SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[
] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the Fiscal Year Ended March 31, 2004
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from April 1, 2003 to March 31, 2004.
Commission File No. 0-22236
Skreem Entertainment Corporation
(formerly Stanford Capital Corporation)
---------------------------------------------
(Name of small business issuer in its charter)
Delaware 33-0565710
-------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
11637 Orpington Street, Orlando, Florida 32817
------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Include Area Code: (407) 207-0400
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
None None
Securities Registered Pursuant to Section 15(d) of the Act:
Common Stock, $0.001 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve (12) months (or
for such shorter period that the registrant was required to file such reports);
and (2) has been subject to such filing requirements for the past ninety (90)
days. Yes xT No
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [x]
State issuer's revenues for its most recent fiscal year were $376.
State the aggregate market value of the voting stock held by nonaffiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock, as of a specified date within the past 60
days: The Company's common stock does not have a trading market.
As of July 31, 2004, the Registrant had 26,006,925 shares of Common Stock
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
part of the form 10-KSB (e.g. part I, part II, etc.) Into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or other
information statement; and (3) Any prospectus filed pursuant to rule 424(b) or
(c) under the Securities Act of 1933: None.
TABLE OF CONTENTS
Page
------
PART I
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. DESCRIPTION OF PROPERTY 3
ITEM 3. LEGAL PROCEEDINGS 3
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 4
PART II
ITEM 5. MARKET FOR COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES 4
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION 4
ITEM 7. FINANCIAL STATEMENTS 5
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 19
ITEM 8A. CONTROLS AND PROCEDURES
ITEM 8B. OTHER INFORMATION
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. EXHIBITS AND REPORTS OF FORM 8-K
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
SIGNATURES
CERTIFICATIONS
2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This periodic report contain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 with respect to the
financial condition, results of operations, business strategies, operating
efficiencies or synergies, competitive positions, growth opportunities for
existing products, plans and objectives of management. Statements in this
periodic report that are not historical facts are hereby indentified as
"forward-looking statements".
Business
The Company was incorporated in Delaware on June 11, 1992. On May 28, 1998,
the Company changed its name from Plasmatic Technologies, Inc. to Ecological
Services, Inc. and on January 3, 2003 changed its name to Stanford Capital
Corporation. In December 2002, the Company acquired all the issued and
outstanding shares of Stanford Capital International, Ltd. a Hong Kong based
public relations firm for 10,000 shares of its common stock. This transaction
was subsequently revoked. On January 31, 2004, the Company aquired all of the
shares of Skreem Entertainment Corporation in exchange for 22,000,000 shares of
its one for five post reverse split common shares. Skreem Entertainment
Corporation promotes finances and manages artists in the entertainment industry.
Overview
Our business is to search for recording talent and promote and fund.
The making of a recording act
Signing and promoting a recording act falls into two distinct categories. The
first is the process of signing an already established group or artist and
through avenues not readily available to the act, but available to the record
company, promote the act to a level of widespread public recognition. The second
is a company, through auditions and referrals, forms a group or hires an artist
with the goal of achieving wide spread recognition. The principal difference
financially between these alternatives is that an established act will take a
larger percentage of the overall revenues because they absorbed the initial
costs of getting started and promoting themselves before the recording deal
happened, while normally all of the costs involved in developing the second type
of group are borne on by the company which will need to recoop such costs. From
the company's vantage the second process results in more control over the
product and a larger percentage of the revenues. Examples of the second
categories are the signing groups "Menudo", "New Kids On The Block", and
"O-Town". "Back Street Boys" and "N-Sync" are examples of established acts that
were signed after they were already in existence. These groups mentioned are
examples of the two categories and the Company did not sign, promote or fund
these groups.
For company formed acts, the company provides the training coordinate and
consultation that it deems necessary to produce a hit record. This includes, but
is not limited to vocal coaching, choreography, fitness training, clothes, hair
design, transportation, living expenses, as well as food and housing if
necessary. In addition, the company finds and contracts with producers and
writers to record songs that fit the style of the act as dictated by the
company. The act records the songs, then performs them live to promote the sales
of the records and increase radio airplay. A video is also made for further
promotion in the television arena. Revenue is generated through record sales,
performance fees, management fees, merchandising such as T-shirts, hats, etc.,
and publishing royalties. This includes publishing royalties that are paid in
the event that the recording(s) are included on any compilations that are
released by any other entity. From these revenues the company's investment is
repaid, after repayment, the remainder is split between the company and the act
by percentages outline in the original recording agreement. All agreements are
different as to percentages; however, the repayment of all money invested by the
company before any payment is made to the act is standard practice.
In the case of established acts, the process is the same. The main differences
is the revenue split between the act and the company, and creative control. The
established act will always demand a higher percentage of the revenues and more
control over the musical direction of the act and the selection of the material
to be recorded. With new talent, this can be controlled in the first contract
but will undoubtedly be an issued in future negotiations.
Record Sales
Prior to 1997 the record industry enjoyed tremendous success with record sales.
The past six years however have presented a new problem in the form of the
internet. Downloading, also referred to as file sharing, has hurt the record
industry tremendously, especially in the pop music market. If someone wants a
copy of a new song by their favorite artist they can simply sign on to one of
the free file sharing web sites, type in the name of the song, and download it
to their own computer. They can then make a compilation of their favorites, put
the downloaded songs onto a CD and listen to them without the need of paying for
them. This completely bypasses the record company, the publisher, and the
writer, all of whom would normally have received royalties on the sale of those
recordings. Steps are currently being taken by the major record companies
nationwide to stop this practice. In the meantime everyone in the industry is
searching for alternative ways to generate revenue beyond the traditional means
that are outlined.
Solutions we have initiated to insulate us from the downloading problem
In the United States we have one federal government that regulates copyrights,
publishing, licensing, patenting, and most intellectual rights' laws for all of
the states collectively. Therefore, when a song is released in the U.S. all
states have the right to airplay and sale of that song as long as they pay the
predetermined royalty rates. These royalties are tracked by and then paid to
performance organizations such as ASCAP and BMI who in turn disburse the money
to their respective members who are listed as either writers or publishers (or
both) of each song. Every writer and publisher in the U.S. must be a member of
one of these organizations to collect royalties on a commercial record release.
These royalties are paid every time a song is played or purchased. This includes
TV themes, Musak (elevator music), night club performances, juke boxes, radio,
etc.. There is a different rate for each type of venue, but it applies equally
to all of the states.
