U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: JUNE 30, 2004
OR
[ ] 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.
(Name of small business issuer in its charter)
Nevada 95-4786792
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
15452 Cabrieto Rd., Suite 204, Van Nuys, CA 91406
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(Address of principal executive offices) (Zip code)
(Former address)
Issuer's telephone number (818) 909-7911
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Securities registered under Section 12(b) of the Act: NONE Securities registered
under Section 12(g) of the Act:
Common Stock, par value $.001
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $ -0-
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As of September 9, 2004, there were 9,846,571 shares of the
Registrant's common stock, par value $0.001, issued and outstanding. The
aggregate market value of the Registrant's voting stock held by non-affiliates
of the Registrant was approximately $4,601,369, computed at the average bid and
asked price as of September 9, 2004.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"):
NONE
Transitional Small Business Disclosure Format (check one): Yes ; No X
TABLE OF CONTENTS
Item Number and
Caption Page
PART I
Item 1. Description of Business.........................................................................4
Item 2. Description of Property........................................................................10
Item 3. Legal Proceedings..............................................................................10
Item 4. Submission of Matters to a Vote of Security Holders............................................10
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.......................................10
Item 6. Management's Discussion and Analysis or Plan of Operations.....................................15
Item 7. Financial Statements...........................................................................17
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure...........................................................................17
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act..............................................18
Item 10. Executive Compensation.........................................................................21
Item 11. Security Ownership of Certain Beneficial Owners and Management.................................21
Item 12. Certain Relationships and Related Transactions.................................................22
Item 13. Exhibits and Reports on Form 8-K...............................................................23
PART I
ITEM 1. DESCRIPTION OF
BUSINESS
GENERAL
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 NASDAQ OTC Bulletin Board
market under the symbol: SVSN.
HISTORY
Stereo Vision Entertainment, Inc. ("SVEI") was originally incorporated
in the State of Arizona as Arizona Tax Pros & Insurance Wholesalers, Inc., on
December14, 1993. Arizona Tax Pros & Insurance Wholesalers, Inc., changed its
name to Kestrel Equity Corporation ("Kestrel") on September 30, 1997. On July
20, 1999, Kestrel entered into an Acquisition Agreement and Plan of Reverse
Merger with Stereo Vision Entertainment, Inc., a privately held Nevada
corporation ("Stereo") (the "Merger"). Pursuant to the Merger, which was not
actually consummated until December 30, 1999, Stereo was merged with and into
"Kestrel". Each share of Stereo common stock outstanding was exchanged for 120
shares of Kestrel's common stock, $.001 par value (the "Common Stock").
On January 31, 2000, "Kestrel" changed its state of incorporation from
Arizona to Nevada, and also changed its name to Stereo Vision Entertainment,
Inc.
Since the time of its inception until the effective date of the Merger,
Kestrel Equity Corporation was a development stage company with no active
business operations and no revenues. As such, Kestrel was considered a "shell"
corporation with a principal purpose of locating and consummating a merger or
acquisition with a private entity. Beginning in August 1999, the business
activities of Kestrel, prior to the Merger, encompassed administrative and
organizational matters and identifying additional acquisition opportunities for
operating companies and intellectual property assets in the global multi-media
industries. Upon the consummation of the Merger, Kestrel acquired all of the
assets of Stereo with the intent of continuing Stereo's business and expanding
into new areas of the entertainment industry. Stereo was incorporated in the
State of Nevada on May 5, 1999 for purposes of acquiring
multi-media/entertainment industry assets and pursuing merger opportunities with
an existing publicly traded company. Mr. Kallett, an officer and director of
Kestrel Equity Corporation, and Mr. Honour, a principal shareholder of Kestrel,
both owned common stock in Stereo representing an aggregate of 51% of the issued
and outstanding capital stock of Stereo. The operations and management of the
merged companies (SVEI) were then integrated following the replacement of
Stereo's sole officer and director with the then sole officer and director of
Kestrel.
On December 17, 1999 "Kestrel" filed its Form 10-SB with the U.S.
Securities and Exchange Commission. Upon the consummation of the merger on
December 30, 1999, shortly thereafter in January of 2000, SVEI elected new
officers and directors. Since January 2000, the Company's activities have been
developing entertainment projects, both musical and theatrical, and identifying
and securing candidates with entertainment industry experience to serve on the
SVEI Board of Directors and identifying additional opportunities for the
acquisition of operating entertainment oriented companies as well as acquiring
intellectual property assets. Although acquisition opportunities have been
identified, no transactions have been consummated and there is no guarantee that
any transactions will be consummated in the near future.
The executive offices of the Company are located at 15452 Cabrieto Rd.,
Suite 204, Van Nuys, CA 91406. Its telephone number is (818) 909-7911.
OPERATING LOSSES
The Company has incurred net losses of approximately $2,945,000 and
$2,459,000 for the fiscal years ended June 30, 2004 and 2003. Such operating
losses reflect developmental and other start-up activities for 2004 and 2003.
The Company expects to incur losses in the near future until profitability is
achieved. The Company's operations are subject to numerous risks associated with
establishing any new business, including unforeseen expenses, delays and
complications. There can be no assurance that the Company will achieve or
sustain profitable operations or that it will be able to remain in business.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
SVEI anticipates generating operating revenues during its next fiscal
year as it becomes operational and acquires operating companies and/or
intellectual property assets. "SVEI" management acknowledges that during its
next fiscal year there is no assurance that "SVEI" will transition itself from a
development stage company to an operational one and SVEI's continued operations
may be dependent upon additional shareholder loans and/or proceeds from "SVEI"
debt/equity offerings. There currently are no agreements in place for future
shareholder loans and management has no assurances as to any market acceptance
of any future SVEI debt/equity offerings.
BUSINESS - OVERVIEW
Currently, management believes that SVEI's principal expertise is in
the content production segment of the multi-media entertainment industry. SVEI
also intends to acquire additional intellectual property assets. In utilizing
the SVEI's existing physical and managerial assets, SVEI's initial operating
activities are anticipated to encompass the production, acquisition, marketing
and distribution of music content and the production, distribution, exhibition
of independent feature length theatrical films and related technology. SVEI
intends to use traditional distribution channels for its content and, when
available and if practical, alternative and complimentary distribution channels
such as the Internet.
STEREOVISION ENTERTAINMENT PRODUCTIONS
The film content production business is very capital intensive and
StereoVision will need to raise and secure significant equity or debt financing
to implement its specific production objectives. If the Company receives such
financing, it anticipates producing and/or co-producing cutting edge,
commercially successful independent feature length film productions in all
genres. Financing for these productions, when possible, will be accomplished
through partnerships or joint ventures in order to minimize company risk. When
feasible, StereoVision anticipates each production will be structured as a
stand-alone limited liability company, thus diminishing the equity dilution
impact on the Company. StereoVision intends to act as the executive producer of
each film project. There is no assurance that StereoVision can secure financing
to produce films or even if films are produced that they can be profitably
distributed.
MUSIC DIVISION
The Company intends to engage in the production of music albums
under the StereoVision label. Herky Williams, a Director of the Company, has
been an active record producer for over ten years. Mr. Williams will direct this
effort for the Company from his home base in Nashville, TN.
BUSINESS EXPANSION; CAPITAL GROWTH
StereoVision intends to position itself to evolve into a vertically
integrated, diversified global multimedia entertainment company as well as to
pursue the acquisition of diversified entertainment companies and intellectual
property assets that will allow it to pursue opportunities currently available
in the global marketplace. The Company believes that synergy among its divisions
will allow it to effectively compete for its incremental share of the global
consumer's discretionary expenditures. StereoVision intends to finance its
business expansion and acquisitions through the sale of equity securities. The
Company can give no assurance that any offering of its securities will be
successful. If the Company is unable to successfully raise equity financing or
alternative financing its ability to fund its business plan would be
significantly limited.
