UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
Commission file number 000-28553
STEREO VISION ENTERTAINMENT, INC.
---------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 95-4786792
------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
15452 Cabrieto Rd., Suite 204, Van Nuys, CA 91406
--------------------------------------------------
(Address of principal executive offices)
(310) 205-7998 (Issuer's
telephone number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practical date: 7,958,238 as of May 12, 2004
Transitional Small Business Disclosure Format (check one). Yes ; No X
1
PART I
ITEM 1. FINANCIAL STATEMENTS
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS: March 31, June 30,
2004 2003
------------------ ------------------
Current Assets:
Cash $ 62,206 $ 10,757
Other Receivables 199 -
------------------ ------------------
Total Current Assets 62,405 10,757
------------------ ------------------
Fixed Assets:
Office Equipment 15,343 13,745
Less Accumulated Depreciation (13,164) (10,996)
------------------ ------------------
Net Fixed Assets 2,179 2,749
------------------ ------------------
Intangible and Other Non- Current Assets:
Investment in Wilfield Entertainment - 220,000
Distribution Rights for WOW- Women of Wrestling 34,500 -
Films, Manuscripts, Recordings and Similar Property 252,681 337,008
------------------ ------------------
Net Intangible and Other Non-Current Assets 287,181 557,008
------------------ ------------------
Total Assets $ 351,765 $ 570,514
================== ==================
2
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Continued)
March 31, June 30,
2004 2003
------------------ ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Accounts Payable $ 248,160 $ 268,277
Accrued Expenses 53,767 42,042
Payable to SAG for Route 66 71,493 71,493
Loans from Shareholders 285,188 230,708
------------------ ------------------
Total Current Liabilities 658,608 612,520
------------------ ------------------
Minority Interest (26,924) -
------------------ ------------------
Stockholders' Equity:
Shareholder Receivable (500) -
Common Stock, $.001 Par value
Authorized 100,000,000 shares,
Issued 7,383,238 shares at March 31, 2004
and 3,828,150 shares at June 30, 2003 7,383 3,828
Common Stock to be Issued, 375,000 and 0 375 -
Additional Paid in Capital 13,458,201 11,489,811
Stock Options Outstanding 487,500 487,500
Deficit Accumulated During the Development Stage (14,232,878) (12,023,145)
------------------ ------------------
Total Stockholders' Equity (279,919) (42,006)
------------------ ------------------
Total Liabilities and Stockholders' Equity $ 351,765 $ 570,514
================== ==================
See accompanying notes
3
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
Since May 5,
For the Three Months For the Nine Months 1999
Ended Ended Inception of
March 31, March 31, Development
---------------------------------- ---------------------------------
2004 2003 2004 2003 Stage
---------------- ---------------- --------------- ---------------- ------------------
Revenues $ - $ - $ - $ - $ -
---------------- ---------------- --------------- ---------------- ------------------
Expenses
Research & Development - - - - 293,000
General & Administrative 138,112 379,764 223,901 537,629 9,100,259
Consulting 756,967 - 1,645,784 - 4,283,579
Advertising & Promotion 31,750 - 31,750 - 301,823
---------------- ---------------- --------------- ---------------- ------------------
Operating Loss (926,829) (379,764) (1,901,435) (537,629) (13,978,661)
Other income (expense):
Interest (4,205) (45,865) (12,212) (49,204) (391,536)
Loss on Sale of Assets - - - - (15,883)
Loss on Investment (247,000) (12,000) (305,510) (12,000) (317,510)
Lawsuit Settlement (67,500) - (67,500) - (67,500)
Gain on Forgiveness of Debt - - - - 48,516
Gain (Loss) on Trading
Investments - - - - 412,772
---------------- ---------------- --------------- ---------------- ------------------
Total Other Income (expense) (318,705) (57,865) (385,222) (61,204) (331,141)
Minority Interest 46,349 - 76,924 - 76,924
---------------- ---------------- --------------- ---------------- ------------------
Net Loss $ (1,199,185) $ (437,629) $ 2,209,733 $ (598,833) $ (14,232,878)
================ ================ =============== ================ ==================
Basic & Diluted loss
Per Share $ (0.17) $ (0.36) $ (0.40) $ (0.62)
================ ================ =============== ================
Weighted Average 6,951,533 1,206,444 5,547,393 971,311
================ ================ =============== ================
See accompanying notes
4
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
Since May 5,
For the Nine Months 1999
Ended Inception of
March 31, Development
------------------------------------
2004 2003 Stage
