SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-KSB





(Mark
      One)


x
      ANNUAL REPORT PURSUANT
      TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For
      the
      Fiscal Year Ended March 31, 2007





o
      TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





Commission
      File No. 0-22236





SKMI
      Interactive, Inc.


(formerly
      SKREEM Entertainment Corp.)




_____________________________________


(Name
      of
      small business issuer in its charter)




Delaware
            
            33-0565710State
                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
                  RegisteredNone
              
              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
x
      No o





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





Issuer’s
      revenues for its most recent fiscal year were $64,937.





State
      the
      aggregate market value of the voting stock held by non-affiliates 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:





As
      of May
      5, 2006, the Registrant had 24,508,950 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





PagePART
                IITEM
                1.
            
            DESCRIPTION
                OF BUSINESS
            
            3ITEM
                2.
            
            DESCRIPTION
                OF PROPERTY
            
            4ITEM
                3.
            
            LEGAL
                PROCEEDINGS
            
            4ITEM
                4.
            
            SUBMISSION
                OF MATTERS TO A VOTEOF
                SECURITY HOLDERS
            
            4PART
                IIITEM
                5.
            
            MARKET
                FOR COMMON EQUITY, RELATED STOCKHOLDERMATTERS
                AND SMALL BUSINESS ISSUER PURCHASES OFEQUITY
                SECURITIES
            
            5ITEM
                6.
            
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLANOF
                OPERATION
            
            6ITEM
                7.
            
            FINANCIAL
                STATEMENTS
            
            14ITEM
                8.
            
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTSON
                ACCOUNTING AND FINANCIAL DISCLOSURE
            
            31ITEM
                8A.
            
            CONTROLS
                AND PROCEDURES
            
            31ITEM
                8B.
            
            OTHER
                INFORMATION
            
            32PART
                IIIITEM
                9.
            
            DIRECTORS
                AND EXECUTIVE OFFICERS OF THE REGISTRANT
            
            33ITEM
                10.
            
            EXECUTIVE
                COMPENSATION
            
            34ITEM
                11.
            
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIALOWNERS
                AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
            
            35ITEM
                12.
            
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS
            
            35ITEM
                13.
            
            EXHIBITS
                AND REPORTS OF FORM 8-K
            
            36ITEM
                14.
            
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            
            37SIGNATURES
            
            38CERTIFICATIONS









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 identified 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 Plasmatronics 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 acquired 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.





On
      December 19, 2006, we filed a Def 14C Information Statement advising that the
      name of the Company was amended to SKMI Interactive Inc., as well as spinning
      off our business operations into a subsidiary, Skreem Entertainment Corp
      (Nevada). Thereafter we filed a Form 10-SB on Skreem Entertainment Corp
      (Nevada), in order to complete a stock dividend. These actions were taken in
      anticipation of a transaction with Weaver Interactive, Inc. The spin-off of
      the
      subsidiary containing the business operations of the Company was effective
      February 5, 2007.




Subsequent
      events





On
      June
      22, 2007, **SKRM
      Interactive Inc.** entered
      into a Letter of Intent to acquire 75% of the stock of Sector 10 Services USA,
      Inc. (“SECTOR 10”), a Washington corporation for 65,000,000 of the issued and
      outstanding shares of common stock of SKMI.





Sector
      10
      Services USA, Inc. seeks to become the leading provider of pre-deployed
      emergency life response equipment across all Major US cities. Sector 10 is
      the
      exclusive provider of Pericles LogiX System in the United States. Sector 10’s
      core focus is on the first response solutions, utilizing two lines of patented
      products, Mobile Response United (“MRU”) and Stationary Response Units
      (“SRU”).





It
      is
      expected that the transaction will close within ninety (90) days.





3





Employees





The
      Company, as of June 15, 2006, employs a total of 2 persons, one of these
      full-time, at its corporate headquarters in Florida.





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.





ITEM
      3.
      LEGAL PROCEEDINGS





The
      Company is not aware of any litigation, pending or threatened, to which it
      is a
      party.





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, 2007, other than those for which the majority of shares entitled
      to vote upon were approved as set forth in the Def 14C Information Statement,
      filed on December 19, 2006, approving the Certificate of Amendment to the
      Certificate of Incorporation of the Company, pursuant to which the Company's
      name will change to “SKRM Interactive Inc.”.




4




PART
      II





ITEM
      5.
      MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASER OF EQUITY SECURITIES





The
      Company’s Common Stock trades on the Over the Counter Bulletin Board under the
      symbol SKMI.OB. Prior to February 7, 2007, the stock traded under the symbol
      “SKRM.OB.” The Company’s stock began trading subsequent to its year end of March
      31, 2006. 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 foreseeable future. As of June 15, 2006, the Company had approximately
      160
      shareholders of record.




The
      following chart sets out the High, Low and Close Bid, Ask and Price for the
      stock for the period from June 30 2006 until May 31, 2007




Bid
                Price
            
            
            
            Ask
                Price
            
            
            
            
            
            PriceMonth
            
            High
            
            Low
            
            Close
            
            High
            
            Low
            
            Close
            
            High
            
            Low
            
            Close05/31/2007
            
            0.12
            
            0.08
            
            0.11
            
            0.15
            
            0.13
            
            0.14
            
            0.14
            
            0.1
            
            0.1304/30/2007
            
            0.15
            
            0.1
            
            0.11
            
            0.19
            
            0.13
            
            0.13
            
            0.16
            
            0.1
            
            0.1103/30/2007
            
            0.15
            
            0.14
            
            0.14
            
            0.19
            
            0.19
            
            0.19
            
            0.19
            
            0.14
            
            0.1902/28/2007
            
            0.42
            
            0.12
            
            0.14
            
            0.5
            
            0.18
            
            0.19
            
            0.5
            
            0.16
            
            0.1601/31/2007
            
            0.45
            
            0.35
            
            0.36
            
            0.55
            
            0.38
            
            0.4
            
            0.51
            
            0.35
            
            0.3612/29/2006
            
            1.1
            
            0.4
            
            0.41
            
            1.24
            
            0.48
            
            0.48
            
            1.1
            
            0.41
            
            0.4811/30/2006
            
            1.5
            
            1.1
            
            1.1
            
            1.54
            
            1.24
            
            1.24
            
            1.52
            
            1.1
            
            1.2410/31/2006
            
            1.95
            
            1.25
            
            1.39
            
            2
            
            1.29
            
            1.43
            
            2
            
            1.3
            
            1.4309/29/2006
            
            2.1
            
            1.9
            
            1.9
            
            2.15
            
            1.93
            
            2
            
            2.15
            
            1.9
            
            1.9508/31/2006
            
            2.1
            
            1.79
            
            2.1
            
            2.2
            
            1.83
            
            2.14
            
            2.14
            
            1.79
            
            2.1407/31/2006
            
            1.79
            
            1.32
            
            1.79
            
            1.84
            
            1.35
            
            1.84
            
            1.84
            
            1.32
            
            1.8206/30/2006
            
            1.32
            
            0.8
            
            1.32
            
            1.39
            
            1.12
            
            1.39
            
            1.39
            
            1
            
            1.39




The
      Company’s transfer agent is OTC Stock Transfer, Inc. of Salt Lake City,
      Utah.





5




ITEM
      6.
      MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





Plan
      of
      Operation




Until
        December 19, 2006, the Company’s operations were to develop current acts into
        successful music performing and recording acts. The Company currently has
        three
        acts, “3rd Wish”, “Pat Moe” and Willie Will”. These three acts will tour,
        perform, make public appearances, and continue to record as opportunities
        are
        located. The Company is uncertain as to when these acts may enter the U.S.
        market.


The
      Company’s cash balance is insufficient to satisfy the Company’s cash
      requirements for the next 12 months. The Company believes it can satisfy its
      cash requirements for 6 months with current cash and receivables. The Company
      is
      dependent on continued receipt of revenues and will need outside funding from
      the sale of shares or debt financing in order to continue operations beyond
      that
      point.





The
      Company does not anticipate acquiring any significant equipment during the
      next
      twelve months.





The
      Company does not anticipate any significant changes in the number of employees
      in the next twelve months.





The
      Company’s business operations until November 30, 2006, included entering into
      various license agreements which grant certain exclusive rights to sell and
      distribute certain recordings by “3rd Wish”. These operations are no longer a
      part of the business of the Company, and are presented here only to indicate
      the
      operations until November 30, 2006. The spin-off of the subsidiary containing
      the business operations of the Company was effective February 5,
      2007.





The
      table
      below sets forth the parties and territories covered by these license
      agreements:





Party
                (Licensee)
            
            TerritoriesCheyenne
                Records
            
            Germany,
                Switzerland and AustriaThree
                8 Music Limited
            
            UK,
                EireShock
                Records Pty Ltd
            
            Australia,
                New ZealandNRJ
                Music
            
            France,
                Andorra, Monaco, BelgiumMegaliner
                Records
            
            Russia,
                Azerbaijan, Armenia, Georgia, Moldova, Kazakstan, Kyrgyzstan, Tajikistan,
                Uzbekistan, Turkmenistan, Ukraine, Republic of Belarus, Lithuania,
                Latvia,
                EstoniaNMC
                Music Ltd.
            