The ability of StereoVision to implement its business strategy depends
upon its ability to successfully create, produce, and market entertainment
content and ancillary products for traditional real-world distribution channels
including, but not limited to, retailers, radio, television, theatres and home
markets and newly emerging distribution channels such as the Internet.
StereoVision intends to produce and develop films and DVD/videos in all
genres for its library, as well as acquire additional film and music assets.
While the Company may enter into participation, licensing or other financial
arrangements with third parties in order to minimize its financial involvement
in production, it will be subject to substantial financial risks relating to the
content. StereoVision expects that it will typically be required to pay for the
production of content during the production period prior to release and will
most likely be able to recoup these costs, utilizing a strategy of high volume
and moderate profits, from revenues from exhibition licenses within to 18 to 24
months following release. The company will, however, always seek to arrange
presales to both foreign and domestic buyers such as studios, distribution
companies, cable networks, equity partners etc.
StereoVision anticipates generating revenues from several sources,
including production and distribution of new and existing independent feature
films, TV movies and direct to DVD/video films and record albums. The company
will also license the rights to its products for ancillary markets such as
airlines, hotels, the armed forces, ships at sea, syndication, pay per view,
sound track recordings, merchandising and licensing of video games. When
appropriate, the Company will attempt to acquire other assets and existing
operating global multi-media entertainment companies with seasoned management
teams.
MANAGEMENT OF GROWTH
In order to maximize the potential growth of the Company's various
opportunities, StereoVision believes that it must expand rapidly and
significantly upon its entrance into the marketplace. This impetus for expansion
will place a significant strain on the Company's management, operational and
financial resources. In order to manage growth, the Company must implement and
continually improve its operational and financial systems, expand operations,
attract and retain superior management and train, manage and expand its employee
base. StereoVision cannot guarantee that it will effectively manage the rapid
expansion of its operations, that its systems, procedures or controls will
adequately support its operations or that its management will successfully
implement its business plan. If the Company cannot effectively manage its
growth, its business, financial condition and results of operations could suffer
a material adverse effect.
StereoVision expects that it will require additional equity and/or
credit financing prior to becoming cash self-sufficient. There can be no
assurances that the Company will successfully negotiate or obtain additional
financing, or that it will obtain financing on terms favourable or acceptable to
it. StereoVision does not have any commitments for additional financing. The
Company's ability to obtain additional capital depends on market conditions, the
global economy and other factors outside its control. If the Company does not
obtain adequate financing or such financing is not available on acceptable
terms, its ability to finance its expansion, develop or enhance products or
services or respond to competitive pressures would be significantly limited.
StereoVision's failure to secure necessary financing could have a material
adverse effect on its business, prospects, financial condition and results of
operations.
GOVERNMENT REGULATION
The Classification and Rating Administration of the Motion Picture
Association of America, an industry trade association, assigns ratings for
age-group suitability for motion pictures. SVEI plans to submit its pictures for
such ratings. Management's current policy is to produce motion pictures that
qualify for a rating no more restrictive than "R."
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 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.
RISK OF LOW-PRICED STOCKS
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act
of 1934 (the "Exchange Act") impose sales practice and disclosure requirements
on certain brokers and dealers who engage in certain transactions involving "a
penny stock."
Currently, the Company's Common Stock is considered a penny stock for
purposes of the Exchange Act. The additional sales practice and disclosure
requirements imposed on certain brokers and dealers could impede the sale of the
Company's Common Stock in the secondary market. In addition, the market
liquidity for the Company's securities may be severely adversely affected, with
concomitant adverse effects on the price of the Company's securities.
Under the penny stock regulations, a broker or dealer selling penny
stock to anyone other than an established customer or "accredited investor"
(generally, an individual with net worth in excess of $1,000,000 or annual
incomes exceeding $200,000, or $300,000 together with his or her spouse) must
make a special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the broker
or dealer or the transaction is otherwise exempt. In addition, the penny stock
regulations require the broker or dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission (the "SEC") relating to the penny stock market, unless the
broker or dealer or the transaction is otherwise exempt. A broker or dealer is
also required to disclose commissions payable to the broker or dealer and the
registered representative and current quotations for the Securities. In
addition, a broker or dealer is required to send monthly statements disclosing
recent price information with respect to the penny stock held in a customer's
account and information with respect to the limited market in penny stocks.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company relies on a combination of trade secret, copyright and
trademark law, nondisclosure agreements and technical security measures to
protect its products. Notwithstanding these safeguards, it is possible for
competitors of the company to obtain its trade secrets and to imitate its
products. Furthermore, others may independently develop products similar or
superior to those developed or planned by the Company.
Distribution rights to motion pictures are granted legal protection
under the copyright laws of the United States and most foreign countries. These
copyright laws provide substantial civil and criminal sanctions for unauthorized
duplication and exhibition of motion pictures. Motion pictures, musical works,
sound recordings, artwork, still photography and motion picture properties are
each separate works subject to copyright under most copyright laws, including
the United States Copyright Act of 1976, as amended.
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, Lions Gate Entertainment
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 September 25, 2004, SVEI employed four employees. SVEI considers
its employee relations to be satisfactory at present.
ITEM 2. DESCRIPTION OF PROPERTY
SVEI's principal executive offices are located at 15452 Cabrieto Rd.,
Suite 204, Van Nuys, CA 91406 and consist of approximately 2500 square feet of
unfurnished executive suite offices and reception and conference room
arrangements. The lease expires in June 2005. The monthly rent for the property
is $2,500.
ITEM 3. LEGAL PROCEEDINGS
In September of 2001 the Company entered into a promissory note with
Duncan MacPherson to be payable within the year. A dispute arose and the note
was not timely paid, which led to a court action styled R. DUNCAN MACPHEARSON
VS. STEREOVISION ENTERTAINMENT, ET, AL. ,
Case No. LC 0611749 in Los Angeles, California. Subsequently, the parties, on
January 26, 2004, entered into a Settlement Agreement, including provisions if
scheduled payments do not occur as agreed. 25,000 shares of restricted stock
were delivered and $40,000 of payments were made, with the final $10,000 not
paid according to the stipulated agreement. This resulted in the plaintiff's
entry of a judgment, according to notice received by the company, of slightly
over $37,500, which has been appealed by the Company as incorrect and EXCESSIVE.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY
HOLDERS
In accordance with Nevada corporate law, no matters were subject to a
vote of security holders during the year ended June 30, 2004.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is traded on the NASDAQ OVER OTC Bulletin
Board market under the symbol "SVSN." The following table presents the high and
low bid quotations for the Common Stock as reported by the NASD for each quarter
during the last two years. Such prices reflect inter-dealer quotations without
adjustments for retail markup, markdown or commission, and do not necessarily
represent actual transactions.
Prior to December 2, 1999, there was no trading market for Company's
Common Stock. As of December 2, 1999, SVEI's Common Stock has been traded on the
OTC Bulletin Board under the trading symbol "SVED." On June 2, 2003, the Company
changed its trading symbol to SVSN.OB. The price for the common stock has
approximately ranged in price as follows:
HIGH LOW
Quarter ended September 30, 2002 $0.09 $0.01
Quarter ended December 31, 2002 $0.05 $0.02
Quarter ended March 31, 2003 $0.03 $0.02
Quarter ended June 30, 2003 $1.13 $0.01
Quarter ended September 30, 2003 $1.20 $0.40
Quarter ended December 31, 2003 $0.61 $0.21
Quarter ended March 31, 2004 $3.25 $0.25
Quarter ended June 30, 2004 $2.15 $0.35
The number of shareholders of record of the Company's Common Stock as
of September 9, 2004 was approximately 172.