---------------- ------------------ ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (2,209,733) $ (598,833) $ (14,232,878)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and Amortization 2,168 2,062 3,535,847
Issuance of Common Stock for Expenses 1,494,185 510,467 7,376,112
Stock Issued for Payment of Accounts Payable 20,000 - 20,000
Subsidiary Ownership Interest for Services (36,500) - (36,500)
Compensation Expense from Stock Options 20,000 - 507,500
Realized gain on trading investments - - (412,773)
Loss on sale of assets - - 15,883
Loss on Investment Written Off 305,510 12,000 317,510
Gain on Forgiveness of Debt - (48,516) (48,516)
Cash acquired in merger - - 332
Minority Interest (26,924) - (26,924)
Change in operating assets and liabilities:
Investment in films, manuscripts, recordings
and similar property - (5,547) (272,008)
Other Receivables (199) - (199)
Accounts Payable (20,117) 21,357 230,730
Accrued Expenses 12,212 16,054 54,254
Payable to SAG for Route 66 - - 71,493
---------------- ------------------ ------------------
Net Cash Used in operating activities (439,398) (90,956) (2,900,137)
---------------- ------------------ ------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of equipment (1,598) - (15,343)
Proceeds from sale of assets - - 51,117
Proceeds from sale of investments - - 565,773
---------------- ------------------ ------------------
Net cash provided (used) in investing activities (1,598) - 601,547
---------------- ------------------ ------------------
5
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Cumulative
Since May 5,
For the Nine Months 1999
Ended Inception of
March 31, 2004 Development
------------------------------------
2004 2003 Stage
---------------- ------------------ ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from loans from shareholders $ 127,171 $ 87,889 $ 2,034,773
Payments of principal on loans from shareholders (29,226) (7,364) (403,477)
Proceeds from issuance of common stock 394,500 9,500 665,500
Proceeds from issuance of short-term notes - - 64,000
---------------- ------------------ ------------------
Net Cash Provided by Financing Activities 492,445 90,025 2,360,796
---------------- ------------------ ------------------
Net (Decrease) Increase in
Cash and Cash Equivalents 51,449 (931) 62,206
Cash and Cash Equivalents
at Beginning of Period 10,757 1,007 -
---------------- ------------------ ------------------
Cash and Cash Equivalents
at End of Period $ 62,206 $ 76 $ 62,206
================ ================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ 26 $ 43,799
---------------- ------------------ ------------------
Income taxes $ - $ - $ -
---------------- ------------------ ------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Common Stock Issued for Investment in
Wilfield Entertainment - - 220,000
Common Stock Issued for Investment in
Mad Dogs & Oakies Project - - 3,000
Common Stock Issued for Investment in
In the Garden of Evil Project - - 12,000
Notes Payable Converted to Stock 43,465 289,892 1,191,831
Subsidiary Ownership Interest Issued for
Distribution Rights in WOW 34,500 - 34,500
See accompanying notes
6
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Stereo Vision Entertainment,
Inc. is presented to assist in understanding the Company's financial statements.
The accounting policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the financial statements.
The unaudited financial statements as of March 31, 2004 and for the
three and nine months then ended reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
fairly state the financial position and results of operations for the three and
nine months. Operating results for interim periods are not necessarily
indicative of the results which can be expected for full years.
Nature of Operations and Going Concern
The accompanying financial statements have been prepared on the basis
of accounting principles applicable to a "going concern", which assumes that the
Company will continue in operation for at least one year and will be able to
realize its assets and discharge its liabilities in the normal course of
operations.
Several conditions and events cast doubt about the Company's ability to
continue as a "going concern". The Company has incurred net losses of
approximately $14,233,000 for the period from May 5, 1999 (inception) to March
31, 2004, has a liquidity problem, and requires additional financing in order to
finance its business activities on an ongoing basis. The Company is actively
pursuing alternative financing and has had discussions with various third
parties, although no firm commitments have been obtained. In the interim,
shareholders of the Company have committed to meeting its minimal operating
expenses.
The Company's future capital requirements will depend on numerous
factors including, but not limited to, continued progress developing its
products and market penetration and profitable operations.
