SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission File Number 0-27929
WATERFORD STERLING CORPORATION
--------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 62-1655508
- -------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization
200 S. Knowles Avenue, Winter Park, Florida 32790
-------------------------------------------------
(Address of principal executive offices)
(407) 622-2040
-------------------------
(Issuer's telephone number)
SKREEM.COM CORPORATION
---------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
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 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
As of May 20, 2002, 20, 887,815 shares of the issuer's Common Stock,
$.01 par value, outstanding.
SKREEM.COM CORPORATION
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of March 31, 2002 and
December 31, 2001.............................................. 3
Statements of Operations for the Three Months
Ended March 31, 2002 and 2001................................. 4
Statements of Cash Flows for the Three Months Ended March
31, 2002 and 2001.............................................. 5
Notes to Financial Statements.................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 10
PART II - OTHER INFORMATION................................................ 11
SIGNATURES................................................................. 12
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
ASSETS
CURRENT ASSETS:
Prepaid expense (Note 4) 43,536
------------
Total current assets 43,536
EQUIPMENT:
Office equipment 40,761
Accumulated depreciation (21,727)
------------
19,034
OTHER ASSETS:
Organization costs net of amortization 343
------------
$ 62,913
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 15,206
Account payable related party (Note 5) 70,392
Notes payable - related parties (Note 5) 480,660
------------
Total current liabilities 566,258
STOCKHOLDERS EQUITY (Deficit):
Common stock, par value $.01;
authorized 30,000,0000 shares; issued
and outstanding 20,887,815 shares 208,878
Capital in excess of par 1,353,049
Deficit accumulated during the
development stage (2,065,272)
------------
Total stockholders' deficit (503,345)
------------
$ 62,913
============
See accompanying notes to financial statements
WATERFORD STERLING CORPORATION
(A Development Stage Company)
Consolidated Statements of Operations
For The Three Months Ended March 31, 2002 and 2001
And May 17, 1989 (Date of Inception) to March 31, 2002
Inception
To
March 31, March 31, March 31,
2002 2001 2001
---------- ---------- ------------
REVENUE:
Sales of software $ - $ - $652,458
Sales of furniture 70,393 77,370
Interest income 1,057 2,152 59,282
------ -------- --------
1,057 72,545 789,110
COST AND EXPENSES:
Cost of furniture sold - 58,244 70,694
Selling, general and
administrative 94,800 361,110 2,082,812
Interest 9,613 2,250 34,952
Depreciation and
amortization 1,583 2,319 25,599
Loss on sale of
investments - 36,762 9,825
--------- --------- ----------
Total expenses 105,996 460,685 2,223,882
LOSS BEFORE
EXTRAORDINARY ITEM (104.939) (388,140) (1,434,772)
--------- ---------- -----------
EXTRAORDINARY ITEM
Non-temporary loss on
securities - (630,500) (630,500)
--------- ---------- -----------
NET LOSS (104,939) (1,018,640) (2,065,272)
COMPREHENSIVE
LOSS
Unrealized gain (loss) on
available for sale securities - 200,000 -
COMPREHENSIVE
LOSS $ (104,939) $(818,640) $(2,065,272)
========== ========== ===========
Loss per common share
before extraordinary item $ (.01) $ (.02)
Extraordinary loss per
common share - (.03)
---------- ----------
Net loss per common share $ (.01) $ (.05)
========== ==========
Weighted average shares
outstanding 20,887,815 18,476,704
=========== ==========
See accompanying notes to financial statements
WATERFORD STERLING CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Three Months Ended March 31, 2002 and 2001
May 17, 1989 (Date of Inception) To March 31, 2002
Inception
To
March 31, March 31, March 31,
2002 2001 2002
---------- --------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(104,939) $(1,018,641) $(2,065,272)
Adjustment to reconcile net loss to
net cash used by operating activities:
Loss on sale of investments - 36,762 9,824
Depreciation and amortization 1,630 2,319 22,321
Bad debt - - 12,074
Decrease in prepaid expenses 13,943 12,875 127,017
Increase (decrease) in accounts payable 783 (40,216) 15,207
Bank overdraft - 2,137 -
Revenue in non-cash transaction - - (650,000)
Nontemporary loss on securities - 630,500 630,500
Expenses paid and debts settled
with common stock - 263,082 443,348
Loss on exchange of notes receivable