            IsraelVidisco
            
            PortugalPlanet
                Records
            
            Italy





Revenue
      was recognized in accordance with Staff Accounting Bulleting No. 104 (SAB 104)
      when persuasive evidence of an arrangement exists, the price to the buyer is
      fixed or determinable; delivery had occurred or services have been rendered
      or
      the license period has begun; and collection is reasonably assured.





Revenue
      from the distribution of recordings under license and distribution agreements
      is
      recognized as earned under the criteria established by Statement of Financial
      Accounting Standard No. 50. Revenue is generally recognized when the Company
      receives an “accounting” of recordings sold with payment from the licensee. In
      the event the Company has not received an “accounting” from the licensee and if
      the Company has information related to the licensed use of


recordings
      that would result in the revenue being fixed and determinable, and collection
      is
      reasonably assured, then revenue is recognized in the periods in which the
      license revenue is earned. Minimum guarantees (advances) received from licensees
      are recorded as deferred revenue and are amortized over the performance period,
      which is generally the period covered by the agreement.




6




Our
      independent registered public accounting firm issued a report on their audit
      of
      our financial statements for the fiscal year ended March 31, 2007. Our notes
      to
      the financial statements disclose that the cash flow of the Company has been
      absorbed in operating activities and has incurred net losses for
      the
      fiscal year ,
      and
      have a working capital deficiency. In the event that funding from internal
      sources or from public or private financing is insufficient to fund the business
      at current levels, we will have to substantially cut back our level of spending
      which could substantially curtail our operations. The independent registered
      public accounting firm’s report contains an explanatory paragraph indicating
      that these factors raise substantial doubt about our ability to continue as
      a
      going concern. Our going concern uncertainty may affect our ability to raise
      additional capital, and may also affect our relationships with suppliers and
      customers. Investors should carefully read the independent registered public
      accounting firm's report and examine our financial statements.




**Results
      of Operations for the year ended March 31, 2007 as compared to the year ended
      March 31, 2006.**





**Revenues
      -**





The
      Company’s core business of online gaming has no revenues for the year ended
      March 31, 2007; however, we are actively pursuing opportunities for revenue
      growth in the future.


Since
      management’s decision to increase its business opportunities into the area of
      online gaming occurred in November 2006, we do not have revenue relating to
      SKRM
      for the year ended March 31, 2006.





**General
      and administrative expenses -**





General
      and administrative expenses for the year ended March 31, 2007 increased by
      $922,234 or 100% since general and administrative expenses were $0 for the
      year
      ended March 31, 2006. _________________________________.





Since
      management’s decision to increase its business opportunities into the area of
      online gaming occurred in November 2006, we do not have general and
      administrative expenses relating to SKRM for the year ended March 31,
      2006.





**Impairment
      and recovery of notes receivable -**





In
      conjunction with our Stock Purchase Agreement with Weaver Interactive, Inc.,
      we
      loaned Weaver $400,000 and accrued interest of $10,701 on a notes receivable.
      We
      were concerned as to the collectibility of this note receivable initially which
      is why we impaired the note; however, in March 2007 an agreement was reached
      between the Company and Weaver as to repayment. Weaver did pay the loan back
      to
      us in April of 2007, as per the “Agreement of Repayment” contract. As part of
      the “Agreement of Repayment” Weaver was not required to pay the outstanding
      interest due of $10,701.





7





**Other
      income -**





The
      Company recorded interest income of $10,701 for the year ended March 31, 2007.
      The interest income relates to the notes receivable from Weaver and was written
      off with the initial impairment of the note. The Company has $0 of “Other
      income” for the year ended March 31, 2006.





**Other
      expenses -**





We
      are
      required to measure the fair value of the warrants and the embedded conversion
      features related to our convertible notes on the date of each reporting period.
      The effect of this re-measurement is to adjust the carrying value of the
      liabilities related to the warrants and the embedded conversion features.
      Accordingly, the Company recorded non-cash expense of $796,245 for the year
      ended March 31, 2007 which related to the change in fair value of the warrants
      and embedded derivative liabilities and discounts. The Company did not have
      any
      derivative liabilities during the year ended March 31, 2006.





The
      Company recorded interest expense of $26,197 for the year ended March 31, 2007.
      The interest expense relates to $9,244 of accreted loan closing costs and
      $16,197 of interest due on the convertible notes. The Company has $0 of “Other
      expenses” for the year ended March 31, 2006.




**Discontinued
      operations -**





On
      November 30, 2006, The Board of Directors of SKRM Interactive, Inc. approved
      the
      distribution of all of the shares of common stock of SKREEM Entertainment
      Corporation (a Nevada Company) to SKRM’s shareholders. Effectively, this means
      that for each one (1) shares owned in the Company, a shareholder will receive
      one (1) share in the subsidiary (the “Dividend Shares”). The Board of Directors
      of SKRM Interactive, Inc. has declared November 30, 2006, as the record date
      for
      this share dividend, with a payment date as soon as practicable thereafter.
      The
      effective date of the spin-off was February 5, 2007.





Upon
      distribution of the dividend shares, SKRM shareholders will own 100% of the
      common stock of SKREEM. SKRM’s board of directors believes that creating a
      separate entertainment company will increase value to, and is in the best
      interests of its shareholders. Following the dividend share distribution, each
      shareholder will own common stock in both SKRM and SKREEM.





SKRM
      believes each of the resulting companies will be better positioned to focus
      on
      its core businesses and competencies, and thus compete more effectively in
      their
      respective markets.





SKRM
      has
      reflected the results of operations of SKREEM in its Consolidated Statement
      of
      Operations as “Discontinued operations” for the year ended March 31,
      2007.




8




February
                5,2007Spin
                Off DateRevenue
            
            $
            34,362Revenue
                - related party
            
            
            127,200Total
                revenue
            
            
            161,562Operating
            
            
            952,793General
                and administrative
            
            
            828,926Total
                expenses
            
            
            1,781,719Loss
                from operations
            
            
            (1,620,157
            )Interest
                expense
            
            
            (52,985
            )Loss
                before provision for income tax
            
            
            (1,673,142
            )Income
                tax provision
            
            
            -Net
                loss from discontinued operations
            
            
            (1,673,142
            )Gain
                on spin off of discontinued operations
            
            
            299,082Total
                for discontinued operations
            
            $
            $
                (1,374,060
            )




**Revenues**





Revenues
      from the discontinued subsidiary were $161,562 which consists of $34,362 from
      licensing agreements to distribute “3rd Wishes” music and sales of recordings to
      a related party of $127,200. Revenues for the year ended March 31, 2006 were
      $64,937. The subsidiary had a 149% increase is revenue from the prior
      year.





**Operating
      expenses**





Operating
      expenses relating to the discontinued subsidiary for the year ended March 31,
      2007 totaled $952,793 and consisted of advertising costs of $771,951,
      promotional costs of $55,056, travel expenses of $21,116, internet and web
      maintenance of $20,319, support to artists of $45,600 and $38,751 in studio
      expenses and other miscellaneous costs. The total operating expenses for the
      year ended March 31, 2006 were $914,499. The discontinued subsidiary had a
      4.2%
      increase in operating expenses over the prior year.





**General
      and administrative expenses**





General
      and administrative expenses relating to the discontinued subsidiary for the
      year
      ended March 31,2007 totaled $828,926 and consisted of the following: consulting
      fees of $664,464, payroll expense $56,122, Postage & Delivery $46,856,
      Insurance of $16,736 and miscellaneous general expenses of $44,748. The total
      general and administrative expenses for the year ended March 31, 2006 were
      $357,598. The discontinued subsidiary had a 130% increase in general and
      administrative expenses over the prior year. The largest factor attributing
      to
      this increase is consultant fees increased dramatically during the year 2007.





**Interest
      expense**





Interest
      expense relating to the discontinued subsidiary for the year ended March 31,
      2007 totaled $52,985 with a 69% decrease from last year’s total interest expense
      of $169,369.




9




**Gain
      on spin-off of discontinued operations**





Assets
      and liabilities of the discontinued operations were reported as net assets
      and
      net liabilities of discontinued operations and transferred to SKREEM as a gain
      of $299,082 on the effective spin off date of February 5, 2007.





**Liquidity
      and Capital Resources**





**Cash
      and cash equivalents -**





We
      believe our cash and cash equivalents balance of $1,781 with a deficit in
      working capital of $1,105,888 as of March 31, 2007 is not sufficient to meet
      our
      working capital requirements for the coming year.





**Total
      assets -**





We
      currently have $488,975 in total assets for the year ended March 31, 2007.
      Our
      total assets are comprised of $1,781 in cash and cash equivalents, $400,000
      in
      notes receivable and $87,194 in deferred financing costs.





**Working
      capital -**





We
      have
      financed our operations almost exclusively through the sale of our common shares
      to investors and borrowers. We expect to finance operations through the sale
      of
      equity in the foreseeable future as we receive minimal revenue from our current
      business operations. There is no guarantee that we will be successful in
      arranging financing on acceptable terms.





We
      anticipate that up to $500,000(?) of additional working capital will be required
      over the next 12 months to meet our budgeted needs for the coming year. We
      do
      not have sufficient cash on hand to meet these anticipated
      obligations.





