SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended March 31, 2006
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-22236
Skreem Entertainment Corporation
(formerly Stanford Capital Corporation)
---------------------------------------------
(Name of small business issuer in its charter)
Delaware 33-0565710
-------------------------------- -----------------------------------
State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
11637 Orpington Street, Orlando, Florida 32817
------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Include Area Code: (407) 207-0400
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
None None
Securities Registered Pursuant to Section 15(d) of the Act:
Common Stock, $0.001 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past twelve (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 ninety (90)days. Yes
[x] No
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [x]
Issuer's revenues for its most recent fiscal year were $64,937.
State the aggregate market value of the voting stock held by nonaffiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock, as of a specified date within the past 60
days: The Company's common stock does not have a trading market.
As of May 5, 2006, the Registrant had 24,508,950 shares of Common Stock issued
and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the part
of the form 10-KSB (e.g. part I, part II, etc.) Into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or other
information statement; and (3) Any prospectus filed pursuant to rule 424(b) or
(c) under the Securities Act of 1933: None.
TABLE OF CONTENTS
Page
PART I
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. DESCRIPTION OF PROPERTY 5
ITEM 3. LEGAL PROCEEDINGS 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 5
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF
EQUITY SECURITIES 6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION 6
ITEM 7. FINANCIAL STATEMENTS 7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 8
ITEM 8A.CONTROLS AND PROCEDURES 9
ITEM 8B.OTHER INFORMATION 9
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 10
ITEM 10. EXECUTIVE COMPENSATION 11
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS 12
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12
ITEM 13. EXHIBITS AND REPORTS OF FORM 8-K 12
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 13
SIGNATURES 14
CERTIFICATIONS 15
PART I
ITEM 1. DESCRIPTION OF BUSINESS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This periodic report contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 with respect to the
financial condition, results of operations, business strategies, operating
efficiencies or synergies, competitive positions, growth opportunities for
existing products, plans and objectives of management. Statements in this
periodic report that are not historical facts are hereby identified as
"forward-looking statements".
Business
The Company was incorporated in Delaware on June 11, 1992. On May 28, 1998, the
Company changed its name from Plasmatronics Technologies, Inc. to Ecological
Services, Inc. and on January 3, 2003 changed its name to Stanford Capital
Corporation. In December 2002, the Company acquired all the issued and
outstanding shares of Stanford Capital International, Ltd. a Hong Kong based
public relations firm for 10,000 shares of its common stock. This transaction
was subsequently revoked. On January 31, 2004, the Company acquired all of the
shares of Skreem Entertainment Corporation in exchange for 22,000,000 shares of
its one for five post reverse split common shares. Skreem Entertainment
Corporation promotes finances and manages artists in the entertainment industry.
Overview
Our business is to locate and promote recording talent.
The Company is constantly seeking talent for recording and performing. Company
employees utilize their industry contacts and experience to locate prospective
music acts, including music groups and individuals, and evaluate these acts to
determine if, from the Company's perspective, such acts demonstrate the talent
potential to succeed in the music industry.
Upon locating an act that the Company believes has the potential for success,
the Company will sign the act to a contract. Upon signing a typical contract,
the Company at its option will advance funds to the artist to pay for travel,
arrange for performances, schedule public appearances and generally promote the
act, and the act's music, in exchange for a percentage of the revenues generated
by the act's performances and music sales.
Once the Company has located an act it wishes to promote, the Company will
determine where to promote the artist. It is the Company's strategy to promote
talent outside of the United States until the talent has demonstrated the
ability to sell music or tickets to performances. Once an act has gained some
level of success abroad, the Company intends to promote and market the act in
the United States. The Company believes that promoting abroad is a viable
approach because it costs less initially, foreign markets are very receptive to
American type music acts, and there is less competition.
Distribution
The Company distributes its acts in two different ways. The first is through
concerts and public appearances. An act will perform and tour playing concerts
as frequently as possible to increase public awareness of their music. An act
will also make public appearances at retail centers, public places and other
events also to increase the act's public awareness.
The second way the act gains publicity is through licensing and sales of the
act's music. The Company does not sell records or other music media, however, it
does license master recordings to other organizations which distribute the
recordings in various media. The Company receives royalty payments pursuant to
licensing agreements, which are a percentage of revenues from distribution of
the recordings.
The Company's artists' music is currently being distributed by various
organizations throughout Europe and in other countries. Further description is
provided in the Plan of Operation under Item 6.
3
Licensing
From time to time the Company enters into licensing agreements with music
production and distribution companies. The license agreements typically grant
the production and distribution company rights to a music single or all of an
act's music in a particular country or region with a term of three to fifteen
years. The production or distribution company can then distribute the music in
record or cd format, mp3, ringtone, or any other music media licensed in the
agreement. The Company typically receives royalties of a negotiated percentage
between 18% and 75% of sales of the production and distribution company's
published dealer price less certain packaging deductions. In addition, the
Company shall receive between 18% and 75% of net royalty receipts received by in
the particular nation or region. In connection with the license agreement, the
Company may receive a cash advance.
Exclusive Artist Recording Agreements
At March 31, 2006, the Company had entered into long-term Exclusive Artist
Recording Agreements with six artists, which include the three Artists of
"3rdWish", the Artist "PatMoe", the Artist "Precious Dawn Francis" and the
Artist "Willie Bivins, Jr" also known as "Willie Will" 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 Artists during the terms
of the agreements shall be recorded by the Artists 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 Artists 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 Artists by the Company. Any and all
monies paid to or on behalf of the Artists during the term of the agreement
shall be fully recoupable, non-returnable advances unless otherwise expressly
agreed in writing between the Company and the Artists. The Company has the
right, but not the obligation to have the Artists 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 Artists 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 Artists through normal
retail channels in the United States and worldwide. With respect to master
recordings of the Artists licensed to third parties on a flat-fee basis, the
Company shall pay the Artists 20-50% of the net amount received by the Company
under such license. With respect to master recordings of the Artists 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 Artists the lesser of 20-50% of the Company's net earned royalty receipts
under such license or distribution agreement, or 20-50% 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
Artists 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 Artists shall be
paid a royalty of 20-50% of the amounts provided of the above mentioned amounts.
In addition, the Artists may earn royalties related to licenses for musical
compositions, music video licenses and merchandising.
At March 31, 2006, the Artists had earned royalties of approximately $45,000,
based on the year-end reported licensing revenues. However, the Company is not
obligated to pay any royalties until total advances to Artists of $1,468,424 at
March 31, 2006 (plus any future advances) have been recouped.
Music Publishing Agreements
At March 31, 2006, the Company had entered into long-term Music Publishing
Agreements with five individual Writers, which include the three Artists of "3rd
Wish", the Artist "PatMoe" and the Artist "Willie Will". The Company engaged the
Writers to render the Writer's exclusive services as songwriters and composers
based upon terms and conditions set forth in the agreements. In accordance with
the agreements, the Writers grant all rights to all musical compositions written
or owned by the Writers and all musical compositions shall be the Company's
exclusive property as sole owner. The Company shall pay royalties to the Writers
based on various terms and conditions set forth in the agreements. There have
been no royalties earned by the writers related to the agreements.
4
Personal Management Agreement
At March 31, 2006, the Company had entered into long-term Personal Management
Agreements with five Artists, which include the three Artists of "3rd Wish", the
Artist "PatMoe" and 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 their services as musicians, songwriters, actors,
publishers, packagers or performers in any medium now known or hereafter
devised. For personal management services performed, the Artists agree to pay
the Company 15%-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 Artists 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. During the year ended March 31, 2006, the
Company earned commissions of $981, all related to live performances.
