest were paid on January 6, 2006.
7
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 4 - EQUITY
During the quarter ended December 31, 2005, the Company issued 14,000 shares of
common stock for cash proceeds of $14,000.
NOTE 5 - GOING CONCERN
The accompanying consolidated condensed 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. The Company
sustained losses of $1,135,914 for the nine months ended December 31, 2005. The
Company had an accumulated deficit of $4,865,047 at December 31, 2005. 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 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 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 a shareholder and an affiliate 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.
NOTE 6 - BUSINESS MANAGEMENT AGREEMENT
On June 14, 2005, the Company entered into a business management agreement with
Mr. Andy Lai for services performed in certain countries in Asia and shall
continue in perpetuity until written notice of termination is given by either
party. Mr. Lai shall act as Business Manager and services shall include contract
negotiations, securing recordings distribution, arranging live performances and
tours, securing of sponsorships, as well as other business activities that are
necessary for the advancement of the artists that are represented by the
Company. The Company agrees to compensate Mr. Lai ten percent (10%) of the net
revenues collected as a direct result of his negotiations in Asia and should the
Company through its own resources enter into a recording or distribution
agreement with a major company and the agreement includes certain countries in
Asia, Mr. Lai shall be compensated five percent (5%) of the net revenues
resulting from said agreement. The Company has not recorded any transactions
related to this agreement.
NOTE 7 - DISTRIBUTION AGREEMENT
During April 2005, 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 of the artist "Pat
Moe" in Germany, Switzerland and Austria. Cheyenne shall receive a distribution
and service fee of 30% to 36% of all net receipts (gross receipts less Value
Added Tax of approximately 16%). In addition, Cheyenne will perform certain
services including booking commercial concerts and concert tours, securing
personal appearances of "Pat Moe", securing advertising, endorsements, and
related activities of "Pat Moe" and music publishing /sub publishing throughout
the territory. In consideration for these services, except music publishing/sub
publishing, Cheyenne shall receive 15-30% of all net receipts. The
Company/Cheyenne shall split music publishing revenues on a 75%/25% basis. The
Company has not recorded any revenue related to this agreement.
NOTE 8 - LICENSE AGREEMENT
On September 6, 2005, the Company entered into a five and one-half year license
agreement with Planet Records Italy (Planet). The license agreement grants
Planet the exclusive rights for an Album (TBA Title) by "3rd Wish" in Italy.
Under the license agreement the Company is to receive a royalty rate of 20% of
net sales. The Company grant Planet a digital download distribution license
agreement that will include all digital and wireless platforms on a
non-exclusive basis in Italy only and will be split on a 60/40 basis.
8
SKREEM ENTERTAINMENT CORPORATION (A DEVELOPMENT STAGE
COMPANY) NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 9 - ARTIST AGREEMENTS
Exclusive Artist Recording Agreement
On October 28, 2005, the Company entered into a long-term Exclusive Artist
Recording Agreement with Willie Bivins, Jr. an Artist also known as "Willie
Will" (the Artist), for the purpose of engaging the exclusive personal services
of the Artists for making master sound recordings for distribution in any
medium. The territory for the agreements shall be worldwide. All master
recordings made by the Artist during the term of the agreement shall be recorded
by the Artist on the Company's behalf, and all phonograph records and related
performances shall be the entire property of the Company; the Company shall have
the right to secure sound recording copyright; and the Company and its licensees
shall have the sole and exclusive right to use the recordings throughout the
world or any part thereof in any manner it sees fit. The Company may pay all
specifically approved recording costs in connection with the master recordings
made hereunder, and all recording costs shall be deemed fully recoupable
advances to the Artist and shall be deducted from any and all royalties payable
to the Artist by the Company under this or any and all royalties payable to the
Artist by the Company. Any and all monies paid to or on behalf of the Artist
during the term of the agreement are recoverable, non-returnable advances unless
otherwise expressly agreed in writing between the Company and the Artist. The
Company has the right, but not the obligation to have the Artist participate in
the creation of music videos and 100% of any and all monies expended by or
advanced by the Company for the production of music videos shall constitute
additional fully recoupable advances hereunder. The Company shall own any and
all rights in and to said music videos in perpetuity.