for prepaid rent - - 45,200
Other expenses incurred in
non-cash transactions - - 44,248
---------- ------------- ------------
Net cash (Used) by operations (88,583) (111,182) (1,365,533)
---------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of securities available for sale - 13,238 59,676
Issuance of notes receivable - - (290,733)
Collections on notes receivable - - 78,658
Purchase of marketable securities - - (50,000)
Purchase of equipment - - (40,761)
Increase in organization costs - - (936)
---------- ------------- ------------
Net cash provided (used)
by investing activities - 13,238 (244,096)
---------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock for cash - - 1,009,344
Loans from related parties 70,392 95,590 600,285
----------- ------------- ------------
Net cash provided from
financing activities 70,392 95,590 1,609,629
----------- ------------- ------------
NET INCREASE IN CASH (18,191) (2,354) -
Cash, beginning 18,191 12,664 -
----------- ------------- ------------
Cash, ending $ - $ 10,310 $ -
=========== ============= ============
See (Note 7) for supplemental disclosures.
See accompanying notes to financial statements
WATERFORD STERLING CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
Business activity
The Company, a Delaware corporation was incorporated on May 17, 1989, and is
currently in the development stage. The Company sought to acquire and develop
high technology software firms, and to engage in the sourcing and marketing of
furniture and accessories to the hospitality and time share market. Currently
the Company is exploring other business possibilities.
In April 1999 the Company changed its name from Commerce Centers Corporation to
Skreem.com Corporation and approved a reverse stock split of 3 shares of
outstanding stock for 5 shares. The report has been prepared as if the stock
split had occurred at inception.
In January 2001 the Company changed its name from Skreem.com Corporation to
Waterford Sterling Corporation.
Accounting method
The Company's financial statements are prepared using the accrual method of
accounting.
Principles of consolidation
The consolidated financial statements include the accounts of Skreem.com
Corporation and Waterford Florida, Inc., both Nevada corporations. All material
intercompany transactions have been eliminated.
Computer software costs
The Company expenses research and development costs related to software
development that has not reached technological feasibility and started
production for sale. Thereafter costs are capitalized and amortized over a
maximum of five years or expected life of the product, whichever is less.
Income (loss) per share
The computation of income (loss) per share of common stock is based on the
weighted average number of shares outstanding, after the stock split.
Statement of cash flows
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents for purposes of the
statement of cash flows.
Financial instruments
The Company estimates that the fair value of all financial instruments at March
31, 2002 do not differ materially from the aggregate carrying values of its
financial instruments recorded in the accompanying balance sheets.
Dividend policy
The Company has not yet adopted a policy regarding payment of dividends.
WATERFORD STERLING CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
Estimates and assumptions
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of the assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing these financial statements.
Marketable securities:
Certain equity securities are classified as available for sale as defined by
SFAS 115. In accordance with that Statement, they are reported at aggregate fair
value with unrealized gains and losses excluded from earnings and reported as a
separate component of stockholders' equity.
1. INCOME TAXES
The Company complies with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. At March 31, 2002 the Company had a net operating
loss ("NOL") carry forward for United States income tax purposes of
approximately $1,408,938. The NOL carryforward expires in increments beginning
in 2004. The Company also had a net capital loss carryover of approximately
$640,000. The Company's ability to utilize its net NOL carryforward is subject
to the realization of taxable income in future years, and under certain
circumstances, the Tax Reform Act of 1986 restricts a corporation's use of its
NOL carryforward. The Company believes that there is at least a 50% chance that
the carryforward will expire unused, therefore, any tax benefit from the loss
carryforward has been fully offset by a valuation reserve.