DIVIDENDS
SVEI has never paid a cash dividend on its Common Stock nor does SVEI
anticipate paying cash dividends on its Common Stock in the near future. It is
the present policy of SVEI not to pay cash dividends on the Common Stock but to
retain earnings, if any, to fund growth and expansion. Any payment of cash
dividends on the Common Stock in the future will be dependent upon SVEI's
financial condition, results of operations, current and anticipated cash
requirements, plans for expansion, as well as other factors the Board of
Directors deems relevant.
TRANSFER AGENT
The Company has appointed Holladay Stock Transfer, Inc., with offices
at 2939 North 67th Place, Scottsdale, Arizona, 85215, phone number 480-481-3940,
as transfer agent for our shares of common stock. The transfer agent is
responsible for all record-keeping and administrative functions in connection
with the common shares and stock warrants.
RECENT SALES OF UNREGISTERED SECURITIES
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 3, 1999 the Company entered into an acquisition agreement
and plan of reverse merger with Kestrel Equity Corporation and at the same time
entered into an asset acquisition agreement for the acquisition of 3-D projects,
equipment, licensing and distribution rights. By virtue of the merger and the
asset acquisition, the Company issued 106,800 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 shares to various
employees and consultants for services rendered valued at $2.00 per share.
On February 14, 2000 the Company issued 4,000 shares of common stock as
payment for services rendered by Mr. Herky Williams. The services rendered were
for the development of the Company's music division.
From April to June 2000, the Company issued 8,000 restricted common
shares to various consultants for services and 3,620 restricted common shares to
individuals for cash all at $1.00 per share.
On April 25, 2000 the Board of Directors approved a stock option plan
whereby107,000 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 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
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 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 Mr. Whiten
has performed no services 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 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 shares of common stock at a market
price of $0.55 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 shares that were issued to various people for
services were cancelled. These shares were cancelled for non-performance of
services.
During the year ending June 30, 2001, 68,840 shares were issued for
conversion of notes payable totaling $664,651. The value of these shares ranged
from $0.26 to $0.51 per share.
During the year ended June 30, 2001, the Company issued 61,304 shares
to various consultants for services at the market value on the date of issuance
and 600 restricted common shares to individuals for cash at $1.00 per share.
During the quarter ended September 30, 2001,4,000 shares were issued
for conversion of notes payable totaling $25,600. The value of these shares was
$0.26 per share.
During the quarter ended September 30, 2001, the Company issued 123,200
shares to various consultants for services at the market value on the date of
issuance and 3,600 restricted common shares to individuals for cash at $0.50 per
share.
During the quarter ended December 31, 2001, the Company issued 25,912
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 $0.14 and $0.35 per share.
During the quarter ended December 31, 2001, the Company issued
2,370,631 shares to various consultants for services at the market value on the
date of issuance. Also, 1,600 shares issued on July 30, 2001 for services were
cancelled on October 2, 2001 for non-performance of services.
On January 15, 2002, 12,000 shares of common stock were issued for cash
at $0.33 per share. Also during the quarter, 106,480 were issued in connection
with previous debt cancellation.
During the quarter ended June 30, 2002, the Company issued 12,000
shares of common stock for cash. Shares were issued for$0.025 to $0.075 per
share. Also during the quarter, 10,000 shares were issued for consulting and
rent expense. The value of the shares was between $0.03 and $0.08 per share.
On April 29, 2002, 8,000 common shares were issued for the purchase of
"In the Garden of Evil" album. The value of the shares was $0.06.
On May 30, 2002, 4,000 common shares were issued to various people for
services connected with the project "Mad Dogs and Oakies." The shares were
issued for $0.03 per share.
On July 1, 2002, 34,000 common shares were issued for cash. Shares were
issued for $0.01 to $0.025 per share. Also on July 8, 2002, 93,344 were issued
in connection with a previous debt cancellation.
On December 23, 2002, 132,000 common shares were cancelled from various
shareholders for non-performance of services.
During the quarter ended March 31, 2003, 661,400 common shares were
issued to various people for services. The value of the shares was between $0.01
and $0.03 per share.
On March 26, 2003, 160,000 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 $0.25 to $1.13 per
share.
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 $0.45 to
$0.57 per share.
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 $0.13 to $0.25 per share. Also during the quarter, 720,000 shares
were issued to various people for services. The value of the shares was $0.25.
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 $0.25 to $0.50 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 $0.25 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.
On April 7, 2004, the Company issued 60,000 shares of common stock to
various people for consulting services. Also, on April 7, 2004 the Company
issued 375,000 shares of common stock to various people for cash of at $0.25 to
$0.75 per share. In addition, approximately $14,200 in loans were converted into
30,000 shares of common stock.
On April 14, 2004, the Company issued 100,000 shares of common stock
for cash at $0.25 per share.
On May 6, 2004, the Company issued 10,000 shares of common stock for
cash at $0.50 per share.
On May 25, 2004, the Company issued 50,000 shares of common stock
valued at $0.81 per share for consulting services.
On June 8, 2004, the Company issued 100,000 shares of common stock in
connection with extension of acquiring ownership in Baywatch 3D Production, LLC.
The shares were valued at $0.75 per share
On June 16, 2004, the Company issued 240,000 shares of common stock for
consulting expenses paid by a shareholder to a third party. The amount paid for
the consulting services was $80,000.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
PLAN OF OPERATIONS - The following discussion should be read in conjunction with
the Company's audited financial statements.
The Company was organized for the purpose of creating a corporate
vehicle to seek, investigate and, if such investigation warrants, acquire an
interest in one or more business opportunities presented to it by persons or
firms who or which desire to seek perceived advantages of a publicly held
corporation.
The Company may incur significant post-merger or acquisition
registration costs in the event management wishes to register a portion of their
shares for subsequent sale. The Company will also incur significant legal and
accounting costs in connection with the acquisition including the costs of
preparing post- effective amendments, Forms 8-K, agreements and related reports
and documents.
The Company will not have sufficient funds (unless it is able to raise
funds in a private placement) to undertake any significant development,
marketing and manufacturing of the products acquired. Accordingly, following an
acquisition, the Company will, in all likelihood, be required to either seek
debt or equity financing or obtain funding from third parties, in exchange for
which the Company may be required to give up a substantial portion of its
interest in the acquired product. There is no assurance that the Company will be
able either to obtain additional financing or interest third parties in
providing funding for the further development, marketing and manufacturing of
any products acquired.
The current plan of SVEI incorporates operational resources that will
reach the mass market by aligning itself with already-established, branded
products and titles for the production, promotion and distribution of 3-D
products. The Company's management intends to aggressively evaluate and pursue
production opportunities in order to increase SVEI's content library. As a
development stage company, SVEI has minimal historical operations, no revenues
and negative cash flows. In order to satisfy cash requirements for SVEI's
production and revenue goals, management must obtain working capital through
either debt or equity financing.
The entertainment industry is an intensely competitive one, where
price, service, location, and quality are critical factors. The Company has many
established competitors, ranging from similar local single unit operations to
large multi-national operations. Some of these competitors have substantially
greater financial resources and may be established or indeed become established
in areas where the Company operates. The entertainment industry may be affected
by changes in customer tastes, economic, and demographic trends. Factors such as
inflation, increased supplies costs and the availability of suitable employees
may adversely affect the entertainment industry in general and the Company in
particular. In view of the Company's limited financial resources and management
availability, the Company will continue to be at a significant competitive
disadvantage vis-a-vis the Company's competitors.
RESULTS OF OPERATIONS - THERE were no revenues from sales for the two years
ended June 30, 2003 and 2004. SVEI has sustained a net loss of approximately
$2.9 million for the year ended June 30, 2004, which was largely attributable to
consulting expense from stock issuances to consultants. 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 $5,000,000 to $10,000,000 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 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 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. During the year ended June 30, 2004, the Company received approximately
$448,000 from the sale of common stock and $112,000 from related party loans.