In Europe, however, this is not the case. Each country is a governing entity
unto itself. Therefore, when a song is released in Germany, it cannot be played,
reproduced, or sold in Spain unless the company wishing to release it in Spain
pays the license holder of the song a licensing fee for the Spanish rights to
the song. This is the case between all countries except Germany, Austria, and
Switzerland, also known as the "GAS Territory". Through an agreement between
these three countries, recorded and copyrighted materials can be released in all
three without special licensing. Outside of those three, all other countries
must pay a licensing fee.
Because the European countries are small and easily accessible by the general
public, when a song is released in one country its existence becomes known in
other countries very quickly through word of mouth and DJs that travel from
country to country to perform, sometimes during the same weekend. As the
popularity of the song grows it attains a "chart position". A "chart" is a
weekly report that lists songs currently in market order for sales, radio
airplay, and DJ club play. These lists usually consist of the top selling or
played 200 songs. There are DJ club charts, national charts, and radio charts
that report publicly each week. The charts are posted on sites available to
everyone on the internet. A song achieving the TOP 40 of any of these charts is
considered a success and is in position to create future revenues in the areas
of licensing and publishing. A good chart position creates a demand for the song
(and act) in each marketplace. Record companies in each marketplace must then
acquire the license for their country in order to release the song. This is done
by paying the original license holder a fee that is negotiated based on the
song's current popularity, the highest chart position it has attained, and its
predicted future popularity. The result is that the original license holder is
paid a licensing fee by each country that wishes to release the song. Licensing
fees for each song can range from $5,000.00 to $25,000.00 and more from each
country depending on the popularity of the song and the act and the size of the
country.
Why the European marketplace is ideal for establishing artists in our target
market
Our target market is kids between 12 and 18 years of age, especially girls.
Teenage girls in Europe make up the majority of the record buying public for pop
music. They love American acts and want everything and anything the act has to
offer as far as pictures, shirts, hats, CDs, autographs, etc. Since N-Sync has
stopped touring there, few acts have come out to fill that void. The kids are
hungry for new American talent with a fresh sound.
When developing a recording act in the U.S., the basic process has been the
same for decades. Record a CD of songs then shop the CD to distributors and
other larger record companies for distribution and promotional support. Next a
single is chosen out of the CD of songs; it's released, and followed by the
release of the full CD. If the act doesn't have an entire CD or close to it
completed, they can almost be assured that no one will be interested. Although
oversimplified, it generally is how it works. Producing a CD is expensive and
time consuming. The cost of producing 12 or more songs that will stand up to the
quality of what's currently on the market by established artists can be
astronomical.
The European market is just the opposite. The first step in the process is to
record and release a single. This minimizes cost and time. Since this is
established practice, there are limited problems with distribution companies or
record companies (as long as they like the act). It also allows the Company to
as far as musical direction and style before you commit to an entire CD of
material. Then a second single is released. A video is produced for each single
that's simultaneously released. Concurrently, the act will be performing doing
both paid and promotional live performances. Based on the success of these two
releases, the company can then determine whether or not to take on the expense
of a full CD.
Our target market are net surfers. By creative use of the internet including a
web site, online promotions such as giveaways, online chats with the act,
contests with prizes such as a chance to spend a day with the act, free
downloads of unreleased songs, etc., interest and record sales grows. One of the
goals of all of this is to create excitement that will result sufficient record
sales to attain a favorable position in the weekly charts because licensing fees
are negotiated according to the popularity of the song, the act, and their
position in the charts. While the act is working its live performances, internet
chats, and recording, the company negotiates licenses with other companies for
other countries. It will always be the license holding company's prerogative to
release any song it owns the license for in any country without any fees. It
will however have to take on the expense of pressing and distribution if that
avenue is chosen, but if the record is a success this will be offset by not
having to split revenues. The company can also enter into a limited partnership
with a different company in each country and share in the profits of the release
while sharing the expenses if it so chooses.
The key element in our strategy
A key element in initiating and successfully implementing a marketing and
development plan such as has been described is someone who knows the marketplace
intimately and is respected by the people who do business in that marketplace.
Tony Harrison our Vice President fits those requirements. He has both American
and German citizenship and has lived in Germany for over 20 years. He's known in
the music industry as "Captain Hollywood". As a performer, he's one of the most
respected in Europe. He has had worldwide hits and has been performing since
1985. He's also worked as a choreographer and /or producer for such acts as
LaToya Jackson, BackStreet Boys, Natural, and O-Town. He's known by everyone in
the record business in Europe and is highly respected for both his success as an
entertainer and his knowledge of the industry since June 2003. As "Captain
Hollywood" he has since had two songs in the top 20 dance charts and in the top
40 national charts. His years of experience in all aspects of the business have
proven invaluable in successfully introducing SKREEM Entertainment to the record
industry in Europe.
Coming to America after European success
The final step is to introduce the act to the Americans. This process has been
successfully achieved several times in the past with Back Street Boys, Britney
Spears, N-Sync, and Snap. The act will be polished and roadworthy from time to
time spent in Europe, and will have already been making money through record
sales, publishing revenues, licensing fees, live performances, and
merchandising. Also, they'll have bragging rights with regards to having "Gold
Records" in Europe. The catch there is that a gold record in the U.S. requires
500,000 copies sold. In Europe, depending on the country, a gold record can be
earned with a few as 25,000 copies sold. American audiences do not generally
realize this and assume that the act has sold many more records than they
actually have sold. This is helpful in the American marketing campaign. They
also come to America with many record industry people, promoters, and managers
already aware of them through industry connections in Europe. This is helpful
when arranging for the act to perform nationally or with an already established
American act, which is the most tried and true way of introducing the act and
their songs to the public.
All of this leads to launching a recording act that has the potential of
creating a greater return on a much lower investment than would be necessary to
achieve the same results by starting out in the American market.
ITEM 2.DESCRIPTION OF PROPERTIES
The Company's administrative offices are located in a leased office
facility located at 11637 Orpington Street, Orlando, Florida 32817. The facility
contains approximately 2,000 square feet of office space. There is no lease on
the facility nor is there a rental fee as the property is owned by the principal
shareholder of the Company (post merger).
ITEM 3.LEGAL PROCEEDINGS
None
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders through
the solicitation of proxies, during the fourth quarter of the Company's fiscal
year ended March 31, 2004.
