SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2004
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934
From the transition period from ____________ to ___________.
Commission File Number 0-22236
SKREEM ENTERTAINMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 33-0565710
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11637 Orpington Street, Orlando, Florida 32817
(Address of principal executive offices)
(407) 207-0400
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days:
Yes |X| No |_|
Class Shares Outstanding Date
Common, $.001 par value 26,610,781 November 5, 2004
SKREEM ENTERTAINMENT CORPORATION
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Balance Sheet - September 30, 2004 (unaudited)....................... 3
Consolidated Statements of Operations (unaudited) - For the six and three months
ended September 30, 2004 and 2003 and for the period from
inception (August 19, 1999) to September 30, 2004................................. 5
Consolidated Condensed Statements of changes in Shareholders' Deficit (unaudited)
For the period from inception (August 19, 1999) to September 30, 2004........... 7
Consolidated Statements of Cash Flows (unaudited) - For the six months ended
September 30, 2004 and 2003 and for the period from inception
(August 19, 1999) to September 30, 2004........................................... 8
Notes to Consolidated Financial Statements (unaudited)............................ 9
Item 2.Management's Discussion and Analysis of Financial Condition and Results
of Operations..................................................................... 12
Item 3. Controls and Procedures........................................................... 14
PART II - OTHER INFORMATION.................................................................... 14
Item 1. Legal Proceedings............................................................ 14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds............................ 15
Item 3. Defaults Upon Senior Securities.............................................. 15
Item 4. Submission of Matters to a Vote of Security Holders.......................... 15
Item 5. Other Information............................................................ 15
Item 6. Exhibits and Reports on Form 8-K............................................. 15
SIGNATURES..................................................................................... 15
2
Skreem Entertainment Corporation
(A Development Stage Company)
Consolidated Balance Sheet
September 30, 2004
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 6,472
Prepaid expenses 1,515
--------
Total Current Assets 7,987
Property and Equipment
Machinery and equipment 28,604
Furniture and fixtures 18,161
--------
46,765
Less: Accumulated depreciation (32,260)
--------
Total Property and Equipment 14,505
Other Assets
Deposits 19,920
--------
Total Other Assets 19,920
--------
$ 42,412
========
The accompanying notes are an integral part of these financial statements.
3
Skreem Entertainment Corporation
(A Development Stage Company)
Consolidated Balance Sheet
September 30, 2004
(Unaudited)
LIABILITIES AND SHAREHOLDERS ' DEFICIT
Current Liabilities
Accounts payable and accrued liabilities $ 56,244
Accrued interest payable to affiliates and shareholder 39,543
Accrued interest payable to others 2,718
Notes payable - other 247,858
Notes payable - shareholder 230,000
Notes payable - affiliates 510,592
---------
Total Current Liabilities 1,086,955
Shareholders' Deficit
Prefer red stock, par value $0.001,
1,000,000 shares authorized, no shares
issued and outstanding Common stock, par
value $0.001, 50,000,000 shares
authorized, 26,610,781 shares
issued and outstanding 26,611
Additional Paid In Capital 1,857,321
Accumulated deficit (2,928,475)
Total Shareholders' Deficit (1,044,543)
---------
$ 42,412
=========
The accompanying notes are an integral part of these financial statements.
4
Skreem Entertainment Corporation
(A Development Stage Company)
Consolidated Statements of Operations
For Six Months Ended September 30, 2004 and 2003
And Period from August 19, 1999 (Inception) to September 30, 2004
(Unaudited)
6 Months Ended 6 Months Ended Inception to
September 30, 2004 September 30, 2003 September 30, 2004
------------------ ------------------ -------------------
Revenues $ - $ 176 $ 2,926
Expenses
Operating expenses 584,161 295,268 1,683,164
General and administrative 153,222 30,456 410,042
Salaries and benefits 27,488 33,296 452,267
Impairment of loan receivable - - 130,000
-------- -------- --------
764,871 359,020 2,675,473
Loss from Operations (764,871) (358,844) (2,672,547)
Other Income / (Expenses)
Interest expense (26,940) (53,796) (255,928)
--------------- --------------- ---------------
Net Loss $(791,811) $ (412,640) $ (2,928,475)
=============== =============== ===============
Weighted Average Shares
Outstanding 26,421,825 9,549,454(1)
=============== ================
Income / (Loss) Per Share $(0.03) $ (0.04)
=============== ================
(1) Weighted average shares outstanding for six months ended September 30, 2003
reflects equivalent shares issued for reverse merger transaction and is for
comparative purposes only.
