SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB





(Mark
      One)





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





For
      the
      quarterly period ended December 31, 2006





OR





o TRANSITION
      REPORT UNDER SECTION
      13 OF 15(d) OF THE EXCHANGE ACT OF 1934





From
      the
      transition period from ____________ to ___________.





Commission
      File Number 0-22236





SKRM
      Interactive, Inc.





(formerly
      SKREEM ENTERTAINMENT CORPORATION))


(Exact
      name of small business issuer as specified in its charter)





Delaware
            33-0565710(State
                or other jurisdiction of
            (IRS
                Employer Identification
                No.)incorporation
                or organization)




11637
      Orpington Street, Orlando, Florida 32817


(Address
      of principal executive offices)





(407)
      207-0400


(Issuer's
      telephone number)





N/A


(Former
      name, former address and former fiscal year,


if
      changed since last report)





Indicate
      by
      check mark whether the registrant (1) filed all reports required
      to be filed by Section 13 or 15(d) of the Exchange Act during the past 12
      months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past 90
      days:





Yes
x
      No o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
o
      No x




Class
            
            Shares
                Outstanding
            
            DateCommon,
                $.001 par value
            
            29,298,292
            
            March
                16,
                2007





Transitional
      Small Business Disclosure Format (Check one): Yes o No x










TABLE
      OF
      CONTENTS





SKRM
      Interactive, Inc.





(formerly
      SKREEM ENTERTAINMENT CORPORATION))





Part
      I.
      Financial Information


Item
                  1.
              Consolidated
                  Financial StatementsUnaudited
                  Consolidated Balance Sheets - December 31, 2006 and March 31,
                  2006.
              3Unaudited
                  Consolidated Statements of Operations for the nine and three months
                  ended
                  December 31, 2006 and 2005 and for the period from inception, August
                  19,
                  1999, to December 31, 2006
              4Unaudited
                  Consolidated Statement of Changes in Shareholders' Deficit for
                  the period
                  from inception, August 19, 1999, to December 31, 2006
              6Unaudited
                  Consolidated Statements of Cash Flows for the nine months ended
                  December
                  31, 2006 and 2005 and for the period from inception, August 19,
                  1999, to
                  December 31, 2006
              7Notes
                  to the Unaudited Consolidated Financial Statements
              8Item
                  2.
              Management's
                  Discussion and Analysis or Plan of Operation
              16Item
                  3.
              Controls
                  and Procedures
              20Part
                  II. Other InformationItem
                  1.
              Legal
                  Proceedings
              21Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              21Item
                  3.
              Defaults
                  Upon Senior Securities
              21Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              21Item
                  5.
              Other
                  Information
              21Item
                  6.
              Exhibits
              21Signatures
              22Certifications
              23
  2





SKRM
      Interactive, Inc.


(formerly
      SKREEM ENTERTAINMENT CORPORATION)


(A
      DEVELOPMENT STAGE COMPANY)


UNAUDITED
      CONSOLIDATED BALANCE SHEETS


December
      31, 2006 and March 31, 2006




December
                  31,
              
              March
                  31,2006
              
              2006ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              26,795
              
              $
              62,383Related
                  party receivable
              
              
              5,158
              
              
              -Total
                  current assets
              
              
              31,953
              
              
              62,383Property
                  and equipment, net
              
              
              5,400
              
              
              7,030Deferred
                  financing costs, net
              
              
              87,640
              
              
              -Total
                  assets
              
              $
              124,993
              
              $
              69,413LIABILITIES
                  AND SHAREHOLDERS' DEFICITCurrent
                  liabilities:Accounts
                  payable and accrued liabilities
              
              $
              174,992
              
              $
              173,410Related
                  party payable
              
              
              9,254
              
              
              9,254Accrued
                  interest payable - related parties
              
              
              -
              
              
              217,190Deferred
                  revenue
              
              
              25,027
              
              
              24,500Notes
                  payable - shareholder
              
              
              126,996
              
              
              556,770Notes
                  payable - affiliates
              
              
              -
              
              
              933,620Derivative
                  liabilities
              
              
              2,485,243
              
              
              -Total
                  current liabilities
              
              
              2,821,512
              
              
              1,914,744Callable
                  secured convertible notes payable net of unamortized discount of
                  $600,000
              
              
              -
              
              
              -Total
                  liabilities
              
              
              2,821,512
              
              
              1,914,744Shareholders'
                  deficit:Preferred
                  shares - $0.001 par value; 1,000,000 authorized, no shares issued
                  or
                  outstanding
              
              
              -
              
              
              -Common
                  shares - $0.001 par value; 50,000,000 authorized; 29,298,292 and
                  24,484,256 shares issued and outstanding
              
              
              29,298
              
              
              24,484Additional
                  paid - in capital
              
              
              10,881,999
              
              
              3,235,847Shares
                  receivable
              
              
              (4,020,000
              )
              
              -Losses
                  accumulated in the development stage
              
              
              (9,587,816
              )
              
              (5,105,662
              )Total
                  shareholders' deficit
              
              
              (2,696,519
              )
              
              (1,845,331
              )Total
                  liabilities and shareholders' deficit
              
              $
              124,993
              
              $
              69,413


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





3




SKRM
      Interactive, Inc.


(formerly
      SKREEM ENTERTAINMENT CORPORATION)


(A
      DEVELOPMENT STAGE COMPANY)


UNAUDITED
      CONSOLIDATED STATEMENTS OF OPERATIONS


For
      the
      Nine Months Ended December 31, 2006 and 2005 and for the Period
      From


Inception,
      August 19, 1999, to December 31, 2006


Nine
                  Months Ended
              
              Inception
                  toDecember
                  31,
              
              December
                  31,
              
              December
                  31,2006
              
              2005
              
              2006Revenue
              
              $
              33,633
              
              $
              63,987
              
              $
              222,358Revenue
                  - related party
              
              
              127,200
              
              
              -
              
              
              127,200Total
                  Revenue
              
              
              160,833
              
              
              63,987
              
              
              349,558ExpensesOperating
              
              
              (1,230,552
              )
              
              (793,939
              )
              
              (4,555,914
              )General
                  and administrative
              
              
              (1,067,849
              )
              
              (284,294
              )
              
              (2,424,268
              )Impairment
                  of loan receivable
              
              
              (410,701
              )
              
              -
              
              
              (540,701
              )Total
                  expenses
              
              
              (2,709,102
              )
              