PART II
ITEM 5.MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASER OF EQUITY SECURITIES
The Company's Common Stock is not listed for trading. Since its inception,
the Company has not paid any dividends on its Common Stock, and the Company does
not anticipate that it will pay dividends in the forseeable future. At March 31,
2004, the Company had approximately 108 shareholders.
The Company issued 10,000 shares of its common stock for the acquisition of
Stanford Capital Corporation. When this transaction was recinded, the shares
were cancelled. However, pursuant to the terms of the Termination Agreement with
the shareholders of Stanford Capital Corporation, the shareholders were to be
issued 10,000 post reverse split common shares.
The Company also issued 22,000,000 post reverse split common shares for the
acquisition of Skreem Entertainment Corporation.
ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Three Months Ended March 31, 2004 Compared to the Three Months Ended March 31,
2003
Revenues. The Company had no revenue for the three months ended March 31, 2004
as it prepared for its first recording and record release in the summer. For the
three months ended March 31, 2003, Company had revenue of $200.
Operating Expense. Operating expenses for the three months ended March 31, 2004,
were $149,470, an increase of $65,817 or 78.7% from the $83,653 for the
corresponding period of the prior year. This increase primarily resulted from
travel, housing, and transportation expenses of approximately $89,000 incurred
by "Third Wish" Artists and Manager while on tour in Germany during the three
months ended March 31, 2004. In addition, there was an increase in promotion and
advertising of approximately $17,000. The overall increase is offset by a
decrease in music production costs of approximately $36,000.
General and Administrative Expenses. General and administrative expenses
increased by $21,882 or 508% to $26,186 for the three months ended March 31,
2004 from $4,304 for the corresponding period of the prior year. This increase
is primarily attributable to increased legal and accounting fees of
approximately $19,000.
Salaries and Benefits. Salaries and benefits decreased by $6,997 or 25.1% to
$20,885 for the three months ended March 31, 2004 from $27,882 for the
corresponding period of the prior year. This decrease is attributable to having
less employees during the three months ended March 31, 2004.
Interest Expense. Interest expense decreased by $13,293 or 58.4% to $9,453 for
the three months ended March 31, 2004 from $22,746 for the corresponding period
of the prior year. This decrease is attributable to having more debt outstanding
for the three months ended March 31, 2003.
As a result of the foregoing, the net operating loss of the company increased by
$67,609 to $205,994 for the three months ended March 31, 2004.
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002
Revenue. Revenue for the year ended December 31, 2003 decreased by $2,174 or
85.3% to 376 from $2550 for the year ended December 31, 2002. This decrease in
revenues is attributable to a decrease in show income.
Operating Expenses. Operating expenses increased by $281,756 or 149% to 470,331
for the year-ended December 31, 2003 from $188,575 for the year ended December
31, 2002. This increase is primarily attributable to expenses of approximately
$121,000 incurred by "Third Wish" Artists and Manager while on tour in Germany
and promotion and Advertising expenses of approximately $160,000 incurred during
2003.
General and Administrative Expenses. General and administrative expenses
increased by $52,493 or 138% to $90,455 for the year ended December 31, 2003
from $37,962 for the year ended December 31, 2002. This increase is primarily
attributable to an increase in travel expenses of approximately $37,000 and an
increase in professional fees of approximately $17,000.
Salaries and Benefits. Salaries and benefits increased by $16,670 or 18.9% to
$104,825 for the year ended December 31, 2003 from $88,155 for the year ended
December 31, 2002. This increase is primarily attributable to a bonus and
medical insurance coverage of approximately $12,000 and $13,500 respectively for
an officer of the Company. This increase is partially offset by a decrease in
salaries as there were less employees during 2003.
Interest Expense. Interest expense decreased by $1,319 or 1.8% to $71,129 for
the year ended December 31, 2003 from $72,448 for the year ended December 31,
2002. This decrease is attributable to having less debt throughout 2003.
As a result of the foregoing, the net operating loss of the Company increased by
$351,774 to $736,364 for the year ended December 31, 2003 from $384,590 for the
year ended December 31, 2002.
Liquidity and Capital Resources
As of March 31, 2004, the Company had cash of $2,914 and a deficit in working
capital of $581,477.
For the three months ended March 31, 2004, the Company used $168,280 in
operating activities which is primarily due to a net loss of $205,994 offset by
an increase in liabilities of $32,033.
For the year-ended December 31, 2003, the Company used $672,070 in operating
activities, or $365,286 more than the $306,784 used in operating activities for
the year ended December 31, 2002. The principal reasons for the increase in the
cash used in operating activities was the increase in the net operating loss of
$351,774 which was partially offset by changes in operating assets and
liabilities.
There were no cash flows from investing activities for the three months ended
March 31, 2004.
Cash used by investing activities increased by $1,132 to $3,497 for the year
ended December 31, 2003 from $2,365 for the year ended December 31, 2002. All of
the cash used by investing activities in both years was for the purchase of
equipment.
Cash provided by financing activities was $156,591 for the three months ended
March 31,2004. Cash provided by financing activities increased by $381,500 to
$687,000 for the year ended December 31, 2003 from $305,500 for the year ended
December 31, 2002. All of the cash provided by financing activities in all
periods was from proceeds of notes payable to affiliates.
Because of the continued net operating losses of the Company, the Company will
not be able to continue as a going concern unless it is able to sell its shares
or obtain third and/or related party loans. Although the principal shareholder
of the Company has been willig to lend funds to the Company in the past, there
is no obligation for them to do so in the future. Without such funding, or the
sale of its shares, the Company will have insufficient funds to execute its
business plans for the next twelve months.
