The assumptions used within the model are included below:

Probability-Weighted Expected Cash Flow Methodology - Assumptions: Single Compound Embedded Derivative within Convertible Note

Description		June 30, 2007			March 31, 2007
Risk-free interest rate			4.89	%		4.54	%
Default status			10.00	%		10.00	%
Alternative financing available and exercised			1.00	%		1.00	%
Trading volume, gross monthly rate increase			1.00	%		1.00	%
Annual growth rate of stock price			22.05	%		21.76	%
Future projected volatility			125.85	%		100.00	%

 

Derivative Liabilities - Warrants

The warrants were valued at June 30, 2007 for $1,843,890 and the change in fair value was recorded as a loss in the amount of $474,855 in the consolidated statement of operations.

Black-Scholes Option Pricing Model Assumptions -

Description		June 30, 2007			March 31, 2007
Risk-free interest rate			4.96	%		4.58	%
Expected warrant life			6.42 years			6.67 years
Expected volatility			141.90	%		119.82	%
Dividends			none			none
Exercise pricing reset probability			10	%		-

The Company felt it was necessary to consider a possible reset of its exercise price for the warrants due the probability of the Company issuing new debt with additional equity or derivative instruments. The issuance of new debt could trigger a reset price for the warrants from an exercise price of $1.75 to $0.20. The Company has placed a probability of this event occurring at 10%.

18

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Note 5 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

For the three months ended June 30, 2007, the Company paid $100 in interest expense and $0 in income taxes and had no non-cash transactions.

The Company paid $0 interest expense and $0 in income taxes for the three months ended June 30, 2006.

The Company has included in its discontinued operations for the three months ended June 30, 2006, a one-year agreement with Hobson, Bowersock, & Associates, LLC (HLB) in which HLB prepared and implemented a promotional campaign for the Company. The Company issued 250,000 shares of common stock and recorded $250,000 in advertising expense. 

 

19

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SKRM Interactive Inc.
Two Year Proforma Financial Statements
		2008			2008
MRUs/SRU's sold			1175			6900
Revenues
Revenue based on $25,000 average per unit		$	29,250,000		$	172,500,000
Expenses
General & administrative		$	250,000		$	595,000
Distribution & warehousing		$	0		$	0
Information systems		$	0		$	0
Intellectual property		$	0		$	0
Product development		$	0		$	0
Legal support		$	130,800		$	170,400
Finance & contracts support		$	132,000		$	186,000
Human Resources support		$	113,400		$	150,300
Training		$	185,250		$	364,500
PR / Marketing Support		$	455,200		$	431,200
IT / Telecommunications support		$	621,150		$	561,900
Service Center / Metro Rollout Support		$	1,486,875		$	2,748,500
Professional fees		$	60,000		$	65,000
Pres. Services salary & benefits		$	180,000		$	210,000
Personal expenses		$	36,000		$	36,000
Director National Sales		$	168,000		$	168,000
Personal expenses		$	12,000		$	12,000
Direct Sales Reps		$	530,750		$	1,665,000
Personal expenses		$	78,000		$	222,000
Emergency Management		$	168,000		$	168,000
Personal expenses		$	12,000		$	12,000
Occupational Health Management		$	168,000		$	168,000
Personal expenses		$	12,000		$	12,000
Personal expenses		$	10,500		$	60,000
Field Service Manager		$	144,000		$	144,000
Personal expenses		$	6,000		$	6,000
Administration salary & benefits		$	60,000		$	60,000
Personal expenses		$	1,200		$	1,200
Other expenses		$	51,000		$	60,000
Total Expenses		$	5,072,125		$	8,277,000
Net Income		$	24,177,875		$	164,223,000

 

Dissenters’ Rights of Appraisal.

Under Delaware Law, our dissenting shareholders, if any, are not entitled to appraisal rights with respect to our amendment, and we will not independently provide our shareholders with any such right.

 

20

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ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith files reports, proxy statements and other information including annual and quarterly reports on Form 10-KSB and 10-QSB (the “1934 Act Filings”) with the Securities and Exchange Commission (the “Commission”). Reports and other information filed by the Company can be inspected and copied at the public reference facilities maintained at the Commission at 100 F Street, NW Washington, D.C, 20459. Copies of such material can be obtained upon written request addressed to the Commission, Public Reference Section, 100 F Street, NW Washington, D.C 20549, at prescribed rates. The Commission maintains a web site on the Internet (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission through the Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).

The following documents as filed with the Commission by the Company are incorporated herein by reference:

(1) Annual Report on Form 10-KSB, for the year ended March 31, 2007;

IF YOU HAVE ANY QUESTIONS REGARDING THIS INFORMATION STATEMENT,

PLEASE CONTACT:

By order of the Board of Directors of

SKRM Interactive Inc.

11637 Orpington Street

Orlando, Florida 32817

(407) 207-0400

September 27, 2007

 

By: /s/ Charles Camorata
Charles Camorata Chief Executive Officer, President

 

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Exhibit A

CERTIFICATE of AMENDMENT of

CERTIFICATE of INCORPORATION of

SKREEM ENTERTAINMENT CORPORATION

Pursuant to § 242 of the General Corporation Law of the State of Delaware

The undersigned, pursuant to the provisions of the General Corporation Law of the State of Delaware, do hereby certify and set forth as follows:

FIRST: That at a meeting of the Board of Directors of SKREEM ENTERTAINMENT CORPORATION. (the “Corporation”), the following resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable:

RESOLVED, that the Board of Directors hereby declares it advisable and in the best interests of the Company that Article FOURTH of the Certificate of Incorporation be amended to read as follows:

“FOURTH: The total number of shares of all classes which the Corporation is authorized to have outstanding is Two Hundred Million (200,000,000) shares of which stock, One Hundred Ninety Million (190,000,000) shares in the par value of $.001 shall be common stock and of which One Million (1,000,000) shares in the par value of $.001 each, shall be preferred stock. The board of directors is authorized, subject to limitations prescribed by law, to provide for the issuance of the authorized shares of preferred stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series and the qualifications, limitations or restrictions thereof. The authority of the board with respect to each series shall include, but not be limited to, determination of the following:

(a) The number of shares constituting that series and the distinctive designation of that series;

(b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;

(c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

 

(d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;

 

22

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(e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or date upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions, and at different redemption rates;

(f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

(g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series;

(h) Any other relative rights, preferences and limitations of that series, unless otherwise provided by the certificate of determination.”