The accompanying notes are an integral part of these financial statements.
5
Skreem Entertainment Corporation
(A Development Stage Company)
Consolidated Statements of Operations
For Three Months Ended September 30, 2004 and 2003
And Period from August 19, 1999 (Inception) to September 30, 2004
(Unaudited)
3 Months Ended 3 Months Ended Inception to
September 30, 2004 September 30, 2003 September 30, 2004
-------------------- -------------------- -------------------
Revenues - - $ 2,926
Expenses
Operating expenses 345,989 225,382 1,683,164
General and administrative 74,461 19,208 410,042
Salaries and benefits 12,699 12,674 452,267
Impairment of loan receivable - - 130,000
-------- --------- ----------
433,149 257,264 2,675,473
-------- --------- ----------
Loss from Operations (433,149) (257,264) (2,672,547)
Other Income / (Expenses)
Interest expense (15,950) (28,852) (255,928)
-------- --------- ----------
Net Loss (449,099) $ (286,116) (2,928,475)
-------- --------- ----------
Weighted Average Shares
Outstanding 26,597,618 12,071,196 (1)
========== ==========
Income / (Loss) Per Share $ (0.02) $ (0.02)
======= =======
(1) Weighted average shares outstanding for three months ended September 30,
2003 reflects equivalent shares issued for reverse merger transaction and
is for comparative purposes only.
The accompanying notes are an integral part of these financial statements.
6
SKREEM ENTERTAINMENT CORPORATION
(A Development Stage Company)
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
FROM AUGUST 19, 1999 (DATE OF INCEPTION) TO SEPTEMBER 30, 2004
Paid
Common Stock In Retained
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 1,581,941 - 1,581,984
Net loss - - - (736,364) (736,364)
--------- ---------- ------- --------- ---------
Balance at December 31, 2003 63,000 63 1,581,941 (1,930,670) (348,666)
Effect of issuance of common stock
and recapitilization 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 1,555,997 (2,136,664) (554,660)
Proceeds from issuance of
common stock 603,856 604 301,324 - 301,928
Net loss - - - (791,811) (791,811)
--------- --------- --------- --------- ---------
Balance at September 30, 2004 26,610,781 $ 26,611 $ 1,857,321 $ (2,928,475) $(1,044,543)
========= ========= ========= ========= =========
The accompanying notes are an integral part of these condensed
financial statements
7
Skreem Entertainment Corporation
(A Development Stage Company)
Consolidated Statements of Cash Flows
For Six Months Ended September 30, 2004 and 2003
And Period from August 19, 1999 (Inception) to September 30, 2004
(Unaudited)
6 Months Ended 6 Months Ended Inception to
September 30, 2004 September 30, 2003 September 30, 2004
------------------- ------------------- -------------------
Cash Flows from Operating Activities
Net Loss $(791,811) $ (412,640) $ (2,928,475)
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Depreciation and amortization 3,831 1,914 36,245
Impairment of loan receivable 130,000
(Increase) Decrease in Operating Assets:
Prepaid expenses (1,515) (1,153) (1,515)
Other assets (4,555) (19,920)
Increase (Decrease) in Operating Liabilities
Accounts payable 13,105 13,906 56,244
Accrued interest payable 26,602 53,762 250,648
-------- -------- ---------
Total Adjustments 42,023 63,874 451,702
-------- -------- ---------
Net Cash Used in Operating Activities (749,788) (348,766) (2,476,773)
Cash Flows from Investing Activities
Payments for purchase of equipment (11,441) (1,208) (50,752)
Loan receivable - - (130,000)
-------- -------- ---------
Net Cash Used in Investing Activities (11,441) (1,208) (180,752)
Cash Flows from Financing Activities
Proceeds from issuance of stock 301,928 - 301,948
Proceeds from notes payable - other 250,000 1,802,191
Proceeds from notes payable - shareholder 230,000 230,000
Proceeds from notes payable - affiliates 50,000 397,000 447,000
Principal payments on notes payable to others (2,142) (2,142)
Principal payments on notes payable to affiliates (65,000) - (115,000)
-------- -------- ---------
Net Cash Provided by Financing Activites 764,786 397,000 2,663,997
Net increase (decrease) in cash and cash equivalents 3,557 47,026 6,472
Cash and cash equivalents at beginning of period 2,915 1,936 -
-------- -------- ---------
Cash and cash equivalents at end of period $6,472 $ 48,962 $ 6,472
======== ======== =========
The accompanying notes are an integral part of these financial statements.