              (1,078,233
              )
              
              (7,520,883
              )Loss
                  from operations
              
              
              (2,548,269
              )
              
              (1,014,246
              )
              
              (7,171,325
              )Other
                  income (expense)Interest
                  income
              
              
              10,701
              
              
              -
              
              
              10,701Interest
                  expense
              
              
              (59,344
              )
              
              (121,668
              )
              
              (541,949
              )Change
                  in fair value of derivatives
              
              
              (1,885,243
              )
              
              -
              
              
              (1,885,243
              )Total
                  other
              
              
              (1,933,886
              )
              
              (121,668
              )
              
              (2,416,491
              )Net
                  loss
              
              $
              (4,482,155
              )
              $
              (1,135,914
              )
              $
              (9,587,816
              )Weighted
                  Average Shares Outstanding - basic and diluted
              
              
              25,643,956
              
              
              23,107,856Loss
                  Per Share - basic and diluted
              
              $
              (0.17
              )
              $
              (0.05
              )




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





4




SKRM
      Interactive, Inc.


(formerly
      SKREEM ENTERTAINMENT CORPORATION)


(A
      DEVELOPMENT STAGE COMPANY)


UNAUDITED
      CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended


December
      31, 2006 and 2005


Three
                  Months EndedDecember
                  31,
              
              December
                  31,2006
              
              2005Revenue
              
              $
              2,185
              
              $
              39,590Revenue
                  - related party
              
              
              1,100
              
              
              -Total
                  Revenue
              
              
              3,285
              
              
              39,590ExpensesOperating
              
              
              (305,598
              )
              
              (229,434
              )General
                  and administrative
              
              
              (812,581
              )
              
              (66,634
              )Impairment
                  of note receivable
              
              
              (410,701
              )
              
              -Total
                  expenses
              
              
              (1,528,880
              )
              
              (296,068
              )Loss
                  from operations
              
              
              (1,525,595
              )
              
              (256,478
              )Other
                  income (expenses)Interest
                  income
              
              
              9,608
              
              
              -Change
                  in fair value of derivatives
              
              
              (1,885,242
              )
              
              -Interest
                  expense
              
              
              (10,584
              )
              
              (44,576
              )Total
                  other
              
              
              (1,886,218
              )
              
              (44,576
              )Net
                  loss
              
              $
              (3,411,813
              )
              $
              (301,054
              )Weighted
                  Average Shares Outstanding - basic and diluted
              
              
              27,469,293
              
              
              23,107,856Loss
                  Per Share - basic and diluted
              
              $
              (0.12
              )
              $
              (0.01
              )




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





5




SKRM
      Interactive, Inc.


(formerly
      SKREEM ENTERTAINMENT CORPORATION)


(A
      DEVELOPMENT STAGE COMPANY)


UNAUDITED
      CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT For the


period
      from inception, August 19, 1999, to December 31, 2006


LossesAccumulatedAdditional
              
              During
                  the
              
              
              
              TotalCommon
                  Stock
              
              Paid-In
              
              Development
              
              Shares
              
              ShareholdersShares
              
              Amount
              
              Capital
              
              Stage
              
              Receivable
              
              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
              
              
              250,000
              
              
              250
              
              
              249,750
              
              
              -
              
              
              -
              
              
              250,000Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (433,538
              )
              
              -
              
              
              (433,538
              )Balance
                  at June 30, 2006
              
              
              24,758,950
              
              
              24,759
              
              
              3,510,267
              
              
              (5,539,200
              )
              
              -
              
              
              (2,004,174
              )Stock
                  issued for conversion of debt
              
              
              817,342
              
              
              817
              
              
              1,838,204
              
              
              -
              
              
              -
              
              
              1,839,021Expense
                  paid by shareholder
              
              
              -
              
              
              -
              
              
              515,000
              
              
              -
              
              
              -
              
              
              515,000Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (636,803
              )
              
              -
              
              
              (636,803
              )Balance
                  at September 30, 2006
              
              
              25,576,292
              
              
              25,576
              
              
              5,863,471
              
              
              (6,176,003
              )
              
              -
              
              
              (286,956
              )Stock
                  issued for services
              
              
              722,000
              
              
              722
              
              
              1,001,528
              
              
              -
              
              
              -
              
              
              1,002,250Stock
                    issued for investmentto be rescinded
              
              
              3,000,000
              
              
              3,000
              
              
              4,017,000
              
              
              -
              
              
              (4,020,000
              )
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,411,813
              )
              
              -
              
              
              (3,411,813
              )Balance
                  at December 31, 2006
              
              
              29,298,292
              
              $
              29,298
              
              $
              10,881,999
              
              $
              (9,587,816
              )
              $
              (4,020,000
              )
              $
              (2,696,519
              )




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





6




SKRM
      Interactive, Inc.


(formerly
      SKREEM ENTERTAINMENT CORPORATION)


(A
      DEVELOPMENT STAGE COMPANY)


UNAUDITED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


For
      the
      Nine Months Ended December 31, 2006 and 2005 and for the Period
      From


Inception,
      August 19, 1999, to December 31, 2006


Nine
                  months Ended
              
              Inception
                  toDecember
                  31,
              
              December
                  31,
              
              December
                  31,2006
              
              2005
              
              2006Cash
                  Flows from Operating Activities:Net
                  loss
              
              $
              (4,482,155
              )
              $
              (1,135,914
              )
              $
              (9,587,816
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  expense
              
              
              3,660
              
              
              2,763
              
              
              48,244Impairment
                  of note receivable
              
              
              410,701
              
              
              -
              
              
              540,701Accrued
                  interest converted to equity
              
              
              33,439
              
              
              -
              
              
              459,035Expenses
                  paid by shareholder and affiliate
              
              
              515,000
              
              
              68,770
              
              
              636,796Stock
                  issued for services
              
              
              1,252,250
              
              
              -
              
              
              1,252,250Amortization
                  of deferred financing costs
              
              
              2,360
              
              
              -
              
              
              2,360Change
                  in fair value of derivatives
              
              
              1,885,243
              
              
              -
              
              
              1,885,243Changes
                  in operating assets and liabilities:Increase
                  in interest receivable
              
              
              (10,701
              )
              
              -
              
              
              (10,701
              )Increase
                  in related party receivable
              
              
              (5,158
              )
              