We
      do not
      currently have any arrangements for financing and we may not be able to find
      such financing if required. Obtaining additional financing would be subject
      to a
      number of factors, including investor sentiment. Market factors may make the
      timing, amount, terms or conditions of additional financing unavailable to
      us.





Our
      auditors are of the opinion that our continuation as a going concern is in
      doubt. Our continuation as a going concern is dependent upon continued financial
      support from our shareholders and other related parties.





**Liabilities
      -**





Current
      and total liabilities as of March 31, 2007 were $1,598,733. The derivative
      liabilities comprise the major of this balance at $1,396,245. The Company also
      has accounts payable of $144,102, a notes payable to a shareholder of $35,000
      and $13,078 due to an affiliate.




10




**Cash
      flows -**





Year
                EndedMarch
                31,Sources
                and Uses of Cash
            
            2007Net
                cash provided by / (used in)Operating
                activities
            
            $
            (78,295
            )Investing
                activities
            
            
            (400,000
            )Financing
                activities
            
            
            569,695Discontinued
                operations activities
            
            
            (152,002
            )Increase/(decrease)
                in cash and cash equivalents
            
            $
            (60,602
            )Year
                end March 31, 2007Cash
                and cash equivalents
            
            $
            1,781





**Operating
      activities -**





Cash
      used
      in operations for the year ended March 31, 2007 was $78, 295. Operating
      activities were affected by non-cash expenses of $796,245 for the change in
      fair
      value of derivatives, $692,650 for stock issued for services, $9,244 of accreted
      deferred financing costs and discount on convertible debt and $10,701 of
      interest expense on the notes receivable to Weaver. Operating activities were
      also affected by the changes in operating assets and liabilities of $146,477.





Cash
      used
      in operations for the year ended March 31, 2006 was $0.





**Investing
      activities -**





Cash
      used
      in investing activities for the year ended March 31, 2007 which is comprised
      of
      a $400,000 loan to Weaver. The loan was collected in April 2007.




Cash
      used
      in investing activities for the year ended March 31, 2006 was $0.





**Financing
      activities -**





The
      Company acquired $569,695 in cash from financing activities for the year ended
      March 31, 2007. The cash provided from financing activities is comprised of
      proceeds from a shareholder loan of $35,000, proceeds form the issuance of
      common stock of $24,695 and proceeds from the convertible notes of $600,000.
      The
      Company also used cash of $90,000 in debt issuance costs.





Cash
      used
      in financing activities for the year ended March 31, 2006 was $0.





**Discontinued
      operations activities** -





The
      Company used $152,002 in cash during its discontinued operation of its
      subsidiary for the year ended March 31, 2007.





Discontinued
      operating activities include adjustments to net loss of $1,673,142 of non-cash
      expenses of $4,479 in depreciation, $770,674 in common stock issued for
      services, $515,000 of expenses paid by a shareholder and the net change in
      assets and liabilities of $3,300. Cash used in discontinued operations
      activities for the year ended March 31, 2007 was $379,689.





Discontinued
      investing activities include the purchase of equipment in the amount of $6,134
      for the year ended March 31, 2007.




11




Discontinued
      financing activities comprise several different areas of contribution in cash
      to
      the company. The discontinued subsidiary received cash from a shareholder in
      the
      amount of $303,050 and also paid back the shareholder $132,229 of the note’s
      balance over the course of the year ended March 31, 2007. The discontinued
      subsidiary also received proceeds from an affiliate in the amount of $63,000
      and
      proceeds from its parent company of $24,695.





**Critical
      Accounting Policies**





The
      discussions and analysis of our financial condition and results of operations,
      including the discussion on liquidity and capital resources, are based upon
      the
      financial statements, which have been prepared in accordance with US GAAP.
      The
      preparation of these financial statements requires us to make estimates and
      judgments that affect the reported amounts of assets, liabilities, revenues
      and
      expenses, and related disclosure of contingent assets and liabilities. On an
      ongoing basis, management re-evaluates its estimates and judgments, particularly
      those related to the determination of the impairment of its intangible assets.
      Actual results could differ from the estimates. We believe the following are
      the
      critical accounting policies used in the preparation of the consolidated
      financial statements.





**Revenue
      -**





The
      Company will recognize revenue in accordance with Securities and Exchange
      Commission Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial
      Statements." Revenue will be recognized only when the price is fixed or
      determinable, persuasive evidence of an arrangement exists, the service is
      performed, and collectibility is reasonably assured.





**Licensing
      -**





The
      Company accounts for licensing fees on a gross basis pursuant to the
      requirements of Emerging Issues Task Force No. 99-19. The Company is the primary
      obligor to transactions, has full pricing latitude, can modify the product
      specifications as it sees fit, will perform part of the service to the end
      customer, carries sole risk of physical inventory loss, realizes full credit
      risk, and commission income, is not fixed.





**Long-Lived
      Assets -**





SFAS
      No.
      144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
      establishes a single accounting model for long-lived assets to be disposed
      of by
      sale including discontinued operations. SFAS 144 requires that these long-lived
      assets be measured at the lower of the carrying amount or fair value less cost
      to sell, whether reported in continuing operations or discontinued
      operations.





**Research
      and Development -**





Costs
      incurred in the research and development of software products are charged to
      operations as incurred until technological feasibility has been established.
      After technological feasibility is established, any additional costs are to
      be
      capitalized in accordance with SFAS No. 86, "Accounting for the Cost of Computer
      Software to be Sold, Leased or Otherwise Marketed". The establishment of
      technological feasibility and the ongoing assessment of recoverability of
      capitalized software development costs require considerable judgment by
      management with respect to certain external factors such as anticipated future
      revenues, estimated economic life and changes in software and hardware
      technologies. No software development costs have been capitalized as of March
      31, 2007.




12




**Derivatives
      -**




We
      follow
      the provisions of SFAS No. 133 "Accounting for Derivative Instruments and
      Hedging Activities" along with related interpretations EITF No. 00-19
      "Accounting for Derivative Financial Instruments Indexed to, and Potentially
      Settled in, a Company's Own Stock" and EITF No. 05-2 "The Meaning of
      'Conventional Convertible Debt Instrument' in Issue No. 00-19.” SFAS No. 133
      requires every derivative instrument (including certain derivative instruments
      embedded in other contracts) to be recorded in the Balance Sheet as either
      an
      asset or liability measured at its fair value, with changes in the derivative's
      fair value recognized currently in earnings unless specific hedge accounting
      criteria are met.





We
      value
      these derivative securities under the fair value method at the end of each
      reporting period (quarter and annual), and their value is marked to market
      at
      the end of each reporting period with the gain or loss recognition recorded
      against earnings. We continue to revalue these instruments each quarter and
      year
      to reflect their current value in light of the current market price of our
      common stock. As a result, our consolidated financial statements may fluctuate
      from quarter to quarter and year to year based on the change in fair value
      of
      the derivatives and therefore our consolidated financial position and results
      of
      operations may vary significantly from quarter to quarter and year to year,
      based on factors other than the Company's revenues and expenses.





We
      utilize the Black-Scholes option-pricing model to determine the fair value
      of
      our freestanding derivative instruments. Key assumptions of the Black-Scholes
      option-pricing model include applicable volatility rates, risk-free interest
      rates and the instruments expected remaining life. We also determined a fair
      value for our various embedded derivatives within our $600,000 Convertible
      Notes
      by using a layered, discounted, probability-weighted cash flow model. The
      assumptions used in both modeling techniques required significant management
      judgment and estimates of future fluctuation in stock price as well as changes
      in future interest rates. The reader should reference Note 5 in the "Notes
      to
      Consolidated Financial Statements" for further details in regards to our
      derivative liabilities.





**Income
      Taxes -**





The
      amount of income taxes recorded by us requires the interpretation of complex
      rules and regulations of various taxing jurisdictions throughout the world.
      We
      have recognized deferred tax assets and liabilities for all significant
      temporary differences, operating losses and tax credit carryforwards. We
      routinely assess the potential realization of our deferred tax assets and reduce
      such assets by a valuation allowance if it is more likely than not that some
      portion or all of the deferred tax assets will not be realized. We routinely
      assess potential tax contingencies and, if required, establish accruals for
      such
      contingencies. The accruals for deferred tax assets and liabilities are subject
      to a significant amount of judgment by us and we review and adjust routinely
      our
      estimates based on changes in facts and circumstances. Although we believe
      our
      tax accruals are adequate, material changes in these accruals may occur in
      the
      future, based on the progress of ongoing tax audits, changes in legislation
      and
      resolution of pending tax matters.





**Litigation
      -**





An
      estimated loss from a loss contingency is recorded when information available
      prior to issuance of the financial statements indicates that it is probable
      that
      a liability has been incurred at the date of the financial statements and the
      amount of the loss can be reasonably estimated. Accounting for contingencies
      such as legal matters requires the use of judgment as to the probability of
      the
      outcome and the amount. Many legal contingencies can take years to be resolved.
      An adverse outcome could have a material impact on our financial condition,
      operating results and cash flows.





13


**ITEM
      7 . FINANCIAL STATEMENTS**





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors


SKRM
      Interactive, Inc.