The Company's acts face fierce competition. There is no shortage of acts and
musicians seeking fortune and fame. There is also no shortage of talent in the
music industry. The Company believes that their approach of being selective when
choosing acts, refining these acts abroad, and marketing the acts through
appearances, performances, and music sales is a viable method to compete in the
music industry. However there are many other organizations with more capital to
spend, greater access to talent, better industry connections, and more
experience.
The Company's future depends on the success of it's acts and artists. Many music
acts spend entire careers without having a single popular song or tour. The most
talented artists and acts are not always the most successful and fan acceptance
is the most important and most difficult element of success. If the fans like
the act, the fans will purchase the music and tickets and recommend it to
friends. If the fans don't like the act, the act may never gain acceptance.
Employees
The Company, as of June 15, 2006, employs a total of 2 persons, one of these
full-time, at its corporate headquarters in Florida.
ITEM 2 DESCRIPTION OF PROPERTIES
The Company's administrative offices are located in a leased office facility
located at 11637 Orpington Street, Orlando, Florida 32817. The facility contains
approximately 2,000 square feet of office space. There is no lease on the
facility nor is there a rental fee as the property is owned by the principal
shareholder of the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any litigation, pending or threatened, to which it
is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders through the
solicitation of proxies, during the fourth quarter of the Company's fiscal year
ended March 31, 2006.
5
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASER OF EQUITY SECURITIES
The Company's Common Stock trades on the Over the Counter Bulleten Board under
the symbol SKRM.OB. The Company's stock began trading subsequent to its year end
of March 31, 2006. Since its inception, the Company has not paid any dividends
on its Common Stock, and the Company does not anticipate that it will pay
dividends in the foreseeable future. As of June 15, 2006, the Company had
approximately 160 shareholders of record
The Company's transfer agent is OTC Stock Transfer, Inc. of Salt Lake City,
Utah.
ITEM 6. 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 has 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.
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
point.
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 entered into various license agreements which grant certain
exclusive rights to sell and distribute certain recordings by "3rd Wish". The
table below sets forth the parties and territories covered by these license
agreements:
Party(Licensee) Territories
Cheyenne Records Germany, Switzerland and Austria
Three 8 Music Limited UK, Eire
Shock Records Pty Ltd Australia, New Zealand
NRJ Music France, Andorra, Monaco, Belgium
Megaliner Records Russia, Azerbaijan, Armenia, Georgia,
Moldova, Kazakstan, Kyrgyzstan, Tajikistan,
Uzbekistan, Turkmenistan, Ukraine, Republic
of Belarus, Lithuania, Latvia, Estonia
NMC Music Ltd. Israel
Vidisco Portugal
Planet Records Italy
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 collectibi0n 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.
6
Results of Operations
The Company presents this discussion and analysis as a comparison between the
audited financial data for March 31, 2006 and 2005 for informational purposes.
Year Ended March 31, 2006 Compared to the Year Ended March 31, 2005
Revenues - The Company had $64,937 of revenue for the year ended March 31, 2006,
compared to $120,862 of revenue for the year ended March 31, 2005. The decrease
in revenue is primarily due to a decrease of $53,667 from licensing agreements
to distribute 3rd Wish's music.
Operating Expenses - Operating expenses for the year ended March 31, 2006, were
$914,499, a decrease of $396,434 or 30% from $1,310,933 for the year ended March
31, 2005. The decrease is primarily due to a decrease in production expenses
related to video shoots and recordings of approximately $442,000, a decrease in
advertising of approximately $115,000, and an increase in travel and related
support for artists in Germany of approximately $161,000.
General and Administrative Expenses - General and administrative expenses
increased 12% to $357,598 for the year ended March 31, 2006 from $318,150 for
the year ended March 31, 2005. This increase is attributable to a $29,800
increase in salaries and benefits plus $9,200 increase in other general and
administrative expense.
Interest Expense - Interest expense increased 101% to $169,369 for the year
ended March 31, 2006 from $84,248 for the year ended March 31, 2005. This
increase is attributable to having more debt outstanding for the year ended
March 31, 2006.
As a result of the foregoing, the net operating loss of the company decreased
14% to $1,376,529 for the year ended March 31, 2006 from $1,592,469 for the year
ended March 31, 2005.
Liquidity and Capital Resources
As of March 31, 2006, the Company had cash of $62,383 and a deficit in working
capital of $1,852,361.
For the year ended March 31, 2006, the Company used $873,349 in operating
activities which is primarily due to a net loss of $1,376,529, a decrease in
accounts receivable of 114,257, and a decrease in prepaid expenses and deposits
of $35,616. These are offset by depreciation expense of $3,704, increase in
accounts payable and accrued liabilities of $159,363, increase in interest
payable to affiliates of $132,298, and a decrease in deferred revenue of
$10,828.
For the year ended March 31, 2006, the Company used $863 for investing
activities. All of the cash used by investing activities was for the purchase of
equipment.
For the year ended March 31, 2006 cash provided by financing activities was
$884,400. The amount represents $276,400 provided by the issuance of common
stock, $643,000 which represents the proceeds from notes payable to a
shareholder, and $35,000 which represents notes payable to affiliates and others
which was reduced by $70,000 for the repayment of loans. Because of the
continued net operating losses of the Company, the Company will not be able to
continue as a going concern unless it is able to sell its shares or obtain third
and/or related party loans. Although the principal shareholder and affiliates of
the Company has been willing to lend funds to the Company in the past, there is
no obligation for them to do so in the future. Without such funding, or the sale
of its shares, the Company will have insufficient funds to execute its business
plans for the next twelve months.
ITEM 7. FINANCIAL STATEMENTS
7
SKREEM ENTERTAINMENT CORPORATION
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
March 31, 2006 and 2005, and the period from inception,
August 19, 1999, through March 31, 2006
F-1
SKREEM ENTERTAINMENT CORPORATION
(A Development Stage Company)
Page
Report of Independent Registered Public Accounting Firm F-3
Consolidated Financial Statements:
Consolidated Balance Sheet as of March 31, 2006 F-4
Consolidated Statements of Operations for the years ended March 31, 2006, and
2005 and for the period from inception,
August 19, 1999, through March 31, 2006 F-5
Consolidated Statements of Changes in Shareholders'
Deficit for the period from inception, August 19, 1999,
through March 31, 2006 F-6
Consolidated Statements of Cash Flows for the years ended March 31, 2006,and
2005 and the period from inception, August 19, 1999, through March 31, 2006 F-8
Notes to Consolidated Financial Statements F-9
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Skreem Entertainment Corporation:
We have audited the accompanying consolidated balance sheet of Skreem
Entertainment Corporation (the "Company"), a development stage company, as of
March 31, 2006, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the years ended March 31, 2006
and 2005, and for the period from inception, August 19, 1999, through March 31,
2006. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Skreem
Entertainment Corporation as of March 31, 2006, and the consolidated results of
its operations and its cash flows for the years ended March 31, 2006 and 2005,
and for the period from inception, August 19, 1999, through March 31, 2006, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company is in the development stage and
has suffered recurring losses from operations and had a net capital deficit,
which raises substantial doubt about its ability to continue as a going concern.
Management plans to continue funding the operation through an affiliate owned by
a major shareholder of the Company. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/S/ Ham, Langston & Brezina, L.L.P.