 

SECOND: That the said amendment has been consented to and authorized by the holders of a majority of the issued and outstanding stock entitled to vote by written consent in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.

THIRD: That the aforesaid amendment was duly adopted with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, said corporation has caused this Certificate to be signed by Charles Camorata, this ___ Day of October, 2007.

 

			/s/
			Charles Camorata Authorized Officer

 

23

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Sector 10 Services USA, Inc. seeks to become the leading provider of pre-deployed emergency life response equipment across all Major US cities. Sector 10 Services is the exclusive provider of Pericles LogiX System in the United States and Canada .

Sector 10 Services USA Inc. is uniquely positioned and charged to market and address the city centric emergency needs of all across the US and Canadian Cities with the Pericles LogiX System a structured and integrated emergency solution designed to pre-deploy emergency emergency and disaster response equipment to make US cities safer. Sector 10 Services USA Inc is the exclusive provider of the Pericles LogiX System in the US along with the SRU and MRU product line, organizing safety services to cities across the USA. Sector 10’s initial MRU design has been developed, produced, nationally test marketed and sold.

PRODUCT/SERVICES:

 

Sector 10 Services USA Inc. core focus is on first response solutions, utilizing two lines of patented products, Mobile response Units (MRU) and Stationary Response Units (SRU). Both product lines represent a leap forward is emergency response systems and evacuation aids. These unique comprehensive products represent a new product category for brand development.

Sector 10 Services USA inc. intends to provide replenishment & maintenance, customer service and education and training services. (Including EPA, OSHA, NIOSH & NFPA rules/guidelines). To expedite sales, the company will facilitate financial solutions through private or municipal leases

Major markets defined by the company include Multi-Story Buildings, Construction/Industrial Sites, Schools, Hospitals, Hazmat/Decontamination First Responder Teams

The Multi-Story Building market is the initial target market for Sector 10 Services USA Inc. Customers will primarily be the building owners and managers, institutions and the building tenants. Targeting the top 20 building managers in the U.S. is central to the sales implementation strategy. This complements the 80/20 principle, where a small number of building managers will make up over 80% of the market place. There are over 6 million U.S. buildings, 943,000 are over 7 stories and 400,000 are skyscrapers. This market alone represents the potential of up to $104 billion

COMPETITION:

 

There is no apparent direct competition for the MRU concept at this time. Sector 10 has not identified any enterprise currently manufacturing or marketing a pre-packaged, pre-deployable MRU. Competition is incorrectly identified as the 30,000 products in the existing emergency and safety industry. The numbers of these products are loosely bound fragmented mixture of inventors, distributors and manufacturers in an old distribution market. Sector 10 intends to provide a new channel of distribution in the marketplace. The distributors of the thousands of existing medical safety and communications products are potential customers of Sector 10 because the MRU is a new way to communicate, store, deliver, deploy and stage emergency relief and products. Those who specialize in safety and emergency products are typically a division or subsidiary of a larger organization.

OPPORTUNITY/RISK:

 

America’s war on terrorism provides extraordinary demand for this technology. Sector 10 Services USA, Inc has over 40,000 qualified leads in 7 target markets. The total U.S. market valuation for this new product category is estimated to be $154 billion. Sector 10 has created and introduced a method of deployment for the MRU to create a nationwide unified community response program. The deployment plan directly links the emergency response community to the private sector with systems to communicate, aid and escape. Sector 10 Services USA, inc. believes every major city within the US could be linked under its national response program.

 

8

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Sector 10 Services USA, Inc. central challenge will be to generate and manage operational and revenue growth. The company’s marketing plan and business plan is designed to allow for necessary adjustments and ongoing review without impeding sales efforts.

Upon Completion of the transaction, the following shall assume the office indicated and as Directors of the Company

BIOGRAPHIES:

Pericles DeAvila, President

Pericles DeAvila is the inventor of the imaginative Pericles LogiX System and the Mobile and Stationary Response Units (or MRU and SRU) products, the first self-contained emergency response systems in the emergency and safety market. He has had years of entrepreneurial experience nationally and internationally. His experience in leading large groups of people was expanded when he continued his construction experience as the commercial/industrial construction manager on large projects in Silicon Valley CA and in the Seattle WA area.

He founded DeAvila Homes, a condominium development company and was co-founder of Dagcon General Construction, a 375-employee subcontractor in the San Francisco area in the mid 1990’s. Mr.

DeAvila created a futurist team of architectural, engineering minds to convert existing residential construction methods into new cost effective, time efficient construction erecting technologies. These efforts lead to the construction of metal frame residential homes in the Bay Area.

His experience in the industry has allowed him participation and completion of projects with budgets of over $400 million each.

He is fluent in Portuguese, Italian, French, Spanish, as well as English. He is the recipient of a Congressional National Leadership Award and was appointed as special advisor to the Chairman of the Congressional Committee on the Business Advisory Council.

Alan Rouleau, Vice President

Alan Rouleau is a construction industry professional in Seattle, WA. Mr. Rouleau has more than 25 years of multifaceted experience in the leadership of business and construction operations. He is an accomplished, successful professional in major program/general management roles over teams of eight plus professionals. He was the founder of a drywall company in 1984 that serviced the residential and light commercial industry in the Manchester, NH area.

As a highly sought after professional he has enjoyed working on projects such as the Adobe Waterfront, the most aggressive futuristic architectural design by MBBJ in the Seattle area. He also lead a team of one hundred plus construction professionals responsible for construction and scheduling for a two year contract at Safeco Field in Seattle, WA.

 

9

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His experience includes the development and implementation of safety plans in all types of construction scenarios. This process includes assessment, accident prevention, designating competence training and resource allocation to help companies become more profitable by implementing practical safety plans.