Washington,
      DC




We
      have
      audited the accompanying consolidated balance sheet of SKRM
      Interactive, Inc. (a
      development stage company) as of March 31, 2007 and the related consolidated
      statements of operations, cash flows, and stockholders’ equity for the year then
      ended. The financial statements for the period August 19, 1999 (inception)
      through March 31, 2006, were audited by other auditors. The financial statements
      for the period August 19, 1999 (inception) through March 31, 2007, include
      total
      revenues and net loss of $0 and $8,224,398, respectively. Our opinion on the
      statements of operations, stockholders' equity, and cash flows for the period
      August 19, 1999 (inception) through March 31, 2007, insofar as it relates to
      amounts for prior periods through March 31, 2006, is based solely on the report
      of other auditors. These financial statements are the responsibility of SKRM
      Interactive, Inc.’s management.
      Our responsibility is to express an opinion on these 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 an audit to obtain reasonable assurance whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, based on our audit and the audit report of the other auditors, the
      accompanying consolidated financial statements present fairly, in all material
      respects, the financial position of SKRM
      Interactive, Inc. as
      of
      March 31, 2007, and the results of its operations and its cash flows for the
      year then ended and for the period from August 19, 1999 (inception) through
      March 31, 2007 in conformity with accounting principles generally accepted
      in
      the United States of America.





The
      accompanying financial statements have been prepared assuming that the Company will
      continue as a going concern. As discussed in Note 3 to the financial statements,
      the Company has accumulated a deficit of $8,224,398 since inception, has not
      attained profitable operations and is dependent upon obtaining adequate
      financing to fulfill its business activities. These factors raise substantial
      doubt that the Company will be able to continue as a going concern. Management’s
      plans in regard to these matters are also discussed in Note 3. The financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.





Malone
      & Bailey, PC


www.malone-bailey.com


Houston,
      Texas





July
      11,
      2007




14




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Stockholders and Board of Directors


Skreem
      Entertainment Corporation:




We
        have
        audited the accompanying consolidated balance sheet of Skreem Entertainment
        Corporation (the “Company”), a development stage company, as of March 31, 2006,
        and the related consolidated statements of operations, stockholders’ equity
        (deficit) and cash flows for the years ended March 31, 2006 and 2005, and
        for
        the period from inception, August 19, 1999, through March 31, 2006. These
        consolidated financial statements are the responsibility of the Company’s
        management. Our responsibility is to express an opinion on these financial
        statements based on our audits.




We
      conducted our audits 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 financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Skreem
      Entertainment Corporation as of March 31, 2006, and the consolidated results
      of
      its operations and its cash flows for the years ended March 31, 2006 and 2005,
      and for the period from inception, August 19, 1999, through March 31, 2006,
      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 3 to the
      consolidated 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 consolidated financial statements do
      not
      include any adjustments that might result from the outcome of this
      uncertainty.




/S/
      Ham,
      Langston & Brezina, L.L.P.




Houston,
      Texas


June
      20,
      2006




15


**SKRM
      Interactive, Inc.**


**(formerly
      SKREEM ENTERTAINMENT CORPORATION)**


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      BALANCE SHEET


March
      31,
      2007




March
                31,2007**ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            1,781Note
                receivable, net of impairment allowance of $10,710
            
            
            400,000Deferred
                financing costs
            
            
            11,438Total
                current assets
            
            
            413,219Deferred
                financing costs, net of amortization of $2,806
            
            
            75,756Total
                assets
            
            $
            488,975**LIABILITIES
                AND SHAREHOLDERS' DEFICIT**Current
                liabilitiesAccounts
                payable and accrued liabilities
            
            $
            154,410Notes
                payable - shareholder
            
            
            35,000Due
                to affiliate
            
            
            13,078Derivative
                liabilities
            
            
            1,396,245Total
                current liabilities
            
            
            1,598,733Callable
                secured convertible notes payable net of unamortized discount of
                $600,000
            
            
            7,194Total
                liabilities
            
            
            1,605,927Shareholders'
                deficitPreferred
                shares - $0.001 par value; 1,000,000 authorized, no shares issued
                or
                outstanding
            
            
            -Common
                shares - $0.001 par value; 50,000,000 authorized; 26,548,292 shares
                issued
                and outstanding
            
            
            26,548Additional
                paid - in capital
            
            
            7,080,898Deficit
                accumulated during the development stage
            
            
            (8,224,398
            )Total
                shareholders' deficit
            
            
            (1,116,952
            )Total
                liabilities and shareholders' deficit
            
            $
            488,975




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





16




**SKRM
      Interactive, Inc.**


**(formerly
      SKREEM ENTERTAINMENT CORPORATION)**


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF OPERATIONS


For
      the
      Years Ended March 31, 2007 and 2006 and for the period from August 19, 1999
      (inception) through March 31, 2007


Years
                  Ended
              
              Inception
                  toMarch
                  31,
              
              March
                  31,
              
              March
                  31,2007
              
              2006
              
              2007ExpensesGeneral
                  and administrative
              
              $
              922,234
              
              
              -
              
              $
              922,234Impairment
                  of note receivable
              
              
              10,701
              
              
              -
              
              
              10,701Total
                  expenses
              
              
              932,935
              
              
              -
              
              
              932,935Loss
                  from operations
              
              
              (932,935
              )
              
              -
              
              
              (932,935
              )Other
                  income (expense)Interest
                  income
              
              
              10,701
              
              
              -
              
              
              10,701Interest
                  expense
              
              
              (26,197
              )
              
              
              
              
              (26,197
              )Change
                  in fair value of derivatives
              
              
              (796,245
              )
              
              
              
              
              (796,245
              )Total
                  other income (expense)
              
              
              (811,741
              )
              
              -
              
              
              (811,741
              )Loss
                  from continuing operations
              
              
              (1,744,676
              )
              
              -
              
              
              (1,744,676
              )Discontinued
                  operationsLoss
                  from operations of subsidiary
              
              
              (1,673,142
              )
              
              (1,376,529
              )
              
              (6,778,804
              )Gain
                  on disposal of subsidiary
              
              
              299,082
              
              
              -
              
              
              299,082Loss
                  from discontinued operations
              
              
              (1,374,060
              )
              
              (1,376,529
              )
              
              (6,479,722
              )Net
                  loss
              
              $
              (3,118,736
              )
              $
              (1,376,529
              )
              $
              (8,224,398
              )Basic
                  and diluted loss per shareContinuing
                  operations
              
              $
              (0.07
              )
              $
              -Discontinued
                  operations
              
              $
              (0.05
              )
              $
              (0.06
              )Net
                  loss
              
              $
              (0.12
              )
              $
              (0.06
              )Weighted
                  average shares outstanding
              
              
              25,494,306
              
              
              23,148,786


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




17




**SKRM
      Interactive, Inc.**


**(formerly
      SKREEM ENTERTAINMENT CORPORATION)**


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT


For
      the
      period from August 19, 1999 (inception) through March 31, 2007


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




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




18




**SKRM
      Interactive, Inc.**


**(formerly
      SKREEM ENTERTAINMENT CORPORATION)**


(A
      DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


For
      the
      Years Ended March 31, 2007 and 2006, and for the period from August 19, 1999
      (inception) through March 31, 2007




Years
                  Ended
              
              Inception
                  toMarch
                  31,
              
              March
                  31,
              
              March
                  31,2007
              
              2006
              
              2007Cash
                  Flows from Operating ActivitiesNet
                  loss
              
              $
              (3,118,736
              )
              $
              (1,376,529
              )
              $
              (8,224,398
              )Loss
                  on discontinued operations
              
              
              1,374,060
              
              
              1,376,529
              
              
              6,479,722Loss
                  from continuing operations
              
              
              (1,744,676
              )
              
              -
              
              
              (1,744,676
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activitiesImpairment
                  of note receivable
              
              
              10,701
              
              
              -
              
              
              10,701Stock
                  issued for services
              
              
              692,650
              
              
              
              
              
              692,650Amortization
                  of deferred financing costs
              
              
              2,806
              
              
              -
              
              
              2,806Accretion
                  of discount on convertible notes
              
              
              7,194
              
              
              -
              
              
              7,194Change
                  in fair value of derivatives
              
              
              796,245
              
              
              -
              
              
              796,245Changes
                  in
              
              
              
              
              
              -Interest
                  receivable
              
              
              (10,701
              )
              
              -
              
              
              (10,701
              )Accounts
                  payable and accrued liabilities
              
              
              154,408
              
              
              -
              
              
              154,408Due
                  to affiliate
              
              
              13,078
              
              
              -
              
              
              13,078Net
                  cash used in operating activities
              
              
              (78,295
              )
              
              -
              
              
              (78,295
              )Cash
                  Flows from Investing ActivitiesInvestment
                  in note receivable
              
              
              (400,000
              )
              
              -
              
              
              (400,000
              )Cash
                  Flows from Financing ActivitiesProceeds
                  from issuance of common stock
              
              
              24,695
              
              
              -
              
              
              24,695Proceeds
                  from notes payable - shareholder
              
              
              35,000
              
              
              -
              
              
              35,000Proceeds
                  from convertible notes payable
              
              
              600,000
              
              
              -
              
              
              600,000Debt
                  issuance costs
              
              
              (90,000
              )
              