These financial statements do not reflect adjustments that would be
necessary if the Company were unable to continue as a "going concern". While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial statements, there can be
no assurance that these actions will be successful.
If the Company were unable to continue as a "going concern", then
substantial adjustments would be necessary to the carrying values of assets, the
reported amounts of its liabilities, the reported expenses, and the balance
sheet classifications used.
7
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Nevada on
May 5, 1999. The Company as of March 31, 2004 is in the development stage, and
has not commenced planned principal operations.
Nature of Business
The Company intends to position itself to evolve into a vertically
integrated, diversified global media entertainment company. The Company intends
to acquire a number of diversified entertainment companies that will allow for
the pursuit of opportunities currently available in the global marketplace.
The Company anticipates generating revenues from several sources,
including, production of and exhibition of new and existing feature films and
providing integrated solutions to help organizations broadcast audio, video,
animation, and music over the Internet as well as expanding into other areas of
the entertainment industry.
Principals of Consolidation
The consolidated financial statements include the accounts of Stereo
Vision Entertainment, Inc. and its subsidiary WOW Events, LLC of which the
Company owns 50%. All significant intercompany accounts and transactions have
been eliminated.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
8
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Joint Venture Operations Accounting
Joint venture operations are accounted for under the equity method of
accounting.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for
in amounts sufficient to relate the cost of depreciable assets to operations
over their estimated service lives, principally on a straight-line basis from 3
to 5 years.
Upon sale or other disposition of property and equipment, the cost and
related accumulated depreciation or amortization are removed from the accounts
and any gain or loss is included in the determination of income or loss.
Expenditures for maintenance and repairs are charged to expense as
incurred. Major overhauls and betterments are capitalized and depreciated over
their useful lives.
The Company identifies and records impairment losses on long-lived
assets such as property and equipment when events and circumstances indicate
that such assets might be impaired. The Company considers factors such as
significant changes in the regulatory or business climate and projected future
cash flows from the respective asset. Impairment losses are measured as the
amount by which the carrying amount of intangible asset exceeds its fair value.
Stock Compensation for Non-Employees
The Company accounts for the fair value of its stock compensation
grants for non-employees in accordance with FASB Statement 123. The fair value
of each grant is equal to the market price of the Company's stock on the date of
grant if an active market exists or at a value determined in an arms length
negotiation between the Company and the non-employee.
9
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Intangible Assets
Intangible assets consist of movie and music licensing rights and
production costs and are valued at cost. As of March 31, 2004 and June 30, 2003,
the Company had $287,181 and $557,008 in film costs that are in the development
stage or preproduction stage.
The Company identifies and records impairment losses on intangible
assets when events and circumstances indicate that such assets might be impaired
or when the property is not set for production within three years of
acquisition. The Company considers factors such as significant changes in the
regulatory or business climate and projected future cash flows from the
respective asset. Impairment losses are measured as the amount by which the
carrying amount of intangible asset exceeds its fair value.
Advertising Costs
Advertising costs are expensed as incurred. There was $31,750 and
$31,750 advertising expense for the three and nine months ended March 31, 2004
and $0 and $0 for 2003.
Loss per Share
Basic loss per share has been computed by dividing the loss for the
year applicable to the common stockholders by the weighted average number of
common shares outstanding during the years. The effect of outstanding common
stock equivalents would be anti-dilutive for March 31, 2004 and 2003 and are
thus not considered.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements. The Company maintains the majority of its cash
balances with one financial institution, in the form of demand deposits.
Reclassification
Certain reclassifications have been made in the 2003 financial
statements to conform with the March 31, 2004 presentation.
10
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2 - INCOME TAXES
As of March 31, 2004, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $14,208,729 that may be
offset against future taxable income through 2022. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY/ GOING CONCERN
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage. Continuation of the Company as a going concern is dependent
upon obtaining the additional working capital necessary to be successful in its
planned activity, and the management of the Company has developed a strategy,
which it believes will accomplish this objective through additional equity
funding and long term financing, which will enable the Company to operate for
the coming year.
NOTE 4 - RENT EXPENSE
The Company has entered into lease agreements for various office,
storage and warehouse facilities on a month to month basis. For the three and
nine months ended March 31, 2004 rent expense was $4,203 and $16,703 and for the
three and nine months ended March 31, 2003 rent expense was $0 and $0.