Mr. Rouleau served in the USMC from 1978-1982 MOS: Scout/Sniper and is the recipient of a humanitarian award. Mr. Rouleau is an avid sportsman and globe trekker. He has traveled to 39 countries and has climbed some of the world’s largest mountains, such as Mt. Kenya in Africa and Mont Blanc in Europe. He is fluent in French.

Cristy A. DeAvila, Secretary/Treasurer

Ms. DeAvila is a technology professional possessing a comprehensive knowledge of telecommunications and data convergence industry trends to enhance business processes. She is an experienced liaison between regulators, vendors, commercial customers and international business owners. Her strong business knowledge and interpersonal skills demonstrate innovative thinking, strategic planning and project directives. Most recently she served as the Vice President over a 120 million dollar budget of COGS and pricing for UCN, a technology company in Utah.

Ms. DeAvila has had a very successful career as an executive in the telecommunications industry. She was Director of Long Distance Services for McLeod USA Communications, Inc. She had corporate responsibility for contract negotiations and vendor/sales relationships. She provided technical expertise and support for product development. Ms. DeAvila managed six departments of network administration including project development, traffic engineering , provisioning, private line optimization, line costs and vendor relations. She had line cost responsibility of $15 million per month and was able to institute a cost reduction program resulting in a $3.5 million savings to the company. Auditing charges and managing disputed charges by vendors was also one of her responsibilities. She also directed the design and implementation of a WEB based traffic analysis system.

Ms. DeAvila was also the Director of Network Services for Access Communications, Inc. She had complete responsibility for contract negotiations and vendor/sales relationships. She was also responsible for product and sales support for technical, pricing and costing requirements. She developed & submitted over $4 million of liability and expense reports monthly. Ms. DeAvila was also responsible for the development and delivery of all employee-training requirements. She designed and developed the sales and marketing collateral for the company. She was also the key contact for investors and large customer support for the company. She is the spouse of Pericles DeAvila.

10

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SKRM Interactive, Inc.

(formerly SKREEM ENTERTAINMENT CORPORATION)

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONSOLIDATED BALANCE SHEETS

As of June 30, 2007 and March 31, 2007

		June 30, 2007			March 31, 2007
ASSETS
Current assets:
Cash and Cash equivalents		$	397		$	1,781
Due from affiliate			14,123			-
Note receivable, net of impairment allowance of $0 and $10,710			-			400,000
Deferred financing costs			14,427			11,438
Total current assets			28,947			413,219
Deferred financing costs, net of amortization of $4,752 and $2,806			70,821			75,756
Total assets		$	99,768		$	488,975
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities		$	145,395		$	154,410
Derivative liabilities			1,870,209			1,396,245
Notes payable - shareholder			8,500			35,000
Due to affiliate			-			13,078
Total current liabilities			2,024,104			1,598,733
Callable secured convertible notes payable net of unamortized discount of $588,720 and $592,806			11,280			7,194
Total liabilities			2,035,384			1,605,927
Shareholders' deficit:
Preferred shares - $0.001 par value; 1,000,000 authorized, no shares issued or outstanding			-			-
Common shares - $0.001 par value; 50,000,000 authorized; 26,548,292 shares issued and outstanding			26,548			26,548
Additional paid - in capital			7,080,898			7,080,898
Deficit accumulated during the development stage			(9,043,062	)		(8,224,398	)
Total shareholders' deficit			(1,935,616	)		(1,116,952	)
Total liabilities and shareholders' deficit		$	99,768		$	488,975

The accompanying notes are an integral part of these unaudited consolidated financial statements

11

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SKRM Interactive, Inc.

(formerly SKREEM ENTERTAINMENT CORPORATION)

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended June 30, 2007 and 2006

and for the Period From Inception, August 19, 1999, to June 30, 2007

		Three Months Ended						Inception to
		June 30,			June 30,			June 30,
		2007			2006			2007
Expenses
General and administrative		$	325,629			-		$	1,247,863
Impairment of note receivable			-			-			10,701
Total expenses			325,629			-			1,258,564
Loss from operations			(325,629	)		-			(1,258,564	)
Other income (expense)
Interest income			-			-			10,701
Interest expense			(19,071	)		-			(45,268	)
Change in fair value of derivatives			(473,964	)		-			(1,270,209	)
Total other income/(expense)			(493,035	)		-			(1,304,776	)
Loss from continuing operations			(818,664	)		-			(2,563,340	)
Discontinued operations
Loss from operations of subsidiary			-			(433,538	)		(6,778,804	)
Gain on disposal of subsidiary			-			-			299,082
Loss from discontinued operations			-			(433,538	)		(6,479,722	)
Net loss		$	(818,664	)	$	(433,538	)	$	(9,043,062	)
Weighted Average Shares Outstanding - basic and diluted			26,548,292			24,612,455
Basic and diluted loss per share
Continuing Operations		$	(0.03	)	$	-
Discontinued Operations		$	-		$	(0.02	)
Net Loss		$	(0.03	)	$	(0.02	)

The accompanying notes are an integral part of these unaudited consolidated financial statements

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SKRM Interactive, Inc.

