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 June 30, 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 32789
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(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 August 7, 2002, 20,887,815 shares of the issuer's Common Stock,
$.01 par value, outstanding.
SKREEM.COM CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of June 30, 2002.............................. 3
Statements of Operations for the Three Months and Six Months
Ended June 30, 2002 and 2001 and from Inception to
June 30, 2002.................................................. 4
Statements of Cash Flows for the Six Months Ended June
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
WATERFORD STERLING CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
June 30, 2002
ASSETS
CURRENT ASSETS:
Prepaid expense (Note 4) $ 29,312
------------
Total current assets 29,312
EQUIPMENT:
Office equipment 40,761
Accumulated depreciation (23,309)
------------
17,452
OTHER ASSETS:
Business acquisition costs (Note 9) 21,700
Organization costs net of amortization 297
------------
$ 68,761
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 24,386
Account payable related party (Note 5) 127,725
Notes payable - related parties (Note 5) 480,660
------------
Total current liabilities 632,771
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 (2,125,937)
------------
Total stockholders' deficit (564,010)
------------
$ 68,761
============
See accompanying notes to financial statements
WATERFORD STERLING CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended June 30, 2002 and 2001
May 17, 1989 (Date of Inception) To June 30, 2002
Inception
To
June 30, June 30, June 30,
2002 2001 2002
-------- -------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(165,604) $(1,144,054) $(2,125,937)
Adjustment to reconcile net loss to
net cash used by operating activities:
Loss on sale of investments - 9,824 9,824
Depreciation and amortization 3,258 4,731 23,949
Bad debt - - 12,074
Decrease in prepaid expenses 28,167 26,008 141,241
Increase (decrease) in accounts payable 9,963 (41,876) 24,387
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 (124,216) (251,785) (1,401,166)
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of securities available for sale - 59,676 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)
Increase in business acquisition costs (21,700) - (21,700)
---------- ---------- -----------
Net cash provided (used)
by investing activities (21,700) 59,676 (265,796)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock for cash - - 1,009,344
Loans from related parties 127,725 185,210 657,618
----------- ---------- -----------
Net cash provided from
financing activities 127,725 185,210 1,666,962
----------- ---------- -----------
NET INCREASE IN CASH (18,191) (6,899) -
Cash, beginning 18,191 12,664 -
----------- ---------- -----------
Cash, ending $ - $ 5,765 $ -
=========== ========== ===========
See (Note 8) for supplemental disclosures.
See accompanying notes to financial statements
WATERFORD STERLING CORPORATION
(A Development Stage Company)
Consolidated Statements Of Operations
For The Three Months Ended June 30, 2002 and 2001
For The Six Months Ended June 30, 2002 and 2001
And May 17, 1989 (Date Of Inception) To June 30, 2002
Inception
Three Months Ended Six Months Ended To
June 30, June 30, June 30, June 30, June 30,
2002 2001 2002 2001 2002
--------- --------- ---------- ---------- ------------
REVENUE:
Sales of software $ - $ - $ - $ - $ 652,458
Sales of furniture - 6,756 - 77,14977,370
Interest income 776 1,871 1,833 4,024 60,058
---------- --------- --------- --------- -------------
776 8,627 1,833 81,173 789,886
COST AND EXPENSES:
Cost of furniture sold - 11,828 - 70,072 70,072
Selling, general and
administrative 48,794 140,911 143,594 502,022 2,132,228
Interest 10,971 5,920 20,584 8,170 45,923
Depreciation and
amortization 1,676 2,319 3,259 4,637 27,275
Loss (gain) on sale of
investments - (26,938) - 9,825 9,825
----------- ---------- ---------- --------- ------------
Total expenses 61,441 134,040 167,437 594,726 2,285,323
----------- ---------- ---------- --------- ------------
LOSS BEFORE
EXTRAORDINARY ITEM (60,665) (125,413) (165,604) (513,553) (1,495.427)
----------- ---------- ---------- ---------- ------------
EXTRAORDINARY ITEM
Non-temporary loss
on securities - - - (630,500) (630,500)
----------- --------- ---------- ---------- ------------
NET LOSS (60,665) (125,413) (165,604) (1,144,053) (2,125,937)
OTHER COMPREHENSIVE
INCOME
Unrealized gain on available
for sale securities - - - 200,000 -
----------- --------- ---------- ---------- ------------
COMPREHENSIVE LOSS $(60,665) $(125,413) $(165,604) $(994,053) $(2,125,937)
=========== ========= ========== ========== ============
Loss per common share before
extraordinary item $ (.00) $ (.01) $ (.01) $ (.03)
Extraordinary loss per
common share - - - (.03)
----------- --------- ---------- ----------
Net less per common share $ (.00) $ (.01) $ (.01) $ (06)
=========== ========= ========== ==========
Weighted average
shares outstanding 20,887,815 20,887,815 20,887,815 19,688,920
============ ============= =========== ============
See accompanying notes to financial statements
WATERFORD STERLING CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June
30, 2002 do not differ materially from the aggregate carrying values of its
financial instruments recorded in the accompanying balance sheets.
WATERFORD STERLING CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
Dividend policy
- ---------------
The Company has not yet adopted a policy regarding payment of dividends.