NOTE 5 - FORGIVENESS OF DEBT
During the first quarter of 2003, the Company was relieved of $48,516
worth of debt in connection with the return of the 3-D equipment previously
disposed of.
NOTE 6 - LOANS FROM SHAREHOLDERS AND OTHER RELATED PARTY
TRANSACTIONS
The loans are payable to various shareholders, are unsecured with
interest at rates of between 4.00% to12% and have no fixed terms of repayment.
11
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 6 - LOANS FROM SHAREHOLDERS AND OTHER RELATED PARTY
TRANSACTIONS (Continued)
Management at present anticipates the need to raise approximately
$500,000 in additional operating capital. Such funding may be accomplished
through public financial markets, private offerings of equity or debt, and joint
venture opportunities. The Company's stockholders, officers and/or directors
have committed to advancing the operating costs of the Company at 6.1% interest.
NOTE 7 - COMMON STOCK TRANSACTIONS
The Company was initially incorporated to allow for the issuance of up
to 25,000 shares of no par value common stock. As a result of the merger with
Kestrel Equity Corporation the authorized number of shares is 100,000,000 with a
par value of $.001.
At inception, the Company issued 61,200 (1,530,000 pre split) shares of
common stock to its officers and directors for services performed and payments
made on the Company's behalf during its formation. This transaction was valued
at approximately $0.003 per share or an aggregate approximate $5,000.
On December 2, 1999, the Company issued 58,800 (1,470,000 pre split)
shares of common stock in exchange for $350,000 investment in 3-D projects,
$255,000 licensing and distribution rights, $3,306,900 3-D film production and
exhibition equipment, and $100,000 patent pending. On September 25, 2001 the
asset acquisition was rescinded. The assets acquired were returned and the
common stock was returned to treasury.
In addition to the asset acquisition, on December 3, 1999, the Company
entered into an acquisition agreement and plan of reverse merger with Kestrel
Equity Corporation whereby the Company acquired $332 cash, $153,001 trading
investments, $100,686 reduction in accounts payable, and $366,084 notes payable
in exchange for 48,000 (1,200,000 pre split) shares of common stock. By virtue
of the merger and the asset acquisition, the Company issued 106,800 (2,670,000
pre split) shares of common stock of the surviving corporation and acquired
assets valued at $4,013,100 or approximately $1.50 per share.
On December 31, 1999, the Company issued 14,000 (350,000 pre split)
shares to various employees and consultants for services rendered valued at
$2.00 per share.
On February 14, 2000, the Company issued 4,000 (100,000 pre split)
shares of common stock as payment for services rendered by Mr. Herky Williams
valued at $2 per share. The services rendered were for the development of the
Company's music division.
12
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)
On August 10, 2000, the Company purchased a motion picture entitled
"ROUTE 66" including all rights and materials, the rights as the creator and the
writer of the original screenplay, all copyright rights, trade names and
trademarks and all other forms of exploitation of the Property, and all
ancillary, merchandise, music and book-publishing rights in exchange for 10,600
(265,000 per split) restricted common shares, $96,492.73 (payable $25,000 August
14, 2000 and $11,915.46 per month from December 14, 2000 to May 14, 2001 and
$25,000 plus a 1 1/2% royalty on any merchandise and 2% royalty on sequels).
On September 27, 2000, the Company entered into a contract with Ron
Whiten to make strategic introductions on behalf of the Company to the
investments community in exchange for 4,000 (100,000 pre split) common shares.
On September 29, 2000, the shares were issued at a value of $95,000, which was
the quoted market price on the date of issue. The contract is for a period of
time covering 3 quarterly financial statements. To the best knowledge and belief
of the Company no services have been performed by Mr. Whiten pursuant to this
agreement. On May 25, 2001, the 4,000 shares of stock issued to Mr. Whiten were
canceled for non-performance of services.
On October 27, 2000, the Company issued 500 (12,500 pre split) shares
of common stock valued at $1.00 per share to National Financial Group for
services previously rendered.