Houston, Texas
June 20, 2006
F-3
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
March 31, 2006
ASSETS
Current assets:
Cash and cash equivalents $ 62,383
-------------
Total current assets 62,383
Property and equipment, net 7,030
-------------
Total assets $ 69,413
=============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 173,410
Related party payable 9,254
Accrued interest payable - affiliates and shareholder 217,190
Notes payable - shareholder 556,770
Notes payable - affiliates 933,620
Deferred revenue 24,500
------------
Total current liabilities 1,914,744
------------
Commitments and contingencies
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, 24,484,256 shares issued
and outstanding 24,484
Paid-in capital 3,235,847
Deficit accumulated during the development stage (5,105,662)
------------
Total shareholders' deficit (1,845,331)
------------
Total liabilities and shareholders' deficit $ 69,413
============
The accompanying notes are an integral part
of these consolidated financial statements
F-4
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended Year Ended Inception to
March 31, March 31, March 31,
2006 2005 2006
----------- ----------- ------------
Revenues $ 64,937 $ 120,862 $ 188,725
Operating expenses (914,499) (1,310,933) (3,325,362)
General and administrative
expenses (357,598) (318,150) (1,356,419)
Impairment of loan receivable - - (130,000)
----------- ------------- ------------
Loss from operations (1,207,160) (1,508,221) (4,623,056)
Interest expense (169,369) (84,248) (482,606)
----------- -------------- ------------
Net loss $ (1,376,529) $ (1,592,469) $ (5,105,662)
=========== ============== ============
Basic and diluted net loss
per share $ (0.06) $ (0.06)
=========== ==============
Weighted average shares
outstanding 23,148,786 24,813,714
============ =--===========
The accompanying notes are an integral part
of these consolidated financial statements
F-5
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
from inception, August 19, 1999, through March 31, 2006
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital (Deficit) 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
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)
=========== =========== ============= ============= ===========
The accompanying notes are an integral part
of these consolidated financial statements
F-6
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
from inception, August 19, 1999, through March 31, 2006
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital (Deficit) Total
--------- -------- ---------- ----------- -------
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)
============= ========== ============= ============= =============
The accompanying notes are an integral part
of these consolidated financial statements
F-7
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended Year Ended Inception to
March 31, March 31, March 31,
2006 2005 2006
---------- ------------ ------------
Cash flows from operating activities:
Net loss $ (1,376,529) $ (1,592,469) $ (5,105,662)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation expense 3,704 8,465 44,584
Impairment of loan receivable - - 130,000
Accrued interest payable converted to equity - - 208,405
Expenses paid by shareholder and affiliate 68,770 53,026 121,796
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 114,257 (114,257) -
Decrease (increase) in prepaid expenses and deposits 35,616 (15,695) -
Increase in accounts payable and accrued liabilities 159,363 30,159 232,665
Increase in interest payable to affiliates 132,298 69,236 217,190
Increase (decrease) in deferred revenue (10,828) 35,328 24,500
------------- ------------- -------------
Net cash used in operating activities (873,349) (1,526,207) (4,126,522)
------------- ------------- -------------
Cash flows from investing activities:
Purchase of property and equipment (863) (11,440) (51,614)
Loan receivable - - (130,000)
------------- ------------- -------------
Net cash used by investing activities (863) (11,440) (181,614)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock 276,400 301,928 578,328
Proceeds from notes payable-other 20,000 365,000 385,000
Proceeds from notes payable-shareholder 643,000 880,000 1,523,000
Proceeds from notes payable to affiliates 15,000 475,000 2,439,191
Principal payments on notes payable to affiliates - (90,000) (140,000)
Principal payments on notes payable-other (70,000) (265,000) (335,000)
Principal payments on notes payable-shareholder - (80,000) (80,000)
------------- ------------- -------------
Net cash provided by financing activities 884,400 1,586,928 4,370,519
------------- ------------- -------------
Net increase in cash and cash equivalents 10,188 49,281 62,383
Cash and cash equivalents, beginning of year 52,195 2,914 -
------------- ------------- -------------
Cash and cash equivalents, end of year $ 62,383 $ 52,195 $ 62,383
============= ============= =============
The accompanying notes are an integral part
of these consolidated financial statements
F-8
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of the Business and Merger
Stanford Capital Corporation (Stanford) was incorporated under the laws of
the State of Delaware on June 11, 1992. During January 2004, Stanford
acquired all of the issued and outstanding shares of common stock of Skreem
Entertainment Corporation (Skreem) in exchange for 22,000,000 post reverse
split shares of common stock, par value $0.001 per share, to holders of
Skreem's common stock. The transaction is considered a reverse merger and
Skreem became a wholly owned subsidiary of Stanford. Stanford and Skreem
are collectively referred to as "the Company". On March 16, 2004 the
Company filed a Certificate of Amendment with the Delaware Secretary of
State changing the Company's name to Skreem Entertainment Corporation and
reverse splitting the Company's shares on a one (1) for five (5) basis. The
financial statements herein reflect the effect of the reverse stock split.
The proforma effects of the reverse merger are not material to the
consolidated financial statements.
Skreem is a development stage company that was incorporated in Nevada on
August 19, 1999. Skreem was formed to promote, finance and manage artists
and projects in the music industry and is located in the State of Florida.
Basis of Presentation and Consolidation
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.
The Company has elected to continue the fiscal year of the legal acquirer
(registrant).
The consolidated financial statements include the financial statements of
the Company and its wholly owned subsidiary. All significant intercompany
balances and transactions, including intercompany profits and unrealized
profits and losses are eliminated on consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and on deposit at a major
financial institution. The Company considers highly liquid investments with
original maturities of three months or less when purchased to be cash
equivalents.
Advances to Artists
The Company advances monies to artists upon the artist signing the
"Exclusive Recording Artist Agreement." An advance paid to an artist shall
be reported as an asset if the past performance and current popularity of
the artist to whom the advance is made provide a sound basis for estimating
that the amount of the advance will be recoverable from future royalties to
be earned by the artist. Any portion of advances that subsequently appear
not to be fully recoverable from future royalties to be earned by the
artist shall be charged to expense during the period in which the loss
becomes evident.
F-9
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations and Summary of Significant Accounting Policies,
Continued
Property and Equipment
Property and equipment are stated at cost. Provisions for depreciation are
computed using the double-declining method based on the estimated useful
lives of the assets, generally three to seven years. Expenditures that
increase the value or extend the life of the asset are capitalized, while
cost of maintenance and repairs are expensed as incurred. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
useful life of the improvement or the term of the lease. When assets are
retired or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss
is recognized.
In accordance with Statement of Financial Accounting Standards (SFAS)
No.144, "Accounting for the Impairment or Disposal of Long-lived
Assets,"the Company examines the possibility of decrease in value of fixed
assets when events or changes in circumstances reflect the fact that their
recorded value may not be recoverable.
Record Masters
A record master borne by the Company is reported as a cost of production
when the past performance and current popularity of the artist does not
provide a sound basis for estimating that the cost will be recovered from
future sales.
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.
Advertising Costs
All costs related to general advertising are charged to expense as
incurred. For the year ended March 31, 2006 and 2005, the Company recorded
total advertising expense of $1,266 and $116,046, respectively.
Operating Expenses
Operating expenses include music production costs, artist compensation
costs, and other operating expenses. The Company enters into production,
promotion and related consulting agreements in the ordinary course of
business.
F-10
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations and Summary of Significant Accounting Policies,
Continued
Use of Estimates
The preparation of financial statements in conformity with general accepted
accounting principles in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
From inception of the Company through August 31, 2003, the Company had
elected to be taxed under Subchapter S of the Internal Revenue Code. As a
result, corporate income or loss passes through to the shareholders and
therefore, no provision for federal or state income taxes has been recorded
by the Company. On August 31, 2003, the Company converted certain debt and
accrued interest owed to affiliates to equity. The affiliates were a
corporation and a partnership that made the Company ineligible to be taxed
under subchapter S of the Internal Revenue Code. Subsequent to August 31,
2003, the Company accounts for income tax using Statements of Financial
Accounting (SFAS) No. 109 "Accounting for Income Taxes."