In its sole discretion, the Company may choose, at any time during the term of
the agreements, to license master recordings made by the Artist to third parties
on a flat fee or royalty basis, or to enter into a distribution agreement with a
third party distributor for the distribution of phonograph records embodying
master recordings recorded by the Artist through normal retail channels in the
United States and worldwide. With respect to master recordings of the Artist
licensed to third parties on a flat-fee basis, the Company shall pay the Artist
20% of the net amount received by the Company under such license. With respect
to master recordings of the Artist licensed to third parties on a royalty basis,
and with respect to phonograph recordings released through a distributor
selected by the Company, the Company shall pay the Artist the lesser of 20% of
the Company's net earned royalty receipts under such license or distribution
agreement, or 20% of the basic album or single rate as defined in the
agreements. Further, in its sole discretion, the Company may choose to
commercially release phonograph records through the Company's own distribution
network. In such event, the Company agrees to pay the Artist royalties based on
the basic album or singe rate as defined in the agreements. For phonograph
recordings that are exported or sold outside the United States and through
record clubs or similar plans, the Artist shall be paid a royalty of 20% of the
amounts provided of the above mentioned amounts. In addition, the Artist may
earn royalties related to licenses for musical compositions, music video
licenses and merchandising. There have been no royalties earned by the Artist
related to the agreement.
Music Publishing Agreement
On October 28, 2005, the Company entered into a long-term Music Publishing
Agreement with an individual Writer, the Artist "Willie Will". The Company
engaged the Writer to render the Writer's exclusive services as a songwriter and
composer based upon terms and conditions set forth in the agreement. In
accordance with the agreement, the Writer grants all rights to all musical
compositions written or owned by the Writer and all musical compositions shall
be the Company's exclusive property as sole owner. The Company shall pay
royalties to the Writer based on various terms and conditions set forth in the
agreement. There have been no royalties earned by the Writer related to the
agreement.
9
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 9 - ARTIST AGREEMENTS, continued
Personal Management Agreement
On October 28, 2005, the Company had entered into a long-term Personal
Management Agreement with the Artist "Willie Will". The Company accepts the
engagement as the Artists' sole and exclusive personal management company in
connection with all activities in the entertainment industries throughout the
world, including but not limited to his service as a musician, in any medium now
known or hereafter devised. For personal management services performed, the
Artist agrees to pay the Company 20% of all gross compensation earned or
received as a result of activities in the entertainment industry. However, the
Company shall not be entitled to commissions by the Artist from the sale,
license, or grant of any literary or music rights to the Company or any person,
firm, or corporation owned or controlled by the Company. The Company has not
earned any commissions related to the agreement.
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 currently is
actively promoting two acts, "3rd Wish" and "Pat Moe". These two 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 December 31, 2005, neither of the Company's acts have received
gold records for album sales.
The countries in which the Company is currently 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 Italy
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 additional debt from a
major shareholder. 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 95% of the Company's revenue for the year ended March 31, 2005
came from the Cheyenne Records agreement. 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
recordings by 3rd Wish 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.
11
Party(Licensee) Territories
Three 8 Music Limited UK, Eire
Our agreement with Three 8 provides that they will receive royalties from the
first three singles 3rd Wish releases. 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.
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
The Company will receive royalties of approximately 18% of all record net sales.
The contract expires in December 2009.
Vidisco Portugal
The Company will receive a royalty of approximately 18% of all record net sales.
The contract expires in January of 2010.
Planet Records Italy
The Company will receive a royalty of approximately 20% of all record net sales.
The contract term is 5.5 years.
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. 12
Results of Operations for the Nine Months Ended December 31, 2005 as Compared to
the Nine Months Ended December 31, 2004.
Revenues - The Company recorded revenue of $63,987 and $13,961 for the nine
months ended December 31, 2005 and 2004, respectively. The revenue for these
periods consists of earnings from licensing agreements to distribute "3rd
Wish's" music of $63,005 and $13,233 and live performances of $982 and $728,
respectively.
Operating Expenses - Operating expenses for the nine months ended December 31,
2005 were $793,939, a decrease of $148,767 or 16% from $942,706 for the
corresponding period of December 31, 2004. The decrease is primarily due to a
decrease in overall music production and video costs of $277,279 and a decrease
in advertising of $115,484, offset by increases in tour expenses of $41,777 (No
significant tour expenses were incurred in the nine months ended December 31,
2004), commission expense of $68,201 and an increase in travel and support for
Artists in Germany of $124,813.
General and Administrative Expenses - General and administrative expense
increased by $60,263 or 27% to $284,294 for the nine months ended December 31,
2005. This increase is primarily attributable to an increase of $23,942 in
professional fees, an increase of $21,261 in payroll expense, an increase of
$9,012 in insurance expense and an overall increase in other general and
administrative expense of $6,048.
Interest Expense - Interest expense increased by $70,386 or 137% to $121,668 for
the nine months ended December 31, 2005 from $51,282 for the corresponding
period of the prior year. This increase is attributable to having additional
debt outstanding during the nine months ended December 31 2005.
Results of Operations for the Three Months Ended December 31, 2005 as Compared
to the Three Months Ended December 31, 2004
Revenues - The Company recorded revenue of $39,590 and $13,961 for the three
months ended December 31, 2005 and 2004, respectively. The revenue for the
period ended December 31, 2005 and 2004 consists of earnings from licensing
agreements to distribute 3rd Wish's music of $39,590 and $13,233, respectively,
and $728 from live performances for the period ended December 31, 2004.