8
Skreem Entertainment Corporation
Notes to the Unaudited Consolidated Financial Statements
From August 19, 1999 (Date of Inception) to September 30, 2004
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Skreem
Entertainment Corporation have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10QSB and Item 310(b) of
Regulation S-B. They do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation, have been included in the accompanying
unaudited consolidated financial statements.
Operating results for the periods presented are not necessarily indicative of
the results that may be expected for the full year.
These unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements and footnotes, which are included as
part of consolidated financial statements as of March 31, 2004 included in the
Company's Form 10KSB.
Note 2 - ACCOUNTING POLICY FOR REVENUE RECOGNITION
Revenue is recognized in accordance with Staff Accounting Bulletin No. 104 (SAB
104) when persuasive evidence of an arrangement exists, the price to the buyer
is fixed or determinable; delivery has occurred or services have been rendered
or the license period has begun; and collectibility 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 Standards No. 50 ("FASB 50").Revenue is generally
recognized when the Company receives an "accounting" of recordings sold with
payment from the licensee. In the event the Company has not received an
"accounting" from the licensee and if the Company has information related to the
licensed use of recordings that would result in the revenue being fixed and
determinable, and collection is reasonably assured, then revenue is recognized
in the periods in which the license revenue is earned. Minimum guarantees
(advances) received from licensees are recorded as deferred revenue and are
amortized over the performance period, which is generally the period covered by
the agreement.
Note 3 - NOTES PAYABLE
Shareholder
Since May 24, 2004 Jeffrey D. Martin, a major stockholder has loaned the Company
$130,000. The notes are payable on demand and bear interest at the rate of 8%
per annum. Accrued interest at September 30, 2004 was $3,093. The dates and
amounts of these individual note agreements entered into during the six months
ended September 30, 2004 are as follows:
Date of Note Amount
------------ ------
May 24, 2004 $75,000
July 2, 2004 30,000
July 14, 2004 20,000
August 26, 2004 5,000
---------
Total $130,000
=========
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 and is payable on demand.
9
Affiliates
Since April 6, 2004, the Company has borrowed an additional $50,000 from Martin
Consultants, Inc. The notes bear interest the the rate of 8% per annum. The
total balance of the notes payable to Martin Consultants, Inc. was $471,000 at
September 30, 2004. Martin Consultants, Inc. is owned by Jeffrey D. Martin, a
major shareholder of the Company. The dates and amounts of these individual not
agreements entered into during the nine months ended September 30, 2004 are as
follows:
Date of Note Amount
------------ ------
April 6, 2004 $10,000
April 12, 2004 10,000
July 23, 2004 20,000
July 30, 2004 10,000
---------
Total $50,000
Others
On August 3, 2004 the Company borrowed $50,000 through a line of credit with an
individual. Interest on the line of credit varies monthly. At September 30, 2004
the corresponding annual percentage rate was approximately 6.25%. Interest paid
through September 30, 2004 was $337. The line of credit has been guaranteed by
Jeffrey A. Martin, a major shareholder of the Company.
On August 19, 2004 the Company borrowed $200,000 from Sugarcreek Capital, LLC.