Recent Accounting Pronouncements
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections, a Replacement of APB Opinion No. 20 and FASB Statement No. 3."
SFAS No. 154 requires retrospective application of changes in accounting
principle to prior periods' financial statements, rather than the use of
the cumulative effect of a change in accounting principle, unless
impracticable. If impracticable to determine the impact on prior periods,
then the new accounting principle should be applied to the balances of
assets and liabilities as of the beginning of the earliest period for which
retrospective application is practicable, with a corresponding adjustment
to equity, unless impracticable for all periods presented, in which case
prospective treatment should be applied. SFAS No. 154 applies to all
voluntary changes in accounting principle, as well as those required by the
issuance of new accounting pronouncements if no specific transition
guidance is provided. SFAS No. 154 does not change the previously issued
guidance for reporting a change in accounting estimate or correction of an
error. SFAS No. 154 becomes effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15,
2005. The Company does not expect this policy to have a material impact on
its financial position, results of operations or cash flows.
Going Concern
The accompanying 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 $1,376,529 and $1,592,469,for the year ended March 31, 2006, and the
year ended March 31, 2005 respectively. The Company had an accumulated
deficit of $5,105,662 at March 31, 2006. 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 an affiliate and
shareholder in order to fund the current and planned operating levels. The
consolidated 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 and loans from an affiliate and shareholder 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.
F-11
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Property and Equipment
Property and equipment is comprised of the following at March 31, 2006:
Furniture $ 18,161
Music and computer equipment 29,468
-------------
47,629
Less: accumulated depreciation (40,599)
-------------
$ 7,030
Depreciation expense was $ 3,704, and $8,465, for the years ended March 31,
2006 and 2005, respectively.
3. Income Taxes
From inception of the Company through August 31, 2003, the Company had
elected to be taxed under Subchapter S of the Internal Revenue Code. As a
result, corporate income or loss passes through to the shareholder and
therefore, no provision for federal or state income tax was recorded by the
Company. On August 31, 2003, the Company converted certain debt and accrued
interest owed to affiliates to equity. The affiliates were a corporation
and a partnership that made the Company ineligible to be taxed under
subchapter S of the Internal Revenue Code. Subsequent to August 31, 2003,
the Company accounts for income tax using Statements of Financial
Accounting (SFAS) No. 109 "Accounting for Income Taxes."
The following table sets forth a reconciliation of federal income tax for
the years ended March 31, 2006 and 2005:
Year Ended Year Ended
March 31, March 31,
2006 2005
------------ -----------
Loss before income taxes $ (1,376,529) $ (1,592,469)
Income tax benefit computed at statutory rates (468,020) ( 541,439)
Increase in valuation allowance 628,732 540,596
Permanent differences 2,871 843
Adjustment to deferred tax assets (163,583) -
------------ ------------
Tax benefit $ - $ -
============ ============
F-12
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Income Taxes, Continued
As of March 31, 2006, the Company has net operating loss carryforwards of
approximately $2,178,000. The carryforwards begin to expire in the year
2023. The Company's net operating loss carry forwards may be subject to
annual limitations, which could reduce or defer the utilization of the
losses as a result of an ownership change as defined in section 382 of the
Internal Revenue Code. The tax effects of the temporary differences between
reportable financial statement income and taxable income are recognized as
a deferred tax asset and liability.
Significant components of the deferred tax assets are set out below along
with a valuation allowance to reduce the net deferred tax asset to zero. In
order to comply with generally accepted accounting principles, management
has decided to establish the valuation allowance because of the potential
that the tax benefits underlying deferred tax asset may not be realized.
Significant components of the Company's deferred tax asset at March 31,
2006 are as follows:
Net operating loss carryforwards $ 740,421
Deferred revenues 8,330
Deferred expenses 573,109
Less: valuation allowance (1,321,860)
-------------
Net deferred tax assets $ -
=============
4. Notes Payable
Shareholder
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. On August 19, 2004 the note
payable to Sugarcreek Capital, LLC was transferred to Jeffrey D. Martin, a
major stockholder, in exchange for his 1/3 interest in Osceola Partners.
This note is payable on demand.
During the year ended March 31, 2006, Jeffrey D. Martin loaned the Company
$711,770. The notes are payable on demand and bear interest at the rate of
8% per year. Accrued interest at March 31, 2006 was $73,575. Interest
payments to Jeffrey D. Martin during the year ended March 31, 2006 were
$32,787. There were no principal payments of these notes during the year
ended March 31, 2006. The dates and amounts of these individual note
agreements entered into during the year ended March 31, 2006 and
outstanding are as follows:
Date of Note Amount
June 30, 2005 $ 219,000
September 30, 2005 264,000
December 31, 2005 228,770
-------------
Total $ 711,770
=============
On March 29, 2006 notes payable to Jeffrey D. Martin totaling $1,000,000
were converted to 1,000,000 shares of common stock.
F-13
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Notes Payable, continued
Affiliates
The Company's Board of Directors held a meeting on August 30, 2003 and
unanimously approved a proposal received from Martin Consultants, Inc. and
JT Investments, Ltd., affiliates of the Company, to convert the debt and
accrued interest owed by the Company to equity. Martin Consultants, Inc.
and JT Investments, Ltd. are 100% and 50%, respectively owned by Jeffrey D.
Martin. The notes payable of $1,373,600 and related accrued interest of
$208,383 were reclassified to equity on August 31, 2003 and Martin
Consultants, Inc. was issued 43,000 shares (pre-merger) of common stock.
On January 27, 2004, the Company borrowed $39,592 from JT Investments, Ltd.
The note is unsecured, bears interest at the rate of 8% per year and is
payable on demand. The entire principal balance is outstanding at March 31,
2006. The Company recorded interest expense of $3,167 related to the note
for the years ended March 31, 2006 and 2005.
At March 31, 2006, the balance of notes payable to Martin Consultants,
Inc., a company owned by Jeffrey D. Martin, was $879,028. The notes bear
interest at the rate of 8% per year and are secured by assets of the
Company. The Company recorded interest expense of $ $70,323, and $45,162
related to these notes for the year ended March 31, 2006, and year ended
March 31, 2005, respectively. The dates and amounts of the individual note
agreements with Martin Consultants, Inc. that remain outstanding at March
31, 2006 are as follows:
Date of Note Amount
December 31, 2003 $ 304,000
January 7, 2004 20,000
February 15, 2004 20,000
February 25, 2004 20,000
March 8, 2004 10,000
March 11,2004 12,000
March 15,2004 10,000
March 24,2004 15,000
March 31, 2004 10,000
April 6, 2004 10,000
April 12, 2004 10,000
July 23, 2004 20,000
July 30, 2004 10,000
January 7, 2005 400,000
March 31, 2005 8,028
-------------
Total $ 879,028
=============
F-14
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Notes Payable, continued
Others
On January 24, 2005, the Company borrowed $100,000 from Market Management,
Inc (MMI). The note is unsecured, payable on demand and bears interest at a
rate of 10% per year. The Company recognized interest expense of $6,890
during the year ended March 31, 2006, related to this note. On August 17,
2005 the Company repaid $50,000 of the principal and on January 30, 2006
the remaining principal was converted to 50,000 shares of common stock. At
March 31, 2006 the Company owes $1,878 accrued interest related to this
note.
5. Capital Transactions
The Company has offered a Private Placement Memorandum ("PPM") that 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 120 days. The Company did extend
the offering for 120 days and issued 603,856 shares with proceeds of
$301,928. The Company amended the PPM reducing the share minimum to 100,000
shares. The offering concluded after the 120-day extension.
On October 6, 2004 3,502,925 shares of common stock were returned to the
treasury and cancelled.