4
ITEM 7.FINANCIAL STATEMENTS
SKREEM ENTERTAINMENT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
Report of Independent Auditors F-1
Consolidated Balance Sheet as of March 31, 2004 F-2
Consolidated Statements of Operations for the three months ended
March 31, 2004,years ended December 31, 2003 and 2002 and the
period from inception (August 19, 1999) to March 31, 2004 F-3
Consolidated Statements of Changes in Shareholders' Deficit
From inception (August 19, 1999) to March 31, 2004 F-4
Consolidated Statements of Cash Flows for the three months ended
March 31, 2004,years ended December 31, 2003 and 2002 and the
period from inception (August 19, 1999) to March 31, 2004 F-5
Notes to Consolidated Financial Statements F-6
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Skreem Entertainment Corporation
We have audited the accompanying consolidated balance sheet of Skreem
Entertainment Corporation and subsidiary (a development stage company) (the
"Company"), as of March 31, 2004, and the related consolidated statements of
operations, shareholders' deficit and cash flows for the three months ended
March 31, 2004 and the years ended December 31, 2003 and 2002 and for the period
from August 19, 1999 (date of inception) through March 31, 2004. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Skreem Entertainment
Corporation and subsidiary as of March 31, 2004 and the results of its
operations, and its cash flows for the three months ended March 31, 2004 and the
years ended December 31, 2003 and 2002 and for the period August 19, 1999 (date
of inception) through March 31, 2004 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is in the development stage and has suffered
recurring losses from operations and had a net capital deficit, which raises
substantial doubt about its ability to continue as a going concern. Management
plans to continue funding the operation through an affiliate owned by a major
shareholder of the Company. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Thomas Leger & Co. L.L.P.
July 21, 2004
Houston, Texas
F-1
SKREEM ENTERTAINMENT CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,914
--------
Total current assets 2,914
--------
PROPERTY AND EQUIPMENT, net 6,895
DEPOSITS 19,921
--------
TOTAL ASSETS $ 29,730
========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 43,141
Accrued interest payable to affiliates 15,658
Notes payable to affiliates 525,592
--------
Total current liabilities 584,391
--------
SHAREHOLDERS' DEFICIT
Preferred stock, par value $0.001, 1,000,000
shares authorized, no shares issued and outstanding -
Common stock, par value $0.001, 50,000,000
shares authorized, 26,006,925 shares issued
and outstanding 26,007
Paid-in capital 1,555,996
Deficit accumulated during the development stage (2,136,664)
----------
Total shareholders' deficit (554,661)
----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 29,730
----------
F-2
The accompanying notes are an integral part of these consolidated
financial statements
SKREEM ENTERTAINMENT CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
August 19, 1999
Three (Date of Inception)
months ended For the Years Ended December 31
March 31,2004 2003 2002 March 31, 2004
REVENUES $ - $ 376 $ 2,550 $ 2,926
EXPENSES
Operating expenses (149,470) (470,331) (188,575) (1,099,930)
General and administrative expenses (26,186) (90,455) (37,962) (257,962)
Salaries and benefits (20,885) (104,825) (88,155) (422,709)
Impairment of loan receivable - - - (130,000)
--------- ---------- ---------- -----------
Loss from operations (196,541) (665,235) (312,142) (1,907,675)
OTHER INCOME (EXPENSE)
Interest expense (9,453) (71,129) (72,448) (228,989)
--------- ---------- ---------- -----------
NET LOSS $ (205,994) $ (736,364) $ (384,590) $ (2,136,664)
BASIC AND DILUTED ========= ========== ========== ===========
LOSS PER SHARE $ (0.01) $ (0.06) $ (0.05)
BASIC AND DILUTED ========= ========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING 24,733,180 12,054,795 (1) 7,000,000 (1)
=========== ========== ===========
(1) Number of shares outstanding to reflect reverse merger and for comparison
purposes only
The accompanying notes are an integral part of these consolidated
financial statements
F-3
SKREEM ENTERTAINMENT CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
FROM AUGUST 19, 1999 (DATE OF INCEPTION) TO MARCH 31, 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 1,581,940 - 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 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 $ 1,555,996 $ (2,136,664) $ (554,661)
========= ========= ========== ======== =========
The accompanying notes are an integral part of these consolidated
financial statements
F-4
SKREEM ENTERTAINMENT CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three August 19, 1999
months ended For the years ended December 31, (Date of Inception) to
March 31, 2004 2003 2002 March 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (205,994) $ (736,364) $ (384,590) $(2,136,664)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation expense 1,273 6,220 5,359 32,415
Impairment of loan receivable - - - 130,000
Changes in operating assets and liabilities:
Decrease (Increase) in prepaid expenses 4,408 (4,408) - 20
Increase in other assets - (19,920) - (19,920)
Increase in accounts payable
and accrued liabilities 22,580 11,307 - 43,141
Increase in interest payable to affiliates 9,453 71,095 72,447 224,042
--------- --------- --------- ----------
Total adjustments 37,714 64,294 77,806 409,698
Net cash used in operating activities (168,280) (672,070) (306,784) (1,726,966)
--------- --------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment - (3,497) (2,365) (39,311)
Loan receivable - - - (130,000)
--------- --------- --------- ----------
Net cash used by investing activities - (3,497) (2,365) (169,311)
--------- --------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable to affiliates 156,591 687,000 305,500 1,949,191
Principal payments on notes payable to affiliates - - - (50,000)
--------- --------- --------- ----------
Net cash provided by financing activities 156,591 687,000 305,500 1,899,191
--------- --------- --------- ----------
Net increase (decrease) in cash and cash equivalents (11,689) 11,433 (3,649) 2,914
CASH AND CASH EQUIVALENT AT BEGINING OF YEAR 14,603 3,170 6,819 -
--------- --------- --------- ----------
CASH AND CASH EQUIVALENT AT END OF YEAR $ 2,914 $ 14,603 $ 3,170 $ 2,914
========= ========= ========= ==========
F-5
The accompanying notes are an integral part of these consolidated
financial statements
SKREEM ENTERTAINMENT CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the business and merger
Stanford Capital Corporation (Stanford) was incorporated under the laws of the
State of Delaware on June 11, 1992. During January 2004, Stanford acquired all
of the issued and outstanding shares of common stock of Skreem Entertainment
Corporation (Skreem) in exchange for 22,000,000 post reverse split shares of
common stock, par value $0.001 per share, to the holders of Skreem's common
stock. The transaction is considered a reverse merger and Skreem became a wholly
owned subsidiary of Stanford. Stanford and Skreem are collectively referred to
as "the Company". On March 16, 2004 the Company filed a Certificate of Amendment
with the Delaware Secretary of State changing the Company's name to Skreem
Entertainment Corporation and reverse splitting the Company's shares on a one
(1) for five (5) basis. The financial statements herein reflect the effect of
the reverse stock split. The proforma effects of the reverse merger are not
material to the consolidated financial statements.
Skreem is a development stage company that was incorporated in Nevada on August
19, 1999. Skreem was formed to promote, finance and manage artists and projects
in the music industry and is located in the State of Florida.