2. ACQUISITION OF SUBSIDIARIES
In April 1999 the Company, Skreem.com Corporation, a Delaware corporation
("SCD") acquired all of the outstanding stock of Skreem.com Corporation, a
Nevada corporation ("SCN") through a stock for stock exchange in which the
stockholders of SCN received 9,600,000 post stock split
common shares of the SCD in exchange for all of the stock of the SCN.
Skreem.com Corporation ("SCN") was incorporated in Nevada on January 29, 1999
for the purpose of developing high technology software.
For reporting purposes, the acquisition is treated as an acquisition of the
Company ("SCD") by Skreem.com Corporation of Nevada ("SCN") (reverse
acquisition) and a recapitalization of SCN with its historical financial
statements being combined with the Company's. No proforma statements have been
included since the acquisition is considered to be a reverse acquisition.
On January 31, 2001, the Company executed and Exchange Agreement for the
acquisition of all of the issued and outstanding shares of Waterford Florida,
Inc. in exchange for 7,000,000 share of the Company's common stock. Waterford
Florida, Inc. is currently engaged in the sourcing and marketing of furniture
and accessories to the hospitality and time share market, however, at the date
of acquisition it had not commenced this activity.
3. PREPAID EXPENSE
The Company leases office space under a noncancellable operating lease agreement
effective January 1, 2001 which expires December 31, 2002. The Company prepaid
the rent for the two years specified in the lease agreement. Consideration for
the prepayment was based on the present value of 24 months at $5,000 per month,
discounted at 8% or $110,553. Prepaid rent expense at March 31, 2002 was
$43,536.
WATERFORD STERLING CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
5. RELATED PARTY TRANSACTIONS
During February 1998, the Company issued 1,585,258 post stock split shares to
five major stockholders and two persons who were both officers and directors.
The consideration for the issuance was assumption of the Company's accrued
liabilities in the amount of $21,920 by the above mentioned shareholders, and
the agreement by them to fund future Company expenditures in the amount of
$4,500.
The shares issued pursuant to the acquisition agreement as described in note 3
were issued to four individuals who collectively represent a controlling
interest of the Company.
During May 2000, the Company borrowed $50,000 from its President payable on
demand at 8%.
On September 26, 2000, the Company issued 75,000 shares of its common stock in
settlement of the $50,000 note including accrued interest.
The Company has borrowed additional funds from related parties resulting in 8%
demand notes secured by the Company's assets and treasury securities, and other
unsecured amounts as follows at March 31, 2002:
Notes payable - Stockholder of the Company $150,955
Notes payable - Market Management International,
a company is which a major stockholder has
an interest. 329,705
---------
$480,660
Unsecured amounts borrowed form Market
Management International $ 70,392
=========
6. GOING CONCERN
The Company has suffered recurring operating losses from its inception. The
Company intends to acquire interests in various business opportunities which, in
the opinion of management, will provide a profit for the Company, however, there
is insufficient working capital to service its debt and for any future planned
activity. Continuation of the Company as a going concern is dependent upon
obtaining additional working capital for any future planned activity and
management of the Company will be required to develop a strategy which will
accomplish this objective.
7. SUPPLEMENTAL CASH FLOW DISCLOSURES
Inception
to
March 31, March 31, March 31,
2002 2001 2002
--------- ----------- ------------
Non-cash operating and financing activities:
Non-cash sales $ - $ - $650,000
======== ========= =========
Other non-cash operating expenses $ - $ - $ 89,448
======== ========= =========
Issuance of common stock for expenses $ - $ 263,082 $443,348
======== ========= =========
Issuance of common stock for note payable $ - $ - $50,000
======== ========= =========
8. COMMITMENTS
The Company leases office space under a noncancellable operating lease agreement
effective January 1, 2001 which expires December 31, 2002. Minimum lease
payments of $60,000 for 2002 are required. The Company has prepaid this
obligation (refer to note 4).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company, a Delaware corporation was incorporated on May 17, 1989, and is
currently in the development stage. The Company intends to acquire and develop
high technology software firms, and to engage in the sourcing and marketing of
furniture and accessories to the hospitality and time share market.