On January 30, 2006 the Company converted a remaining $50,000 note payable
to Market Management to 50,000 shares of common stock.
On March 29, 2006 the Company converted $1,000,000 of notes payable to
Jeffrey D. Martin to 1,000,000 shares of common stock.
During the year ended March 31, 2006, the Company received cash proceeds of
$276,400 from the issuance of 276,400 shares of common stock.
6. Related Party Transactions
Related party payables at March 31, 2006, consisted of $9,254 for health
insurance as of March 31, 2006. Additionally, notes payable to affiliates
and a major shareholder at March 31, 2006 are presented at Note 5.
The Company promotes an artist who is the son of the Company's major
shareholder. Total advances to the son are approximately $469,400 as of
March 31, 2006.
On March 1, 2003, the Company entered into an agreement with All Star
Consulting that established a fee of $5,000 per month, plus rent of an
apartment and lease of a car, for services rendered as a Manager of artists
in Germany. Effective January 2005, the agreement was amended to increase
the fee paid to All Star Consulting to $6,500 per month. Tony Harrison, a
Vice President and Director of the Company, owns All Star consulting. In
connection with the agreement, the Company expensed promotion fees of
approximately $78,000, and $64,500 for the years ended March 31, 2006 and
2005, respectively.
7. Operating Leases
The Company leases a vehicle and housing in Germany for the Artists and
Manager. Rent expense under these leases was $75,404, and $68,999 for the
years ended March 31, 2006 and 2005, respectively.
There are no significant future minimum non-cancelable lease payments to be
made after March 31, 2006 as all significant lease commitments have been
met.
F-15
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Nu-Sol Agreement And Impairment
During May 2000, the Company entered into a financing agreement with Nu-Sol
Productions, Inc. (NU-SOL). The purpose of the agreement is for NU-SOL to
produce, manufacture, market, and commercially exploit the first LP by
Precious Francis "Precious" entitled "Big Girls Don't Cry" and singles
derived from the LP (the Property). The Company funded costs and expenses
of $130,000 with respect to the production, manufacturing, marketing, and
exploitation of the Property. Under terms established by the NU-SOL
agreement, net revenues are to be distributed first to the Company, until
the Company recoups 100% of the $130,000 advanced plus an additional
$39,000. Thereafter, the Company receives 30% of all net revenues. The
Company originally recorded the advance to NU-SOL as a loan receivable, but
during 2001, the Company deemed the advance uncollectible and recognized an
impairment charge.
10. Distribution And Service Agreements
During May 2004, the company entered into a five and one-half year
Distribution and Service Agreement with Cheyenne Records GmbH (Cheyenne).
The agreement grants Cheyenne certain exclusive rights to distribute and
sell recordings by 3rd Wish in Germany, Switzerland and Austria. Under the
agreement, Cheyenne is to receive a distribution and service fee of 45% of
all net receipts (gross receipts less Value Added Tax of approximately
16%). The agreement requires Cheyenne to perform certain services including
booking commercial concerts and concert tours, securing personal
appearances of "3rd Wish", securing advertising, endorsements and related
activities of "3rd Wish", and music publishing/sub-publishing throughout
the territory. In consideration for these services except music
publishing/sub-publishing, Cheyenne is to receive 35% of all net receipts
paid by third parties. The agreement provides for the Company/Cheyenne to
split music publishing revenues on a 75%/25% basis. The Company recorded
license revenue of $19,774 and $115,227 for the years ended March 31, 2006
and 2005 respectively.
During April 2005, the Company entered into a 5.5 year Distribution and
Service Agreement with Cheyenne Records GHbh (Cheyenne). The agreement
grants Cheyenne certain exclusive rights to distribute and sell recordings
of the artist "Pat Moe" in Germany, Switzerland and Austria. Cheyenne is to
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/subpublishing throughout the territory. In consideration
for these services, except music publishing/subpublising, Cheyenne is to
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.
11. Business Management Agreement
On June 14, 2005, the Company entered into a business management agreement
with Mr. Andy Lai for services performed in Asia that continues in until
written notice of termination is given by either party. Mr. Lai is to act
as Business Manager and his services 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. Under the agreement, the Company is 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 Asia, Mr. Lai is to be compensated five percent (5%) of
the net revenues resulting from such agreement. The Company has not
recorded any transactions related to this agreement. On December 14, 2005,
the Company terminated the agreement.
F-16
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. License Agreements
On October 11, 2004, the Company entered into a fifteen-year license
agreement with Three8 Music Limited (Three8). The terms of the license
agreement grant Three8 all rights to the single release by "3rd Wish"
entitled "Obsession" in the United Kingdom and Eire, for which the Company
earns royalties of 19% calculated on 100% sales of Three8's published
dealer price less certain packaging deductions. Additionally, for any third
party licensing or digital delivery, the Company is to receive 50% of
Three8's net United Kingdom sourced royalty receipts. In connection with
the license agreement, the Company received a $15,000 advance that was
initially recorded as deferred revenue and will be recognized as revenue as
license fees are earned under the agreement. At March 31, 2006, the
accompanying financial statements reflect license fees of $1,000 and
deferred revenue of $13,500 related to this agreement.
On November 12, 2004, the Company entered into a five year license
agreement with NRJ Music (NRJ). The license agreement grants NRJ the
exclusive right to the audio and/or audiovisual recordings of "3rd Wish"
for the purpose of reproducing them on all media in France, Dom Tom,
Andorra, Monaco, and Belgium. In consideration of the exclusive rights
granted, JR shall pay the Company a royalty for sales (less returns) of
19-22% in France, Dom Tom, Andorra and Monaco and 13-15% in Belgium. In
addition the Company may earn additional royalties related to phonograms,
videograms, and other digital media as defined in the agreement. In
connection with the license agreement, the Company received a $16,822
advance that was initially recorded as deferred revenue and will be
recognized as revenue as license fees are earned under the agreement. At
March 31, 2006, the accompanying financial statements reflect license fees
of $33,860 related to this agreement.
On November 26, 2004, the Company entered into a five-year license
agreement with Shock Records Pty Ltd (Shock). The license agreement grants
Shock the exclusive right to the single release by "3rd Wish" entitled
"Obsession" in Australia and New Zealand. Under the license agreement the
Company is to receive royalties of 18-22% of net sales, which excludes any
sales tax and includes any discounts. Shock retains the right to license
the recording for third party, compilation and synchronization use in the
territory and the Company shall receive 50% of any third party income.
Shock retains exclusive right to copy, extract, digitally encode, sell,
distribute, and otherwise exploit the recording in digital format via any
interactive technology. In connection with the license agreement, the
Company received a $5,150 advance that was initially recorded as deferred
revenue and will be recognized as revenue as license fees are earned under
the agreement. At March 31, 2006, the accompanying financial statements
reflect license fees of $1,030 and deferred revenue of $3,691 related to
this agreement.
On December 14, 2004, the Company entered into a three-year license
agreement with NMC Music Ltd. (NMC). The license agreement grants NMC
exclusive rights to the single release by "3rd Wish" entitled "obsession"
in Israel. The Company shall receive royalties of 18% calculated on 100% of
net sales. The Company recorded revenue of $987 related to this agreement
in the year ended March 31, 2006.
On January 17, 2005, the Company entered into a three-year license
agreement with Megaliner Records (Megaliner). The license agreement grants
Megaliner exclusive rights to the single release by "3rd Wish" entitled
"Obsession" including all available remixes. The territories covered by the
license agreement with Megaliner includes Russia, Azerbaijan, Armenia,
Georgia, Moldova, Kazakstan, Krygystan, Tajikistan, Uzbekistan,
Turkmenistan, Ukraine, Republic of Belarus, Lithuania, Lativa and Estonia.