              -
              
              
              (5,158
              )Decrease
                  in accounts receivable
              
              
              -
              
              
              114,257
              
              
              -Decrease
                  in prepaid expenses and deposits
              
              
              -
              
              
              8,908
              
              
              -Increase
                  in accounts payable and accrued liabilities
              
              
              1,583
              
              
              188,355
              
              
              234,248Increase
                  in interest payable to affiliates
              
              
              -
              
              
              92,883
              
              
              -Increase
                  (decrease) in deferred revenue
              
              
              530
              
              
              (10,413
              )
              
              25,027Net
                  cash used in operating activities
              
              
              (393,248
              )
              
              (670,391
              )
              
              (4,519,771
              )Cash
                  Flows from Investing ActivitiesPayments
                  for purchase of property and equipment
              
              
              (2,030
              )
              
              (864
              )
              
              (53,644
              )Note
                  receivable
              
              
              (400,000
              )
              
              -
              
              
              (530,000
              )Net
                  cash used in investing activities
              
              
              (402,030
              )
              
              (864
              )
              
              (583,644
              )Cash
                  Flows from Financing ActivitiesProceeds
                  from issuance of common stock
              
              
              24,695
              
              
              14,000
              
              
              603,024Proceeds
                  from notes payable - other
              
              
              -
              
              
              20,000
              
              
              385,000Proceeds
                  from notes payable - shareholder
              
              
              293,050
              
              
              643,000
              
              
              1,816,050Proceeds
                  from notes payable - affiliate
              
              
              63,000
              
              
              15,000
              
              
              2,502,191Proceeds
                  from convertible notes payable
              
              
              600,000
              
              
              -
              
              
              600,000Principal
                  payments on notes payable - affiliate
              
              
              -
              
              
              -
              
              
              (140,000
              )Principal
                  payments on notes payable - other
              
              
              -
              
              
              (50,000
              )
              
              (335,000
              )Principal
                  payments on notes payable - shareholder
              
              
              (131,055
              )
              
              -
              
              
              (211,055
              )Debt
                  issuance costs
              
              
              (90,000
              )
              
              -
              
              
              (90,000
              )Net
                  cash provided by financing activities
              
              
              759,690
              
              
              642,000
              
              
              5,130,210Net
                  increase (decrease) in cash and cash equivalents
              
              
              (35,588
              )
              
              (29,255
              )
              
              26,795Cash
                  and cash equivalents, beginning of period
              
              
              62,383
              
              
              52,195
              
              
              -Cash
                  and cash equivalents, end of period
              
              $
              26,795
              
              $
              22,940
              
              $
              26,795




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





7





SKRM
      Interactive, Inc.


(formerly
      SKREEM ENTERTAINMENT CORPORATION)


(A
      DEVELOPMENT STAGE COMPANY)


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





Note
      1 -
      BASIS OF PRESENTATION





The
      accompanying unaudited consolidated condensed financial statements of SKRM Interactive,
      Inc. (formerly Skreem Entertainment Corporation)(“SKRM”, “Skreem” or the
“Company”), have
      been
      prepared in accordance with accounting principles generally accepted in the
      United States of
      America for interim financial information and with the instructions to Form 10QSB
      and
      Item 310(b) of Regulation S-B. They do not include all of the information and
      footnotes required by accounting principles generally accepted in the United
      States


of
      America for complete financial statements. In the opinion of management, all adjustments,
      consisting only of normal recurring adjustments, considered necessary
      for a fair presentation, have been included in the accompanying unaudited
      consolidated financial statements. Operating results for the periods presented
      are not necessarily indicative of the results that may be expected for the
      full
      year.





These
      unaudited consolidated financial statements should be read in conjunction with
      the
      consolidated financial statements and footnotes, which are included as part
      of
      consolidated financial statements as of March 31, 2006 included in Skreem's
      Form 10KSB.





Note
      2 -
      ACCOUNTING POLICY FOR REVENUE RECOGNITION





Revenue
      is recognized when persuasive evidence of an arrangement exists, the price
      to
      the buyer is fixed or determinable; delivery has occurred or services have
      been
      rendered or the license period has begun; and collect ability 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 SKRM
      receives an "accounting" of recordings sold with payment from the licensee.
      In the event SKRM has not received an "accounting" from the licensee and
      if
      SKRM has information related to the licensed use of recordings that would
      result in the revenue being fixed and determinable, and collection
      is


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





Note
      3 -
      RECISSION OF INVESTMENT AND IMPAIRMENT OF NOTE RECEIVABLE





On
      November 20, 2006, SKRM completed and closed on a Stock Purchase Agreement,
      with Weaver
      Interactive, Inc. (“Weaver”), a company formed and existing under the laws
      of
      South Korea.





Pursuant
      to the transaction, SKRM purchased a 51% investment in Weaver. SKRM issued 3,000,000
      shares of its commonstock as consideration for the equity investment. The
      Company initially determined that the minority shareholders had significant
      participatory rights
      that allowed them to participate in significant decisions of
      Weaver. Weaver
      would continue to operate completely and fully independently in all corporate business,
      free from corporate control or interference in day-to-day business by SKRM. Therefore
      SKRM would not consolidate the results of Weaver but rather would account for
      its investment
      under the equity method of accounting and in accordance with EITF 96-16,
*Investor’s* *Accounting
      for an Investee When the Investor Has a Majority of the Voting Interest but* *the
      Minority Shareholder or Shareholders Have Certain Approval or Veto Rights.*SKRM also issued
      200,000 shares ofcommon stock as a finder’s fee to an unrelated party as part of
      the investment
      transaction.





SKRM
      also
      agreed to loan Weaver $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 the Company
      would also make a good faith deposit at the closing.





8





During
      February 2007, SKRM and Weaver entered into negotiations for the termination of
      the
      Stock Purchase Agreement. Both parties plan to return the shares that were previously
      issued under the Stock Purchase Agreement and SKRM has requested Weaver to
      execute a promissory note for repayment of all monies loaned to Weaver by SKRM. As
      of the
      date of the filing, Management believes both parties will cooperate and return
      the shares. Therefore SKRM has recorded shares receivable of $4,020,000
      as a
      contra
      equity account. The receivable value was determined based on the fair value
      of
      the 3,000,000 common shares issued by 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.
      Management believes the total amount loaned of $400,000 plus accrued of $10,710 interest
      may not be collected and therefore recorded a total impairment change of
      $410,710. In
      addition, since the transaction is no longer considered an equity investment,
      SKRM expensed
      the 200,000 shares issued as a finders fee of $268,000.