The Note is payable on December 30, 2004 and bears interest at the rate of 8%
per annum. The note has been personally guaranteed by Jeffrey D. Martin, a major
shareholder of the Company. Accrued interest as of September 30, 2004 was $2,718
Note 4 - GOING CONCERN
The accompanying financial statement has been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company sustained losses of $791,811 at
September 30, 2004. The Company had an accumulated deficit of $2,928,475 at
September 30, 2004. These factors raise substantial doubt about the ability of
the Company to continue as a going concern for a reasonable period of time. The
Company is highly dependent on its ability to continue to obtain investment
capital and loans from an affiliate and major shareholder in order to fund the
current and planned operating levels. The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
continue receiving investment capital from an affiliate and obtaining loans to
complete promotion of the Company's artists, continue production of music and
achieve a level of success that will enable it to sustain its operations. No
assurance can be given that the Company will be successful in these efforts.
Note 5 - PRIVATE PLACEMENT MEMORANDUM
The Company has offered a Private Placement Memorandum ("PPM") which offers for
sale a maximum of 3,000,000 and a minimum of 1,000,000 shares of its common
stock, $.001 par value at $.50 per share ("the Offering"). The shares are
offered on a "best efforts" basis. The Offering will be made in reliance upon an
exemption from registration under the federal securities laws provided by
Regulation D as promulgated by the United States Securities and Exchange
Commission ("SEC"). The Offering will terminate upon the earlier of (i) the sale
of the 3,000,000 shares or (ii) May 31, 2004 unless extended by the Company for
one hundred and twenty days. The Company amended the PPM reducing the share
minimum to 100,000 shares. The offering terminated after the 120 day extension
expired. The Company issued a total of 603,856 shares with proceeds of $301,928.
Note 6 - DISTRIBUTION AND SERVICE AGREEMENT
During May 2004, the company entered into a 5.5 year Distribution and Service
Agreement with Cheyenne Records GmbH (Cheyenne). The agreement grants Cheyenne
certain exclusive rights to distribute and sell recordings in Germany,
Switzerland and Austria. Cheyenne shall receive a distribution and service fee
of 45% 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 "3rd
Wish", and music publishing/subpublishing throughout the territory.
In consideration for these services except music publishing/subpublishing,
Cheyenne shall receive 35% of all net receipts paid by third parties. The
Company/Cheyenne shall split music publishing revenues on a 75%/25% basis.
Cheyenne reported that as of September 30, 2004
130,115 copies of the "3rd Wish" single "Obsession" had been shipped. As of
September 30, 2004 and through the date of the 10QSB filing, Cheyenne has not
provided the Company with an accounting; therefore, no revenue has been
recognized in connection with the copies shipped.
10
Note 7 - MUSIC VIDEO PRODUCTION AGREEMENTS
During May 2004, the Company entered into a Music Video Production agreement
with 1171 Production Group (Production Company). Production Company will produce
a music video embodying the performance by "3rd Wish". In consideration for
services rendered by Production Company, the Company agrees to pay $100,000 upon
the terms and conditions set forth in the agreement. In connection with the
music video, the Company has agreed to pay $40,000 to a third party for the
performance of "Baby Bash" in the music video. As of September 30, 2004, all
contractual obligations have been completed and the Company recorded video
production expenses of $140,000 related to this agreement.
On September 14, 2004, the Company entered into a music video production
agreement with 1171 Production Group (Production Company). Production Company
will produce a music video embodying the performance by "3rd Wish" of the
musical composition entitled "Nina". In consideration for services rendered by
Production Company. The Company has agreed to pay $116,525 upon the terms and
conditions set forth in the agreement. As of September 30, 2004 the Company
recorded video production expenses of $87,394 related to this agreement.
Note 8 - 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 wil
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). The Company has not
recorded any revenue related to this agreement during the six months ended
September 30, 2004. In accordance with SAB 104, the Company will record revenue
related to the Content License Agreement when the license revenue is fixed or
determinable and collectibility is reasonably assured.