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 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.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company and supplementary data are
included beginning immediately following the signature page to this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Company
and its accountants on any matter of accounting principles, practices or
financial statements disclosure.
ITEM 8A. CONTROLS AND PROCEDURES
We have established disclosure controls and procedures to ensure that material
information relating to the Company is made known to the officers who certify
the Company's financial reports and to other members of senior management and
the Board of Directors.
Based on their evaluation, as of the end of the period covered by this Annual
Report on Form 10-KSB, the principal executive officer and principal financial
officer of Stereo Vision Entertainment, Inc. have concluded that Stereo Vision's
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) are effective in ensuring that the
information required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms.
There were no significant changes in Stereo Vision's internal control over
financial reporting during the Company's fourth fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART III
ITEM 9. DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
EXECUTIVE OFFICERS AND DIRECTORS
The composition of the Board of Directors as well as the Officers of the company
has undergone significant change since the end of the company's fiscal year. On
July 5,2004 Douglas Schwartz was named Chairman of the Board of Directors. On
August 30, 2004 Lance H. Robbins was appointed CEO and President and joined the
Board of Directors. On that same day, Theodore P. Botts joined the Board and was
appointed Chief Financial Officer on September 7.
The members of the Board of Directors of the Company serve until the next annual
meeting of stockholders, or until their successors have been elected. The
officers serve at the pleasure of the Board of Directors. The following table
sets forth the name, age, and position of each executive officer and director of
the Company:
Name of Director Age Current Position Position Held Since
Doug Schwartz 59 Chairman/Director July, 2004
Tom Noonan 72 Vice Chairman August, 2000
Lance Robbins 48 CEO/President August, 2004
Director
John Honour 52 COO, Director June, 2001
Theodore Botts 59 CFO, Director September, 2004
Herky Williams 49 Secretary/Treasurer May, 2000
Director
John C. Bodziak, Jr. 30 Director August, 2000
DOUG SCHWARTZ, Chairman of the Board
Mr. Schwartz was elected Chairman of the Board on July 6, 2004. He has been an
established writer, creator and director for 25 years. His extensive
entertainment background includes being co-creator and executive producer of the
world's most watched television series in history.
`Baywatch", which was distributed to 145 countries in 23 languages, was viewed
by a world wide audience of over one billion people. In addition, Mr. Schwartz
has co-created and executive produced eight television series, which added up to
hundreds of one hour episodes, and over twenty highly rated and award winning
television movies
TOM NOONAN, Vice-Chairman of the Board
Mr. Noonan has served on the Board of Directors since August, 2000. He is
currently head of Columbia/Epic Records Alumni Association. From 1995-2000 he
was President of Noonan Consulting, a record industry consulting firm to
artists, labels, video companies, music publishers, trade publications, artists'
managers, newly formed companies and foreign affiliates. Mr. Noonan was formerly
a senior executive at Billboard Magazine where he founded the Hot 100 Charts. He
has provided valuation advice to the IRS on albums and music associations and
served as a US Government Expert Witness before investigative congressional
committees. He has provided marketing services for major artists including
Barbara Streisand, Bob Seger, Janis Joplin, Marvin Gaye and Diana Ross & The
Supremes.
LANCE H. ROBBINS, President and CEO, Director
Lance Robbins was elected to the Board of Directors and appointed President and
CEO of the company in August, 2004. He has been an entertainment industry force
since graduating law school and joining a prestigious Los Angeles law firm.
While remaining a licensed attorney, in 1983 he began his first entertainment
company, Barnett-Robbins Enterprises, which became a leader in nationally
syndicated radio programs. After four years, Barnett-Robbins was acquired by MCA
Music Inc. For the next three years Robbins was vice-president of Premiere
Entertainment Group, where he oversaw the development, acquisition, and
production of feature films and low-to-medium budget, and highly profitable,
direct-to-video titles. In 1990 he joined Saban Entertainment as President. Over
the next eight years he was the driving force behind Saban's building a motion
picture and television library of more than three hundred and fifty titles,
which included the most successful kids franchise in television and marketing,
MIGHTY MORPHIN POWER RANGERS, as well as NINJA TURTLES, and THE ADDAMS FAMILY.
The Saban International and Saban Entertainment assets and libraries were later
sold to ABC/Disney for over five billion dollars. In 1998 he became President of
Fox Family Television Studios Worldwide. During his tenure there, his numerous
credits included the critically acclaimed LES MISERABLES, CASPER MEETS WENDY,
EARTHQUAKE IN NEW York, THE SPIRAL STAIRCASE, AU PAIR, HONOR THY FATHER AND
MOTHER: THE TRUE STORY OF THE MENENDEZ MURDERS, THE MICHAEL JORDAN STORY and the
award-winning ELIAN GONZALEZ STORY. In 2002, Robbins left Fox Family Television
Studios and formed Robbins Entertainment Group. For the past two years, Robbins
has continued to develop projects with almost all the network and cable
companies, including CBS, Pax, TNT, Lifetime, Hallmark, and Showtime. As CEO of
Stereo Vision Entertainment Inc. Robbins intends to utilize all his creative,
business and strategic alliances in the Hollywood community and abroad to help
build Stereo Vision into a leading multimedia entertainment production and
distribution company.
JACK HONOUR, Chief Operating Officer, Director
Mr. Honour has been the driving force behind the Company's vision and strategy.
He founded the Company three years ago in order to capitalize on what he saw as
the emerging transition from traditional entertainment to state of the art
multimedia entertainment. He served as President and CEO before recruiting Lance
Robbins to that position and is a member of the Board of Directors. His diverse
career has included starting a number of businesses in Restaurant Management,
Real Estate and an Import/Export Trading Company. Since he founded Stereo Vision
Entertainment he has gathered together the management team and Board of
Directors necessary to develop the various facets of the business. In addition,
Mr. Honour has succeeded in identifying attractive projects for the Company and
forging close relationships with key strategic partners.
THEODORE P. BOTTS, Chief Financial Officer, Director
Mr. Botts was elected to the StereoVision Board of Directors and appointed as
the Chief Financial officer in August, 2004. Prior to his appointments, Mr.
Botts had served as Senior Financial Advisor to the Company's officers and Board
of Directors.
With a career on Wall Street that spans more than 30 years, including fourteen
years at Goldman Sachs, and then until the year 2000, twelve years as a Managing
Director for UBS in London and New York, Mr.Botts brings to StereoVision a broad
range of corporate finance experience and contacts in the investment community.
Since 2000, he has been managing his private financial advisory firm, Kensington
Gate Capital. He has been consulting to StereoVision since the beginning of
2004. In addition to his position at StereoVision, Mr. Botts serves as the
chairman of the audit committee and a Board Member of INTAC International, a
NASDAQ listed China Ventures Company. He also serves as the head of development
for REACH Prep, a non-profit children's educational organization.
HERKY WILLIAMS, Secretary and Treasurer, Director
Mr. Williams has served as Secretary/Treasurer and a member of the board of
directors since May, 2000. Mr. Williams has an extensive background and
experience in various facets of the music industry. He served as Senior Director
of A&R for Capitol Records in 1995/6 where his duties included signing artists
as well as artist development. Such artists included Willie Nelson, Garth
Brooks, Charlie Daniels and Tanya Tucker.
JOHN C. BODZIAK, Director
Mr. Bodziak served as CEO/President of StereoVision from August 4 to November
15, 2000. During his career, Mr. Bodziak has owned and operated a number of
businesses in the restaurant, liquor and concert entertainment areas. From
1995-1997 he was the general manager for Key Largo International where his
duties included managing a restaurant and a nightclub. From 1997-2000 he served
as CEO/President of Janus Landing Courtyard that was voted by Rolling Stone
magazine to be one of the top ten concert venues in the US.