Under the terms of the agreement the Company is to receive royalties of 20%
of the published dealer price with no deductions allowed. In addition the
Company/Megaliner shall split any third party income and broadcasting
income on a 60%/40% basis. In connection with the license agreement, the
Company has received advances of $750 and $500 and will record the advance
as revenue as earned under the agreement. At March 31, 2006 the
accompanying financial statements reflect license fees of $270 and deferred
revenue of $917 related to this agreement.
On February 14, 2005, the Company entered into a license agreement with
VIDISCO. The license agreement grants VIDISCO exclusive rights to the
single release by "3rd Wish" entitled "Obsession" in Portugal. The Company
shall receive royalties of 18% calculated on 100% net sales.
F-17
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. License Agreements, continued
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 granted 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. In connection with the license agreement the Company received
an advance of $7,127 that was initially recorded as deferred revenue and
will be recognized as revenues as license fees are earned under the
agreement. At March 31, 2006, the accompanying financial statements reflect
license fees of $734 and deferred revenue of $6,393 related to this
agreement.
13. Music Video Production Agreements
During the year ended March 31, 2005, the Company entered into Music Video
Production Agreements with 1171 Production Group (Production Company).
Production Company produced music videos embodying performances by "3rd
Wish" and "Pat Moe'. As of March 31, 2005 all contractual obligations have
been completed and the Company recorded total video production expenses of
$406,525 related to these agreements.
14. Content License Agreement
On September 10, 2004, the Company entered into a Content License Agreement
with JAMBA!AG (JAMBA) for the distribution of mobile content including ring
tones, wallpaper, and logos through the JAMBA service and JAMBA Network.
The Content License Agreement is non-exclusive and covers the territories
of Germany, Switzerland, and Austria. The term of the agreement commences
on the date of the agreement and terminates upon a three month written
notice by either party. In consideration of the authorizations granted to
JAMBA in the agreement, JAMBA will pay the Company a license fee from all
paid and successfully completed downloads of content by end users as set
forth in the agreement, which shall be calculated from the net revenue
(revenue less value added tax.) In accordance with SAB 104, the Company
records revenue related to the Content License Agreement when the license
revenue is fixed or determinable and collectibility is reasonably assured.
The Company recorded revenue of $829 related to this agreement in the year
ended March 31, 2006.
15. Video Ringtone And Promotion Video License Agreement
On March 9, 2005, the Company entered into a Framework Master and Video
Ringtone and Promotion Video License Agreement ( Framework Agreement) with
Jamster International Sarl (Jamster) whereas Jamster desires to distribute
Master Ringtones and Video Ringtones of certain of the Company's tracks to
include excerpts of certain of the Company's promotion video clips into
such television advertising campaigns. The video description, license
period, territory, exclusivity and any other rights granted to Jamster
shall be described in each case by signature of an individual written order
form. The term of the Framework Agreement shall remain effective unless
terminated by either of the parties. In consideration of the rights granted
in the order form(s), Jamster shall pay the Company for each fully paid and
completed download of the Ringtone in its monophonic, polyphonic Master and
Video Ringtone version a lump sum of $0.40 for Master Ringtones/Video
Ringtones and $0.15 for tones which trigger a new subscription between end
user consumer and distributor as compensation for the use of the video. The
Company has not recorded any revenue related to this agreement. In
accordance with SAB 104, the Company will record revenue related to the
Framework when the license revenue is fixed or determinable and
collectibility is reasonably assured.
F-18
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Publishing Agreement
On January 17, 2002, the Company entered into a publishing agreement with
Broadcast Music, Inc. (BMI) for the period from July 1, 2001 to June 30,
2006. In accordance with the agreement, the Company sold, assigned and
transferred to BMI, its successors or assigns all rights which the Company
owned or acquired publicly to perform, and to license others to perform,
anywhere in the world and part or all musical compositions; the
non-exclusive right to record, and to license others to record, any part or
all of any of the musical compositions on electrical transcriptions, wire,
tape, film or otherwise, but only for the purpose of performing such
musical compositions publicly by means of radio and television or for
archive or audition purposes; and the exclusive right to adapt or arrange
any part or all of any of the musical compositions for performance
purposes, and to license others to do so. As consideration for all rights
granted to BMI hereunder, BMI agrees to pay the Company upon the basis of
current performance rates generally paid by BMI for its affiliated
publishers for similar performances. The Company has not recorded any
revenue related to the agreement. In accordance with SAB No. 104 the
Company will record publishing revenues when the revenue is fixed or
determinable and collection is reasonably assured.
17. Commitments
Exclusive Artist Recording Agreements
At March 31, 2006, the Company had entered into long-term Exclusive Artist
Recording Agreements with six artists, which include the three Artists of
"3rd Wish", the Artist "PatMoe", the Artist "Precious Dawn Francis" and the
Artist "Willie Bivins, Jr" also known as "Willie Will" 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 is worldwide. All master recordings made by the Artists during
the terms of the agreements are recorded by the Artists on the Company's
behalf, and all phonograph records and related performances are the
property of the Company; the Company has the right to secure sound
recording copyright; and the Company and its licensees 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 are deemed fully recoupable advances to
the Artists and are to be deducted from any and all royalties payable to
the Artist by the Company under this or any and all royalties payable to
the Artists by the Company. Amounts paid to or on behalf of the Artists
during the term of the agreement are fully recoverable, non-returnable
advances unless otherwise expressly agreed in writing between the Company
and the Artists. The Company has the right, but not the obligation to have
the Artists participate in the creation of music videos and all amounts
expended by or advanced by the Company for the production of music videos
constitute additional fully recoupable advances. The Company owns any and
all current and future rights to music videos.
In its sole discretion, the Company may choose, at any time during the term
of the agreements, to license master recordings made by the Artists 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 Artists
through normal retail channels in the United States and worldwide. With
respect to master recordings of the Artists licensed to third parties on a
flat-fee basis, the Company is to pay the Artists 20-50% of the net amount
received by the Company under such license. With respect to master
recordings of the Artists licensed to third parties on a royalty basis, and
with respect to phonograph recordings released through a distributor
selected by the Company, the Company is to pay the Artists the lesser of
20-50% of the Company's net earned royalty receipts under such license or
distribution agreement, or 20-50% 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 Artists
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 Artists is to
be paid a royalty of 20-50% of the amounts provided of the above mentioned
amounts. In addition, the Artists may earn royalties related to licenses
for musical compositions, music video licenses and merchandising.
F-19
SKREEM ENTERTAINMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Commitments, continued
Exclusive Artist Recording Agreements, continued
At March 31, 2006, the Artists had earned royalties of approximately
$45,000, based on cumulative reported licensing revenues. However, the
Company is not obligated to pay any royalties until it recovers advances to
Artists totaling $1,468,424 at March 31, 2006, plus any future advances.
Music Publishing Agreements
At March 31, 2005, the Company had entered into long-term Music Publishing
Agreements with five individual Writers, which include the three Artists of
"3rd Wish", the Artist "PatMoe" and the Artist "Willie Will". The Company
engaged the Writers to render the Writer's exclusive services as
songwriters and composers based upon terms and conditions set forth in the
agreements. In accordance with the agreements, the Writers granted all
rights to all musical compositions written or owned by the Writers and all
musical compositions are to be the Company's exclusive property as sole
owner. The Company shall pay royalties to the Writers based on various
terms and conditions set forth in the agreements. There have been no
royalties earned by the writers related to the agreements.