Pursuant to an agreement made with an affiliate company of Mr. Williams
(the Secretary- Treasurer and Director of the Company) called Wilfield
Entertainment, the company issued 16,000 (400,000 pre split) shares of common
stock at a market price of $.55 per share on April 18, 2001 for its
participation in the joint venture. The joint venture with Wilfield is for the
production of thirteen music albums. The Company will supply the necessary
funding for the production of said albums and after capital repayment has
occurred, the Company will receive 51% of the profits from the projects. The
estimated production costs per album is projected to be $80,000.
On May 25, 2001, 14,000 (350,000 pre split) shares that were issued to
various people for services were cancelled. These shares were cancelled for
non-performance of services.
During the quarter ended September 30, 2001, 4,000 (100,000 pre split)
shares were issued for conversion of notes payable totaling $25,600. The value
of these shares was $.26 per share.
During the quarter ended September 30, 2001, the Company issued 123,200
(3,080,000 pre split) shares to various consultants for services at the market
value on the date of issuance and 3,600 (90,000 pre split) restricted common
shares to individuals for cash at $.50 per share.
13
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)
During the quarter ended December 31, 2001, the Company issued 25,912 (
647,795 pre split) shares of stock for conversion of notes payable totaling
$135,596, for accrued interest on the notes payable of $12,275, and for
consulting services of $20,778. The value of the shares was between $.14 and
$.35 per share.
During the quarter ended December 31, 2001, the Company issued 94,825
(2,370,631 pre split) shares to various consultants for services at the market
value on the date of issuance. Also, 1,600 (40,000 pre split) shares were issued
on July 30, 2001 for services were cancelled on October 2, 2001 for
non-performance of services.
On January 15, 2002, 12,000 (300,000 pre split) shares of common stock
were issued for cash at $.33 per share. Also during the quarter, 106,480
(2,662,000 pre split) were issued in connection with previous debt cancellation.
On April 29, 2002, 8,000 (200,000 pre split) common shares were issued
for the purchase of "In the Garden of Evil" album. The value of the shares were
$.06.
On May 30, 2002, 4,000 (100,000 pre split) common shares were issued to
various people for services connected with the project "Mad Dog and Oakies." The
value of the shares were $.03.
During the quarter ended June 30, 2002, the Company issued 12,000
(300,000 pre split) shares of common stock for cash. Shares were issued for$.025
to .075 per share. Also during the quarter, 10,000 (250,000 pre split) shares
were issued for consulting and rent expense. The value of the shares was between
$.03 and $.08 per share.
On July 1, 2002, 34,000 (850,000 pre split) common shares were issued
for cash. Shares were issued for $.01 to $.025 per share. Also on July 8, 2002 ,
93,333 (2,333,334 pre split) were issued in connection with a previous debt
cancellation.
On December 20, 2002 and December 23, 2002, 132,000 (3,300,000 pre
split) common shares were cancelled from various shareholders for
non-performance of services.
During the quarter ended March 31, 2003, 661,400 (16,535,000 pre split)
common shares were issued to various people for services. The value of the
shares was between $.01 and $.03 per share.
14
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)
On March 26, 2003, 120,000 (3,000,000 pre split) common shares were
issued for conversion of notes payable of $289,892.
During the quarter ended June 30, 2003, 2,257,600 shares were issued to
various people for services. The value of the shares was between $.25 to $1.13.
On June 2, 2003, 88,000 common shares were issued for conversion of
debt totaling $20,000.
On June 3, 2003, 12,000 shares were cancelled for non-performance of
services.
On June 25, 2003, 40,000 shares were issued for conversion of debt
totaling $15,491.
During the quarter ended September 30, 2003, 1,198,000 shares were
issued to various people for services. The value of the shares was between $.45
to $.57.
On July 8, 2003, 30,000 shares of common stock were issued for
conversion of debt totaling $8,465.
During the quarter ended December 31, 2003, 623,072 shares were issued
for cash from $.13 to $.25 per share. Also during the quarter, 720,000 shares
were issued to various people for services. The value of the shares was $.25. In
addition, the Company issued 100,000 shares to pay an accounts payable of
$20,000.
During the quarter ended March 31, 2004, the Company issued 425,000
shares for cash from $.25 to $.50 per share. Also during the quarter, 435,000
shares were issued to various people for services and 100,000 shares were issued
to pay rent. The value of these shares was $.25 to $2.00. In addition, the
Company canceled 176,000 shares for nonperformance of services.