Basis of presentation and consolidation
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
Company has elected to continue the fiscal year of the legal acquirer
(registrant). As the transaction is deemed a reverse merger, this gives rise to
the three month transition period ended March 31, 2004.
The consolidated financial statements include the financial statements of the
Company and its wholly owned subsidiary. All significant intercompany balances
and transactions, including intercompany profits and unrealized profits and
losses are eliminated on consolidation.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and on deposit at a major
financial institution. The Company considers highly liquid investments with
original maturities of three months or less when purchased to be cash
equivalents.
Advances to Artists
The Company advances monies to artists upon the artist signing the "Exclusive
Recording Artist Agreement." An advance paid to an artist shall be reported as
an asset if the past performance and current popularity of the artist to whom
the advance is made provide a sound basis for estimating that the amount of the
advance will be recoverable from future royalties to be earned by the artist.
Any portion of advances that subsequently appear not to be fully recoverable
from future royalties to be earned by the artist shall be charged to expense
during the period in which the loss becomes evident.
F-6
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
Continued
Property and equipment
Property and equipment are stated at cost. Provisions for depreciation are
computed using the double-declining method based on the estimated useful lives
of the assets, generally five to seven years. Expenditures that increase the
value or extend the life of the asset are capitalized, while cost of maintenance
and repairs are expensed as incurred. Leasehold improvements are amortized on a
straight-line basis over the shorter of the useful life of the improvement or
the term of the lease. When assets are retired or otherwise disposed of, the
cost and related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is recognized.
In accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
"Accounting for the Impairment or Disposal of Long-lived Assets," the Company
examines the possibility of decrease in value of fixed assets when events or
changes in circumstances reflect the fact that their recorded value may not be
recoverable.
Record masters
A record master borne by the Company is reported as a cost of production when
the past performance and current popularity of the artist does not provide a
sound basis for estimating that the cost will be recovered from future sales.
Operating expenses
Operating expenses include music production costs, artist compensation costs,
and other operating expenses. The Company enters into production, promotion and
related consulting agreements in the ordinary course of business.
Use of estimates
The preparation of financial statements in conformity with general accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Income taxes
From inception of the Company through August 31, 2003, the Company had elected
to be taxed under Subchapter S of the Internal Revenue Code. As a result,
corporate income or loss passes through to the shareholder and therefore, no
provision for federal or state income taxes is recorded by the Company. On
August 31, 2003, the Company converted certain debt and accrued interest owed to
affiliates to equity. The affiliates were a corporation and a partnership which
made the Company ineligible to be taxed under subchapter S of the Internal
Revenue Code. Subsequent to August 31, 2003, the Company accounts for income tax
using Statements of Financial Accounting (SFAS) No. 109 "Accounting for Income
Taxes."
Recent accounting pronouncements
In January 2003, and as revised in December 2003, the Financial Accounting
Standards Board ("FASB") issued Interpretation No.46 ("FIN 46") "Consolidation
of Variable Interest Entities." Until this interpretation, a company generally
included another entity in its consolidated financial
F-7
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
Continued
statements only if it controlled the entity through voting interest. FIN 46
requires a variable interest entity, as defined, to be consolidated by a company
if that company is subject to a majority of the risk of loss from the variable
interest entity's activities or entitled to receive a majority of the entity's
residual returns. Certain provisions of FIN 46 were deferred until the period
ending after March 15, 2004. The adoption of FIN 46 for provisions effective
during 2003 and 2004 did not have a material impact on the Company's financial
position, cash flows or results of operations.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" ("SFAS 149"), which amends SFAS
133 for certain decisions made by the FASB Derivatives Implementation Group, In
Particular, SFAS 149: (1) clarifies under what circumstances a contract with an
initial net investment meets the characteristic of a derivative, (2) clarifies
when a derivative contains a financing component, (3) amends the definition of
an underlying to conform it to language used in FASB Interpretation No. 45
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others," and (4) amends certain other
existing pronouncements. This Statement is effective for contracts entered into
or modified after June 30, 2003, and for hedging relationships designated after
June 30, 2003. In addition, most provisions of SFAS 149 are to be applied
prospectively. The adoption of SFAS 149 did not have a material impact on the
Company's financial position, cash flows or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" ("SFAS 150").
SFAS 150 changes the accounting for certain financial instruments that under
previous guidance issuers could account for as equity. It requires that those
instruments be classified as liabilities in balance sheets. The guidance in SFAS
150 is generally effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise is effective on July 1, 2003. The
adoption of SFAS 150 did not have a material impact on the Company's financial
position, cash flows or results of operations.
Going Concern
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company sustained losses of
$205,994, $736,364, and $384,590 for the three months ended March 31, 2004, and
years ended December 31, 2003, and 2002 respectively. The Company had an
accumulated deficit of $2,136,664 at March 31, 2004. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern for a reasonable period of time. The Company is highly dependent on its
ability to continue to obtain investment capital from an affiliate in order to
fund the current and planned operating levels. The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
continue receiving investment capital from an affiliate to complete promotion of
the Company's artists, continue production of music and achieve a level of
success that will enable it to sustain its operations. No assurance can be given
that the Company will be successful in these efforts.
F-8
2. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following at March 31, 2004:
Furniture $18,161
Music equipment 17,164
--------
35,325
Less: accumulated depreciation (28,430)
$ 6,895
========
Depreciation expense was $1,273, $6,220, and $5,359 for the three months ended
March 31, 2004 and for the years ended December 31, 2003 and 2002, respectively.
3. DEPOSITS
At March 31, 2004, the Company had deposits of $15,366 for the rental of a
vehicle and $4,554 for the rental of housing for the Artists and Manager of "3rd
Wish" .
4. INCOME TAXES
From inception of the Company through August 31, 2003, the Company had elected
to be taxed under Subchapter S of the Internal Revenue Code. As a result,
corporate income or loss passes through to the shareholder and therefore, no
provision for federal or state income taxes is recorded by the Company. On
August 31, 2003, the Company converted certain debt and accrued interest owed to
affiliates to equity. The affiliates were a corporation and a partnership which
made the Company ineligible to be taxed under subchapter S of the Internal
Revenue Code. Subsequent to August 31, 2003, the Company accounts for income tax
using Statements of Financial Accounting (SFAS) No. 109 "Accounting for Income
Taxes."