              -
              
              
              (90,000
              )Net
                  cash provided by financing activities
              
              
              569,695
              
              
              -
              
              
              569,695Discontinued
                  operationsDiscontinued
                  operating activities
              
              
              (379,689
              )
              
              (873,349
              )
              
              (4,506,211
              )Discontinued
                  investing activities
              
              
              (6,134
              )
              
              (863
              )
              
              (187,748
              )Discontinued
                  financing activities
              
              
              233,821
              
              
              884,400
              
              
              4,604,340Net
                  cash provided by(used in) discontinued operations
              
              
              (152,002
              )
              
              10,188
              
              
              (89,619
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              (60,602
              )
              
              10,188
              
              
              1,781Cash
                  and cash equivalentsBeginning
                  of period - continuing operations
              
              
              -
              
              
              -
              
              
              -Beginning
                  of period - discontinued operations
              
              
              62,383
              
              
              52,195
              
              
              -End
                  of period - continuing operations
              
              $
              1,781
              
              $
              -
              
              $
              1,781End
                  of period - discontinued operations
              
              $
              -
              
              $
              62,383
              
              $
              -





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




19




**SKRM
      Interactive, Inc.**


**(formerly
      SKREEM ENTERTAINMENT CORPORATION)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1 - ORGANIZATION AND BUSINESS OPERATIONS**





SKRM
      Interactive, Inc., formerly Skreem Entertainment Corporation (“SKREEM”) was
      incorporated in Nevada on August 19, 1999. On November 30, 2006, SKREEM changed
      its name to SKRM Interactive, Inc.





Stanford
      Capital Corporation was incorporated in Delaware on June 11, 1992. In January
      2004, Stanford acquired all of the common stock of SKREEM in exchange for
      22,000,000 post reverse split shares of common stock. For reporting purposes,
      the merger between Stanford and SKREEM was treated as a reverse merger with
      SKREEM being considered the “accounting acquirer” and accordingly it assumed
      Stanford's reporting obligations with the SEC.





SKREEM
      was originally formed to promote, finance and manage artists and projects in
      the
      music industry and its business operations are located in the State of Florida.
      SKRM Interactive made a strategic decision to discontinue its operations in
      the
      music industry. On February 5, 2007, SKRM Interactive spun off its entertainment
      subsidiary, SKREEM. Each holder of SKRM Interactive's common stock as of
      November 30, 2006 received one share in SKREEM.





Because
      of the spin off the operations of SKREEM, results of operations of SKREEM in
      all
      periods presented are shown as discontinued operations.





**Note
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





*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
      consolidated financial statements include the financial statements of the
      Company and its wholly owned subsidiary, SKREEM. All significant inter-company
      balances and transactions, including inter-company profits and unrealized
      profits and losses are eliminated on consolidation.





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make estimates
      and assumptions that affect the amounts reported in the financial statements
      and
      accompanying notes. Actual results could differ from those estimates.





*Reclassifications*





Certain
      prior year amounts have been reclassified to conform to the current year
      presentation.





*Cash
      and Cash Equivalents*





SKRM
      Interactive considers all highly liquid investments with a maturity of three
      months or less when purchased to be cash equivalents.





*Note
      Receivable*





SKRM
      Interactive loaned $400,000 to a company in Korea. The full amount was collected
      in April 2007. No accrued interest was recorded at March 31, 2007 because none
      was realized.




20





*Deferred
      Financing Costs*





SKRM
      Interactive incurred debt issuance costs of $90,000 in November 2006 associated
      with the issuance of convertible notes. These costs were capitalized as deferred
      loan costs and are being amortized over the life of the convertible notes using
      the effective interest method.





*Derivative
      Instruments*





SKRM
      Interactive accounts
      for all derivative financial instruments in accordance with SFAS No. 133,
      "Accounting for Derivative Instruments and Hedging Activities." Derivative
      financial instruments are recorded as liabilities in the consolidated balance
      sheet and are measured at fair value. When available, quoted market prices
      are
      used in determining fair value. However, if quoted market prices are not
      available, SKRM
      Interactive estimates
      fair value using either quoted market prices of financial instruments with
      similar characteristics or other valuation techniques. These derivative
      liabilities are marked-to-market each quarter with the change in fair value
      recorded in the income statement.





SKRM
      Interactive utilizes
      the Black-Scholes option-pricing model to determine the fair value of its
      freestanding derivative instruments. Key assumptions of the Black-Scholes
      option-pricing model include applicable volatility rates, risk-free interest
      rates and the instruments expected remaining life. We also determined a fair
      value for our various embedded derivatives within our convertible note by using
      a layered discounted probability-weighted cash flow model. The assumptions
      used
      in both modeling techniques required significant management judgment and
      estimates of future fluctuation in stock price as well as changes in future
      interest rates.





*Fair
      Value of Financial Instruments*





Our
      financial instruments consist of accounts receivable, accounts payable, notes
      payable and derivative liabilities. The fair values of our accounts receivable,
      accounts payable, notes payable and derivative liabilities, in our opinion,
      reflect their respective carrying amounts.





*Discount
      on Debt*





The
      fair
      value of warrants and derivatives are recorded as a reduction to the carrying
      amount of the related debt, and is amortized to operations over the term of
      such
      debt, with the initial offsetting entries recorded as warrant liability and
      derivative liability on the balance sheet. Upon the conversion of subordinated
      convertible notes payable into common stock, the pro rata portion of any related
      unamortized discount on debt is charged to operations.




*Contingencies*





We
      account for loss contingencies in accordance with SFAS No. 5, "Accounting for
      Contingencies." Accordingly, when management determines that it is probable
      that
      an asset has been impaired or a liability has been incurred, we accrue our
      best
      estimate of the loss if it can be reasonably estimated. Our legal costs related
      to litigation are expensed as incurred.





*Income
      Tax*





Income
      taxes are accounted for using the asset and liability method. Deferred tax
      assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective tax bases and net operating
      loss carryforwards. Valuation allowances are established when necessary to
      reduce net deferred tax assets to the amount expected to be realized.




21





*Discontinued
      Operations*





SKRM
      Interactive has
      accounted for its spin-off of SKREEM as discontinued operations for all periods
      presented in accordance with SFAS No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets”.




*Loss
      Per Share*





In
      accordance with SFAS No. 128, "Earnings Per Share," we report basic loss per
      common share, which excludes the effect of potentially dilutive securities,
      and
      diluted loss per common share, which includes the effect of all potentially
      dilutive securities unless their impact is anti-dilutive.





*Share-Based
      Compensation*





We
      may,
      from time to time, issue common stock, stock options or common stock warrants
      to
      acquire services or goods from non-employees. Common stock, stock options and
      common stock warrants issued to persons other than employees or directors are
      recorded on the basis of their fair value, as required by EITF Issue 96-18,
      "Accounting for Equity Instruments That Are Issued to Other Than Employees
      for
      Acquiring, or in Conjunction with Selling, Goods or Services."





*Impact
      of Recent Accounting Pronouncements*





SKRM
      Interactive does
      not
      expect the adoption of any recently issued accounting pronouncements to have
      a
      material impact on its financial condition or results of
      operations.





**Note
      3 - GOING CONCERN**





The
      accompanying consolidated financial statements have been prepared on a going
      concern basis, which contemplates the realization of assets and the satisfaction
      of liabilities in the normal course of business. SKRM
      Interactive sustained
      losses of $3,118,736 and $1,376,529 for the years ended March 31, 2007 and
      March
      31, 2006, respectively. The Company had an accumulated deficit of $8,224,398
      as
      of March 31, 2007. These factors raise substantial doubt about the ability
      of SKRM
      Interactive to
      continue as a going concern for a reasonable period of time. SKRM
      Interactive is
      highly
      dependent on its ability to continue to obtain investment capital and loans
      from
      an affiliate and shareholder in order to fund the current and planned operating
      levels. No assurance can be given that SKRM
      Interactive y
      will be
      successful in these efforts.





The
      consolidated financial statements do not include any adjustments relating to
      the
      recoverability and classification of recorded asset amounts or the amounts
      and
      classification of liabilities that might be necessary should SKRM
      Interactive be
      unable
      to continue as a going concern.





**Note
      4 - RECISSION OF INVESTMENT AND IMPAIRMENT AND RECOVERY OF LOAN
      RECEIVABLE**





On
      November 20, 2006, SKRM Interactive purchased a 51% investment in Weaver
      Interactive, Inc., a company formed and existing in South Korea.





SKRM
      Interactive issued 3,000,000 common shares for 596,000 shares of Weaver stock.
      SKRM Interactive also agreed to loan Weaver up to $500,000 in cash whereby
      the
      principal plus 21% interest would accrue for two years and be payable in full
      at
      the due date and SKRM Interactive would also make a good faith deposit at the
      closing.




22





As
      part
      of the initial transaction, SKRM Interactive loaned Weaver $400,000, which
      was
      accounted for as a note receivable and accrued interest of $10,710. The
      principal of this note has subsequently been collected; however, SKRM
      Interactive has reported an allowance for impairment for the accrued interest
      as
      of March 31, 2007.