(formerly SKREEM ENTERTAINMENT CORPORATION

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT

For the period from inception, August 19, 1999, to June 30, 2007

								Additional			During the			Losses
		Common Stock						Paid-In			Development			Accumulated
		Shares			Amount			Capital			Stage			Total
Balance at Inception, August 19,1999			-		$	-		$	-		$	-		$	-
Issuance of common stock			20,000			20			-			-			20
Net loss			-			-			-			(84,021	)		(84,021	)
Balance at December 31, 1999			20,000			20			-			(84,021	)		(84,001	)
Net loss			-			-			-			(230,879	)		(230,879	)
Balance at December 31, 2000			20,000			20			-			(314,900	)		(314,880	)
Net loss			-			-			-			(494,816	)		(494,816	)
Balance at December 31, 2001			20,000			20			-			(809,716	)		(809,696	)
Net loss			-			-			-			(384,590	)		(384,590	)
Balance at December 31, 2002			20,000			20			-			(1,194,306	)		(1,194,286	)
Reclassification of debt to equity			43,000			43			1,581,940			-			1,581,983
Net loss			-			-			-			(736,364	)		(736,364	)
Balance at December 31, 2003			63,000			63			1,581,940			(1,930,670	)		(348,667	)
Effect of issuance of common stock and recapitalization in a reverse acquisition transaction			25,943,925			25,944			(25,944	)		-			-
Net loss			-			-			-			(205,994	)		(205,994	)
Balance at March 31, 2004			26,006,925			26,007			1,555,996			(2,136,664	)		(554,661	)
Proceeds from issuance of common stock			603,856			604			301,324			-			301,928
Cancellation of shares			(3,502,925	)		(3,503	)		3,503			-			-
Net loss			-			-			(1,592,469	)		(1,592,469	)
Balance at March 31, 2005			23,107,856			23,108			1,860,823			(3,729,133	)		(1,845,202	)
Proceeds from issuance of common stock			276,400			276			276,124			-			276,400
Stock issued for accounts payable			50,000			50			49,950			-			50,000
Stock issued for conversion of debt			1,050,000			1,050			1,048,950			-			1,050,000
Net loss			-			-			-			(1,376,529	)		(1,376,529	)
Balance at March 31, 2006			24,484,256			24,484			3,235,847			(5,105,662	)		(1,845,331	)
Proceeds from issuance of common stock			24,694			25			24,670			-			24,695
Stock issued for services			1,102,000			1,102			1,306,500			-			1,307,602
Stock issued for debt			817,342			817			1,838,204			-			1,839,021
Stock issued for investment			3,000,000			3,000			4,017,000			-			4,020,000
Stock rescinded relating to investment			(2,880,000	)		(2,880	)		(3,856,323	)		-			(3,859,203	)
Expenses paid by shareholder			-			-			515,000			-			515,000
Net loss			-			-			-			(3,118,736	)		(3,118,736	)
Balance at March 31, 2007			26,548,292			26,548			7,080,898			(8,224,398	)		(1,116,952	)
Net loss			-			-			-			(818,664	)		(818,664	)
Balance at June 30, 2007			26,548,292		$	26,548		$	7,080,898		$	(9,043,062	)	$	(1,935,616	)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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SKRM Interactive, Inc.

(formerly SKREEM ENTERTAINMENT CORPORATION)

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended June 30, 2007 and 2006

and for the Period From Inception, August 19, 1999, to June 30, 2007

		Three Months Ended						Inception to
		June 30,			June 30,			June 30,
		2007			2006			2007
Cash Flows from Operating Activities:
Net loss		$	(818,664	)	$	(433,538	)	$	(9,043,062	)
Loss on discontinued operations			-			433,538			6,479,722
Loss from continuing operations			(818,664	)		-			(2,563,340	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of loan receivable			-			-			10,701
Stock issued for services			-			-			692,650
Amortization of deferred financing costs			1,946			-			4,752
Accretion of discount on convertible notes			4,086			-			11,280
Change in fair value of derivatives			473,964			-			1,270,209
Changes in
Accounts payable and accrued liabilities			(9,015	)		-			145,393
Due to affiliate			(27,201	)		-			(14,123	)
Interest receivable			-			-			(10,701	)
Net cash used in operating activities			(374,884	)		-			(453,179	)
Cash Flows from Investing Activities
Investment in note receivable			-			-			(400,000	)
Proceeds from note receivable			400,000			-			400,000
Net cash provided by investing activities			400,000			-			-
Cash Flows from Financing Activities
Proceeds from issuance of common stock			-			-			24,695
Proceeds from notes payable - shareholder			8,500			-			43,500
Proceeds from convertible notes payable			-			-			600,000
Payments on notes payable - shareholder			(35,000	)		-			(35,000	)
Debt issuance costs			-			-			(90,000	)
Net cash provided by financing activities			(26,500	)		-			543,195
Discontinued operations
Discontinued operating activities			-			(139,230	)		(4,506,211	)
Discontinued investing activities			-			(373	)		(187,748	)
Discontinued financing activities			-			84,695			4,604,340
Net cash provided by (used in) discontinued operations			-			(54,908	)		(89,619	)
Net increase (decrease) in cash and cash equivalents			(1,384	)		(54,908	)		397
Cash and cash equivalents
Beginning of period - continuing operations			1,781			-			-
Beginning of period - discontinued operations			-			62,383			-
End of period - continuing operations		$	397		$	-		$	397
End of period - discontinued operations		$	-		$	7,475		$	-

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

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SKRM Interactive, Inc.

(formerly SKREEM ENTERTAINMENT CORPORATION)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of SKRM Interactive, Inc. formerly SKREEM ENTERTAINMENT CORPORATION have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10QSB and Item 310(b) of Regulation S-B. Certain information and footnote disclosures normally in financial statements prepared in accordance with generally accepted accounting principles have been or omitted pursuant to the rules and regulations of the Securities and Exchange Commission; however, management believes the disclosures which are made are adequate to make the information presented not misleading. Management believes that all adjustments have been made to the financial statements as are necessary to the fair statement of the results of the interim period. These consolidated financial statements and footnotes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB for the year ended March 31, 2007, and Management’s Discussion and Analysis of Financial Condition and Results of Operations. Certain prior year amounts have been reclassified to conform to the current year presentation.

Note 2 - GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. SKRM Interactive sustained losses of $818,664 and $433,538 for the three months ended June 30, 2007 and June 30, 2006, respectively. The Company had an accumulated deficit of $9,043,062 as of June 30, 2007. These factors raise substantial doubt about the ability of SKRM Interactive to continue as a going concern for a reasonable period of time. SKRM Interactive 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. No assurance can be given that SKRM Interactive will be successful in these efforts.

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 SKRM Interactive be unable to continue as a going concern.