Note 9 - SUBSEQUENT EVENTS
On October 11, 2004, the Company entered into a 15 year licensing agreement with
Three 8 Music Limited to promote the single release by "3rd Wish" entitled
"Obsession" in the United Kingdom and Eire.
On October 6, 2004, 3,502,925 shares were returned to the treasury and
cancelled.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
For the Three Month Period Ended September 30, 2004 and 2003
Revenues - The Company had no revenues for the three months ended September 30,
2004 and for the three months ended September 30, 2003. However, for the period
from July 26 to September 30, 2004, the Company shipped 130,115 copies of 3rd
Wish's single recorded, Obsession. Because of the practice in the music industry
that distributors have the right to return any unsold copies, no sales were
recorded until this number becomes fixed. Once this number becomes fixed, the
company will record approximately $2.57 per record as revenue.
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 collectibility 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 Standards No. 50 ("FASB 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.
Operating expenses - Operating expenses for the three months ended September 30,
2004 were $345,989 , an increase of $120,607 or 53.5% from the $225,382 for the
corresponding period of the prior year. This increase primarily resulted from
increased production expenses related to Video Shoot and Recordings of $82,549,
increased travel expenses of $30,929 due to the group being in Germany,
advertising expenses of $62,670, and increases in other operating expenses such
as advances to artists, training of artists and rent of $2,706, and a
corresponding decrease in promotional expenses of $58,247.
General and Administrative Expenses - General and administrative expenses
increased by $55,253 or 287.7% to $74,461 for the three months ended September
30, 2004 from $19,208 for the corresponding period of the prior year. This
increase is primarily attributable to an increase in legal and accounting fees
of $49,035, increased website related expenses of $7,007 and a corresponding
decrease in other expenses of $789.
Salaries and Benefits - There were virtually no changes in salaries and benefits
for the three months ended September 30, 2004 from the corresponding period of
the prior year.
Interest Expense - Interest expense decreased by $12,902 or 44.7% to $15,950 for
the three months ended September 30, 2004 from $28,852 for the corresponding
period of the prior year. This decrease is attributable to having more debt
outstanding for the three months ended September 30, 2003.
For the Six Month Period Ended September 30, 2004
Revenues - The Company had no revenues for the six months ended September 30,
2004. For the six months ended September 30, 2003, the Company had revenues of
$176.
Operating expenses - Operating expenses for the six months ended September 30,
2004 were $584,161 , an increase of $288,893 or 97.8% from the $295,268 for the
corresponding period of the prior year. This increase primarily resulted from
increased production expenses related to Video Shoot and Recordings of $232,282,
increased travel expenses of $29,850 due to the group being in Germany,
advertising expenses of $62,670, and increases in other operating expenses such
as advances to artists, training of artists, and rent of $25,868 , and a
corresponding decrease in promotional expenses of $61,777 .
12
General and Administrative Expenses - General and administrative expenses
increased by $122,766 or 403.1% to $153,222 for the six months ended September
30, 2004 from $30,456 for the corresponding period of the prior year. This
increase is primarily attributable to an increase in legal and accounting fees
of $112,764, increased website related expenses of $11,534, and a corresponding
decrease in other expense s of $1,532.
Salaries and Benefits - Salaries and benefits for the six months ended September
30, 2004 were $27,488, a decrease of $5,808 or 17.4% from the $33,296 for the
corresponding period of the prior year. This decrease is due to there being
fewer employees during the six months ended September 30, 2004.
Interest Expense - Interest expense decreased by $26,856 or 49.9% to $26,940 for
the six months ended September 30, 2004 from $53,796 for the corresponding
period of the prior year. This decrease is attributable to having more debt
outstanding for the six months ended September 30, 2003.
13
Liquidity and Capital Resources
As of September 30, 2004, the Company had cash of $6,472 and a deficit in
working capital of $1,078,968. This compares with cash of $2,914 and a deficit
in working capital of $581,477 as of March 31, 2004.