NOTE
      4 -
      CALLABLE SECURED CONVERTIBLE NOTES PAYABLE AND WARRANTS





SKRM
      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
      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 notional 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’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 the Company 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.





SKRM
      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 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
      agreed to give its best efforts to obtain effectiveness of the Registration
      Statement within 120 days of the Closing Date. If SKRM 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 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 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.





In
      December 2006, FASB STAFF POSITION (“FSP”) 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 February 28, 2007, the Company has
      not filed a Registration Statement with the SEC and has recorded a contingent
      liability of $12,000 as partial relief for damages to the note holders.




9





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 the Company under the convertible notes, Securities Purchase
      Agreement and any Related Agreement and may require the Company to immediately
      pay 140% of the principal amounts outstanding under the convertible notes,
      plus
      any accrued and unpaid interest.




At
      February 28, 2007, there has been an event of default (failure to timely file
      registration statement within 45 days). However, the Company has not received
      any demands of repayment and this event of default does not require the Company
      to pay 140% of the principal amounts outstanding plus any accrued and unpaid
      interest.





The
      Company incurred debt issuance costs of $90,000 associated with the issuance
      of
      the convertible notes. These costs were capitalized as deferred loan costs
      and
      will be amortized over the life of the convertible notes using the effective
      interest method. Total amortization expense related to the convertible notes
      was
      $2,360 for the quarter ended December 31, 2006.





The
      Company 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 contains 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. The Company 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 for the derivative will
      be
      accreted to interest expense using the effective interest method over the life
      of the convertible notes, or 36 months. Total accretion expense was di minimis
      for the quarter ended December 31, 2006.




Probability-Weighted
      Expected Cash Flow Methodology -





Assumptions:
      Single Compound Embedded Derivative within Convertible Note


At
                  Inception
              
              As
                  ofNovember
                  30, 2006
              
              December
                  31, 2006Risk
                  - free interest rate
              
              
              4.52
              %
              
              4.74
              %Timely
                  registration
              
              
              95.00
              %
              
              90.00
              %Default
                  status
              
              
              5.00
              %
              
              5.00
              %Alternative
                  financing available and exercised
              
              
              0.00
              %
              
              0.00
              %Trading
                  volume, gross monthly dollars monthly rate increase
              
              
              1.00
              %
              
              1.00
              %Annual
                  growth rate of stock price
              
              
              24.00
              %
              
              0.00
              %Future
                  projected volatility
              
              
              66.58
              %
              
              74.72
              %




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 unamortized discount of the warrant derivative liability of $460,714
      will be accreted to interest expense using the effective interest method over
      the life of the convertible notes, or 36 months. The total accretion expense
      was
      di minimis for the quarter ended December 31, 2006. The remaining value of
      $7,172,294 was expensed at inception to change in fair value of derivative
      financial instruments since the total fair value of the derivative at inception
      exceeded the note proceeds.





Variables
      used in the Black-Scholes option-pricing model include (1) 4.52% to 4.74%
      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
      74.72% and (4) zero expected dividends.





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.





10





The
      impact of the application of SFAS No. 133 and EITF 00-19 in regards to the
      derivative liabilities on the balance sheet and statements of operations as
      of
      and through December 31, 2006 was as follows:


Transaction
                  Date
              
              Liability
                  as ofNovember
                  30, 2006
              
              December
                  31, 2006Derivative
                  liability-single compound embedded derivatives within the convertible
                  notes
              
              $
              139,286
              
              $
              69,171Derivative
                  liability-warrants
              
              
              7,633,008
              
              
              2,416,072Total
              
              $
              7,772,294
              
              $
              2,485,243Less
                  basis allocated from debt proceeds
              
              
              
              
              
              (600,000
              )Net
                  change in fair value of derivatives
              
              
              
              
              $
              1,885,243


The
      following summarizes the financial presentation of the convertible notes at
      inception and December 31, 2006:


At
                  inceptionNovember
                  30, 2006
              
              December
                  31, 2006Notional
                  amount of the convertible notes
              
              $
              600,000
              
              $
              600,000Adjustments:Discount
                  for single compound embedded Derivatives within the convertible
                  notes
              
              
              (139,286
              )
              
              (139,286
              )Discount
                  for warrants
              
              
              (460,714
              )
              
              (460,714
              )Convertible
                  notes balance, net
              
              $
              -
              
              $
              -





11





Note
      5 -
      NOTES PAYABLE - RELATED PARTIES





Shareholder





During
      the quarter ended June 30, 2006, Jeffrey D. Martin, a major stockholder loaned
      SKRM $30,000 with two promissory notes of $20,000 and $10,000. The notes
      are
      payable on demand and bear interest at the rate of 8% and 17.49%, respectively.
      Interest on the notes begins to accrue on July 1, 2006. The notes are
      secured by the assets of Skreem.





During
      the quarter ended September 30, 2006, Jeffrey D. Martin, a major stockholder
      loaned SKRM $146,700 with two promissory notes. The notes are payable
      on demand. The $126,700 note bears interest at the rate of 8% and interest
      on this note begins to accrue on October 1, 2006. The $20,000 note bears
      interest at approximately 17.49% per annum. The notes are secured by the assets
      of
      Skreem. During the quarter ended December 31, 2006, SKRM paid $87,054
      reducing the principal balance on the loans.





During
      the quarter ended December 31, 2006, Jeffrey D. Martin, a major stockholder
      loaned Skreem $88,850 with multiple notes. The notes are payable
      on demand and bear interest at the rate of 8% and interest on this note
      begins to accrue on January 1, 2007. The notes are secured by the assets of
      SKRM.





On
      August
      31, 2006, notes payable to Jeffrey Martin totaling $591,770 and related
      interest payable of $79,164 were converted to 298,193 shares of common stock
      at
      $2.25 per share. Due to the related party nature of the transaction, no gain
      was
      recorded for the difference between the conversion price and the market price
      at
      the date of conversion.





Affiliates





During
      the quarter ended June 30, 2006, Skreem borrowed $40,000 from Martin Consultants,
      Inc. The note is payable on demand and bears interest at a rate of 8%
      per
      annum. Interest on this note begins to accrue on July 1, 2006. Martin Consultants,
      Inc. is 100% owned by Jeffery D. Martin.