Note 3 - REGISTRATION RIGHTS AGREEMENT

The Company has not filed its Registration Statement with the SEC as of the date of this filing. Since the Company has not been able to file its Registration Statement in a timely manner, the Company has recorded a liability of $84,000. The liability represents the Company’s obligation under its registration rights agreement to its note holders as partial relief for damages. The Company has included in the consolidated statement of operations the expense of $36,000 within its general and administrative expenses for the three months ended June 30, 2007. The liability of $84,000 will continue to increase by approximately $12,000 each month until the Registration Statement becomes effective or the note holders are paid in full. The Company may pay the obligation in cash or in common stock. If the payment is made in common stock, the Company is required to use the conversion rate of $1.27. The Company plans to file its Registration Statement with the SEC by August 31, 2007.

Note 4 - DERIVATIVE LIABILITES

The impact of the application of SFAS No. 133 and EITF 00-19 in regards to the derivative liabilities on the balance sheet is presented below. The change in fair value of the derivative liabilities from March 31, 2007 to June 30, 2007 is reflected as either a gain or loss in the consolidated statement of operations.

Description		June 30, 2007			March 31, 2007
Derivative liability - single compound embedded derivatives Within the convertible notes		$	26,319		$	27,210
Derivative liability - warrants			1,843,890			1,369,035
Total		$	1,870,209		$	1,396,245

 

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Derivative Liability - Single Compound Embedded Derivatives within Convertible Notes

SKRM Interactive, Inc. valued the single compound embedded derivatives within the convertible notes based on a probability weighted discounted cash flow model. The value at inception of the single compound embedded derivative liability was $139,286 and was bifurcated from the debt host contract and recorded as a derivative liability.

The compound embedded derivative liability was measured at fair value again at June 30, 2007 and the change in fair value was recorded as a gain in the amount of $891 in the consolidated statement of operations.

The assumptions used within the model are included below:

Probability-Weighted Expected Cash Flow Methodology - Assumptions: Single Compound Embedded Derivative within Convertible Note

Description		June 30, 2007			March 31, 2007
Risk-free interest rate			4.89	%		4.54	%
Default status			10.00	%		10.00	%
Alternative financing available and exercised			1.00	%		1.00	%
Trading volume, gross monthly rate increase			1.00	%		1.00	%
Annual growth rate of stock price			22.05	%		21.76	%
Future projected volatility			125.85	%		100.00	%

 

Derivative Liabilities - Warrants

The warrants were valued at June 30, 2007 for $1,843,890 and the change in fair value was recorded as a loss in the amount of $474,855 in the consolidated statement of operations.

Black-Scholes Option Pricing Model Assumptions -

Description		June 30, 2007			March 31, 2007
Risk-free interest rate			4.96	%		4.58	%
Expected warrant life			6.42 years			6.67 years
Expected volatility			141.90	%		119.82	%
Dividends			none			none
Exercise pricing reset probability			10	%		-

The Company felt it was necessary to consider a possible reset of its exercise price for the warrants due the probability of the Company issuing new debt with additional equity or derivative instruments. The issuance of new debt could trigger a reset price for the warrants from an exercise price of $1.75 to $0.20. The Company has placed a probability of this event occurring at 10%.

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Note 5 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

For the three months ended June 30, 2007, the Company paid $100 in interest expense and $0 in income taxes and had no non-cash transactions.

The Company paid $0 interest expense and $0 in income taxes for the three months ended June 30, 2006.

The Company has included in its discontinued operations for the three months ended June 30, 2006, a one-year agreement with Hobson, Bowersock, & Associates, LLC (HLB) in which HLB prepared and implemented a promotional campaign for the Company. The Company issued 250,000 shares of common stock and recorded $250,000 in advertising expense. 

 

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SKRM Interactive Inc.
Two Year Proforma Financial Statements
		2008			2008
MRUs/SRU's sold			1175			6900
Revenues
Revenue based on $25,000 average per unit		$	29,250,000		$	172,500,000
Expenses
General & administrative		$	250,000		$	595,000
Distribution & warehousing		$	0		$	0
Information systems		$	0		$	0
Intellectual property		$	0		$	0
Product development		$	0		$	0
Legal support		$	130,800		$	170,400
Finance & contracts support		$	132,000		$	186,000
Human Resources support		$	113,400		$	150,300
Training		$	185,250		$	364,500
PR / Marketing Support		$	455,200		$	431,200
IT / Telecommunications support		$	621,150		$	561,900
Service Center / Metro Rollout Support		$	1,486,875		$	2,748,500
Professional fees		$	60,000		$	65,000
Pres. Services salary & benefits		$	180,000		$	210,000
Personal expenses		$	36,000		$	36,000
Director National Sales		$	168,000		$	168,000
Personal expenses		$	12,000		$	12,000
Direct Sales Reps		$	530,750		$	1,665,000
Personal expenses		$	78,000		$	222,000
Emergency Management		$	168,000		$	168,000
Personal expenses		$	12,000		$	12,000
Occupational Health Management		$	168,000		$	168,000
Personal expenses		$	12,000		$	12,000
Personal expenses		$	10,500		$	60,000
Field Service Manager		$	144,000		$	144,000
Personal expenses		$	6,000		$	6,000
Administration salary & benefits		$	60,000		$	60,000
Personal expenses		$	1,200		$	1,200
Other expenses		$	51,000		$	60,000
Total Expenses		$	5,072,125		$	8,277,000
Net Income		$	24,177,875		$	164,223,000

 

Dissenters’ Rights of Appraisal.

Under Delaware Law, our dissenting shareholders, if any, are not entitled to appraisal rights with respect to our amendment, and we will not independently provide our shareholders with any such right.

 

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ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith files reports, proxy statements and other information including annual and quarterly reports on Form 10-KSB and 10-QSB (the “1934 Act Filings”) with the Securities and Exchange Commission (the “Commission”). Reports and other information filed by the Company can be inspected and copied at the public reference facilities maintained at the Commission at 100 F Street, NW Washington, D.C, 20459. Copies of such material can be obtained upon written request addressed to the Commission, Public Reference Section, 100 F Street, NW Washington, D.C 20549, at prescribed rates. The Commission maintains a web site on the Internet (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission through the Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).