During
      March 2007, SKRM Interactive and Weaver rescinded the transaction. Weaver repaid
      the full $400,000 and returned 2,880,000 of the 3,000,000 common shares of
      SKRM
      Interactive. SKRM Interactive waived interest expense due on the loan and
      returned the 596,000 shares of stock in Weaver. SKRM Interactive expensed the
      120,000 common shares kept by Weaver valued at $160,800, since the shares were
      provided to an individual for facilitating the original Stock Purchase Agreement
      with Weaver.




**NOTE
      5 - CALLABLE SECURED CONVERTIBLE NOTES PAYABLE AND
      WARRANTS**





SKRM
      Interactive entered into a securities purchase agreement with four investors
      (“note holders”) on November 30, 2006, for the sale of (i) $1,000,000 in
      callable secured convertible notes and (ii) warrants to purchase 10,000,000
      shares of common stock at an exercise price of $1.75 per share. On November
      30,
      2006, SKRM Interactive sold to the note holders $600,000 in callable secured
      convertible notes (“convertible notes”) and issued 10,000,000 warrants to
      purchase stock at an exercise price of $1.75 per share.





The
      convertible notes with the balance of $600,000 bear interest at 8% per annum
      from the date of issuance. Interest is computed on the basis of a 365-day year
      and is payable quarterly in cash, provided that no interest shall be due and
      payable for any month in which the trading price is greater than $1.5875 for
      each trading day of the month. The convertible notes mature three years from
      the
      date of issuance, and are convertible into common stock at the note holders'
      option, at 50% of the average of the three lowest trading price for the common
      stock on the OTC Bulletin Board for the 20 trading days before but not including
      the conversion date; however, such percentage shall increase to 55% upon the
      filing of a registration statement registering the shares underlying the
      convertible notes by the appropriate deadline and shall increase to 60% if
      such
      registration statement becomes effective on or before the effectiveness
      deadline. The note holders are not permitted to convert all or part of the
      outstanding balance if the trading volume weighted average price of the common
      stock for the thirty days prior to conversion is below the initial market price
      of $1.27. Accordingly, there is no limit to the number of shares into which
      the
      convertible notes may be converted. The convertible notes are secured by
      substantially all of SKRM Interactive's assets.





The
      warrants are exercisable for a period of 7 years from the date of issuance
      and
      have an exercise price of $1.75 per share. In addition, the conversion price
      of
      the convertible notes and exercise price of the warrants will be adjusted in
      the
      event that SKRM Interactive issues common stock at a price below the initial
      fixed conversion price. The conversion price of the convertible notes and
      exercise price of the warrants may also be adjusted in certain circumstances
      such as if the Company pays a stock dividend, subdivides or combines outstanding
      shares of common stock into a greater or lesser number of shares, or takes
      such
      other actions as would other wise result in dilution of the note holders'
      position.





The
      convertible note agreement restricts the note holders' ability to convert their
      convertible notes or exercise their warrants and receive shares of common stock
      such that the number of shares of common stock held by them in the aggregate
      and
      their affiliates after such conversion or exercise does not exceed 4.99% of
      the
      then issued and outstanding shares of common stock. However, the note holders
      may repeatedly sell shares of common stock in order to reduce their ownership
      percentage, and subsequently convert additional convertible notes.




23





SKRM
      Interactive gave the note holders registration rights to the shares issuable
      in
      connection with the convertible notes pursuant to a Registration Rights
      Agreement dated November 30, 2006. The Registration Rights Agreement required
      SKRM Interactive to file a Registration Statement with the Securities and
      Exchange Commission (“SEC”) within 30 days of the Closing Date. Additionally,
      under the Registration Rights Agreement, SKRM Interactive agreed to give its
      best efforts to obtain effectiveness of the Registration Statement within 120
      days of the Closing Date. If SKRM Interactive does not file the Registration
      Statement within 30 days of Closing Date or obtain effectiveness of this
      Registration Statement within 120 days of the Closing Date then SKRM Interactive
      agrees to pay to the note holders, as partial relief for damages, an amount
      equal to 2% per month of the outstanding principal amount. As a result of
      Amendment No. 1 to the Registration Rights Agreement dated December 19, 2006,
      the date by which SKRM Interactive was to file a Registration Statement covering
      all the securities issuable in connection with the convertible notes has been
      extended from within 30 days to within 60 days, or January 29, 2007.
      Additionally, the number of days to obtain effectiveness of the Registration
      Statement has been extended as well from within 120 days to within 150 days,
      or
      April 29, 2007. As of the date of this filing, SKRM Interactive has not filed
      a
      Registration Statement with the SEC. SKRM Interactive plans to file the
      statement by August 31, 2007 and estimates the effective date will be
      approximately 90 to 120 days later.





In
      December 2006, FASB STAFF POSITION No. EITF 00-19-2 *Accounting for Registration Payment Arrangements* was
      issued with guidance for the accounting of any future payments required by
      the
      Registration Rights Agreement in regards to the timely filing and effectiveness
      of the Registration Statement with the SEC. This FSP specifies that the
      contingent obligation should be separately recognized and measured in accordance
      with FASB Statement No. 5, *Accounting for Contingencies* .
      As of
      the date of this filing, SKRM
      Interactive has
      not
      filed a Registration Statement with the SEC and has accrued a contingent
      liability of $72,000 as partial relief for damages to the note holders.




If
      certain events of default were to occur under the convertible notes, the note
      holders may at their option, demand repayment in full of all obligations and
      liabilities owed by SKRM
      Interactive under
      the
      convertible notes, Securities Purchase Agreement and any Related Agreement
      and
      may require SKRM
      Interactive to
      immediately pay 140% of the principal amounts outstanding under the convertible
      notes, plus any accrued and unpaid interest.




At
      June
      30, 2007, there has been an event of default (failure to timely file
      registration statement within 45 days). However, SKRM Interactive has not
      received any demands of repayment and this event of default does not require
      SKRM Interactive to pay 140% of the principal amounts outstanding plus any
      accrued and unpaid interest.





SKRM
      Interactive incurred debt issuance costs of $90,000 associated with the issuance
      of the convertible notes. These costs were capitalized as deferred loan costs
      and are being amortized over the life of the convertible notes using the
      effective interest method. Total amortization expense related to the deferred
      financing costs was $2,806 for the year ended March 31, 2007.





*Single
      Compound Embedded Derivative within Convertible Note*





SKRM
      Interactive analyzed the convertible notes and the warrants for derivative
      financial instruments, in accordance with SFAS No. 133, *Accounting for Derivative Instruments and Hedging Activities* ****** and EITF
      00-19, *Accounting for Derivative Financial Instruments Indexed to, and Potentially
      Settled in, a Company's Own Stock.* The
      convertible notes are hybrid instruments which contain more than one embedded
      derivative feature which would individually warrant separate accounting as
      derivative instruments under SFAS 133. The various embedded derivative features
      have been bundled together as a single, compound embedded derivative instrument
      that has been bifurcated from the debt host contract. The single compound
      embedded derivative features include the conversion feature with the convertible
      notes, the interest rate adjustment, maximum ownership and default provisions.
      SKRM Interactive valued the compound embedded derivatives based on a probability
      weighted discounted cash flow model. The value at inception of the single
      compound embedded derivative liability was $139,286 and was bifurcated from
      the
      debt host contract and recorded as a derivative liability. The discount on
      the
      debt associated with this derivative liability has been combined with the
      discount associated with the derivative liability generated by the warrants
      addressed below and amortized as a single discount using the effective interest
      method.




24





The
      compound embedded derivative liability was measured at fair value again at
      March
      31, 2007 and the change in fair value was recorded as a gain in the amount
      of
      $112,076 in the consolidated statement of operations.





*Probability-Weighted
      Expected Cash Flow Methodology -*


*Assumptions:
      Single Compound Embedded Derivative within Convertible Note*





At
                Inception
            
            As
                ofDescription
            
            November
                30,
              2006
            
            March
                31,
              2007Risk
                - free interest rate
            
            
            4.52
            %
            
            4.54
            %Default
                status
            
            
            5.00
            %
            
            10.00
            %Alternative
                financing available and exercised
            
            
            0.00
            %
            
            1.00
            %Trading
                volume, gross monthly monthly rate increase
            
            
            1.00
            %
            
            1.00
            %Annual
                growth rate of stock price
            
            
            24.00
            %
            
            21.76
            %Future
                projected volatility
            
            
            46.00
            %
            
            100.00
            %





*Warrants*




The
      stock
      purchase warrants (“warrants”) are freestanding derivative financial instruments
      which were valued using the Black-Scholes method. The fair value of the
      derivative liability was recorded at $7,633,008 at inception on November 30,
      2006. The remaining value of $7,172,294 was expensed at inception to “Change in
      fair value of derivatives” since the total discounts to the convertible notes
      exceeded the notional balance of the convertible notes.





The
      discount on the notes resulting from this derivative liability associated with
      the warrants has been combined with the discount on the notes associated with
      the derivative liability generated by the convertible debt addressed above
      and
      amortized as a single discount using the effective interest method.