On
      August
      31, 2006, notes payable to affiliates (Martin Consultants, Inc., JT Investments,
      and AM-PAC Investments) totaling $996,620 and related interest payable
      of $171,466 were converted to 519,149 shares of common stock at $2.25 per
      share. Due to the related party nature of the transaction, no gain was recorded
      for the difference between the conversion price and the market price at the
      date
      of conversion.





Note
      6 -
      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 sustained losses
      of $4,482,155
      for the nine-months ended December 31, 2006. SKRM had an accumulated deficit
      of $9,587,816 at December 31, 2006. These factors raise substantial doubt
      about the ability of SKRM to continue as a going concern for a reasonable
      period of time. SKRM is highly dependent on its ability to continue


to
      obtain
      investment capital and loans from a major shareholder and third parties in
      order
      to fund the current and planned operating levels. The financial statements
      do not include any adjustments relating to the recoverability and classification
      of recorded asset amounts or the amounts and classification of liabilities
      that might be necessary should SKRM be unable to continue as a going
      concern. SKRM's continuation as a going concern is dependent upon its ability
      to continue receiving investment capital from a shareholder
      and third
      parties and achieve a level of success that will enable it to sustain its operations.
      No assurance can be given that SKRM will be successful in these
      efforts.





12





Note
7
      -
      PRODUCTION AGREEMENT





On
      June
      13, 2006, SKRM entered into an agreement with 1171 Productions (1171) for
      the
      purpose of creating interest in and securing meeting opportunities of the
      "Star
      Maker" reality series. SKRM shall pay a commission of 5% of the net profits
      of the "Star Maker" series worldwide. In addition, Skreem agrees to use 1171
      in
      the production of the series. SKRM has not recorded any transactions related
      to this agreement.





Note
      8 -
      LICENSE AGREEMENT





During
      the quarter ended June 30, 2006, SKRM hired Zero Degrees Entertainment (Zero)
      under a 5-year agreement which grants Zero certain exclusive rights to distribute
      and sell recordings of the artist "3rd Wish" in France. SKRM shall receive
      royalties of 17% to 20% calculated on 100% net sales. In addition, SKRM
      may
      earn third party and other income as defined in the agreement. SKRM has
      not
      recorded any transactions related to this agreement.





Note
      9 -
      ADVERTISING AND PROMOTIONAL SERVICE AGREEMENT





On
      May
      24, 2006, Skreem hired Hobson, Bowerstock, & Associates, LLC (HLB) under a
      one-year agreement to prepare and implement a promotional campaign in exchange for
      1,000,000 shares of common stock. During the quarter ended June 30, 2006, Skreem
      issued 250,000 shares and recorded advertising expense of $250,000 in accordance
      with EITF 96-18. During the quarter ended December 31, 2006, Skreem's
      shareholder paid the shares directly and Skreem recorded advertising expense
      with an offset to paid-in capital of $515,000 in accordance with EITF 96-18
      and
      SAB 107 Topic 5.T. During the quarter ended December 31, 2006, SKRM terminated
      the agreement and no additional shares were issued and no additional services
      were provided.





Note
      10 -
      RELATED PARTY REVENUE





During
      the quarter ended June 30, 2006, there were unsold recordings returned to Skreem
      by
      Cheyenne Records. Am-Pac Investment purchased these remaining recordings
      and Skreem recorded this sale as related party revenue during the quarter
      and nine months ended December 31, 2006. Am-Pac is owned by Jeffery Martin,
      a
      major shareholder.





Note
      11
      -STRATEGIC RESEARCH & ANALYSIS AGREEMENT





On
      July
      1, 2006, SKRM hired Sterling LLC (Sterling) under a 2-year agreement to do research,
      market review and strategic analysis and to provide review and planning
      services in exchange for 3,000 shares per month for year one and 5,000 shares
      per month for year two, and additional incentives as described in the agreement.
      In accordance with EITF 96-18, SKRM recorded total expense of $17,550
      for the quarter ended September 30, 2006. On November 1, 2006, the agreement
      was amended to require SKRM to pay Sterling 30,000 shares per month, paid
      one
      year in advance, for a total of 360,000 shares and additional incentives as
      described in the addendum. SKRM recorded total expense of $508,200 for the quarter
      ended December 31, 2006.





Note
      12 -
      DISTRIBUTION AGREEMENT





On
      July
      7, 2006, SKRM hired MD Lavert & Associates dba Nothing Else Works (NEW)
      which grants NEW exclusive rights to distribute designated albums for SKRM
      in
      the U.S. and Canada. NEW shall retain a retail marketing and distributing
      fee of 25% per artist of SKRM's whole sale price from sales of albums.
      SKRM has not recorded any transactions related to this agreement.





13




Note
      13 -
      CONSULTING AGREEMENT





On
      November 15, 2006, SKRM hired International Capital Investors, LLC under a
      one-year agreement to do research, market review, and advising SKRM with regards
      to potential mergers and acquisitions for 150,000 shares of common stock
      and
      additional incentives as described in the agreement. SKRM recorded total
      expense of $208,500 for the quarter ended December 31, 2006.





Note
      14 -
      SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION





During
      the nine months ended December 31, 2006 and 2005, approximately $19,543 and
      $32,202 was paid for interest, respectively. No cash was paid for income taxes
      during these periods.





During
      the nine months ended December 31, 2006, SKRM issued 817,342 shares of common
      stock for the conversion of related party debt of $2,354,021 to equity. During
      the nine months ended December 31, 2006, SKRM recorded an initial discount on
      the
      convertible notes payable with an offset as derivative liabilities of $600,000.
      During the nine months ended December 31, 2006, SKRM issued 3,000,000 shares
      of
      common stock with a value of $4,020,000 with an offset to shares
      receivable.




Note
      15 -
      SEGMENT REPORTING





At
      December 31, 2006 SKRM had two operating segments which consist of interactive online
      game operations and promoting, financing and managing artists in the music industry.
      The operating segments presented are the segments for which separate financial
      information is available and for which operating performance is evaluated regularly
      by management to decide how to allocate resources and to assess performance. SKRM
      evaluates the performance of the operating segments based on income (loss)
      from operations
      that is defined as total revenues less operating expenses.