The following documents as filed with the Commission by the Company are incorporated herein by reference:

(1) Annual Report on Form 10-KSB, for the year ended March 31, 2007;

IF YOU HAVE ANY QUESTIONS REGARDING THIS INFORMATION STATEMENT,

PLEASE CONTACT:

By order of the Board of Directors of

SKRM Interactive Inc.

11637 Orpington Street

Orlando, Florida 32817

(407) 207-0400

September 27, 2007

 

By: /s/ Charles Camorata
Charles Camorata Chief Executive Officer, President

 

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Exhibit A

CERTIFICATE of AMENDMENT of

CERTIFICATE of INCORPORATION of

SKREEM ENTERTAINMENT CORPORATION

Pursuant to § 242 of the General Corporation Law of the State of Delaware

The undersigned, pursuant to the provisions of the General Corporation Law of the State of Delaware, do hereby certify and set forth as follows:

FIRST: That at a meeting of the Board of Directors of SKREEM ENTERTAINMENT CORPORATION. (the “Corporation”), the following resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable:

RESOLVED, that the Board of Directors hereby declares it advisable and in the best interests of the Company that Article FOURTH of the Certificate of Incorporation be amended to read as follows:

“FOURTH: The total number of shares of all classes which the Corporation is authorized to have outstanding is Two Hundred Million (200,000,000) shares of which stock, One Hundred Ninety Million (190,000,000) shares in the par value of $.001 shall be common stock and of which One Million (1,000,000) shares in the par value of $.001 each, shall be preferred stock. The board of directors is authorized, subject to limitations prescribed by law, to provide for the issuance of the authorized shares of preferred stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series and the qualifications, limitations or restrictions thereof. The authority of the board with respect to each series shall include, but not be limited to, determination of the following:

(a) The number of shares constituting that series and the distinctive designation of that series;

(b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;

(c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

 

(d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;

 

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(e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or date upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions, and at different redemption rates;

(f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

(g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series;

(h) Any other relative rights, preferences and limitations of that series, unless otherwise provided by the certificate of determination.”

 

SECOND: That the said amendment has been consented to and authorized by the holders of a majority of the issued and outstanding stock entitled to vote by written consent in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.

THIRD: That the aforesaid amendment was duly adopted with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, said corporation has caused this Certificate to be signed by Charles Camorata, this ___ Day of October, 2007.

 

			/s/
			Charles Camorata Authorized Officer

 

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Sector 10 Services USA, Inc. seeks to become the leading provider of pre-deployed emergency life response equipment across all Major US cities. Sector 10 Services is the exclusive provider of Pericles LogiX System in the United States and Canada .

Sector 10 Services USA Inc. is uniquely positioned and charged to market and address the city centric emergency needs of all across the US and Canadian Cities with the Pericles LogiX System a structured and integrated emergency solution designed to pre-deploy emergency emergency and disaster response equipment to make US cities safer. Sector 10 Services USA Inc is the exclusive provider of the Pericles LogiX System in the US along with the SRU and MRU product line, organizing safety services to cities across the USA. Sector 10’s initial MRU design has been developed, produced, nationally test marketed and sold.

PRODUCT/SERVICES:

 

Sector 10 Services USA Inc. core focus is on first response solutions, utilizing two lines of patented products, Mobile response Units (MRU) and Stationary Response Units (SRU). Both product lines represent a leap forward is emergency response systems and evacuation aids. These unique comprehensive products represent a new product category for brand development.

Sector 10 Services USA inc. intends to provide replenishment & maintenance, customer service and education and training services. (Including EPA, OSHA, NIOSH & NFPA rules/guidelines). To expedite sales, the company will facilitate financial solutions through private or municipal leases

Major markets defined by the company include Multi-Story Buildings, Construction/Industrial Sites, Schools, Hospitals, Hazmat/Decontamination First Responder Teams

The Multi-Story Building market is the initial target market for Sector 10 Services USA Inc. Customers will primarily be the building owners and managers, institutions and the building tenants. Targeting the top 20 building managers in the U.S. is central to the sales implementation strategy. This complements the 80/20 principle, where a small number of building managers will make up over 80% of the market place. There are over 6 million U.S. buildings, 943,000 are over 7 stories and 400,000 are skyscrapers. This market alone represents the potential of up to $104 billion

COMPETITION:

 

There is no apparent direct competition for the MRU concept at this time. Sector 10 has not identified any enterprise currently manufacturing or marketing a pre-packaged, pre-deployable MRU. Competition is incorrectly identified as the 30,000 products in the existing emergency and safety industry. The numbers of these products are loosely bound fragmented mixture of inventors, distributors and manufacturers in an old distribution market. Sector 10 intends to provide a new channel of distribution in the marketplace. The distributors of the thousands of existing medical safety and communications products are potential customers of Sector 10 because the MRU is a new way to communicate, store, deliver, deploy and stage emergency relief and products. Those who specialize in safety and emergency products are typically a division or subsidiary of a larger organization.

OPPORTUNITY/RISK:

 

America’s war on terrorism provides extraordinary demand for this technology. Sector 10 Services USA, Inc has over 40,000 qualified leads in 7 target markets. The total U.S. market valuation for this new product category is estimated to be $154 billion. Sector 10 has created and introduced a method of deployment for the MRU to create a nationwide unified community response program. The deployment plan directly links the emergency response community to the private sector with systems to communicate, aid and escape. Sector 10 Services USA, inc. believes every major city within the US could be linked under its national response program.

 

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Sector 10 Services USA, Inc. central challenge will be to generate and manage operational and revenue growth. The company’s marketing plan and business plan is designed to allow for necessary adjustments and ongoing review without impeding sales efforts.

Upon Completion of the transaction, the following shall assume the office indicated and as Directors of the Company

BIOGRAPHIES:

Pericles DeAvila, President

Pericles DeAvila is the inventor of the imaginative Pericles LogiX System and the Mobile and Stationary Response Units (or MRU and SRU) products, the first self-contained emergency response systems in the emergency and safety market. He has had years of entrepreneurial experience nationally and internationally. His experience in leading large groups of people was expanded when he continued his construction experience as the commercial/industrial construction manager on large projects in Silicon Valley CA and in the Seattle WA area.