Cash used in operations increased by $401,022 to $749,788 for the six months
ended September 30, 2004 from $348,766 for the corresponding period of the prior
year. The increase is principally attributable to an increase in the net
operating loss of $379,171 and changes in the current accounts of $23,768 which
was partially offset by an increase in depreciation and amortization of $1,917.
For the six months ended September 30, 2004 the Company used $11,441 for the
purchase of equipment. For the six months ended September 30, 2003 the Company
used $1,208 for the purchase of equipment.
For the six months ended September 30, 2004, $831,928 of cash was provided to
the Company from financing activities; $301,928 from the sale of shares, and
$530,000 from the issuance of promissory notes. This compares with $397,000 of
cash being provided during the six months ended September 30, 2003, all from
issuance of promissory notes.
For the six months ended September 30, 2004, the Company used $65,000 of cash
from financing activities to repay principal on notes payable to affiliates and
$2,142 to repay principal on notes payable to others. There was no cash used in
financing activities for the corresponding period of the prior year.
Historically, the company has generated net operating losses, which jeopardized
its ability to continue a growing concern. However, in July 2004 "3rd Wish", a
group under contract to the Company released its first recording in Germany,
Austria and Switzerland, which should produce a revenue stream for the company.
The records initial shipment was 10,000 units. Due to the popularity of the
group and the record, over 120,000 reorders have been shipped bringing the total
units shipped to over 130,000. The September release of the group's second
record was rescheduled for November because sales of the first record were
stronger than expected in September and it was counter productive to release
another product at that time. Also, licenses are currently being negotiated for
the release rights in four other countries. Due to accounting practices common
in the recording industry, the accounting for revenues is received only two
times per year. One report is typically delivered 90 days after June 30th and
the other report is typically delivered 90 days after December 31st each year.
Revenues from the sales of the first release, part of the second release, the
album release, and the licenses secured for them should be reported as part of
the December 31st accounting.
ITEM 3. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures under the supervision of and with the participation of our Chief
Executive Officer ("CEO") and our Chief Financial Officer ("CFO"). Based on this
evaluation, our management, including our CFO and CEO, concluded that our
disclosure controls and procedures were effective, and that there have been no
significant changes in our internal controls or in other factors that could
significantly affect internal controls subsequent to the evaluation.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
None
14
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the six months ended September 30, 2004, the Company sold 603,856 shares
of its common stock for a net of $301,928. All of the proceeds have been used to
fund working capital.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
None
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
SKREEM ENTERTAINMENT CORPORATION
Date: March 22, 2004 By: /s/ Charles Camorata
----------------------------
Charles Camorata
Principal Executive Officer
Date: March 22, 2004 By: /s/ Karen Pollino
----------------------------
Karen Pollino
Chief Financial Officer
15
CERTIFICATIONS
I, Charles Camorata, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Skreem
Entertainment Corporation Systems, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: March 22, 2004
By: /s/ Charles Camorata
----------------------------
Charles Camorata
Principal Executive Officer
16
CERTIFICATIONS
I, Karen Pollino, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Skreem
Entertainment Corporation Systems, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: March 22, 2004
By: /s/ Karen Pollino
----------------------------
Karen Pollino
Chief Financial Officer
17
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF TEHE SARBANES-OXLEY ACT OF 2002
--------------------------------------------------------------------------------
I, Charles Camorata, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Skreem Entertainment Corporation on Form 10-QSB for the quarterly
period ended September 30, 2004 fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Form 10-QSB fairly presents in all material respects the
financial condition and results of operations of Skreem Entertainment
Corporation
By: /s/ Charles Camorata
----------------------------
Name: Charles Camorata
Title: Principal Executive Officer
March 22, 2004
18
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF TEHE SARBANES-OXLEY ACT OF 2002
--------------------------------------------------------------------------------
I, Karen Pollino, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Skreem Entertainment Corporation on Form 10-QSB for the quarterly
period ended September 30, 2004 fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Form 10-QSB fairly presents in all material respects the
financial condition and results of operations of Skreem Entertainment
Corporation
By: /s/ Karen Pollino
----------------------------
Name: Karen Pollino
Title: Chief Financial Officer
March 22, 2004
19