Personal Management Agreement
At March 31, 2005, the Company had entered into long-term Personal
Management Agreements with five Artists, which include the three Artists of
"3rd Wish", the Artist "PatMoe", and 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 their
services as musicians, songwriters, actors, publishers, packagers or
performers in any medium now known or hereafter devised. For personal
management services performed, the Artists agreed to pay the Company 15% of
all gross compensation earned or received as a result of activities in the
entertainment industry. However, the Company is not be entitled to
commissions by the Artists 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. During the years ended March 31, 2006 and 2005,
the Company earned commissions of $981 and $3,241, all related to live
performances.
18. Supplemental Disclosures Of Cash Flow Information
During the year ended March 31, 2006, and the year ended December 31, 2005
approximately $35,780 and $15,000 was paid for interest expense,
respectively. No cash was paid for income taxes during the years ended
March 31, 2006 and 2005.
During the year ended March 31, 2006, the Company issued 50,000 shares of
common stock for accounts payable. In addition, the Company converted notes
payable totaling $1,000,000 to equity upon issuance of 1,000,000 shares of
common stock.
19. Concentrations Of Risk And Major Customers
The Company is economically dependent on an affiliate owned by the
Company's major shareholder.
The Company is dependent on the success of the Artists. The talent would be
difficult to replace.
The license revenues of $115,227 for the year ended March 31, 2005 related
to the Cheyenne agreement and accounted for approximately 95% of total
revenues.
The license revenues of $33,830 and $25,271 for the year ended March 31,
2006 related to the NRJ and Cheyenne agreements and accounted for 52% and
39% of the total revenues respectively.
F-20
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has had no disagreements with its certified public accountants with
respect to accounting practices or procedures or financial disclosure. The
Company did however change its certifying accountants from David T. Thomson P.C.
to Thomas Leger & Co. LLP in March of 2004, and from Thomas Leger & Co. LLP, to
Ham, Langston & Brezina LLP in January of 2005.
(i) On March 3, 2004, the Registrant dismissed David T. Thomson, PC from its
position as the Company's independent accountants.
(ii) The audit report of David T. Thomson, PC, on April 10, 2003, for the year
ended March 31, 2002 contained no adverse opinion, disclaimer of opinion
or modification of the opinion.
(iii) The Registrant's Board of Directors participated in and approved the
decision to change independent accountants.
(iv) In connection with its audit for the most recent fiscal year and the
interim period until the date of dismissal, there have been no
disagreements with David T. Thomson, PC on any matter of accounting
principle or practice, financial statement disclosure, or auditing scope
or procedure, which disagreement if not resolved to the satisfaction of
David T. Thomson, PC would have caused them to make reference thereto in
their report on the financial statements.
(v) During the most recent fiscal year and the interim period until the date
of dismissal, there have been no reportable events (as defined in
Regulation S-K Item 304 (a)(1)(v)).
(vi) The Registrant requested that David T. Thomson, PC furnish it with a
letter addressed to the SEC stating whether or not it agrees with the
above statements.
(vii) On January 7, 2005, the Registrant dismissed Thomas Leger & Co., LLP from
its position as the Company's independent accountants.
(viii) The audit report of Thomas Leger & Co., LLP, on July 21, 2004, for the
balance sheet as of March 31, 2004, and the related consolidated
statements of operations, shareholders' deficit and cash flows for the
three months ended March 31, 2004 and the years ended December 31, 2003
and 2002 and for the period from August 19, 1999 (date of inception)
through March 31, 2004 contained no adverse opinion, disclaimer of opinion
or modification of the opinion other than the substantial doubt about the
Company's ability to continue as a going concern.
(ix) The Registrant's Board of Directors participated in and approved the
decision to change independent accountants.
(x) In connection with its audit for the most recent fiscal year and the
interim period until the date of dismissal, there have been no
disagreements with Thomas Leger & Co., LLP on any matter of accounting
principle or practice, financial statement disclosure, or auditing scope
or procedure, which disagreement if not resolved to the satisfaction of
Thomas Leger & Co., LLP would have caused them to make reference thereto
in their report on the financial statements.
(xi) During the most recent fiscal year and the interim period until the date
of dismissal, there have been no reportable events (as defined in
Regulation S-K Item 304 (a)(1)(v)).
(xii) The Registrant requested that Thomas Leger & Co., LLP furnish it with a
letter addressed to the SEC stating whether or not it agrees with the
above statements
10
(xiii) New independent accountants
On January 7, 2005, the Registrant engaged Ham, Langston, & Brezina LLP to
audit its financial statements for the year ended March 31, 2005. During
the two most recent fiscal years and through March 31, 2005, the
Registrant has not consulted with Ham, Langston, & Brezina LLP regarding
(i) the application of accounting principles to a specified transaction,
either completed or proposed or the type of audit opinion that might be
rendered on the Registrant's financial statements, and no written report
or oral advise was provided to the Registrant by concluding there was an
important factor to be considered by the Registrant in reaching a decision
as to an accounting, auditing or financial reporting issue; or (ii) any
matter that was either the subject of a disagreement, as that term is
defined in item 304 (a)(1)(iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K, or a reportable event, as that
term is defined in Item 304 (a)(1)(v) of Regulation S-K.
ITEM 8A. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our chief executive
officer and our chief financial officer, after evaluating the
effectiveness of the Company's "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 Rule 13a-14(c) and
15-d-14(c) as of a date (the "Evaluation Date") within 90 days before the
filling date of this quarterly report, have concluded that as of the
Evaluation Date, our disclosure controls and procedures were adequate and
designed to ensure that material information relating to us and our
consolidated subsidiaries would be made known to them by others within
those entities.
(c) Changes in internal controls. There were no significant changes in our
internal controls or to our knowledge, in other factors that could
significantly affect our disclosure controls and procedures subsequent to
the Evaluation Date.
ITEM 8B. OTHER INFORMATION
None
11
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information Regarding Present Directors and Executive Officers
The following table sets forth as of June 27, 2006, the name, age, and position
of each executive officer and director and the term of office of each director
of the Company.
Name Age Title Director or Officer Since
Charles Camorata 51 President, Chief Executive 01-31-04
Officer and Director
Tony Harrison 42 Vice President and Director 01-31-04
Karen Pollino 54 Secretary / Treasurer 01-31-04
and Director
The following is the business background of each officer and director:
Charles Camorata. Mr. Camorata was a founder of and has been employed by Skreem
Entertainment Corporation since August 1999 and was appointed Chief Executive
Officer and director of the Company on January 31, 2004. From 1980-1999 he was
the owner and president of Camorata Productions, Inc. an entity which composed,
arranged and produced music as well as designed audio and visual systems for
theme parks and recording studios. He has composed and published 35 musical
arrangements.
Tony Harrison. Mr. Harrison joined Skreem Entertainment Corporation in August
2003 and was appointed Vice President and director of the Company on January 31,
2004. Since 1996 he has operated a recording studio just outside Cologne Germany
and produces records in Europe under the "Captain Hollywood" label.
Karen Pollino. Ms. Pollino joined Skreem Entertainment Corporation in August
1999 and was appointed Secretary/Treasurer and director of the Company January
31, 2004. From 1997 to 1999, Ms. Pollino was employed by Martin Consultants,
Inc. as Secretary/Treasurer. From 1990 to 1997 she was employed by Sorex Medical
of Salt Lake City where she had oversight responsibility of purchasing and
customer service.