He founded DeAvila Homes, a condominium development company and was co-founder of Dagcon General Construction, a 375-employee subcontractor in the San Francisco area in the mid 1990’s. Mr.

DeAvila created a futurist team of architectural, engineering minds to convert existing residential construction methods into new cost effective, time efficient construction erecting technologies. These efforts lead to the construction of metal frame residential homes in the Bay Area.

His experience in the industry has allowed him participation and completion of projects with budgets of over $400 million each.

He is fluent in Portuguese, Italian, French, Spanish, as well as English. He is the recipient of a Congressional National Leadership Award and was appointed as special advisor to the Chairman of the Congressional Committee on the Business Advisory Council.

Alan Rouleau, Vice President

Alan Rouleau is a construction industry professional in Seattle, WA. Mr. Rouleau has more than 25 years of multifaceted experience in the leadership of business and construction operations. He is an accomplished, successful professional in major program/general management roles over teams of eight plus professionals. He was the founder of a drywall company in 1984 that serviced the residential and light commercial industry in the Manchester, NH area.

As a highly sought after professional he has enjoyed working on projects such as the Adobe Waterfront, the most aggressive futuristic architectural design by MBBJ in the Seattle area. He also lead a team of one hundred plus construction professionals responsible for construction and scheduling for a two year contract at Safeco Field in Seattle, WA.

 

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His experience includes the development and implementation of safety plans in all types of construction scenarios. This process includes assessment, accident prevention, designating competence training and resource allocation to help companies become more profitable by implementing practical safety plans.

Mr. Rouleau served in the USMC from 1978-1982 MOS: Scout/Sniper and is the recipient of a humanitarian award. Mr. Rouleau is an avid sportsman and globe trekker. He has traveled to 39 countries and has climbed some of the world’s largest mountains, such as Mt. Kenya in Africa and Mont Blanc in Europe. He is fluent in French.

Cristy A. DeAvila, Secretary/Treasurer

Ms. DeAvila is a technology professional possessing a comprehensive knowledge of telecommunications and data convergence industry trends to enhance business processes. She is an experienced liaison between regulators, vendors, commercial customers and international business owners. Her strong business knowledge and interpersonal skills demonstrate innovative thinking, strategic planning and project directives. Most recently she served as the Vice President over a 120 million dollar budget of COGS and pricing for UCN, a technology company in Utah.

Ms. DeAvila has had a very successful career as an executive in the telecommunications industry. She was Director of Long Distance Services for McLeod USA Communications, Inc. She had corporate responsibility for contract negotiations and vendor/sales relationships. She provided technical expertise and support for product development. Ms. DeAvila managed six departments of network administration including project development, traffic engineering , provisioning, private line optimization, line costs and vendor relations. She had line cost responsibility of $15 million per month and was able to institute a cost reduction program resulting in a $3.5 million savings to the company. Auditing charges and managing disputed charges by vendors was also one of her responsibilities. She also directed the design and implementation of a WEB based traffic analysis system.

Ms. DeAvila was also the Director of Network Services for Access Communications, Inc. She had complete responsibility for contract negotiations and vendor/sales relationships. She was also responsible for product and sales support for technical, pricing and costing requirements. She developed & submitted over $4 million of liability and expense reports monthly. Ms. DeAvila was also responsible for the development and delivery of all employee-training requirements. She designed and developed the sales and marketing collateral for the company. She was also the key contact for investors and large customer support for the company. She is the spouse of Pericles DeAvila.

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SKRM Interactive, Inc.

(formerly SKREEM ENTERTAINMENT CORPORATION)

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONSOLIDATED BALANCE SHEETS

As of June 30, 2007 and March 31, 2007

		June 30, 2007			March 31, 2007
ASSETS
Current assets:
Cash and Cash equivalents		$	397		$	1,781
Due from affiliate			14,123			-
Note receivable, net of impairment allowance of $0 and $10,710			-			400,000
Deferred financing costs			14,427			11,438
Total current assets			28,947			413,219
Deferred financing costs, net of amortization of $4,752 and $2,806			70,821			75,756
Total assets		$	99,768		$	488,975
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities		$	145,395		$	154,410
Derivative liabilities			1,870,209			1,396,245
Notes payable - shareholder			8,500			35,000
Due to affiliate			-			13,078
Total current liabilities			2,024,104			1,598,733
Callable secured convertible notes payable net of unamortized discount of $588,720 and $592,806			11,280			7,194
Total liabilities			2,035,384			1,605,927
Shareholders' deficit:
Preferred shares - $0.001 par value; 1,000,000 authorized, no shares issued or outstanding			-			-
Common shares - $0.001 par value; 50,000,000 authorized; 26,548,292 shares issued and outstanding			26,548			26,548
Additional paid - in capital			7,080,898			7,080,898
Deficit accumulated during the development stage			(9,043,062	)		(8,224,398	)
Total shareholders' deficit			(1,935,616	)		(1,116,952	)
Total liabilities and shareholders' deficit		$	99,768		$	488,975

The accompanying notes are an integral part of these unaudited consolidated financial statements

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SKRM Interactive, Inc.

(formerly SKREEM ENTERTAINMENT CORPORATION)

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended June 30, 2007 and 2006

and for the Period From Inception, August 19, 1999, to June 30, 2007

		Three Months Ended						Inception to
		June 30,			June 30,			June 30,
		2007			2006			2007
Expenses
General and administrative		$	325,629			-		$	1,247,863
Impairment of note receivable			-			-			10,701
Total expenses			325,629			-			1,258,564
Loss from operations			(325,629	)		-			(1,258,564	)
Other income (expense)
Interest income			-			-			10,701
Interest expense			(19,071	)		-			(45,268	)
Change in fair value of derivatives			(473,964	)		-			(1,270,209	)
Total other income/(expense)			(493,035	)		-			(1,304,776	)
Loss from continuing operations			(818,664	)		-			(2,563,340	)
Discontinued operations
Loss from operations of subsidiary			-			(433,538	)		(6,778,804	)
Gain on disposal of subsidiary			-			-			299,082
Loss from discontinued operations			-			(433,538	)		(6,479,722	)
Net loss		$	(818,664	)	$	(433,538	)	$	(9,043,062	)
Weighted Average Shares Outstanding - basic and diluted			26,548,292			24,612,455
Basic and diluted loss per share
Continuing Operations		$	(0.03	)	$	-
Discontinued Operations		$	-		$	(0.02	)
Net Loss		$	(0.03	)	$	(0.02	)

The accompanying notes are an integral part of these unaudited consolidated financial statements

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SKRM Interactive, Inc.