The
      warrants were marked to market at March 31, 2007 and the change in fair value
      was recorded as a gain in the amount of $6,263,973 in the consolidated statement
      of operations.




Variables
      used in the Black-Scholes option-pricing model include (1) 4.52% to 4.58%
      risk-free interest rate, (2) expected warrant life is the actual remaining
      life
      of the warrant as of each period end, (3) expected volatility is from 66.58%
      to
      119.82% and (4) zero expected dividends.




25





The
      combined discount for the derivatives is being accreted to interest expense
      using the effective interest method over the life of the convertible notes
      (36
      months). No accretion expense was recorded since the amount was insignificant
      for the year ended March 31, 2007





Accretion
      expense recognized on the combined discounts for the year ended March 31, 2007
      amounted to $7,194.




*Derivative
      Liabilities*





The
      impact of the application of SFAS No. 133 and EITF 00-19 in regards to the
      derivative liabilities on the balance sheet is presented below. The change
      in
      fair value of the derivative liabilities from November 30, 2006 to March 31,
      2007 is reflected in the Statement of Operations in “Change in fair value of
      derivatives.”





Description
            
            November
                30,
              2006
            
            March
                31,
              2007Derivative
                liability-single compound embedded derivatives within the convertible
                notes
            
            $
            139,286
            
            $
            27,210Derivative
                liability-warrants
            
            
            7,633,008
            
            
            1,369,035Total
            
            $
            7,772,294
            
            $
            1,396,245




The
      following summarizes the financial presentation of the convertible notes at
      inception and March 31, 2007:





At
                inceptionDescription
            
            November
                30,
              2006
            
            March
                31,
              2007Convertible
                notes principal
            
            $
            600,000
            
            $
            600,000AdjustmentsDiscount
                for single compound embedded Derivatives within the convertible notesand
                warrants
            
            
            (600,000
            )
            
            (592,806
            )Convertible
                notes balance, net
            
            $
            -
            
            $
            7,194





Both
      the
      embedded and freestanding derivative financial instruments were recorded as
      liabilities in the consolidated balance sheet and measured at fair value. These
      derivative liabilities will be marked-to-market each quarter with the change
      in
      fair value recorded as either a gain or loss in the income
      statement.





Future
      payments under outstanding notes payable at the principal balance of $600,000
      as
      of March 31, 2007 are as follows:





FutureFor
                the years ending March 31,
            
            Payments2008
            
            $
            -2009
            
            
            600,000Total
            
            $
            600,000




26




**Note
      6 - DISCONTINUED OPERATIONS**





SKRM
      Interactive has reflected the results of operations of SKREEM in its
      Consolidated Statement of Operations as “Discontinued operations” for the years
      ended March 31, 2007 and 2006.





The
      components of discontinued operations are as follows:





February
                5,March
                31,
            
            2007
            
            March
                31,2007
            
            Spin
                Off Date
            
            2006Revenue
            
            $
            -
            
            $
            34,362
            
            $
            64,937Revenue
                - related party
            
            
            -
            
            
            127,200
            
            
            -Total
                revenue
            
            
            -
            
            
            161,562
            
            
            64,937Operating
                expenses
            
            
            -
            
            
            952,793
            
            
            914,499General
                and administrative expenses
            
            
            -
            
            
            828,926
            
            
            357,598Total
                expenses
            
            
            -
            
            
            1,781,719
            
            
            1,272,097Loss
                from operations
            
            
            -
            
            
            (1,620,157
            )
            
            (1,207,160
            )Interest
                expense
            
            
            -
            
            
            (52,985
            )
            
            (169,369
            )Net
                loss from discontinued operations
            
            
            (1,673,142
            )
            
            (1,673,142
            )
            
            (1,376,529
            )Gain
                on spin off of discontinued operations
            
            
            299,082
            
            
            299,082
            
            
            -Total
                discontinued operations
            
            $
            (1,374,060
            )
            $
            $(1,374,060
            )
            $
            (1,376,529
            )





Assets
      and liabilities of the discontinued operations were reported as net assets
      and
      net liabilities of discontinued operations and transferred to SKREEM as of
      the
      effective spin off date of February 5, 2007.





February
                5,2007Current
                assets of discontinued operations
            
            Spin
                Off DateCash
            
            $
            4,104Related
                party receivable
            
            
            5,158Total
                current assets of discontinued operations
            
            
            9,262Non-current
                assets of discontinued operationsProperty
                and equipment, net
            
            
            4,581Total
                assets of discontinued operations
            
            $
            13,843Current
                liabilities of discontinued operationsAccounts
                payable and accrued liabilities
            
            $
            143,552Related
                party payable
            
            
            9,254Deferred
                revenue
            
            
            24,298Notes
                payable - shareholder
            
            
            135,821Total
                liabilities of discontinued operations
            
            
            312,925Net
                liabilities of discontinued operations transferred in spin off to
                SKREEM
            
            $
            299,082




**Note
      7 - NOTES PAYABLE - RELATED PARTIES**





*Shareholder*





During
      the quarter ended March 31, 2007, Jeffrey D. Martin, a major stockholder loaned
      SKRM $35,000 in the form of a promissory note. The note is payable on demand
      and
      bears interest at the rate of 8%. Interest on the notes begins to accrue on
      April 1, 2007. The note is secured by the assets of SKRM
      Interactive.




27





**Note
      8 - WARRANTS**




Activity
                for year ended March 31, 2007
            
            
            WarrantsOutstanding,
                beginning of year
            
            
            -Granted
            
            
            10,000,000Exercised
            
            
            -Expired
                or cancelled
            
            
            -Outstanding,
                end of year
            
            
            10,000,000Exercisable,
                end of year
            
            
            10,000,000Available
                for grant, end of year
            
            
            -





The
      weighted average warrant exercise price information for the year ended March
      31,
      2007 is as follows:





Activity
                for year ended March 31, 2007
            
            WarrantsOutstanding,
                beginning of year
            
            $
            -Granted
            
            $
            1.75Exercised
            
            $
            -Expired
                or cancelled
            
            $
            -Outstanding,
                end of year
            
            $
            1.75Exercisable,
                end of year
            
            $
            1.75Available
                for grant, end of year
            
            $
            -





Significant
      warrant groups outstanding at March 31, 2007 and related weighted average
      exercise price and remaining life information are as follows:





Remaining
            
            Warrants
            
            Weighted
            
            ExerciseGrant
                date
            
            life
            
            Outstanding
            
            Warrants
            
            PriceNovember
                30, 2006
            
            
            6.67
                years
            
            
            10,000,000
            
            
            10,000,000
            
            $
            1.75





On
      November 30, 2006, SKRM Interactive issued 10,000,000 warrants to purchase
      stock
      at an exercise price of $1.75 per share to its convertible note
      holders.





**Note
      9 - STOCKHOLDERS’ EQUITY**





*During
      the Year ended March 31, 2006:*





SKRM
      Interactive received cash proceeds of $276,400 from the issuance of 276,400
      shares of common stock.





On
      March
      30, 2006, SKRM Interactive converted a remaining $50,000 note payable to Market
      Management to 50,000 shares of common stock.





On
      March
      29, 2006, SKRM Interactive converted $1,050,000 of notes payable to Jeffery
      D.
      Martin to 1,050,000 shares of common stock.





*During
      the Year ended March 31, 2007:*





SKRM
      Interactive issued 817,342 shares of common stock for the conversion of related
      party debt of $1,839,021 to equity.




28





SKRM
      Interactive also issued through out the year 1,102,000 shares of common stock
      valued at $1,307,602 to different vendors for services preformed for SKRM
      Interactive.





SKRM
      Interactive received cash proceeds of $24,695 from the issuance of 24,694 shares
      of common stock.





In
      November 2006, SKRM Interactive issued 3,000,000 shares of common stock with
      a
      value of $4,020,000 as part of a Stock Purchase Agreement with Weaver
      Interactive, Inc. This stock transaction was later rescinded and 2,880,000
      shares of common stock were returned to the Company in April 2007 with a fair
      value of $3,859,203. The fair value of the shares was determined using a 10
      day
      average of its market closing price prior to and for the closing day of November
      20, 2006 or $1.34 per share. The share price of $1.34 was used to value both
      the
      initial issuance of common stock and the rescinding of the shares.





General
      operating expenses of $515,000 were paid for by a major shareholder and a credit
      to additional paid-in capital was made to reflect the shareholders contribution.





**Note
      10 - INTEREST EXPENSE**





The
      following table set forth a breakdown of the interest expense for the years
      ended March 31, 2007 and 2006, respectively.





2007
            
            2006Amortization
                of deferred financing costs
            
            $
            2,806
            
            $
            -Accretion
                of discount on convertible notes
            
            
            7,194Interest
                expense on convertible notes
            
            
            16,197
            
            
            -Interest
                expense
            
            $
            26,197
            
            $
            -





**Note
      11 - Change in fair value of derivatives**





The
      following table sets forth a breakdown of the “Change in fair value of
      derivatives” in the consolidated statement of operations for the years ended
      March 31, 2007 and 2006, respectively.