On January 20, 2004, the Company converted debt of $35,000 to 200,000
shares of common stock.
NOTE 8 - STOCK SPLIT
On May 30, 2003, the Board of Directors approved a proposal to
effectuate a 25 to 1 reverse stock split of the Company's outstanding common
shares with no effect on the par value or on the number of authorized shares. As
a result of this action, the total number of outstanding shares of common stock
are reduced from 37,903,485 to 1,516,150 shares. All references to common stock
in the financial statements have been changed to reflect the stock split.
15
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 9 - COMMITMENTS
On August 10, 2000, the Company purchased a motion picture entitled
"ROUTE 66" including all rights and materials, the rights as the creator and the
writer of the original screenplay, all copyright rights, trade names and
trademarks and all other forms of exploitation of the Property, and all
ancillary, merchandise, music and book-publishing rights in exchange for 265,000
restricted common shares, $96,492.73 (payable $25,000 August 14, 2000 and
$11,915.46 per month from December 14, 2000 to May 14, 2001 and $25,000 plus a 1
1/2% royalty on any merchandise and 2% royalty on sequels). Currently, this
project is being restructured.
On April 25, 2000, the Board of Directors approved a stock option plan
whereby 2,675,000 common shares have been set aside for employees and
consultants to be distributed at the discretion of the Board of Directors. The
option shares will be exercisable on a cashless basis at a 15% discount to
market value. No formal plan has been adopted as of the date of this report.
On April 26, 2000, the Company entered into a consulting agreement with
Natural Vision Corporation (Daniel Symmes). Mr. Symmes provided consulting in
3-D technologies in exchange for 17,000 shares valued at $102,000. The contract
provided for a topping up of the shares in the event that the Company's common
stock was not selling for $6 per share or greater.
On November 22, 2000, 102,000 shares, valued at $1 per share, were
issued to Mr. Symmes. In addition, the Company agreed to pay Natural Vision
Corporation $1,000 per week for Mr. Symmes' consulting services for a 2 year
period. Mr. Symmes spends between 15 to 20 hours each week in performing the
consulting services and will provided services on an as needed basis for the
remainder of the contract. Natural Vision will also receive options based on
gross income of the Company over four six-month intervals. The exercise price of
the options is $6 per share and they expire two years after grant.
On September 28, 2000, the Company signed a consulting agreement with
Solomon Broadcasting International for consulting services on a non-exclusive
basis for the purposes of financing, production, acquisition and distribution of
Stereo Vision products in various media throughout the world. The contract is
for 2 years at $300,000 per year plus an option to purchase 250,000 common
shares at $.01 per share. The option is exercisable after September 28, 2002.
16
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 9 - COMMITMENTS (Continued)
On November 13, 2000, the Company entered into a five year employment
agreement with Robert L. Friedman. The agreement provides for a salary of
$21,000 per month for the first six months and $25,000 per month there after, a
bonus payable on December 31, 2001 of 50% of the annual salary, appropriate
health, life, medical, dental and pharmaceutical plan, $1,000 per month
automobile allowance, and stock options to purchase 250,000 shares of common
stock at $.01 per share. The options are exercisable beginning November 13,
2005. On the date of grant the difference between the fair market value of the
option and the option price has been recorded as an expense. In January 2001,
Mr. Friedman tendered his resignation because he had an opportunity to assume a
similar position with a competitor company in the entertainment industry. Upon
acceptance of his resignation by the board, the Agreement was canceled and no
further sums are due Mr. Friedman.
On January 8, 2004, WOW Events, LLC owned 50% by Stereo Vision, entered
into an agreement with GRB Entertainment, whereby WOW Events, LLC granted
exclusive domestic and international distribution rights of "WOW - Women of
Wrestling" to GRB Entertainment. Under the terms of the agreement, WOW Events
shall receive 75% of all distribution fees and GRB Entertainment shall receive
25%.
On March 11, 2004, the Company granted its attorney an option to
purchase 20,000 shares of its common stock at an exercise price of $1.00 for an
exercise price of two years. As a result of the grant, $20,000 was recorded as
compensation expense.
