UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB MARK ONE) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2005 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from To Commission file number 000-28553 STEREO VISION ENTERTAINMENT, INC. --------------------------------- (Exact name of small business issuer as specified in its charter) NEVADA 95-4786792 ------------------------------------ ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or organization) 15452 Cabrito Rd., Suite 204, Van Nuys, CA 91406 ------------------------------------------------- (Address of principal executive offices) (310) 205-7998 (Issuer's telephone number) APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: 10,741,871 as of April 5, Transitional Small Business Disclosure Format (check one). Yes ; No X ---- ---- PART I ITEM 1. FINANCIAL STATEMENTS STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) BALANCE SHEETS (Unaudited) ASSETS: March 31, June 30, ------- 2005 2004 ------------------ ------------------ Current Assets: Cash $ 472 $ - Prepaid Expenses 25,000 9,234 ------------------ ------------------ Total Current Assets 25,472 9,234 ------------------ ------------------ Fixed Assets: Office Equipment 13,745 13,745 Less Accumulated Depreciation (13,745) (13,745) ------------------ ------------------ Net Fixed Assets - - ------------------ ------------------ Total Assets $ 25,472 $ 9,234 ================== ================== 2 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) BALANCE SHEETS (Continued) (Unaudited) March 31, June 30, 2005 2004 ------------------ ------------------ LIABILITIES AND STOCKHOLDERS' EQUITY: Liabilities: Accounts Payable $ 263,534 $ 246,628 Accrued Expenses 283,562 78,373 Bank Overdraft - 401 Payable to SAG for Route 66 71,493 71,493 Lawsuit Payable 37,411 37,411 Loans from Shareholders 459,427 285,370 ------------------ ------------------ Total Current Liabilities 1,115,427 719,676 ------------------ ------------------ Stockholders' Equity: Common Stock, $.001 Par value Authorized 100,000,000 shares, Issued 10,741,871 at March 31, 2005 and 8,348,222 shares at June 30, 2004 10,742 8,348 Common Stock to be Issued, 266,666 shares at March 31, 2005 and -0- shares at June 30, 2004 267 - Additional Paid in Capital 15,356,989 14,249,680 Deficit Accumulated During the Development Stage (16,457,953) (14,968,470) ------------------ ------------------ Total Stockholders' Equity (1,089,955) (710,442) ------------------ ------------------ Total Liabilities and Stockholders' Equity $ 25,472 $ 9,234 ================== ================== The accompanying notes are an integral part of these financial statements. 3 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS (Unaudited) Cumulative Since May 5, 1999 For the Three Months Ended For the Nine Months Ended Inception of March 31, March 31, Development ------------------------------------ ------------------------------------ 2005 2004 2005 2004 Stage ----------------- ----------------- ------------------ ----------------- ----------------- Revenues $ - $- - $ - $ - $ - ----------------- ----------------- ------------------ ----------------- ----------------- Expenses Research & Development - - - - 293,000 General & Administrative 54,334 138,112 151,546 223,901 9,213,594 Salaries & Consulting 238,366 756,967 1,203,928 1,645,784 5,623,426 Advertising & Promotion - 31,750 116,600 31,750 418,423 Loss on Investment - 247,000 - 305,510 570,191 Lawsuit Settlement - 67,500 - 67,500 104,911 ----------------- ----------------- ------------------ ----------------- ----------------- Operating Loss (292,700) (1,241,329) (1,472,074) (2,274,445) (16,223,545) ----------------- ----------------- ------------------ ----------------- ----------------- Other income (expense): Interest (5,783) (4,205) (17,409) (12,212) (411,470) Investment Fee - - - - (75,000) Loss on Sale of Assets - - - - (15,883) Write off of Note Receivable - - - - (191,701) Gain on Forgiveness of Debt - - - - 48,516 Gain (Loss) on Available for Sale Securities - - - - 412,772 ----------------- ----------------- ------------------ ----------------- ----------------- Total Other Income (expense) (5,783) (4,205) (17,409) (12,212) (232,766) ----------------- ----------------- ------------------ ----------------- ----------------- Net Loss Before Taxes (298,483) (1,245,534) (1,489,483) (2,286,657) (16,456,311) Income Tax Expense - - - - (1,642) ----------------- ----------------- ------------------ ----------------- ----------------- Net Loss $ (298,483) $ (1,245,534)$ (1,489,483)$ (2,286,657) $ (16,457,953) ================= ================= ================== ================= ================= Basic & Diluted loss Per Share $ (0.03) $ (0.18) $ (0.15) $ (0.41) ================= ================= ================== ================= Weighted Average 10,232,149 6,951,533 9,822,849 5,547,393 ================= ================= ================== ================= The accompanying notes are an integral part of these financial statements. 4 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS (Unaudited) Cumulative Since May 5, 1999 For the Nine Months Ended Inception of March 31, Development ------------------------------------ 2005 2004 Stage ---------------- ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (1,489,483) $ (2,286,657) $ (16,457,953) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and Amortization - 2,168 3,536,428 Issuance of Common Stock for Expenses 644,333 1,507,685 8,312,029 Stock Issued for Payment of Accounts Payable 25,000 20,000 45,000 Stock to be Issued for Accrued Expenses 266,666 - 266,666 Compensation Expense from Stock Options - 20,000 487,500 Realized gain on trading investments - - (412,773) Loss on sale of assets - - 15,883 Loss on Investment Written Off - 305,510 569,008 Gain on Forgiveness of Debt - - (48,516) Cash acquired in merger - - 332 Change in operating assets and liabilities: Investment in films, manuscripts, recordings and similar property - - (272,008) Prepaid Expense & Other Receivable (15,766) (199) (25,000) Accounts Payable 16,906 (20,117) 246,104 Accrued Expenses 205,189 12,212 283,562 Lawsuit Payable - - 37,411 Payable to SAG for Route 66 - - 71,493 ---------------- ------------------ ------------------ Net Cash Used in operating activities (347,155) (439,398) (3,344,834) ---------------- ------------------ ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment - (1,598) (13,745) Proceeds from sale of assets - - 51,117 Proceeds from sale of investments - - 565,773 ---------------- ------------------ ------------------ Net cash provided (used) in investing activities - (1,598) 603,145 ---------------- ------------------ ------------------ 5 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS (Unaudited) (Continued) Cumulative Since May 5, 1999 For the Nine Months Ended Inception of March 31, Development ------------------------------------ 2005 2004 Stage ---------------- ------------------ ------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from loans from shareholders $ 230,149 $ 127,171 $ 2,250,262 Payments of principal on loans from shareholders (17,091) (29,226) (426,087) Proceeds from issuance of common stock 134,970 394,500 853,986 Proceeds from issuance of short-term notes - - 64,000 Bank Overdraft (401) - - ---------------- ------------------ ------------------ Net Cash Provided by Financing Activities 347,627 492,445 2,742,161 ---------------- ------------------ ------------------ Net (Decrease) Increase in Cash 472 51,449 472 Cash at Beginning of Period - 10,757 - ---------------- ------------------ ------------------ Cash at End of Period $ 472 $ 62,206 $ 472 ================ ================== ================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ - $ - $ 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 39,000 43,465 1,253,936 The accompanying notes are an integral part of these financial statements. 6 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. The unaudited financial statements as of March 31, 2005 and for the three and nine months then ended reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the three and nine months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years. Nature of Operations and Going Concern The accompanying financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assumes that the Company will continue in operation for at least one year and will be able to realize its assets and discharge its liabilities in the normal course of operations. Several conditions and events cast doubt about the Company's ability to continue as a "going concern". The Company has incurred net losses of approximately $16,458,000 for the period from May 5, 1999 (inception) to March 31, 2005, 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, officers and shareholders of the Company have committed to meeting its minimal operating expenses. The Company's future capital requirements will depend on numerous factors including, but not limited to, continued progress developing its products and market penetration and profitable operations. These financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a "going concern". While management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of the "going concern" assumption used in preparing these financial statements, there can be no assurance that these actions will be successful. If the Company were unable to continue as a "going concern", then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the reported expenses, and the balance sheet classifications used. 7 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Organization and Basis of Presentation The Company was incorporated under the laws of the State of Nevada on May 5, 1999. The Company as of March 31, 2005 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 develop its own film and music properties as well as acquire a number of diversified entertainment companies that will allow for the pursuit of opportunities currently available in the global marketplace. The Company plans to produce low to medium budget profitable 3-D and 2-D direct to DVD films, as well as pay-per-view films, theatrical release films, television/cable films and entertainment and merchandising related to specific content. It will also develop its record business and begin with the production and distribution of compilation albums. In addition, the Company will acquire additional intellectual property assets such as existing television, film, gaming and music properties via its own worldwide distribution and merchandising entity, and through the acquisition of existing companies. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 8 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO 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 $116,600 and $31,750 advertising expense for the nine months ended March 31, 2005 and 2004. 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. 9 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 March 31, 2005 and June 30, 2004, the Company had $0 and $0 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 March 31, 2005 and 2004 and are thus not considered. Reclassification Certain reclassifications have been made in the 2004 financial statements to conform with the 2005 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. 10 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 nine months ended March 31, 2005 and 2004, rent expense was $25,109 and $45,923. NOTE 5 - LOANS FROM SHAREHOLDERS AND OTHER RELATED PARTY TRANSACTIONS As of March 31, 2005 and June 30, 2004, the company owes $459,427 and $285,370 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. NOTE 6 - COMMON STOCK TRANSACTIONS The Company was initially authorized to issue 100,000,000 common shares with a par value of $0.001. 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 value of $5,000. These shares were issued under Rule 4(2). 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 and 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 4366,084 in 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 11 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 6 - COMMON STOCK TRANSACTIONS (continued) (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. These shares were issued in reliance upon the Rule 4(2) exemptive provisions, and no advertising nor solicitation occurred. 