For
                the years ended March 31,
            
            2007
            
            2006Derivative
                liability - single compound embedded derivatives
            
            $
            112,076
            
            $
            -Derivative
                liability - warrants
            
            
            6,263,973
            
            
            -Initial
                loss on derivatives at inception
            
            
            (7,172,294
            )
            
            -Change
                in fair value of derivatives
            
            $
            (796,245
            )
            $
            -




**Note
      12 - INCOME TAX**





For
      the
      years ended March 31, 2007 and 2006, there were no provisions for income taxes
      and deferred tax assets have been entirely offset by valuation allowances.
      The
      difference between the amounts of income tax benefit that would result from
      applying domestic federal statutory income tax rates to the net loss and the
      net
      deferred tax assets is related to certain nondeductible expenses, state income
      taxes, and the change in the valuation allowance.




29




As
      of
      March 31, 2007, SKRM
      Interactive has
      net
      operating loss carryforwards of $948,431. The carryforwards begin to expire
      in
      the year 2026. SKRM
      Interactive '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 SKRM
      Interactive 's
      deferred tax asset at March 31, 2007 are as follows:





Description
            
            AmountNet
                operating loss carryforwards
            
            $
            322,467Less:
                Valuation allowance
            
            
            (322,467
            )Net
                deferred tax asset
            
            
            -




**Note
      13 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION**





*Interest
      and Income Taxes Paid*





During
      the twelve months ended March 31, 2007 and 2006, $2,945 and $35,780 was paid
      for
      interest, respectively. All interest paid is related to discontinued operations.
      No interest was paid related to continuing operations. No cash was paid for
      income taxes during either of these periods.





*Non-cash
      Disclosures*





During
      the year ended March 31, 2007, SKRM Interactive issued 817,342 shares of common
      stock for the conversion of related party debt of $1,839,021 to equity.





During
      the year ended March 31, 2007, SKRM Interactive recorded an initial discount
      on
      the convertible notes payable with an offset to derivative liabilities of
      $600,000.





In
      November 2006, SKRM Interactive issued 3,000,000 shares of common stock with
      a
      value of $4,020,000 as part of a Stock Purchase Agreement with Weaver
      Interactive, Inc. This stock transaction was later rescinded (see Note - 4)
      and
      2,880,000 shares of common stock were returned to SKRM Interactive in April
      2007
      with a fair value of $3,859,203.





**Note
      14 - CONSULTING AGREEMENT**





On
      November 15, 2006, SKRM Interactive hired International Capital Investors,
      LLC
      under a one-year agreement to do research, market review, and advising it with
      regards to potential mergers and acquisitions for 150,000 shares of common
      stock
      valued at $208,500.





30





ITEM
      8.
      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





On
      September 1, 2006, Ham, Langston & Brezina, L.L.P. notified the Registrant
      that it would be resigning its position as the Company's independent
      accountants.





The
      audit
      report of Ham, Langston & Brezina, L.L.P., on June 20, 2006, for the year
      ended March 31, 2006 contained no adverse opinion, disclaimer of opinion or
      modification of the opinion other than Ham, Langston & Brezina, L.L.P. did
      qualify its opinion and stated its substantial doubt about the Company's ability
      to continue as a going concern.





In
      connection with its audit for the most recent fiscal year and the interim period
      until the date of dismissal , there were no disagreements with Ham, Langston
      & Brezina, L.L.P. 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 Ham, Langston & Brezina, L.L.P. would have caused them to make reference
      thereto in their report on the financial statements





On
      September 5, 2006, the Registrant engaged Malone & Bailey, PC to audit its
      financial statements for the year ended March 31, 2007. During the two most
      recent fiscal years and through June 30, 2006, the Registrant had not consulted
      with Malone & Bailey, PC 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 advice 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.





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 Securities
      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 not effective to ensure that material information relating to us and our
      consolidated subsidiaries would be made known to them by others within those
      entities because
      of errors in recording debt and related derivative liabilities as well as
      share-based comensation .





(b)  Our
      Independent Accountants have recommended that we adjust our books and records
      and revised Financial Statement disclosures to indicate that our controls were
      ineffective. We plan on implementing within the next fiscal quarter the
      adjustments to the procedures for recording financial transactions and tracking
      of expenses to rectify the ineffective of our controls.




31





(c)
      Changes in internal controls. There were no significant changes in our internal
      controls or to our knowledge, in other factors that could significantly affect
      our disclosure controls and procedures subsequent to the Evaluation
      Date.





ITEM
      8B.
      OTHER INFORMATION





None




32


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 27, 2007, 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 SinceCharles
                Camorata
            
            51
            
            President,
                Chief Executive
            
            01-31-04Officer
                and DirectorKaren
                Pollino
            
            54
            
            Secretary
                / Treasurer
            
            01-31-04and
                Director





The
      following is the business background of each officer and director:





Charles
      Camorata. Mr. Camorata was a founder of and has been employed by the Company
      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.





Karen
      Pollino. Ms. Pollino joined the Company 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 proceeding or named subject of a pending criminal
      proceeding (excluding traffic violations and other minor defenses);





(3)
      was
      the subject of any order, judgment 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 affiliate person, director
      or employee of any investment company or engaging in or continuing any conduct
      or practice in connection with such activity;




33





(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, judgment, 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 judgment 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
      judgment 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, 2006, the
      end
      of the Company’s last completed fiscal year):





Name
            
            Fiscal
                Year
            
            CompensationCharles
                Camorata
            
            
            2007Charles
                Camorata
            
            
            2006
            
            $
            50,000Charles
                Camorata
            
            
            2005
            
            $
            50,000Kevin
                Monson *
            
            
            2004
            
            
            None





*
      Resigned on January 31, 2004





Cash
      Compensation





There
      was
      no cash compensation, other than the $50,000 compensation to Charles Camorata
      paid to any director or executive officer of the Company during the fiscal
      years
      ended March 31, 2007, 2006, and 2005.





Bonuses
      and Deferred Compensation





None.




34





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 termination 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 December 1, 2006 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 29,148,294 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
            
            PercentageClass
            
            Beneficial
                Owner
            
            of
                Beneficial Ownership (1)
            
            of
                ClassOFFICERS,
                DIRECTORS AND FIVE PERCENT SHAREHOLDERSCommon
            
            
            Charles
                Camorata
            
            
            200,000
            
            
            0.06
            %Common
            
            
            Karen
                Pollino
            
            
            200,000
            
            
            0.06
            %Common
            
            
            Jeffrey
                Martin (1)
            
            
            22,650,156
            
            
            77.7
            %





All
      officers and Directors as a Group




(2)
                Persons
            
            
            400,000
            
            
            1.1
            %




(1)
      Includes shares owned by Martin Consultants, Inc. and Am-Pac
      Investments.





ITEM
      12.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





*During
      the Year ended March 31, 2006:*





The
      Company received cash proceeds of $276,400 from the issuance of 276,400 shares
      of common stock.




35





On
      March
      30, 2006, the Company converted a remaining $50,000 note payable to Market
      Management to 50,000 shares of common stock.





On
      March
      29, 2006, the Company converted $1,050,000 of notes payable to Jeffery D. Martin
      to 1,050,000 shares of common stock.





*During
      the Year ended March 31, 2007:*





The
      Company issued 817,342 shares of common stock for the conversion of related
      party debt of $1,839,021 to equity.





The
      Company also issued through out the year 1,102,000 shares of common stock valued
      at $1,307,602 to different vendors for services preformed for the Company.





The
      Company received cash proceeds of $24,695 from the issuance of 24,694 shares
      of
      common stock.





In
      November 2006, SKRM issued 3,000,000 shares of common stock with a value of
      $4,020,000 as part of a Stock Purchase Agreement with Weaver Interactive, Inc.
      This stock transaction was later rescinded (see Note - 4) and 2,880,000 shares
      of common stock were returned to the Company in April 2007 with a fair value
      of
      $3,859,203. The fair value of the shares was determined using a 10 day average
      of its market closing price prior to and for the closing day of November 20,
      2006 or $1.34 per share. The share price of $1.34 was used to value both the
      initial issuance of common stock and the rescinding of the shares.





General
      operating expenses of $515,000 were paid for by a major shareholder and a charge
      to additional paid-in capital was made.





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





23.1
            Consent
                of Independent Registered Public Accounting Firm.23.2
            Consent
                of Independent Registered Public Accounting Firm.31.1
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            Certification
                of the Principal Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32.2
            Certification
                of the Principal Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.





36





ITEM
      14.
      PRINCIPAL ACCOUNTANTS FEES AND SERVICES





2007
            
            2006Audit
                Fees
            
            $
            38,515
            
            $
            10,000Audit
                and Related Fees
            
            
            
            
            
            10,500Tax
                Fees
            
            
            
            
            
            -All
                Other Fees
            
            
            
            
            
            -Total
            
            $
            
            
            $
            20,500





(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.




37


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:


SKMI
                Interactive, Inc.Date:
              June 27, 2007
            By
            /s/
              Charles CamorataCharles
                Camorata,
              Principal
                Executive Officer


Date:
              June 27, 2007
            By
            /s/
              Karen PollinoKaren
              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
            
            Principal
              Executive Officer, Director
            
            June
              27,
              2007Charles Camorata/s/
              Karen Pollino
            
            Chief
              Financial Officer, Director
            
            June
              27,
              2007Karen Pollino




38