The following table sets forth a reconciliation of federal income tax for the
three months ended March 31, 2004:
Loss before income taxes $ (205,994)
==========
Income tax benefit computed
at statutory rates (70,038)
Valuation allowance 69,322
Permanent differences, nondeductible
expenses 716
----------
Tax benefit $ -
==========
F-9
4. INCOME TAXES - Continued
As of March 31, 2004, the Company has net operating loss carryforwards of
approximately $448,623. The carryforwards begin to expire in the year 2023. The
Company's net operating loss carry forwards may be subject to annual
limitations, which could reduce or defer the utilization of the losses as a
result of an ownership change as defined in section 382 of the Internal Revenue
Code. The tax effects of the temporary differences between reportable financial
statement income and taxable income are recognized as a deferred tax asset and
liability.
Significant components of the deferred tax assets are set out below along with a
valuation allowance to reduce the net deferred tax asset to zero. In order to
comply with generally accepted accounting principles, management has decided to
establish the valuation allowance because of the potential that the tax benefits
underlying deferred tax asset may not be realized. Significant components of the
Company's deferred tax asset at March 31, 2004 are as follows:
Deferred tax assets 2003
-------
Net operating loss carry forwards $ (152,531)
Less: valuation allowance 152,531
-----------
Net deferred tax assets $ -
===========
5. NOTES PAYABLE TO AFFILIATES
Notes payable to affiliates consist of the following at March 31, 2004:
Notes payable upon demand to Martin Consultants, Inc.,
secured by the assets of the
Company, interest at 8% per annum $ 486,000
Note payable upon demand to JT Investments, Ltd.,
unsecured, interest at 8% per annum 39,592
---------
$ 525,592
=========
The Company's Board of Directors held a meeting on August 30, 2003 and
unanimously approved a proposal received from Martin Consultants, Inc. and JT
Investments, Ltd., affiliates of the Company, to convert the debt and accrued
interest owed by the Company to equity. Martin Consultants, Inc. and JT
Investments, Ltd. are 100% and 50%, respectively owned by a major shareholder of
the Company. The notes payable and related accrued interest of $1,373,600 and
$208,383, respectively were reclassified to equity on August 31, 2003 and Martin
Consultants, Inc. was issued 43,000 shares (pre-merger) of common stock.
F-10
6. RELATED PARTY TRANSACTIONS
Accounts payable due to an affiliate consisted of $9,254 for health
insurance as of March 31, 2004. Additionally, notes payable due to affiliates as
of March 31, 2004 are presented at Note 5.
The Company promotes an artist who is the son of the Company's major
shareholder. Total advances to the son are approximately $141,000 as of March
31, 2004.
7. OPERATING LEASES
The Company leases a vehicle and housing for the Artists and Manager of "3rd
Wish" in Germany. Total rent expense was $13,205 and $42,637 for the three
months ended March 31, 2004 and for the year ended December 31, 2003
respectively. There was no rent expense for the year ended December 31, 2002.
Future minimum noncancelable lease payments to be made in each of the years
indicated at March 31, 2004 are as follows:
2005 $53,708
2006 12,739
---------
$66,447
=========
8. NU-SOL AGREEMENT AND IMPAIRMENT
During May 2000, the Company entered into a financing agreement with Nu-Sol
Productions, Inc. (N U-SOL). The purpose of the agreement shall be for NU-SOL to
produce, manufacture, market, and commercially exploit the first LP by Precious
Francis "Precious" entitled "Big Girls Don't Cry" and singles derived therefrom
(the Property) and the Company funding the costs and expenses of $130,000 with
respect to the production, manufacturing, marketing, and exploitation of the
Property. All net revenues shall be distributed first to the Company until the
Company recoups 100% of the $130,000 advanced plus an additional $39,000, and
thereafter 30% of all net revenues derived. The Company had originally recorded
the advance to NU-SOL as a loan receivable and during 2001, the Company deemed
the amount advanced uncollectible and recorded an impairment charge.
9. COMMITMENTS
On July 26, 2002, the Company entered into a Music Publishing Agreement, a
Personal Management Agreement and an Exclusive Artist Recording Agreement with
the Artists of "3rd Wish."
Additionally, on July 14, 2003, the Company entered into an Exclusive Artist
Recording Agreement with Precious Dawn Francis.
F-11
10. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
No cash was paid during the three months ended March 31, 2004 and for the years
ended December 31, 2003 and 2002 for interest or income taxes.
Non-cash financing transactions:
A reclassification of notes payable and accrued interest to equity of
$1,581,983 was approved by the Board of Directors during 2003 and is
presented at Note 5.
11. CONCENTRATIONS OF RISK
The Company is economically dependent on an affiliate owned by the Company's
major shareholder.
The Company is dependent on the success of the Artists. The talent would be
difficult to replace.
12. COMPARATIVE FINANCIAL INFORMATION
The comparative statements of operations for the three months ended March 31,
2004 and 2003 are as follows:
Three Months ended March
2004 2003
Revenues $ - $ 200
Expenses
Operating expenses (149,470) (83,653)
General and administrative expenses (26,186) (4,304)
Salaries and benefits (20,885) (27,882)
Loss from operations (196,541) (115,639)
Interest expense (9,453) (22,746)
Net Loss $(205,994) $(138,385)
========== ==========
Basic and Diluted Loss
per share $ (0.01) $ (0.02)
======== ========
Basic and Diluted Weighted Average
shares outstanding 24,723,180 7,000,000 (1)
=========== =========
(1) Number of shares outstanding to reflect reverse merger and for comparison
purposes only.
F-12
SKREEM ENTERTAINMENT CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
13. CAPITAL STOCK
The authorized capital stock of the Company consists of Preferred Stock
(1,000,000 shares) and Common Stock (50,000,000 shares) with a par value of
$0.001 each. 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. At March 31, 2004, there were no preferred
shares issued and outstanding, and there were 26,006,925 common shares issued
and outstanding.
14. SUBSEQUENT EVENTS
Private Placement Memorandum
The Company has offered a Private Placement Memorandum ("PPM") which offers for
sale a maximum of 3,000,000 and a minimum of 1,000,000 shares of its common
stock, $.001 par value at $.50 per share ("the Offering"). The shares are
offered on a "best efforts" basis. The Offering will be made in reliance upon an
exemption from registration under the federal securities laws provided by
Regulation D as promulgated by the United States Securities and Exchange
Commission ("SEC"). The Offering will terminate upon the earlier of (i) the sale
of the 3,000,000 shares or (ii) May 31, 2004 unless extended by the Company for
sixty days. The Company has issued 553,656 shares with proceeds of $276,828
through July 21,2004.