CONFLICTS OF INTEREST
Certain conflicts of interest existed at June 30, 2004 and may continue
to exist between the Company and some of its officers and directors due to the
fact that each may have other business interests to which they devote his
primary attention. Each of these officers and directors may continue to do so
notwithstanding the fact that management time should be devoted to the business
of the Company.
Certain conflicts of interest may exist between the Company and its
management, and conflicts may develop in the future. The Company has not
established policies or procedures for the resolution of current or potential
conflicts of interests between the Company, its officers and directors or
affiliated entities. There can be no assurance that management will resolve all
conflicts of interest in favor of the Company, and failure by management to
conduct the Company's business in the Company's best interest may result in
liability to the management. The officers and directors are accountable to the
Company as fiduciaries, which means that they are required to exercise good
faith and integrity in handling the Company's affairs. Shareholders who believe
that the Company has been harmed by failure of an officer or director to
appropriately resolve any conflict of interest may, subject to applicable rule
of civil procedure, be able to bring a class action or derivative suit to
enforce their rights and the Company's rights.
BOARD MEETINGS AND COMMITTEES
Our Board of Directors conducts its business through meetings of the
Board. During the fiscal year ended June 30, 2004, the Board consisted of four
individuals and adopted 3 resolutions.
The Board does not currently have any committees, but is in the process
of establishing an audit committee and an option committee.
CODE OF ETHICS
We do not currently have a Code of Ethics applicable to our principal
executive, financial and accounting officers. We do not have a "financial
expert" on the board.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer, beneficial owner of more than 10% of any class of equity securities of
the Company or any other person known to be subject to Section 16 of the
Exchange Act of 1934, as amended, failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act for the last fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
None of the executive officer's annual salary and bonus exceeded
$125,000 during any of the Company's last two fiscal years.
ITEM 11. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND
MANAGEMENT
PRINCIPAL SHAREHOLDERS
The table below sets forth information as to each person owning of
record or who was known by the Company to own beneficially more than 5% of the
9,846,571 shares of issued and outstanding Common Stock of the Company as of
September 9, 2004 and information as to the ownership of the Company's Stock by
each of its directors and executive officers and by the directors and executive
officers as a group. Except as otherwise indicated, all shares are owned
directly, and the persons named in the table have sole voting and investment
power with respect to shares shown as beneficially owned by them.
Name and Address of Nature of
Beneficial Owners / Directors Ownership Shares Owned Percent
---------------------------------------- --------------------- ------------------- ----------------
All Executive Officers
and Directors as a Group *
(7 persons) Common 4,094,236 41.58%
Theodore Botts* Common 850,702 8.84%
H.F.I.C Investments
420 S. Hibiscus Dr.
Miami, FL 33139 Common 500,000 5.08%
John Honour * Common 2,424,934 24.62%
Herky Williams
120 Garden Gate Dr.
Franklin, TN 37069 Common 556,000 5.65%
*The address of all five officers and directors is in care of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of June 30, 2004 and 2003, the company owes $285,370 and $230,708 to
various shareholders and officers/directors. The loans are unsecured with
interest at rates of 4.00% to 12% and have no fixed terms of repayment.
On April 30, 2004, the company signed a Development Production
Agreement with Baywatch 3 Double D LLC which is 50 % owned by Douglas Schwartz,
Chairman. Under the terms of the agreement, the company will receive certain
rights in a film to be produced in return for providing the development
production advance. Originally the company had 30 days in which to secure the
advance. The company has since received an extension for which it granted
Baywatch LLC 100,000 unregistered shares and is free to continue to pursue the
funding on a non-exclusive basis of the production advance for the movie,
"Baywatch 3 Double D".
On September 21, 2004 the company announced that Lance Robbins, CEO had
assigned his 50% ownership of five low budget feature length films to Stereo
Vision Entertainment. Robbins will serve as co-executive producer of the films
that will be financed by Movies, Inc. under the umbrella title, "Miami Models".
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
Exhibits
The following exhibits are included as part of this report:
Exhibit
Number Title of Document
2.1 * Acquisition Agreement and Plan of Reverse Merger by and between Stereo
Vision Entertainment, Inc and Kestrel Equity Corporation dated December
3, 1999. (incorporated by reference to Form 10-SB filed with the SEC on
December 17, 1999)
2.2 * Agreement and Plan of Merger by and between Kestrel Equity Corporation
1
1
and SVE Merger, Inc. dated January 10, 2000.
3.1 * Articles of Incorporation of Kestrel Equity Corporation filed with
the State of Arizona on December 14, 1993. (incorporated by reference
to Form 10-SB filed with the SEC on December 17, 1999)
3.2 * Articles of Amendment of Articles of Incorporation of Kestrel Equity
Corporation filed with the State of Arizona on June 18, 1997.
(incorporated by reference to Form 10-SB filed with the SEC on December
17, 1999)
3.3 * Articles of Amendment of Articles of Incorporation of Kestrel Equity
Corporation filed with the State of Arizona on September 30, 1997.
(incorporated by reference to Form 10-SB filed with the SEC on December
17, 1999)
3.4 * Bylaws of the Kestrel Equity Corporation. (incorporated by reference
to Form 10-SB filed with the SEC on December 17, 1999)
3.5 * Articles of Incorporation of SVE Merger, Inc. filed with the State of
Nevada on December 23, 1999.
3.6 * Bylaws of SVE Merger, Inc.
4.1 * Specimen Stock Certificate of Kestrel Equity Corporation. (incorporated
by reference to Form 10-SB filed with the SEC on December 17, 1999)
4.2 * Specimen Stock Certificate of SVE Merger, Inc.
10.1* Stock Purchase Agreement by and between Kestrel Equity Corporation and
John Honour, dated September 25, 1999.
31.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C
Section 1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
31.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C
Section 1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C
Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C
Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(*) Incorporated by reference to the Registrant's registration statement on
Form 10-SB filed on August 9, 2000.
(a) Reports on Form 8-K filed.
There were no Form 8-K's filed during the quarter ended June 30, 2004.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
-:-
INDEPENDENT AUDITOR'S REPORT
JUNE 30, 2004 AND 2003
CONTENTS
Page
Independent Auditor's Report.............................................F - 1
Balance Sheets
June 30, 2004 and 2003................................................F - 2
Statements of Operations for the
Years Ended June 30, 2004 and 2003 and the Cumulative
Period May 5, 1999 (inception) to June 30, 2004.......................F - 4
Statement of Stockholders' Equity for the
Period May 5, 1999 (Inception) to June 30, 2004 ......................F - 5
Statements of Cash Flows for the
Years Ended June 30, 2004 and 2003 and the Cumulative
Period May 5, 1999 (Inception to June 30, 2004.......................F - 15
Notes to Financial Statements...........................................F - 17
INDEPENDENT AUDITOR'S REPORT
Stereo Vision Entertainment, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Stereo Vision
Entertainment, Inc. (a development stage company) as of June 30, 2004 and 2003
and the related statements of operations, and cash flows for the two years ended
June 30, 2004 and 2003 and the cumulative period May 5, 1999 (inception) to June
30, 2004 and the statement of stockholders equity for the period May 5, 1999
(inception) to June 30, 2004. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Stereo Vision
Entertainment, Inc. (a development stage company) as of June 30, 2004 and 2003
and the results of its operations and its cash flows for the two years ended
June 30, 2004 and 2003 and the cumulative period May 5, 1999 (inception) to June
30, 2004, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Respectfully Submitted,
/S/ Robison, Hill & Co.