Except as indicated below, to the knowledge of management, during the past five
years, no present or former director, or executive officer of the Company:
(1) filed a petition under the federal bankruptcy laws or any state insolvency
law, nor had a receiver, fiscal agent or similar officer appointed by a
court for the business or property of such person, or any partnership in
which he was a general partner at or within two years before the time of
such filing, or any corporation or business association of which he was an
executive officer at or within two years before the time of such filing;
(2) was convicted in a criminal proceeding or named subject of a pending
criminal proceeding (excluding traffic violations and other minor
defenses);
(3) was the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting, the
following activities:
(i) acting as a future commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, associated person of any of the foregoing, or as
an investment advisor, underwriter, broker or dealer in securities, or
as an affiliate person, director or employee of any investment company
or engaging in or continuing any conduct or practice in connection with
such activity;
(ii)engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchased or sale of
any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws;
12
(4) was the subject of any order, judgment, or decree, not subsequently
reversed, suspended, or vacated, of any federal or state authority barring,
suspending, or other wise limiting for more than 60 days the right of such
person to engage in any activity described above under this Item, or to be
associated with persons engaged in any such activity;
(5) was found by a court of competent jurisdiction in a civil action or by the
Securities and Exchange Commission to have violated any federal or state
securities law, and the judgment in such civil action or finding by the
Securities and Exchange Commission has not been subsequently reversed,
suspended, or vacated.
(6) was found by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
ITEM 10. EXECUTIVE COMPENSATION
The following tables set forth certain summary information concerning the
compensation paid or accrued for each of the Company's last three completed
fiscal years to the Company's or its principal subsidiaries chief executive
officer and each of its other executive officers that received compensation in
excess of $100,000 during such period (as determined at March 31, 2006, the end
of the Company's last completed fiscal year):
Name Year Compensation
Charles Camorata 2006 $ 50,000
Charles Camorata 2005 $ 50,000
Kevin Monson * 2004 None
Kevin Monson 2003 None
* Resigned on January 31, 2004
Cash Compensation
There was no cash compensation, other than the $50,000 compensation to Charles
Camorata paid to any director or executive officer of the Company during the
fiscal years ended March 31, 2006, and 2005.
Bonuses and Deferred Compensation
None.
Compensation Pursuant to Plans.
None.
Pension Table
None.
Other Compensation
None.
Compensation of Directors.
None.
Termination of Employment and Change of Control Arrangement
There are no compensatory plans or arrangements, including payments to be
received from the Company, with respect to any person named in Cash Compensation
set out above which in any way result in payments to any such person because of
his resignation, retirement, or other termination of such person's employment
with the Company or its subsidiaries, or any change in control of the Company,
or change in the person's responsibilities following a changing in control of
the Company.
13
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 19, 2006 the name and the number of
shares of the Company's Common Stock, par value $.001 per share, held of record
or beneficially by each person who held of record, or was known by the Company
to own beneficially , more than 5% of the 24,508,950 issued and outstanding
shares of the Company's Common Stock, and the name and shareholdings of each
director and of all officers and directors as a group.
Title of Name of Amount and Nature Percentage
Class Beneficial Owner of Beneficial Ownership (1) of Class
-------- ---------------- --------------------------- -----------
OFFICERS, DIRECTORS AND FIVE PERCENT SHAREHOLDERS
Common Charles Camorata 200,000 0.8%
Common Tony Harrison 200,000 0.8%
Common Karen Pollino 109,500 0.5%
Common Jeffrey Martin (1) 22,650,156 92.4%
All officers and
Directors as a Group
(3) persons 509,500 2.2%
(1) Includes shares owned by Martin Consultants, Inc. and Am-Pac Investments.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Board of Directors held a meeting on August 30, 2003 and
unanimously approved a proposal received from Martin Consultants, Inc. and JT
Investments, Ltd., affiliates of the Company, to convert the debt and accrued
interest owed by the Company to equity. Martin Consultants, Inc. and JT
Investments, Ltd. are 100% and 50%, respectively owned by Jeffrey D. Martin. The
notes payable of $1,373,600 and related accrued interest of $208,383 were
reclassified to equity on August 31, 2003 and Martin Consultants, Inc. was
issued 43,000 shares (pre-merger) of common stock.
Notes payable to shareholders and affiliates consist of the following at March
31, 2006:
Notes payable upon demand to Jeffrey Martin secured by the assets of the
Company, interest at 8% per annum $ 556,770
Notes payable upon demand to Martin Consultants, Inc., secured by the assets
of the Company, interest at 8% per annum 879,028
Note payable upon demand to JT Investments, Ltd., unsecured, interest at 8%
per annum 39,592
Note payable upon demand to AM Pac Investment, unsecured, interest at 8%
per annum 15,000
------------
$ 1,490,390
Accounts payable due to an affiliate consisted of $9,254 for health insurance as
of March 31, 2006.
The Company promotes an artist who is the son of the Company's major
shareholder. Total advances to the son are approximately $469,400 as of March
31, 2006.
14
On March 1, 2003, the Company entered into an agreement with All Star Consulting
to establish a fee of $5,000 per month plus rent of an apartment and lease of a
car for services rendered as a Manager of Artists in Germany. Effective January
1, 2005,the Company amended the agreement to increase the fee paid to All Star
Consulting to $6,500 per month. All Star consulting is owned by Tony Harrison,
who is a Vice President and Director of the Company. In connection with the
agreement, the Company expensed promotion fees of approximately $78,000 and
$64,500 for the year ended March 31, 2006, and the year ended March 31, 2005,
respectively.
TRANSACTIONS WITH PROMOTERS
There have been no transactions between the Company and promoters during the
last fiscal year.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
23.1 Consent of Independent Registered Public Accounting Firm.
23.2 Consent of Independent Registered Public Accounting Firm.
31.1 Certification of the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Principal Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Principal Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
2006 2005
Audit Fees $ 10,000 $ 29,511
Audit and Related Fees 10,500 -
Tax Fees - -
All Other Fees - -
----------- -----------
Total $ 20,500 $ 29,511
=========== ===========
(1) Audit fees consist of fees billed for the audit of the Company's
consolidated financial statements and review of the interim consolidated
financial statements.
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 dates indicated:
SKREEM ENTERTAINMENT CORPORATION
Date: June 27, 2006 By /s/ Charles Camorata
Charles Camorata,
Principal Executive Officer
Date: June 27, 2006 By /s/ Karen Pollino
Karen Pollino,
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Name Title Date
/s/ Charles Camorata
Charles Camorata Principal Executive Officer June 27, 2006
/s/ Karen Pollino
Karen Pollino Chief Financial Officer June 27, 2006
/s/ Tony Harrison
Tony Harrison Vice President & Director June 27, 2006
16
Exhibit 31.1
CERTIFICATIONS
I, Charles Camorata, certify that:
1. I have reviewed this annual report on 10-KSB of Skreem Entertainment
Corporation;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) 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) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
c) 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 report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) 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 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
over financial reporting.
June 27, 2006
By: /s/ Charles Camorata
------------------------
Charles Camorata
Principal Executive Officer
17
Exhibit 31.2
CERTIFICATIONS
I, Karen Pollino, certify that:
1. I have reviewed this annual report on 10-KSB of Skreem Entertainment
Corporation;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) 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) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
c) 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 report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) 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 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
over financial reporting.
June 27, 2006
By: /s/ Karen Pollino
-----------------------
Karen Pollino
Chief Financial Officer
18
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002 (18 U.S.C.
SECTION 1350)
In connection with the Annual Report of Skreem Entertainment Corporation; on
Form 10-KSB for the fiscal year ended March 31, 2005, as filed with the
Securities and Exchange Commission (the "Report"), Charles Camorata, Principal
Executive Officer of the Company, does hereby certify, pursuant to ss. 906 of
the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that to his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; 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
Principal Executive Officer
June 27, 2006
19
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002 (18 U.S.C.
SECTION 1350)
In connection with the Annual Report of Skreem Entertainment Corporation; on
Form 10-KSB for the fiscal year ended March 31, 2005, as filed with the
Securities and Exchange Commission (the "Report"), Karen Polino, Principal
Financial Officer of the Company, does hereby certify, pursuant to ss. 906 of
the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that to her knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; 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
Principal Financial Officer
June 27, 2006
20