Operating expenses - Operating expenses for the three months ended December 31,
2005 were $229,434, representing a decrease of $ 118,783 or 34% from $348,217
for the corresponding period ended December 31, 2004. The decrease is primarily
due to a $136,324 decrease in advertising and promotion expenses, a $25,850
decrease in travel expenses, and $23,392 decrease in video shoot expense, which
were partially offset by a $15,255 increase in support for artist in Germany, a
$34,036 increase in commission expense, a $5,606 increase in show expense and a
$4,528 increase in web design and maintenance.
General and Administrative Expenses - General and administrative expenses
increased by $12,563 or 23% to $66,634 for the three months ended December 31,
2005 from $54,071 for the corresponding period ended December 31, 2004. This
increase is primarily attributable to an increase of $10,709 in professional
fees, an increase of $9,670 in payroll expense, an increase of $1,125 in
insurance expense, a decrease of $4,560 in depreciation expense, and an overall
decrease in other general and administrative expenses of $4,381.
Interest Expense - Interest expense increased by $20,234 or 83% to $44,576 for
the nine months ended December 31, 2005 from $24,342 for the corresponding
period of the prior year. This increase is attributable to having additional
debt outstanding during the three months ended December 31, 2005.
13
Liquidity and Capital Resources
As of December 31, 2005, the Company had cash of $22,940 and a deficit in
working capital of $2,989,089. This compares with cash of $52,195 and a deficit
in working capital of $1,855,073 as of March 31, 2005.
Cash used in operations decreased by $342,937 to $656,391 for the nine months
ended December 31, 2005 from $999,328 for the corresponding period of the prior
year. The decrease is principally attributable to an decrease in the net loss of
$68,144, expenses paid by shareholder of $68,770, decrease in accounts
receivable of $114,257, decrease in prepaid expense of $8,908, increase in
accounts payable and accrued liabilities of $202,355,an increase in interest
payable to affiliates of $92,883 and a decrease in deferred revenue of $10,413.
Cash used by investing activities for the nine months ended December 31, 2005
was $864 for the purchase of computer equipment. For the nine months ended
December 31, 2004 the Company used $11,440 for the purchase of equipment.
Cash provided by financing activities for the nine months ended December 31,
2005 was $642,000 from the issuance of promissory notes and common stock. This
compares with $1,032,816 of cash being provided from financing activities during
the nine months ended December 31, 2004, $301,928 from the issuance of common
stock and the remainder from 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.
14
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
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
15
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: February 14, 2006 By: /s/ Charles Camorata
----------------------------
Charles Camorata
Principal Executive Officer
Date: February 14, 2006 By: /s/ Karen Pollino
----------------------------
Karen Pollino
Chief Financial Officer
16
Exhibit 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
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 officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, 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 report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this quarterly report based on such evaluation; and
c) disclosed in this quarterly report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting,
and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control.
Dated: February 14, 2006
By: /s/ Charles Camorata
Charles Camorata
Chief Executive Officer
Exhibit 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
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 officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, 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 report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this quarterly report based on such evaluation; and
c) disclosed in this quarterly report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting,
and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control.
Dated: February 14, 2006
By: /s/ Karen Pollino
Karen Pollino
Chief Financial Officer
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
In connection with the Quarterly Report of Skreem Entertainment Corporation (the
"Company") on Form 10-QSB for the quarterly period ended December 31, 2005 (the
"Report"), as filed with the Securities and Exchange Commission on the date
hereof, I, Charles Camorata , Chief Executive Officer of the Company, hereby
certify, to my knowledge, that pursuant to 18 U.S.C. Sec. 1350, as adopted
pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1. the Report fully complies with the requirements of section 13(a) or 15(d), as
applicable, of the Securities Exchange Act of 1934, as amended; and
2. the information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
By: /s/ Charles Camorata
Name: Charles Camorata
Title: Chief Executive Officer
February 14, 2006
Exhibit 32.2
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
In connection with the Quarterly Report of Skreem Entertainment Corporation (the
"Company") on Form 10-QSB for the quarterly period ended December 31, 2005 (the
"Report"), as filed with the Securities and Exchange Commission on the date
hereof, I, Karen Pollino, Chief Financial Officer of the Company, hereby
certify, to my knowledge, that pursuant to 18 U.S.C. Sec. 1350, as adopted
pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
1. the Report fully complies with the requirements of section 13(a) or 15(d), as
applicable, of the Securities Exchange Act of 1934, as amended; and
2. the information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
By: /s/ Karen Pollino
Name: Karen Pollino
Title: Chief Financial Officer
February 14, 2006