Information
      regarding our reportable segments for the nine months ended December 2006 and
      2005
      is as follows:


Online
              
              MusicGaming
              
              Operations
              
              Total2006Revenue
              
              $
              -
              
              $
              160,833
              
              $
              160,833Loss
                  from operations
              
              
              (1,329,612
              )
              
              (1,218,657
              )
              
              (2,548,269
              )Other
                  expenses, net
              
              
              (1,887,288
              )
              
              (46,598
              )
              
              (1,933,886
              )Net
                  loss
              
              
              (3,216,900
              )
              
              (1,265,255
              )
              
              (4,482,155
              )Segment
                  assets
              
              
              114,413
              
              
              10,580
              
              
              124,9932005Revenue
              
              $
              -
              
              $
              63,987
              
              $
              63,987Loss
                  from operations
              
              
              -
              
              
              (1,014,246
              )
              
              (1,014,246
              )Other
                  expense
              
              
              -
              
              
              (121,668
              )
              
              (121,668
              )Net
                  loss
              
              
              -
              
              
              (1,135,914
              )
              
              (1,135,914
              )Segment
                  assets
              
              
              -
              
              
              57,621
              
              
              57,621


Information
      regarding our reportable segments for the three months ended December 31, 2006
      and 2005 is as follows:


Online
              
              MusicGaming
              
              Operations
              
              Total2006Revenue
              
              $
              -
              
              $
              3,285
              
              $
              3,285Loss
                  from operations
              
              
              (1,329,613
              )
              
              (195,982
              )
              
              (1,525,595
              )Other
                  expenses, net
              
              
              (1,881,995
              )
              
              (4,223
              )
              
              (1,886,218
              )Net
                  loss
              
              
              (3,216,899
              )
              
              (194,914
              )
              
              (3,411,813
              )Segment
                  assets
              
              
              114,413
              
              
              10,580
              
              
              124,9932005Revenue
              
              $
              -
              
              $
              39,590
              
              $
              39,590Loss
                  from operations
              
              
              -
              
              
              (256,478
              )
              
              (256,478
              )Other
                  expense
              
              
              -
              
              
              (44,576
              )
              
              (44,576
              )Net
                  loss
              
              
              -
              
              
              (301,054
              )
              
              (301,054
              )Segment
                  assets
              
              
              -
              
              
              57,621
              
              
              57,621
  14




Note
      16
      -SUBSEQUENT EVENTS





SPIN-OFF
      OF SUBSIDIARY





The
      Board
      of Directors of SKRM Interactive, Inc. (formerly Skreem Entertainment Corporation,
      a Delaware corporation) (SKRM) has approved the spin-off of its subsidiary,
      SKREEM ENTERTAINMENT CORPORATION, (a Nevada Company) (SKREEM). SKREEM’s primary
      operations have included promoting, financing and managing artists in
      the music
      industry. Each holder of SKRM’s common stock at November 30, 2006
      will receive
      one (1) share of SKRM stock held on that date. 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. The effective
      date of transaction is February 5, 2007. SKRM will reflect the results of operations
      of SKREEM as discontinued operations during the fourth quarter ended March
      31,
      2007.





15




ITEM
        2.
        MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 Plan
        of
        Operation
 
 Online
        Game Development
  During
        January 2007, we changed our name to SKRM Interactive, Inc., (SKRM), in
        connection with our Stock Purchase Agreement for the acquisition of 51% of
        the
        outstanding equity of Weaver Interactive, Inc. (Weaver) in exchange for
        3,000,000 shares of our common stock and a loan of $500,000. During February
        2007, SKRM and Weaver entered into negotiations for the termination of the
        Stock
        Purchase Agreement. SKRM and Weaver plan to return the shares that were issued
        under the Stock Purchase Agreement and SKRM has requested Weaver to execute
        a
        promissory note for all monies loaned to Weaver by SKRM. We have impaired
        the
        loan and accrued interest receivable from Weaver as we believe it may not
        be
        collected. Our future plans include seeking other online game operators for
        acquisition and then we will primarily focus on developing and operating
        multiplayer online role playing games.
 
 Spin
        Off
 
 The
        Board
        of Directors of SKRM Interactive, Inc. (formerly Skreem Entertainment
        Corporation, a Delaware corporation) (SKRM) has approved the spin-off of
        its
        subsidiary, SKREEM Entertainment CORPORATION, (a Nevada Company) (SKREEM).
        SKREEM’s primary operations have included promoting, financing and managing
        artists in the music industry. Each holder of SKRM’s common stock at November
        30, 2006 will receive one(1) share of SKRM stock held on that date. SKRM
        will
        reflect the results of operations of SKREEM as discontinued operations during
        the fourth quarter ended March 31, 2007.
 
 SKREEM
        plans to continue operations as a separate company by developing current
        acts
        into successful music performing and recording acts. SKREEM has been actively
        promoting 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. SKREEM is uncertain as to when these acts may
        enter
        the U.S. market. As of December 31, 2006, none of the Company’s acts has
        received gold records for album sales.
 
 The
        countries in which SKREEM has been promoting its acts are as
        follows:
 Pat
                    Moe
                
                3rd
                    WishGermany,
                    Switzerland, Austria
                
                Germany,
                    Switzerland and AustriaUK,
                    Eire, Australia,New
                    Zealand, FranceAndorra,
                    Monaco, Belgium, Russia, Azerbaijan,Armenia,
                    Georgia,MoldovaKazakstan,
                    Krygyzstan, Tajikistan, Uzbekistan,Turkmenistan,Ukraine,
                    Republic of Belarus, Lithuania, Latvia,Estonia,Israel,
                    Portugal
 SKREEM’s
        cash balance is insufficient to satisfy its cash requirements for the next
        12
        months. SKREEM believes it can satisfy its cash requirements for 6 months
        with
        current cash and receivables. SKREEM 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.
 
 SKREEM
        does not anticipate acquiring any significant equipment during the next twelve
        months.
 
 SKREEM
        does not anticipate any significant changes in the number of employees in
        the
        next twelve months.
 