Distribution and Service Agreement
During May 2004, the Company entered into a 5.5 year Distribution and Service
Agreement with Cheyenne Records GmbH (Cheyenne). The agreement grants Cheyenne
certain exclusive rights to distribute and sell recordings. In addition,
Cheyenne will perform certain services in accordance with the agreement.
Music Video Production Agreement
During May 2004, the Company entered into a Music Video Production Agreement
with 1171 Production Group (Production Company). Production Company will produce
a music video embodying the performance by "3rd Wish". In consideration for
services rendered by Production Company, the Company agrees to pay $100,000 upon
the terms and conditions set forth in the agreement. In connection with the
music video, the Company has agreed to pay $40,000 to a third party for the
performance of "Baby Bash" in the music video.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has had no disagreements with its certified public accoutants
with respect to accounting practices or procedures or financial disclosure. The
Company did however change its certifying accountants from David T. Thomsom P.C.
to Thomas Leger & Co. LLP.
(i) On March 3, 2004, the Registrant dismissed David T. Thomson, PC from its
position as the Company's independent accountants.
(ii) The audit report of David T. Thomson, PC, on April 10, 2003, for the year
ended March 31, 2002 contained no adverse opinion, disclaimer of opinion or
modification of the opinion.
(iii)The Registrant's Board of Directors participated in and approved the
decision to change independent accountants.
(iv) In connection with its audit for the most recent fiscal year and the
interim period until the date of dismissal , there have been no
disagreements with David T. Thomson, PC on any matter of accounting
principle or practice, financial statement disclosure, or auditing scope or
procedure, which disagreement if not resolved to the satisfaction of David
T. Thomson, PC would have caused them to make reference thereto in their
report on the financial statements.
(v) During the most recent fiscal year and the interim period until the date of
dismissal , there have been no reportable events (as defined in Regulation
S-K Item 304 (a)(1)(v)).
(vi) The Registrant requested that David T. Thomson, PC furnish it with a letter
addressed to the SEC stating whether or not it agrees with the above
statements.
(b) New independent accountants
On May 3, 2004, the Registrant engaged Thomas Leger & Co. LLP to
audit its financial statements for the year ended March 31, 2003. During the two
most recent fiscal years and through March31, 2003, the Registrant has not
consulted with Thomas Leger & Co. LLP regarding (i) the application of
accounting principles to a specified transaction, either completed or proposed
or the type of audit opinion that might be rendered on the Registrant's
financial statements, and no written report or oral advise was provided to the
Registrant by concluding there was an important factor to be considered by the
Registrant in reaching a decision as to an accounting, auditing or financial
reporting issue; or (ii) any matter that was either the subject of a
disagreement, as that term is defined in item 304 (a)(1)(iv) of Regulation S-K
and the related instructions to Item 304 of Regulation S-K, or a reportable
event, as that term is defined in Item 304 (a)(1)(v) of Regulation S-K.
15
Item 8A. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Our chief executive
officer and our chief financial officer, after evaluating the effectiveness of
the Company's "disclosure controls and procedures" (as defined in the Securiteis
Exchange Act of 1934 Rule 13a-14(c) and 15-d-14(c) as of a date (the "Evaluation
Date") within 90 days before the filling date of this quarterly report, have
concluded that as of the Evaluation Date, our disclosure controls and procedures
were adequate and designed to ensure that material information relating to us
and our consolidated subsidiaries would be made known to them by others within
those entities.
(c) Changes in internal controls. There were no significant changes in our
internal controls or to our knowlege, in other factors that could significantly
affect our disclosure controls and procedures subsequent to the Evaluation Date.
Item 8B. Other Information
None
16
PART III
ITEM 9.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information Regarding Present Directors and Executive Officers
The following table sets forth as of June 30, 2004, the name, age, and
position of each executive officer and director and the term of office of each
director of the Company.
Name Age Title Director or Officer Since
------ ----- ------- -------------------------
Charles Camorata 50 President, Chief Executive
Officer and Director 01-31-04
Tony Harrison 41 Vice President and Director 01-31-04
Karen Pollino 53 Secretary / Treasurer
and Director 01-31-04
The following is the business background of each officer and director.
Charles Camorata. Mr. Camorata was a founder of and has been employed by
Skreem Entertainment Corporation since August 1999 and was appointed Chief
Executive Officer and director of the Company on January 31, 2004. From
1980-1999 he was the owner and president of Camorata Productions, Inc. an entity
which composed, arranged and produced music as well as designed audio and visual
systems for theme parks and recording studios. He has composed and published 35
musical arrangements.
Tony Harrison. Mr. Harrison joined Skreem Entertainment Corporation in
August 2003 and was appointed Vice President and director of the Company on
January 31, 2004. Since 1996 he has operated a recording studio just outside
Cologne Germany and produces records in Europe under the "Captain Hollywood"
label.
Karen Pollino. Ms. Pollino joined Skreem Entertainment Corporation in
August 1999 and was appointed Secretary/Treasurer and director of the Company
January 31, 2004. From 1997 to 1999, Ms. Pollino was employed by Martin
Consultants, Inc. as Secretary/Treasurer. From 1990 to 1997 she was employed by
Sorex Medical of Salt Lake City where she had oversight responsibility of
purchasing and customer service.
Except as indicated below, to the knowledge of management, during the past
five years, no present or former director, or executive officer of the Company:
(1) filed a petition under the federal bankruptcy laws or any state insolvency
law, nor had a receiver, fiscal agent or similar officer appointed by a
court for the business or property of such person, or any partnership in
which he was a general partner at or within two years before the time of
such filing, or any corporation or business association of which he was an
executive officer at or within two years before the time of such filing;
(2) was convicted in a criminal proceedinig or named subject of a pending
criminal proceeding (excluding traffic violations and other minor
defenses);
(3) was the subject of any order, judgement or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting, the
following activities:
(i) acting as a future commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, associated person of any of the foregoing, or as
an investment advisor, underwriter, broker or dealer in securities, or
as an affilate person, director or employee of any investment company
or engaging in or continuing any conduct or practice in connection
with such activity;
17
(ii) engaging in any type of business practice; or
(iii)engaging in any activity in connection with the purchased or sale of
any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws;
(4) was the subject of any order, judgement, or decree, not subsequently
reversed, suspended, or vacated, of any federal or state authority barring,
suspending, or other wise limiting for more than 60 days the right of such
person to engage in any activity described above under this Item, or to be
associated with persons engaged in any such activity;
(5) was found by a court of competent jurisdiction in a civil action or by the
Securities and Exchange Commission to have violated any federal or state
securities law, and the judgement in such civil action or finding by the
Securities and Exchange Commission has not been subsequently reversed,
suspended, or vacated.