NOTE 10- ACQUISITION OF SUBSIDIARY
On September 3, 2003, the Company entered into an agreement to form WOW
Events, LLC with David McLane Enterprises, Inc., David McLane, Jeanie Buss, and
John Corcoran, wherein Stereo Vision Entertainment, Inc. contributed services
and an agreement to provide loans to the Company to fund WOW's startup costs for
a 50 percent ownership in the LLC. In the event that Stereo Vision Entertainment
fails or refuses to disburse all or any part of the agreed upon loan their
percentage interest and units shall be reduced and assigned and transferred to
David McLane Enterprises.
17
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 10- ACQUISITION OF SUBSIDIARY (Continued)
The following is the loan payment schedule that has been agreed upon
between Stereo Vision Entertainment and WOW Events, LLC:
Due Date Amount
------------------------------ --------------------
September 15, 2003 $ 42,900
October 15, 2003 24,975
November 15, 2003 20,275
December 15, 2003 20,175
January 15, 2004 16,675
--------------------
$ 125,000
====================
In addition to the $125,000, the Company has agreed to loan an
additional amount up to $2,875,000 to be used to fund the production of the
women's wrestling events until such time as WOW becomes profitable. These
amounts should be paid as follows:
Due Date Amount
------------------------------ --------------------
January 14, 2004 $ 1,000,000
April 15, 2004 1,000,000
July 15, 2004 875,000
--------------------
$ 2,875,000
====================
As of March 31, 2004, the Company has only paid $190,000 and is in
default on the loans, however, the Company's ownership has not been decreased
because of a verbal extension between the two parties.
NOTE 11 - FILM AND MUSIC COSTS
The Company has intangible assets which consist of movie and music
licensing rights and production costs and are valued at cost. As of March 31,
2004 and June 30, 2003, the Company had $287,181 and $557,008 in film costs that
are in the development stage or preproduction stage.
For the three and nine months ended March 31, 2004, the Company
recorded losses of $247,000 and $305,510 and for the same periods ended March
31, 2003, $12,000 and $12,000, for projects that have been abandoned for various
reasons.
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
General
Currently, the ordinary week-to-week working of the company involves
administrative activities, regulatory compliance, capital formation, and content
development and planning. In the future the Company intends to position itself
to evolve into a vertically integrated, diversified global media entertainment
company. The Company intends to acquire a number of diversified entertainment
companies that will allow for the pursuit of opportunities currently available
in the global marketplace.
The Company anticipates generating revenues from several sources,
including, production of new and existing feature films, as well as expanding
into other areas of the entertainment industry.
The Company's common stock is traded on the over-the-counter and
reported on the OTC Bulletin Board (OTCBB) under the symbol "SVED."
Results of Operations
There were no revenues from sales for the period from inception to
March 31, 2004. The Company has sustained a net loss of approximately $14.23
million for the period from inception to March 31, 2004, which was primarily due
to general and administrative expenses. From May 5, 1999 the Company was a
development stage company and had not begun principal operations. Accordingly,
comparisons with prior periods are not meaningful.
Liquidity and Capital Resources
The Company is in the process of developing a detailed plan of
operations to exploit its asset base. On a preliminary basis, the Company
estimates that it will require from $3,000,000 to $5,000,000 over a period of 18
months to fund this plan of operations. This plan of operations is expected to
include both exploitation of existing movies and equipment, and efforts to
arrange development of additional movies. The Company may attempt to arrange
joint ventures with studios to facilitate the development of new movies.
The Company is also in the business of producing music entertainment
products through its March 2000 acquisition of a joint venture interest in a
music producer. During the forthcoming year, the Company, through this joint
venture, expects to produce 13 country and western and pop albums. The Company
expects that this effort will require capital of approximately $750,000 to
$1,000,000.
The aforementioned estimates of capital required are still preliminary
in nature and are subject to substantial and continuing revisions. Although the
Company has not yet commenced any formal capital raising efforts, the Company
expects that any capital that it raises will be in the form of one or more debt
or equity financings. However, there can be no assurances that the Company will
be successful in raising any required capital on a timely basis and/or under
acceptable terms and
19
conditions. To the extent that the Company does not raise sufficient capital to
implement its plan of operations on a timely basis, it will have to curtail,
revise and/or delay its business plans. The Company has financed its operations
to date from the sale of stock and loans from related parties.
The Company has also relied on loans from officers, directors and
shareholders to support its operations. However, there can be no assurances that
additional loans will be forthcoming from officers, directors, and shareholders.