 SKREEM
        has entered into various license agreements that grant certain exclusive
        rights
        to sell and distribute certain recordings by “3rd Wish”. Approximately 18% of
        the Company’s revenue for the nine months ended December 31, 2006 came from the
        Cheyenne Records agreement. During the quarter ended June 30, 2006, there
        were
        unsold recordings returned to the Company by Cheyenne Records. A related
        party
        purchased these remaining recordings which represent approximately 79% of
        the
        total revenue. The remaining contracts represent, individually, less than
        3% of
        revenue.
  16
 
 The
        table
        below sets forth the parties, material terms, and territories covered by
        these
        license agreements:
  Party(Licensee)
                TerritoriesCheyenne
                    Records
                Germany,
                    Switzerland and Austria
 Our
        agreement with Cheyenne Records provide that Cheyenne will market and sell
        3rd
        Wish’s recordings for a period of 5 years beginning in March 2004. Cheyenne will
        retain approximately 25% to 45% of revenue from distribution and sales and
        the
        Company will pay the costs of production. The term of the contract is 5.5
        years
        from May 2004.
  Three
                    8 Music Limited
                UK,
                    Eire
 Our
        agreement with Three 8 provides that they will receive royalties from 3rd
        Wish’s
        first three singles released. Royalties are 19% on record sales and 50% on
        third
        party licensing. The term of the contract is 15 years from October
        2004.
  Shock
                    Records Pty Ltd
                Australia,
                    New Zealand
 Our
        agreement with Shock Records provides for royalties of 18-22% on album sales
        and
        50% to Shock for third party licensing. The term of the contract is
        approximately 5 years from January 2005.
  NRJ
                    Music
                France,
                    Andorra, Monaco, Belgium
 Our
        agreement with NRJ provides for royalties of 13-22% for record sales. The
        Company will bear the costs of production, the term is 5 years from January
        2005.
 Megaliner
                    Records
                Russia,
                    Azerbaijan, Armenia, Georgia,Moldova,
                    Kazakstan, Kyrgyzstan,Tajikistan,
                    Uzbekistan, Turkmenistan,Ukraine,
                    Republic of Belarus, Lithuania, Latvia,Estonia
 Our
        agreement with Megaliner provides Megaliner with 20% of income from record
        sales
        and 60% of third party licensing and broadcasting revenue. The term is three
        years.
  NMC
                      Music Ltd.
                  Israel
  NMC
            will
            receive royalties of approximately 18% of all record sales. The contract
            expires
            in December 2009.
  Vidisco
                Portugal
 Vidisco
        will receive a royalty of approximately 18% of all record sales. The contract
        expires in January of 2010.
  Zero
                    Degrees
                France
 Zero
        will
        receive a royalty of approximately 17-20% of record sales. The contract Expires
        in 2011.
  17
  Revenue
        is recognized in accordance with Staff Accounting Bulleting No. 104 (SAB
        104)
        when persuasive evidence of an arrangement exists, the price to the buyer
        is
        fixed or determinable; delivery had occurred or services have been rendered
        or
        the license period has begun; and collectability 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.
 
 Results
        of Operations for the Nine Months Ended December 31, 2006 as Compared to
        the
        Nine Months Ended December 31, 2005
 
 Revenues
        - The Company recorded revenue of $160,833 and $63,987 for the nine months
        ended
        December 31, 2006 and December 31, 2005, respectively. The revenue for the
        nine
        months ended December 31, 2006 consists of earnings of $33,633 from Licensing
        agreements to distribute 3rd Wish’s music and sales of recordings to a related
        party of $127,200. Revenue for the nine months ended December 31, 2005 consists
        of earnings from licensing agreements to distribute “3rd Wish’s music of $63,005
        and live performances of $982.
 
 Operating
        expenses - Operating expenses for the nine months ended December 31, 2006
        were
        $1,230,552, an increase of $436,613 or 55% from $793,939 for the corresponding
        period ended December 31, 2005. The increase is primarily due to the significant
        increase in advertising expense of $780,685 and a finders fee of $268,000
        that
        was related to the Weaver acquisition offset by a net decrease in touring,
        travel, promotion and support for artist of approximately $612,000.
 
 General
        and Administrative Expenses - General and administrative expenses increased
        by
        $783,555 or 276% to $1,067,849 for the nine months ended December 31, 2006
        from
        $284,294 for the corresponding period ended December 31, 2005. This increase
        is
        primarily attributable to an increase in salaries of $2,795, increased delivery
        expense of $42,182, increased professional and consulting fees of $723,097,
        and
        increased other general and administrative expenses of $15,239.
 
 Impairment
        of Note Receivable - In conjunction with our Stock Purchase Agreement with
        Weaver Interactive, Inc., we loaned Weaver $400,000 and accrued interest
        of
        $10,701 on the loan. We have entered into negotiations to terminate the Stock
        Purchase Agreement, and we have requested that Weaver pay all monies loaned
        to
        Weaver. However, we may not collect the note receivable and therefore have
        recorded an impairment charge of $410,701 for the nine months ended December
        31,
        2006.
  Other
        Income (expense) -
 
 During
        the nine months ended December 31, 2006, the Company recorded $10,701 for
        interest income on the $400,000 loaned to Weaver Interactive, Inc. There
        were no
        notes receivable outstanding during the nine months ended December 31, 2005,
        therefore there was no interest income recorded.
 
 For
        the
        nine months ended December 31, 2006, the Company recorded interest expense
        in
        the amount of $59,344, which relates to the amortization of loan costs for
        the
        convertible notes, accrued interest for the convertible notes and notes payable
        to a shareholder and the accretion of the discount related to the convertible
        notes which was recorded in conjunction with the derivative liabilities.
        This
        compares with interest expense on notes payable of $121,668 for the nine
        months
        ended December 31, 2005.
 
 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 other expense of $1,885,243 in
        the
        nine months ended December 31, 2006 related to the change in the fair market
        value of the warrants and embedded derivative liability. The Company did
        not
        have any derivative liabilities during 2005.
 
 18
  Results
        of Operations for the Three Months Ended December 31, 2006 as Compared to
        the
        Three Months Ended December 31, 2005
 
 Revenues
        - The Company recorded revenue of $3,286 and $39,590 for the three months
        ended
        December 31, 2006 and December 31, 2005, respectively. The revenue for the
        three
        months ended December 31, 2006 consists of earnings from licensing agreements
        to
        distribute 3rd Wish’s music of $2,186 and sales of recordings to a related party
        of $1,100. The revenue for the three months ended December 31, 2005 consists
        of
        earnings from licensing agreements to distribute 3rd Wish’s music.
 