Certified Public Accountants
Salt Lake City, Utah
October 11, 2004
F - 1
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS: June 30,
2004 2003
------------------ ------------------
Current Assets:
Cash $ - $ 10,757
Prepaid Expenses 9,234 -
------------------ ------------------
Total Current Assets 9,234 10,757
------------------ ------------------
Fixed Assets:
Office Equipment 13,745 13,745
Less Accumulated Depreciation (13,745) (10,996)
------------------ ------------------
Net Fixed Assets - 2,749
------------------ ------------------
Intangible and Other Non- Current Assets:
Investment in Wilfield Entertainment - 220,000
Films, Manuscripts, Recordings and Similar Property - 337,008
------------------ ------------------
Net Intangible and Other Non-Current Assets - 557,008
------------------ ------------------
Total Assets $ 9,234 $ 570,514
================== ==================
F - 2
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
BALANCE SHEETS
(Continued)
June 30,
2004 2003
------------------ ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Accounts Payable $ 246,628 $ 268,277
Accrued Expenses 78,373 42,042
Bank Overdraft 401 -
Payable to SAG for Route 66 71,493 71,493
Lawsuit Payable 37,411 -
Loans from Shareholders 285,370 230,708
------------------ ------------------
Total Current Liabilities 719,676 612,520
------------------ ------------------
Stockholders' Equity:
Shareholder Receivable - -
Common Stock, $.001 Par value
Authorized 100,000,000 shares,
Issued 8,348,222 shares at June 30, 2004
and 3,828,150 shares at June 30, 2003 8,348 3,828
Additional Paid in Capital 14,249,680 11,489,811
Stock Options Outstanding - 487,500
Deficit Accumulated During the Development Stage (14,968,470) (12,023,145)
------------------ ------------------
Total Stockholders' Equity (710,442) (42,006)
------------------ ------------------
Total Liabilities and Stockholders' Equity $ 9,234 $ 570,514
================== ==================
The accompanying notes are an integral part of these
financial statements.
F - 3
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
Since May 5,
1999
For the Year Ended Inception of
June 30, Development
--------------------------------------
2004 2003 Stage
------------------ ------------------ -------------------
Revenues $ - $ - $ -
------------------ ------------------ -------------------
Expenses
Research & Development - - 293,000
General & Administrative 186,524 648,250 9,062,048
Consulting 1,781,703 1,648,106 4,419,498
Advertising & Promotion 31,750 122,040 301,823
------------------ ------------------ -------------------
Operating Loss (1,999,977) (2,418,396) (14,076,369)
Other income (expense):
Interest (14,737) (76,733) (394,061)
Investment Fee (75,000) (75,000)
Loss on Sale of Assets - - (15,883)
Loss on Investment (558,191) (12,000) (570,191)
Lawsuit Settlement (104,911) - (104,911)
Write off of Note Receivable (191,701) - (191,701)
Gain on Forgiveness of Debt - 48,516 48,516
Gain (Loss) on Trading
Investments - - 412,772
------------------ ------------------ -------------------
Total Other Income (expense) (944,540) (40,217) (890,459)
------------------ ------------------ -------------------
Net Loss Before Taxes (2,944,517) (2,458,613) (14,966,828)
Income Tax Expense (808) (834) (1,642)
------------------ ------------------ -------------------
Net Loss $ (2,945,325) $ (2,459,447) $ (14,968,470)
================== ================== ===================
Basic & Diluted loss Per Share $ (0.48) $ (2.00)
================== ==================
Weighted Average 6,154,874 1,232,591
================== ==================
The accompanying notes are an integral part of these
financial statements.
F - 4
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
Additional During
Common Stock Paid in Development
----------------------------
Shares Value Capital Stage
-------------- ------------ ---------------- -----------------
May 5, 1999 Stock Issued for Services
and Payment of Accounts Payable 1,530,000 $ 1,530 $ 3,470 $ -
Net Loss - - - (144,977)
-------------- ------------ ---------------- -----------------
Balance at June 30, 1999 1,530,000 1,530 3,470 (144,977)
Retroactive Adjustment for 25:1
Stock Split May 30, 2003 (1,468,800) (1,469) 1,469 -
-------------- ------------ ---------------- -----------------
Restated Balance June 30, 1999 61,200 61 4,939 (144,977)
December 2, 1999 Stock Issued in
Exchange for Assets 58,800 59 4,011,841 -
December 3, 1999 Stock Issued in
Connection to Merger with Kestrel
Equity Corporation 48,000 48 (112,114) -
December 31, 1999 Stock Issued
for Services 14,000 14 699,986 -
February 14, 2000 Stock Issued
for Services 4,000 4 99,996 -
April 17, 2000 Stock Issued for
Services 4,000 4 99,996 -
May 4, 2000 Stock Issued for Cash 2,200 2 54,998 -
June 2, 2000 Stock Issued for Services 4,000 4 99,996 -
June 30, 2000 Stock Issued for Cash 1,420 2 35,499 -
Net Loss - - - (2,680,213)
-------------- ------------ ---------------- -----------------
F - 5
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Additional During
Common Stock Paid in Development
----------------------------
Shares Value Capital Stage
-------------- ------------ ---------------- -----------------
Balance at June 30, 2000 197,620 $ 198 $ 4,995,137 $ (2,825,190)
September 13, 2000 Stock Issued for
Services 5,000 5 141,245 -
September 29, 2000 Stock Issued for
Advertising 4,000 4 94,996 -
October 27, 2000 Stock Issued for
Advertising 500 - 12,499 -
November 15, 2000 Stock Issued for
Conversion of Note Payable 32,000 32 407,106 -
November 22, 2000 Stock Issued for
Conversion of Note Payable 2,000 2 24,998 -
November 22, 2000 Stock Issued for
Consulting 4,080 4 101,996 -
December 4, 2000 Stock Issued for
Services 400 - 10,200 -
December 14, 2000 Stock Issued for
Services 4,000 4 105,996 -
January 23, 2001 Stock Issued for
Cash 600 1 14,999 -
January 30, 2001 Stock Issued for
Services 4,724 4 64,946 -
March 10, 2001 Stock Issued for
Services 8,000 8 153,992 -
F - 6
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Additional During
Common Stock Paid in Development
----------------------------
Shares Value Capital Stage
-------------- ------------ ---------------- -----------------
April 9, 2001 Stock Issued for
Advertising 3,600 $ 4 $ 49,496 $ -
April 18, 2001 Stock Issued for
Acquisition of Wilfield Entertainment 16,000 16 219,984 -
May 25, 2001 Shares Cancelled for
Non-Performance of Advertising and
Services (14,000) (14) (328,486) -
June 1, 2001 Shares Issued for
Conversion of Notes Payable 840 1 7,512 -
June 15, 2001 Shares Issued for
Services 1,000 1 14,999 -
June 28, 2001 Shares Issued for
Advertising 4,000 4 59,996 -
June 28, 2001 Shares Issued for
Services 6,000 6 89,994 -
June 29, 2001 Shares Issued for
Conversion of Notes Payable 34,000 34 224,966 -
Net Loss - - - (4,572,325)
-------------- ------------ ---------------- -----------------
Balance at June 30, 2001 314,364 314 6,466,571 (7,397,515)