Government Regulations
The Company is subject to all pertinent Federal, State, and Local laws
governing its business. The Company is subject to licensing and regulation by a
number of authorities in its Province (State) or municipality. These may include
health, safety, and fire regulations. The Company's operations are also subject
to Federal and State minimum wage laws governing such matters as working
conditions and overtime.
Competition
SVEI competes with a large array of diverse global media conglomerates,
upstart "entertainment, information and commerce" companies, as well as with a
number of smaller, independent production companies. SVEI's current and
potential competitors include:
o Fox, Disney, Warner Bros., Universal and others
o Globcast, Vyvx and COMSAT World Systems
o Universal music, EMI, BMG and others
A portion of these companies compete for motion picture projects and
talent and are producing motion pictures that compete for exhibition time at
theaters, on television, and on home video with pictures produced by the
Company. Other companies compete in areas of satellite production and
transmission services and music production, distribution and promotion. SVEI
also intends to use its core competencies in areas of music production and
production services to diversify and compete in the global marketplace.
Most of SVEI's competitors have operating histories, larger customer
bases and significantly greater financial, marketing and other resources.
Certain of SVEI's competitors have the financial resources to devote greater
resources to marketing and promotional campaigns and devote substantially more
resources to technology development. Increased competition may result in reduced
operating margins.
Employees
As of March 31, 2004, SVEI employed four employees. SVEI considers its
employee relations to be satisfactory at present.
20
ITEM 3. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on an evaluation conducted within 90 days prior to the filing
date of this Quarterly Report on Form 10-QSB, that the Company's disclosure
controls and procedures have functioned effectively so as to provide those
officers the information necessary whether:
(i) this Quarterly Report on Form 10-QSB contains any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this
Quarterly Report on Form 10-QSB, and
(ii) the financial statements, and other financial information
included in this Quarterly Report on Form 10-QSB, fairly
present in all material respects the financial condition,
results of operations and cash flows of the Company as of, and
for, the periods presented in this Quarterly Report on Form
10-QSB.
There have been no significant changes in the Company's internal
controls or in other factors since the date of the Chief Executive Officer's and
Chief Financial Officer's evaluation that could significantly affect these
internal controls, including any corrective actions with regards to significant
deficiencies and material weaknesses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not engaged in any legal proceedings other than the
ordinary routine litigation incidental to its business operations, which the
Company does not believe, in the aggregate, will have a material adverse effect
on the Company, or its operations.
ITEM 2. CHANGES IN SECURITIES
During the quarter ended March 31, 2004, the Company issued 425,000
shares for cash from $.25 to $.50 per share. Also during the quarter, 435,000
shares were issued to various people for services and 100,000 shares were issued
to pay rent. The value of these shares was $.25 to $2.00. In addition, the
Company canceled 176,000 shares for nonperformance of services.
On January 20, 2004, the Company converted debt of $35,000 to 200,000
shares of common stock.
21
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 AND REPORTS ON FORM 8-K
The following exhibits are included as part of this report:
Exhibit
Number Exhibit
3.1 Articles of Incorporation (1)
3.2 Amended Articles of Incorporation (1)
3.3 Bylaws (1)
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(1) Incorporated by reference to the Registrant's registration statement on
Form 10-SB filed on August 9, 2000.
(b) On January 28, 2004, the Company filed a Current Report under
Item 5 to announce the formation of WOW Events, LLC in which
the Company has a 50% ownership.
On February 9, 2004, the Company filed a Current Report under
Item 5 to announce that its 50% owned subsidiary, WOW Events,
LLC entered into an agreement with GRB Entertainment, whereby
WOW Events, LLC granted exclusive domestic and international
distribution rights of "WOW - Women of Wrestling" to GRB
Entertainment. Under the terms of the agreement, WOW Events
shall receive 75% of all distribution fees and GRB
Entertainment shall receive 25%.
22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized.
STEREO VISION ENTERTAINMENT, INC.
(Registrant)
Dated: May 20, 2004 By /S/ John Honour
---------------------------
John Honour,
C.E.O. and President,
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 indicated.
Signatures & Title
/S/ John Honour
John Honour
C.E.O. and President
(Principal Executive Officer)
/S/ Herky Williams
Herky Williams
Secretary-Treasurer, Director
(Principal Financial and Accounting Officer)
23