(formerly SKREEM ENTERTAINMENT CORPORATION

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT

For the period from inception, August 19, 1999, to June 30, 2007

								Additional			During the			Losses
		Common Stock						Paid-In			Development			Accumulated
		Shares			Amount			Capital			Stage			Total
Balance at Inception, August 19,1999			-		$	-		$	-		$	-		$	-
Issuance of common stock			20,000			20			-			-			20
Net loss			-			-			-			(84,021	)		(84,021	)
Balance at December 31, 1999			20,000			20			-			(84,021	)		(84,001	)
Net loss			-			-			-			(230,879	)		(230,879	)
Balance at December 31, 2000			20,000			20			-			(314,900	)		(314,880	)
Net loss			-			-			-			(494,816	)		(494,816	)
Balance at December 31, 2001			20,000			20			-			(809,716	)		(809,696	)
Net loss			-			-			-			(384,590	)		(384,590	)
Balance at December 31, 2002			20,000			20			-			(1,194,306	)		(1,194,286	)
Reclassification of debt to equity			43,000			43			1,581,940			-			1,581,983
Net loss			-			-			-			(736,364	)		(736,364	)
Balance at December 31, 2003			63,000			63			1,581,940			(1,930,670	)		(348,667	)
Effect of issuance of common stock and recapitalization in a reverse acquisition transaction			25,943,925			25,944			(25,944	)		-			-
Net loss			-			-			-			(205,994	)		(205,994	)
Balance at March 31, 2004			26,006,925			26,007			1,555,996			(2,136,664	)		(554,661	)
Proceeds from issuance of common stock			603,856			604			301,324			-			301,928
Cancellation of shares			(3,502,925	)		(3,503	)		3,503			-			-
Net loss			-			-			(1,592,469	)		(1,592,469	)
Balance at March 31, 2005			23,107,856			23,108			1,860,823			(3,729,133	)		(1,845,202	)
Proceeds from issuance of common stock			276,400			276			276,124			-			276,400
Stock issued for accounts payable			50,000			50			49,950			-			50,000
Stock issued for conversion of debt			1,050,000			1,050			1,048,950			-			1,050,000
Net loss			-			-			-			(1,376,529	)		(1,376,529	)
Balance at March 31, 2006			24,484,256			24,484			3,235,847			(5,105,662	)		(1,845,331	)
Proceeds from issuance of common stock			24,694			25			24,670			-			24,695
Stock issued for services			1,102,000			1,102			1,306,500			-			1,307,602
Stock issued for debt			817,342			817			1,838,204			-			1,839,021
Stock issued for investment			3,000,000			3,000			4,017,000			-			4,020,000
Stock rescinded relating to investment			(2,880,000	)		(2,880	)		(3,856,323	)		-			(3,859,203	)
Expenses paid by shareholder			-			-			515,000			-			515,000
Net loss			-			-			-			(3,118,736	)		(3,118,736	)
Balance at March 31, 2007			26,548,292			26,548			7,080,898			(8,224,398	)		(1,116,952	)
Net loss			-			-			-			(818,664	)		(818,664	)
Balance at June 30, 2007			26,548,292		$	26,548		$	7,080,898		$	(9,043,062	)	$	(1,935,616	)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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SKRM Interactive, Inc.

(formerly SKREEM ENTERTAINMENT CORPORATION)

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended June 30, 2007 and 2006

and for the Period From Inception, August 19, 1999, to June 30, 2007

		Three Months Ended						Inception to
		June 30,			June 30,			June 30,
		2007			2006			2007
Cash Flows from Operating Activities:
Net loss		$	(818,664	)	$	(433,538	)	$	(9,043,062	)
Loss on discontinued operations			-			433,538			6,479,722
Loss from continuing operations			(818,664	)		-			(2,563,340	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of loan receivable			-			-			10,701
Stock issued for services			-			-			692,650
Amortization of deferred financing costs			1,946			-			4,752
Accretion of discount on convertible notes			4,086			-			11,280
Change in fair value of derivatives			473,964			-			1,270,209
Changes in
Accounts payable and accrued liabilities			(9,015	)		-			145,393
Due to affiliate			(27,201	)		-			(14,123	)
Interest receivable			-			-			(10,701	)
Net cash used in operating activities			(374,884	)		-			(453,179	)
Cash Flows from Investing Activities
Investment in note receivable			-			-			(400,000	)
Proceeds from note receivable			400,000			-			400,000
Net cash provided by investing activities			400,000			-			-
Cash Flows from Financing Activities
Proceeds from issuance of common stock			-			-			24,695
Proceeds from notes payable - shareholder			8,500			-			43,500
Proceeds from convertible notes payable			-			-			600,000
Payments on notes payable - shareholder			(35,000	)		-			(35,000	)
Debt issuance costs			-			-			(90,000	)
Net cash provided by financing activities			(26,500	)		-			543,195
Discontinued operations
Discontinued operating activities			-			(139,230	)		(4,506,211	)
Discontinued investing activities			-			(373	)		(187,748	)
Discontinued financing activities			-			84,695			4,604,340
Net cash provided by (used in) discontinued operations			-			(54,908	)		(89,619	)
Net increase (decrease) in cash and cash equivalents			(1,384	)		(54,908	)		397
Cash and cash equivalents
Beginning of period - continuing operations			1,781			-			-
Beginning of period - discontinued operations			-			62,383			-
End of period - continuing operations		$	397		$	-		$	397
End of period - discontinued operations		$	-		$	7,475		$	-

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

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