(6) was found by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgemet in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
ITEM 10. EXECUTIVE COMPENSATION
The following tables set forth certain summary information concerning the
compensation paid or accrued for each of the Company's last three completed
fiscal years to the Company's or its principal subsidiaries chief executive
officer and each of its other executive officers that received compensation in
excess of $100,000 during such period (as determined at March 31, 2003, the end
of the Company's last completed fiscal year):
Name Year Compensation
------- ------- --------------
Kevin Monson 2001 None
Kevin Monson 2002 None
Kevin Monson * 2003 None
* Resigned on January 31, 2004
Cash Compensation
There was no cash compensation paid to any director or executive officer of
the Company during the fiscal years ended March 31, 2003, 2002, and 2001.
18
Bonuses and Deferred Compensation
None.
Compensation Pursuant to Plans.
None.
Pension Table
None.
Other Compensation
None.
Compensation of Directors.
None.
Termination of Employment and Change of Control Arrangement
There are no compensatory plans or arrangements, including payments to be
received from the Company, with respect to any person named in Cash Compensation
set out above which in any way result in payments to any such person because of
his resignation, retirement, or other terminatioon of such person's employment
with the Company or its subsidiaries, or any change in control of the Company,
or change in the person's responsibilities following a changing in control of
the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 31, 2004 the name and the number
of shares of the Company's Common Stock, par value $.001 per share, held of
record or beneficially by each person who held of record, or was known by the
Company to own beneficially , more than 5% of the 26,006,925 issued and
outstanding shares of the Company's Common Stock, and the name and shareholdings
of each director and of all officers and directors as a group.
Title of Name of Amount and Nature Percentage
Class Beneficial Owner of Beneficial Ownership (1) of Class
--------- ------------------ ---------------------------- ----------
OFFICERS, DIRECTORS AND FIVE PERCENT SHAREHOLDERS
Common Charles Camorata 200,000 0.8%
Common Tony Harrison 200,000 0.8%
Common Karen Pollino 100,000 0.4%
Common Jeffrey Martin (1) 21,350,000 82.1%
Common Kevin Monson 3,505,925 13.5%
All officers and
Directors as a Group
(3) persons 500,000 1.9%
(1) Includes shares
owned by Martin Consultants, Inc.
ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Notes payable to affiliates consist of the following at March 31, 2004:
Notes payable upon demand to Martin Consultants, Inc.,
secured by the assets of the
Company, interest at 8% per annum $ 486,000
Note payable upon demand to JT Investments, Ltd.,
unsecured, interest at 8% per annum 39,592
---------
$ 525,592
The Company's Board of Directors held a meeting on August 30, 2003 and
unanimously approved a proposal received from Martin Consultants, Inc. and JT
Investments, Ltd., affiliates of the Company, to convert the debt and accrued
interest owed by the Company to equity. Martin Consultants, Inc. and JT
Investments, Ltd. are 100% and 50%, respectively owned by a major shareholder of
the Company. The notes payable and related accrued interest of $1,373,600 and
$208,383, respectively were reclassified to equity on August 31, 2003 and Martin
Consultants, Inc. was issued 43,000 shares (pre-merger) of common stock.
Accounts payable due to an affiliate consisted of $9,254 for health
insurance as of March 31, 2004. Additionally, notes payable due to affiliates as
of March 31, 2004 are presented at Note 5.
The Company promotes an artist who is the son of the Company's major
shareholder. Total advances to the son are approximately $141,000 as of March
31, 2004.
TRANSACTIONS WITH PROMOTERS
There have been no transactions between the Company and promoters during
the last fiscal year.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
None
ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
2004 2003
Audit Fees (1) $17,792 $ 5,562
Audit Related Fees(2) 36,668 -
Tax Fees - -
All Other Fees ---------- ---------
Total $ 54,460 $ 5,562
========== =========
(1) Audit fees consist of fees billed for the audit of the Company's
consolidated financial statements and review of the interim consolidated
financial statements.
(2) Audit related fees consist of fees billed for the audit of Skreem
Entertainment Corporation's prior years financial statements since
inception and related business acquisition and review of proforma
information on Form 8-K and accounting research.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
SKREEM ENTERTAINMENT CORPORATION
Date: August 12, 2004 By /s/ Charles Camorata
----------------------------------
Charles Camorata, Principal Executive Officer
Date: August 12, 2004 By /s/ Karen Pollino
----------------------------------
Karen Pollino, Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Name Title Date
------- -------- --------
/s/ Charles Camorata
Charles Camorata Principal Executive Officer June 2, 2004
/s/ Karen Pollino
Karen Pollino Chief Financial Officer June 2, 2004
/s/ Tony Harrison
Tony Harrison Vice President & Director June 2, 2004
CERTIFICATIONS
I, Charles Camorata, certify that:
1. I have reviewed this annual report on Form 10-KSB of Skreem Entertainment
Corporation;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
1. The registrant's other certifying officers and I are responsible for
establishing and maintaining
2. 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 annual 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
annual report (the "Evaluation Date"); and
c) presented in this annual 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
annual 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: August 12, 2004
By: /s/ Charles Camorata
------------------------
Charles Camorata
Chief Executive Officer
22
I, Karen Pollino , certify that:
1. I have reviewed this annual report on Form 10-KSB of Skreem Entertainment
Corporation;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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
annual report (the "Evaluation Date"); and
c) presented in this annual 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
annual 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: August 12, 2004
By: /s/ Karen Pollino
-----------------------
Karen Pollino
Chief Financial Officer
23
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 Annual
Report of Skreem Entertainment Corporation; on Form 10-KSB for the fiscal year
ended March 31, 2004 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that information contained in
such Form 10-KSB 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: Chief Executive Officer
August 12, 2004
24
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 Polino, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual
Report of Skreem Entertainment Corporation; on Form 10-KSB for the fiscal year
ended March 31, 2004 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that information contained in
such Form 10-KSB 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
August 12, 2004
25