In April 1999, the Company changed its name from Commerce Centers Corporation to
Skreem.com Corporation and approved a reverse stock split of 3 shares of
outstanding stock for 5 shares. The report has been prepared as if the stock
split had occurred at inception.
In January 2001, the Company changed its name from Skreem.com Corporation to
Waterford Sterling Corporation
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended March 31
Revenues for the three months ended March 31, 2002 decreased by $71,488
or 98.5% to $1,057 from $72,545 for the three months ended March 31, 2001. This
decrease in revenues resulted from the absense of the sale of furniture in the
current quarter, a business shut down by the Company. Interest income also
decreased by $1,095 because of lower interest rates and reduced interest bearing
balances.
Selling, General and administrative expenses decreased by $266,310 or
73.7% to $94,800 for the three months ended March 31, 2002 from $361,110 for the
corresponding period of the prior year. This decrease resulted because the
Company no longer has an operating business and has terminated nearly all of its
personnel.
For the three months ended March 31, 2002, the Company incurred
interest expense of $9,613 on notes payable to the Company's principal
shareholder and to a related party corporation. The Company had $2,250 of
interest expense for the corresponding period of the prior year. The increased
interest expense reflects increased borrowings by the Company.
Depreciation and amortization expense decreased by $736 or 31.7% $1,513
for the three months ended March 31, 2002 from $2,319 for the corresponding
period of the prior year. The decrease in depreciation and amortization expense
resulted from reduced investment in equipment.
The Company had no gain or loss on the sale of investments for the
three months ended March 31, 2002. For the three months ended March 31, 2001,
the Company incurred a loss on the sale of investments of $36,762 from its sale
of Intermost Corporation securities.
As a result of the foregoing, the Company's net operating loss before
extraordinary items decreased by $283,201 or 73% to $104,939 for the three
months ended March 31, 2002 from $388,140 for the corresponding period of the
prior year.
For the three months ended March 31, 2001 the Company also incurred an
extraordinary loss of $630,500 from a decline in the value of its holdings in
Grand Slam Treasures, Inc. There was no extraordinary item for the three months
ended March 31, 2002.
For the three months ended March 31, 2001, the Company also reported
other comprehensive income of $200,000 from unrealized gain on available for
sale securities. For the three months ended March 31, 2002, the Company had no
other comprehensive income or loss.
CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
For the past twelve months, the Company has funded its operating losses
and capital requirements through the sale of securities in its portfolio and
loans from related parties. As of March 31, 2001, the Company had a cash balance
of $0 and a working capital deficit of $522,722. This compares with cash of
$10,310 and a working capital deficit of $93,661 at March 31, 2001.
Net cash used in operating activities decreased to $88,583 from
$111,182 for the three months ended March 31, 2002 and 2001, respectively. The
decrease in cash used in operations resulted from a decrease in the net
operating loss which was partially offset by changes in current accounts, and
non-cash losses from a decline in portfolio values.
There were no cash flows from investing activities for the three months
ended March 31, 2002 and $13,238 for the corresponding period of the prior year.
This decrease resulted from the absence of a sale of securities in the current
period.
Net cash provided by financing activities decreased to $70,392 from
$95,590 for the three months ended March 31, 2002 and 2001, respectively. This
decrease resulted from reduced loans from related parties.
The Company has experienced significant operating losses throughout its
history, and will require substantial funds for the development of any business.
Therefore, the Company's ability to survive is dependent on its ability to raise
capital through the issuance of stock, the borrowing of additional funds or
finding a profitable company to acquire or with which to merge. Without the
success of one of these options, the Company will not have sufficient cash to
satisfy its working capital and investment requirements for the next twelve
months.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.
WATERFORD STERLING CORPORATION
May 20, 2002 /s/ Jacob Nguyen
--------------------------------
Jacob Nguyen, Chief Executive Officer
and Chief Financial Officer