 Operating
        expenses - Operating expenses for the three months ended December 31, 2006
        were
        $305,598, an increase of $76,164 or 33% from $229,434 for the corresponding
        period ended December 31, 2005. The increase is primarily due to a finders
        fee
        of $268,000 related to the Weaver acquisition, an increase in advertising
        of
        $12,447, offset by a net decrease in touring, travel, promotion, and support
        for
        artists of approximately $200,000.
 
 General
        and Administrative Expenses - General and administrative expenses increased
        by
        $745,947 for the three months ended December 31, 2006 to $812,581 from $66,634
        for the corresponding period ended December 31, 2005. This increase is primarily
        attributable to an increase in consulting and professional fees of
        $734,529.
 
 Impairment
        of Note Receivable - In conjunction with our Stock Purchase Agreement with
        Weaver Interactive, Inc., we loaned Weaver $400,000 and accrued interest
        of
        $10,701 on the loan. We have entered into negotiations to terminate the Stock
        Purchase Agreement and we have requested that Weaver pay all monies loaned
        to
        them. However, we may not collect the note receivable and therefore have
        recorded an impairment charge of $410,701 for the three months ended December
        31, 2006.
 
 Other
        Income (expense)-
 
 During
        the three months ended December 31, 2006, the Company recorded $9,608 for
        interest income on the $400,000 loaned to Weaver Interactive, Inc. There
        were no
        notes receivable outstanding during the three months ended December 31, 2005,
        therefore there was no interest income recorded.
 
 For
        the
        three months ended December 31, 2006, the Company recorded interest expense
        in
        amount of $10,584, which relates to the amortization of loan costs for the
        convertible notes, accrued interest for the convertible notes and notes payable
        to a shareholder and the accretion of the discount related to the convertible
        notes which was recorded in conjunction with the derivative liabilities.
        This
        compares with interest expense on notes payable of $44,576 for the three
        months
        ended December 31, 2005.
 
 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 other expense of $1,885,243 in
        the
        three months ended December 31, 2006 related to the change in the fair market
        value of the warrants and embedded derivative liability. The Company did
        not
        have and derivative liabilities during 2005.
  19
 
 Liquidity
        and Capital Resources
 
 As
        of
        December 31, 2006, the Company had cash of $26,795 and a deficit in working
        capital of $304,316(excluding derivative liabilities of $2,485,243). This
        compares with cash of $62,383 and a deficit in working capital of $1,852,361
        as
        of March 31, 2006.
 
 Cash
        used
        in operations decreased by $277,143 to $393,248 for the nine months ended
        December 31, 2006 from $670,391 for the corresponding period of the prior
        year.
        The decrease is attributable to a significant increase in non-cash expenses
        of
        $2,217,411, offset by a decrease in changes in operating assets and liabilities
        of $13,749, a change in fair value of derivative or non-cash gain of $1,885,243,
        and an increase in net loss of $4,482,154.
 
 Cash
        used
        in investing activities for the nine months ended December 31, 2006 was
        $402,030, which is due to a loan to Weaver Interactive, Inc. of $400,000
        and the
        equipment purchases of $2,030.
 
 Cash
        provided financing activities for the nine months ended December 31, 2006
        was
        $759,690, which is primarily from the issuance of promissory notes of $356,050,
        convertible notes of $600,000 and common stock of $24,695, offset by payments
        on
        notes payable of $131,055 and debt issuance costs of $90,000. This compares
        with
        $642,000 of cash being provided from financing activities during the nine
        months
        ended December 31, 2005, all from the issuance of promissory notes and common
        stock.
 
 Historically,
        the Company has been funded by the sale of its shares and loans from its
        Shareholders and others. However, the Company’s continuation as a going concern
        is dependent upon its ability to continue receiving investment capital and
        obtaining loans to achieve a level of success that will enable it to sustain
        its
        operations. No assurance can be given that the Company will be successful
        in
        these efforts.
  ITEM
        3.
        CONTROLS AND PROCEDURES
 
 As
        of the
        end of the period covered by this report, we have evaluated the effectiveness
        of
        the design and operation of our disclosure controls and procedures under
        the
        supervision of and with the participation of our Chief Executive Officer
        (“CEO”)
        and our Chief Financial Officer (“CFO”). Based on this evaluation, our
        management, including our CEO and CFO, concluded that our disclosure controls
        and procedures were not effective. This conclusion was based on two primary
        factors. The first factor being that we were not able to prepare our financial
        information and report it within the time periods specified by the SEC’s rules
        and forms. The second factor being that during the course of their review
        of our
        quarterly financial information, our independent registered public accounting
        firm identified material adjustments in connection with our accounting for
        derivative financial instruments.
 
 During
        the quarter ended December 31, 2006, there were no changes in our internal
        control over financial reporting that have materially affected, or are
        reasonably likely to materially affect, our internal control over financial
        reporting.
 
 20
  PART
        II -
        OTHER INFORMATION
 
 ITEM
        1.
        LEGAL PROCEDINGS
 
 None
 
 ITEM
        2.
        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 None
 
 ITEM
        3.
        DEFAULTS UPON SENIOR SECURITIES
 
 None
 
 ITEM
        4.
        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None
 
 ITEM
        5.
        OTHER INFORMATION
 
 None
 ITEM
          6.  EXHIBITS
  Number
                
                Description31.1**
                
                Certification
                    of Chief Executive Officer of Skreem Entertainment Corporation
                    Required by
                    Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act
                    of 1934,
                    as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
                    of
                    200231.2**
                
                Certification
                    of Chief Financial Officer of Skreem Entertainment Corporation
                    Required by
                    Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act
                    of 1934,
                    as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
                    of
                    200232.1**
                
                Certification
                    of Chief Executive Officer of Skreem Entertainment Corporation
                    Pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350
                    Of 18
                    U.S.C. 6332.2**
                
                Certification
                    of Chief Financial Officer of Skreem Entertainment Corporation
                    Pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350
                    Of 18
                    U.S.C. 63*
                
                Previously
                    filed**
                
                To
                    be filed
 21
  SIGNATURES
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, as amended, this
        report has been signed below by the following persons on behalf of the
        Registrant and in the capacities and on the date indicated.
  SKRM
                  Interactive, Inc.
                (FORMERLY
                  SKREEM ENTERTAINMENT CORPORATION)Date:
                March 19, 2007
              By:
              Charles
                CamorataCharles
                  Camorata
                Principal
                  Executive Officer
  Date:
                March 19, 2007
              By:
              Karen
                PollinoKaren
                    Pollino
                  Chief
                    Financial Officer
  22