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 June 30, 2002 the Company had a net operating
loss ("NOL") carry forward for United States income tax purposes of
approximately $1,469,603. 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.
WATERFORD STERLING CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
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 June 30, 2002 was $29,312.
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 June 30, 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 $127,725
=========
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
June 30, June 30, June 30,
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).
9. BUSINESS ACQUISITION COSTS
The Company as incurred direct and incremental costs associated with a pending
merger of $21,700.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended June 30, 2002 Compared to the Three Months Ended June 30,
2001
Revenues for the three months ended June 30, 2002 decreased to $776 from
$8,627 for the three months ended June 30, 2001. This decrease in revenues
resulted from the absence of furniture sales in the current quarter compared to
$6,756 of furniture sales during the corresponding quarter of the prior year and
a reduction in interest income of $1,095.
Cost of furniture sold decreased to $0 from $11,828 for the corresponding
period of the prior year as the Company is no longer engaged in the furniture
business.
Selling, general and administrative expenses decreased by $92,117 to
$48,794 for the three months ended June 30, 2002 from $140,911 for the
corresponding period of the prior year. This decrease principally resulted from
decreases in staff payroll.
Interest expense increased by $5,051 to $10,971 for the three months ended
June 30, 2002 from $5,920 for the corresponding period of the prior year. The
increase in interest expense resulted from increased borrowings by the Company.
Depreciation and amortization expense decreased to $1,676 for the three
months ended June 30, 2002 from $2,319 for the corresponding period of the prior
year. The decrease in depreciation and amortization expense resulted from a
reduction in depreciable assets.
For the three months ended June 30, 2001, the Company had a net of $26,938
on the sale of marketable securities. The Company had no gain or loss from the
sale of securities in the corresponding period of the current year.
As a result of the foregoing, the Company's net operating loss decreased by
$64,748 to $60,665 for the three months ended June 30, 2002 from $125,413 for
the corresponding period of the prior year.
Six Months Ended June 30, 2002 Compared to the Six Months Ended June 30, 2001
Revenues for the six months ended June 30, 2002 decreased to $1,833 from
$81,173 for the six months ended June 30, 2001. This decrease in revenues
resulted from the absence of sales of furniture in the current period compared
to $77,149 in the prior year and a reduction in the interest income of $2,191.
Cost of furniture sold decreased to $0 from $70,072 for the corresponding
period of the prior year as the Company is no longer engaged in the furniture
business.
Selling, general and administrative expenses decreased by $358,428 to
$143,594 for the six months ended June 30, 2001from $502,022 for the
corresponding period of the prior year. This decrease resulted from exiting the
furniture business and the corresponding cost of furniture samples, shipping and
costs of Hong Kong operations as well as reduced staff levels.
Interest expense increased by $12,414 to $20,584 for the six months ended
June 30, 2002 from $8,170 for the corresponding period of the prior year. The
increase in interest expense results from increased borrowings by the Company.
Depreciation and amortization expense decreased by $1,378 to $3,259 for the
six months ended June 30, 2002 from $4,637 for the corresponding period of the
prior year. The decrease in depreciation and amortization expense resulted from
a decrease in depreciable assets.
For the six months ended June 30, 2001, the Company had a net loss of
$9,825 from the sale of marketable securities. The Company had no gain or loss
from the sale of marketable securities in the current year. In addition, for the
six months ended June 30, 2001, the Company recorded an extraordinary loss on
the write-down of its Grand Slam Treasures, Inc. shares of $630,500 and had
other comprehensive income of $200,000 from unrealized gain on securities
available for sale. There were no such extraordinary items or comprehensive
income items for the current year.
As a result of the foregoing, the Company's net operating loss including
extraordinary items decreased by $828,449 to $165,604 for the six months ended
June 30, 2002 from $994,053 for the corresponding period of the prior year.
CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
For the past twelve months, the Company has funded its operating losses and
capital requirements through loans from its principal shareholder. As of June
30, 2002, the Company had no cash and a deficit in working capital of $603,459.
This compares with cash of $5,765 and a working capital deficit of $182,938 for
the corresponding period of the prior year.
Net cash used in operating activities decreased to $124,216 for the six
months ended June 30, 2001 from $251,785 for the six months ended June 30, 2001.
The decrease in cash used in operations resulted from a decrease in the net
operating loss which was offset by expenses which were paid in shares, a
non-cash loss resulted from a write-down of the Company's portfolio and moderate
changes in the Company's current accounts.
Cash flows used in investing activities for the six months ended June 30,
2001 increased to $21,700 from net cash provided from investing activities of
$59,676 for the corresponding period of the prior year. This increase is
attributable to the absense of the sale of securities in the current period and
an increase in business acquisition costs.
Net cash provided by financing activities decreased to $127,725 from
$185,210 for the six months ended June 30, 2002 and 2001, respectively. For each
six month period the Company received a loan of $185,210 from its principal
shareholder.
The Company has experienced significant operating losses throughout its
history, and will acquire substantial funds for the development of its business.
Therefore, the Company's ability to survive is dependent on its ability to raise
capital through the issuance of stock or borrowing of additional funds. 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
/s/ Jacob Nguyen
---------------------------
Jacob Nguyen
President Secretary / Treasurer
August 9, 2002