July 3, 2001 Shares Issued for Expenses 1,000 1 9,999 -
July 3, 2001 Shares Issued for Services 5,000 5 74,995 -
July 25, 2001 Shares Issued for Cash 1,600 1 19,999 -
F - 7
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Additional During
Common Stock Paid in Development
----------------------------
Shares Value Capital Stage
-------------- ------------ ---------------- -----------------
July 30, 2001 Shares Issued for
Consulting 4,400 $ 4 $ 45,096 $ -
August 29, 2001 Shares Issued for
Interest on Notes Payable 13,400 13 100,487 -
September 10, 2001 Shares Issued for
Services 800 1 5,999 -
September 10, 2001 Shares Issued for
Conversion of Note Payable 4,000 4 25,596 -
September 25, 2001 Shares Canceled
For Non-Performance of Contract (4,000) (4) 70,536 -
September 27, 2001 Shares Issued for
Services 101,000 101 1,136,149 -
September 27, 2001 Shares Issued for
Cash and Commission 2,000 2 24,998 -
October 2, 2001 Shares Issued for
Services 18,000 18 242,982 -
October 31, 2001 Shares Issued for
Conversion of Note Payable 10,182 10 89,085 -
November 1, 2001 Shares Issued for
Services 2,825 3 14,123 -
November 7, 2001 Shares Issued for
Conversion of Note Payable 8,910 9 55,676 -
F - 8
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Additional During
Common Stock Paid in Development
----------------------------
Shares Value Capital Stage
-------------- ------------ ---------------- -----------------
December 19, 2001 Shares Issued for
Services 44,000 $ 44 $ 153,956 $ -
December 19, 2001 Shares Issued for
Conversion of Note Payable 6,820 7 23,863 -
December 20, 2001 Shares Issued for
Services 30,000 30 157,470 -
January 1, 2002 Shares Issued for Cash 12,000 12 99,988 -
January 24, 2002 Shares Issued for
Previous Conversion of Note Payable 55,660 56 (57) -
February 25, 2002 Shares Issued for
Previous Conversion of Note Payable 63,525 64 (64) -
April 10, 2002 Shares Issued for
Conversion of Note Payable 9,920 10 32,617 -
April 15, 2002 Shares Issued for Rent 2,000 2 3,998 -
April 15, 2002 Shares Issued for Cash 4,000 4 2,996 -
April 29, 2002 Shares Issued for
Project Agreement 8,000 8 11,992 -
April 29, 2002 Shares Issued for
Consulting 4,000 4 5,996 -
May 8, 2002 Shares Issued for Cash 4,000 4 2,496 -
May 24, 2002 Shares Issued for
Consulting 4,000 4 3,496 -
F - 9
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Additional During
Common Stock Paid in Development
----------------------------
Shares Value Capital Stage
-------------- ------------ ---------------- -----------------
May 30, 2002 Shares Issued for
Project Agreement 4,000 $ 4 $ 2,996 $ -
June 24, 2002 Shares Issued for Cash 4,000 4 7,496 -
Net Loss - - - (2,166,183)
-------------- ------------ ---------------- -----------------
Balance at June 30, 2002 739,406 739 8,891,530 (9,563,698)
July 1, 2002 Shares Issued for Cash 34,000 34 9,466 -
July 8, 2002 Shares Issued for
Interest on Debt Retirement 93,344 93 81,574 -
December 23, 2002, Shares
Cancelled for non-performance of
Services (132,000) (132) 132 -
January 1, 2003, Shares Issued for
Services 494,000 494 370,006 -
March 18, 2003, Shares Issued for
Services 52,600 53 26,247 -
March 26, 2003, Shares Issued for
Conversion of Debt 160,000 160 274,772 -
March 26, 2003, Shares Issued for
Services 13,200 13 6,587 -
May 9, 2003, Shares Issued for
Services 101,600 102 25,298 -
F - 10
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Additional During
Common Stock Paid in Development
----------------------------
Shares Value Capital Stage
-------------- ------------ ----------------- -----------------
May 29, 2003, Shares Issued for
Services 108,000 $ 108 $ 121,932 $ -
June 2, 2003, Shares Issued for
Services 38,000 38 42,902 -
June 2, 2003, Shares Issued for
Conversion of Debt 88,000 88 19,912 -
June 3, 2003, Shares Cancelled for
Non-Performance of Service (12,000) (12) 12 -
June 12, 2003, Shares Issued for
Services 2,000,000 2,000 1,598,000 -
June 20, 2003, Shares Issued for
Services 10,000 10 5,990 -
June 25, 2003, Shares Issued for
Conversion of Debt 40,000 40 15,451 -
Net Loss - - - (2,459,447)
-------------- ------------ ----------------- -----------------
Balance at June 30, 2003 3,828,150 3,828 11,489,811 (12,023,145)
July 1, 2003, Shares Issued for
Services 100,000 100 47,900 -
July 8, 2003, Loan Converted to Shares 30,000 30 8,875 -
July 9, 2003, Shares Issued for
Services 70,000 70 23,930 -
F - 11
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Additional During
Common Stock Paid in Development
----------------------------
Shares Value Capital Stage
-------------- ------------ ----------------- -----------------
September 11, 2003, Shares Issued
for Services 218,000 $ 218 $ 101,382 $ -
September 17, 2003, Shares Issued
for Services 100,000 100 51,900 -
September 29, 2003, Shares Issued
for Services 710,000 710 403,990 -
October 1, 2003, Shares Issued for
Cash 200,000 200 55,300 -
October 1, 2003, Shares Issued for
Services 20,000 20 4,980 -
November 17, 2003, Shares
Canceled for Non-Performance (100,000) (100) (47,800) -
December 2, 2003, Shares Issued for
Services 1,223,072 1,223 210,277 -
January 12, 2004, Shares Issued for
Services 90,000 90 53,910 -
January 20, 2004, Shares Issued for
Cash 200,000 200 34,846 -
February 2, 2004, Shares Issued for
Cash 400,000 400 99,600 -
February 9, 2004, Shares Canceled
for Non-Performance (20,000) (20) (4,980) -
F - 12
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Additional During
Common Stock Paid in Development
----------------------------
Shares Value Capital Stage
-------------- ------------ ----------------- -----------------
March 9, 2004, Shares Issued for
Cash 25,000 $ 25 $ 12,475 $ -
March 9, 2004, Shares Issued for
Rent and Accounts Payable 100,000 100 24,900 -
March 9, 2004, Shares Canceled for
Non-Performance (156,000) (156) (75,276) -
March 11, 2004, Shares Issued for
Services 345,000 345 689,655 -
April 7, 2004, Shares Issued for
Services 60,000 60 122,740 -
April 7, 2004, Shares Issued for
Cash 375,000 375 214,495 -
April 7, 2004, Loan Converted to
Shares 30,000 30 14,169 -
April 14, 2004, Shares Issued for
Cash 100,000 100 25,000 -
May 6, 2004, Shares Issued for
Cash 10,000 10 4,990 -
May 25, 2004, Shares Issued for
Services 50,000 50 40,450 -
June 8, 2004, Shares Issued for
Investment Expense 100,000 100 74,900 -
F - 13
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Additional During
Common Stock Paid in Development
------------------------------
Shares Value Capital Stage
-------------- -------------- ---------------- ------------------
June 16, 2004, Shares Issued for
Services 240,000 $ 240 $ 79,761 $ -
Cancellation of Stock Options for
Non-Performance - - 487,500 -
Net Loss - - - (2,945,325)
-------------- -------------- ---------------- ------------------
Balance at June 30, 2004 8,348,222 $ 8,348 $ 14,249,680 $ (14,968,470)
============== ============== ================ ==================
The accompanying notes are an integral part of these
financial statements.
F - 14
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
Since May 5,
1999
For the Year Ended Inception of
June 30, Development
------------------------------------
2004 2003 Stage
---------------- ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (2,945,325) $ (2,459,447) $ (14,968,470)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and Amortization 2,749 2,749 3,536,428
Issuance of Common Stock for Expenses 1,785,769 2,281,447 7,667,696
Stock Issued for Payment of Accounts Payable 20,000 - 20,000
Compensation Expense from Stock Options - - 487,500
Realized gain on trading investments - - (412,773)
Loss on sale of assets - - 15,883
Loss on Investment Written Off 557,008 12,000 569,008
Gain on Forgiveness of Debt - (48,516) (48,516)
Cash acquired in merger - - 332
Change in operating assets and liabilities:
Investment in films, manuscripts, recordings
and similar property - (18,547) (272,008)
Prepaid Expense (9,234) (9,234)
Accounts Payable (21,649) 66,870 229,198
Accrued Expenses 36,331 (27,009) 78,373
Bank Overdraft 401 - 401
Lawsuit Payable 37,411 - 37,411
Payable to SAG for Route 66 - - 71,493
---------------- ------------------ ------------------
Net Cash Used in operating activities (536,539) (190,453) (2,997,278)
---------------- ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment - - (13,745)
Proceeds from sale of assets - - 51,117
Proceeds from sale of investments - - 565,773
---------------- ------------------ ------------------
Net cash provided (used) in investing activities - - 603,145
---------------- ------------------ ------------------
F - 15
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Continued)
Cumulative
Since May 5,
1999
For the Year Ended Inception of
June 30, 2004 Development
------------------------------------
2004 2003 Stage
---------------- ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans from shareholders $ 112,511 $ 198,067 $ 2,020,113
Payments of principal on loans from shareholders (34,745) (7,364) (408,996)
Proceeds from issuance of common stock 448,016 9,500 719,016
Proceeds from issuance of short-term notes - - 64,000
---------------- ------------------ ------------------
Net Cash Provided by Financing Activities 525,782 200,203 2,394,133
---------------- ------------------ ------------------
Net (Decrease) Increase in Cash (10,757) 9,750 -
Cash at Beginning of Period 10,757 1,007 -
---------------- ------------------ ------------------
Cash at End of Period $ - $ 10,757 $ -
================ ================== ==================
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 23,105 392,090 1,214,936
The accompanying notes are an integral part of these
financial statements.
F - 16
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO 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.
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 $14,968,000 for the period from May 5, 1999 (inception) to June
30, 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.
F - 17
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO 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 June 30, 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.
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.
F - 18
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
Advertising Costs
Advertising costs are expensed as incurred. There was $31,750 and
$122,040 advertising expense for the two years ended June 30, 2004 and 2003.
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.
F - 19
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO 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 June 30, 2004 and 2003, the
Company had $0 and $557,008 in film costs that are in the development stage or
pre-production 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.
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 June 30, 2004 and 2003 and are thus
not considered.
Reclassification
Certain reclassifications have been made in the 2003 financial
statements to conform with the 2004 presentation.
NOTE 2 - INCOME TAXES
As of June 30, 2004, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $14,805,000 that may be
offset against future taxable income through 2023. 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.
F - 20
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
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 two years
ended June 30, 2004 and 2003, rent expense was $49,723 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
As of June 30, 2004 and 2003, the company owes $285,370 and $230,708 to
various shareholders and officers/directors. The loans are unsecured with
interest at rates of between 4.00% to 12% and have no fixed terms of repayment.
On April 30, 2004, the company signed a Development Production
Agreement with Baywatch 3 Double D LLC which is 50 % owned by Douglas Schwartz,
Chairman of the Board of Stereo Vision Entertainment. Under the terms of the
agreement, the company will receive certain rights in a film to be produced in
return for providing a development production advance. Originally the company
had 30 days in which to secure the advance. The company has since received an
extension for which it granted Baywatch LLC 100,000 unregistered shares and is
free to continue to pursue the funding on a non-exclusive basis of the
production advance for the movie, "Baywatch 3 Double D".
F - 21
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)
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.
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).
F - 22
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)
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.
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.
F - 23
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)
On January 15, 2002, 12,000 (300,000 pre split) shares of common stock
were issued for cash at $0.33 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
$0.06.
On May 30, 2002, 4,000 (100,000 pre split) common shares were issued to
various people for services connected with the project "Mad Dogs 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.
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.
F - 24
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)
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.
On April 7, 2004, the Company issued 60,000 shares of common stock to
various people for consulting services. Also, on April 7, 2004 the Company
issued 375,000 shares of common stock to various people for cash of at $0.25 to
$0.75 per share. In addition, approximately $14,200 in loans were converted into
30,000 shares of common stock.
On April 14, 2004, the Company issued 100,000 shares of common stock
for cash at $0.25 per share.
On May 6, 2004, the Company issued 10,000 shares of common stock for
cash at $0.50 per share.
On May 25, 2004, the Company issued 50,000 shares of common stock
valued at $0.81 per share for consulting services.
On June 8, 2004, the Company issued 100,000 shares of common stock in
connection with extension of acquiring ownership in Baywatch 3D Production, LLC.
The shares were valued at $0.75 per share
On June 16, 2004, the Company issued 240,000 shares of common stock for
consulting expenses paid by a shareholder to a third party. The amount paid for
the consulting services was $80,000.
F - 25
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
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 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.
During the year ended June 30, 2004, these stock options were canceled for
non-performance.
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.
F - 26
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 10- INVESTMENT IN WOW EVENTS, LLC
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.
During the quarter ending June 2004, the Company ceased its funding of
the project and was later issued a notice of termination and default, wherein
its ownership was decreased to 3.167%. The Company had loaned WOW Events, LLC
$190,000 which is to be repaid in the event that WOW Events, LLC becomes
profitable. As the repayment is contingent on the profitability of WOW, it is
uncertain if the loan will be collectible, and thus it has been written off and
will be recorded as a gain in future years if the loan is repaid.
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 June 30,
2004 and 2003, the Company had $0 and $557,008 in film costs that are in the
development stage or pre-production stage.
For the two years ended June 30, 2004 and 2003, the Company recorded
losses of $558,191 and $12,000 for projects that have been abandoned for various
reasons or have not been set for production.
NOTE 12 - LEGAL PROCEEDINGS
In September of 2001 the Company entered into a promissory note with
Duncan MacPherson to be payable within the year. A dispute arose and the note
was not timely paid, which led to a court action styled R. Duncan MacPhearson
vs. Stereovision Entertainment, et, al, Case No. LC 0611749 in Los Angeles,
California. Subsequently, the parties, on January 26, 2004, entered into a
Settlement Agreement, including provisions if scheduled payments do not occur as
agreed. 25,000 shares of restricted stock were delivered and $40,000 of payments
were made, with the final $10,000 not paid according to the stipulated
agreement. This resulted in the plaintiff's entry of a judgment, according to
notice received by the company, of slightly over $37,500, which has been
appealed by the Company as incorrect and excessive. The $37,500 has been accrued
as liability on the June 30, 2004 financial statements.
F - 27
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Robison, Hill & Co. has served as the Company's Principal Accountant since 1999.
Their pre-approved fees billed to the Company are set forth below:
FISCAL YEAR ENDING FISCAL YEAR ENDING
JUNE 30, 2004 JUNE 30, 2003
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
Audit Fees $ 13,725 $ 13,230
Audit Related Fees NIL NIL
Tax Fees 90 80
All Other Fees NIL NIL
As of June 30, 2004, the Company's Audit Committee did not have a formal,
documented pre-approval policy for the fees of the principal accountant.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on it behalf by the undersigned, thereunto duly authorized.
STEREO VISION ENTERTAINMENT, INC.
Dated: October 13, 2004 By /S/ Lance Robbins
------------------------------------
Lance Robbins,
C.E.O., President, Director
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 on this 14th day of October 2003.
Signatures & Title
/S/ Lance Robbins /S/ John Honour
--------------------------- ----------------------------
Lance Robbins, John Honour
C.E.O., President, Director COO, Director
(Principal Executive Officer)
/S/ Theodore Botts /S/ Herky Williams
--------------------------- ----------------------------
Theodore Botts Herky Williams
CFO, Director Secretary-Treasurer, Director
(Principal Financial and
Accounting Officer)
--------------------------- ----------------------------
Doug Schwartz John C. Bodziak
Chairman / Director Director
---------------------------
Tom Noonan
Vice Chairman