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 $2.00 per share. The services rendered were for the development of the company's music division. The shares were issued under Rule 4(2) to an officer of the Company. On April 17, 2000, the Company issued 4,000 (100,000 pre-split) shares of common stock as payment for services valued at $100,000. On May 4, 2000, the Company issued 2,200 (55,000 pre-split) shares of common stock for cash of $55,000. On June 2, 2000, the Company issued 4,000 (100,000 pre-split) shares of common stock as payment for services valued at $100,000. On June 30, 2000, the Company issued 1,420 (35,500 pre-split) shares of common stock for cash of $35,000. 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 pre-split) restricted common shares, $96,492.73 (payable $25,000 on August 14, 2000 and $11,915.46 per month from December 14, 2000 to May 14, 2001 and $25,000 plus a 4.5% royalty on any merchandise and a 2% royalty on sequels). The shares issued were issued in reliance on Rule 4(2) and were issued to an accredited investor. On September 13, 2000, the Company issued 5,000 (125,000 pre-split) shares of common stock as payment for services valued at $141,250. 12 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 6 - 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 investment 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 were performed by Mr.Whiten pursuant to this agreement. On May 25, 2001, the 4,000 shares of stock issued to Mr. Whiten were cancelled 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 financial services previously rendered. These shares were issued under Rule 4(2). On November 15, 2000, the Company issued 32,000 (800,000 pre-split) shares of common stock for conversion of notes payable totaling $407,138. The value of these shares was $0.51 per share. On November 22, 2000, the Company issued 2,000 (50,000 pre-split) shares of common stock for conversion of notes payable totaling $25,000. The value of these shares was $0.50 per share. On November 22, 2000, the Company issued 4,080 (102,000 pre-split) shares of common stock as payment for consulting services valued at $102,000. On December 4, 2000, the Company issued 400 (10,000 pre-split) shares of common stock as payment for services valued at $10,200. On December 14, 2000, the Company issued 4,000 (100,000 pre-split) shares of common stock as payment for services valued at $106,000. On January 23, 2001, the Company issued 600 (15,000 pre-split) shares of common stock for cash $15,000. On January 30, 2001, the Company issued 4,724 (118,100 pre-split) shares of common stock as payment for services valued at $64,950. On March 10, 2001, the Company issued 8,000 (200,000 pre-split) shares of common stock as payment for services valued at $154,000. 13 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 6 - COMMON STOCK TRANSACTIONS (continued) On April 9, 2001, the Company issued 3,600 (90,000 pre-split) shares of common stock as payment for advertising expense valued at $49,500. Pursuant to an agreement made with an affiliate company of Mr. Williams (the Secretary- Treasurer and a 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 musical albums. The company will supply the necessary funding for the production of these albums and after capital repayment has occurred, the Company will receive 51% of the profits from the projects. The estimated production costs per album are projected to be $80,000. On May 25, 2001, 14,000 (350,000 pre split) shares that were issued during the year ended June 30, 2001 to various people for services were cancelled. These shares were cancelled for non- performance of services. The expenses related to these shares were recorded when the shares were issued. The expenses related to the issuance of these shares were reversed upon the cancellation of the shares. On June 1, 2001, the Company issued 840 (21,000 pre-split) shares of common stock for conversion of notes payable totaling $7,513. On June 15, 2001, the Company issued 1,000 (25,000 pre-split) shares of common stock as payment for services valued at $15,000. On June 28, 2001, the Company issued 10,000 (250,000 pre-split) shares of common stock as payment for services and advertising expenses valued at $150,000. On June 29, 2001, the Company issued 34,000 (850,000 pre-split) shares of common stock for conversion of notes payable totaling $225,000. On August 29, 2001, the Company issued 13,400 (335,000 pre-split) shares of common stock for conversion of notes payable totaling $100,500. 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 $0.26 per share, as agreed in the original loan documents. These shares were issued under Rule 4(2). On September 25, 2001, 4,000 (100,000 pre-split) shares that were issued during the year ended June 30, 2000 for services were cancelled. These shares were cancelled for non-performance of services. The expenses related to these shares were recorded when the shares were issued. The expenses related to the issuance of these shares were reversed upon the cancellation of the shares. 14 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 6 - COMMON STOCK TRANSACTIONS (continued) Also on September 25, 2001, the asset acquisition agreement with 3-D was rescinded and the assets acquired by the Company were returned to 3-D. The stock issued by the Company in the acquisition was not returned. There was a net increase in total stockholders' equity of $70,532. During the quarter ended September 30, 2001, the company issued 112,200 (2,805,000 pre- split) shares to the Company's officers and directors for services rendered in their various capacities (J. Honour (1,500,000), H. Williams (600,000), J. Bodziak, R. Urbisci and T. Noonan (100,000 each)) at the market value of the stock on the date of agreed (not actual) issuance of $0.45, allocated at $0.225 for the restricted nature of the securities issued. 3,600 (90,000 pre-split) restricted common shares were issued to individuals for cash at $0.50 per share trading value, or $0.25 cash paid with 50% discount for restricted securities. All shares were issued under Rule 4(2). 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 $0.14 and $0.35 per share. The share values were always determined based upon the trading price of the stock on the date of the agreement for services, not on the date of issuance of the shares. All shares were issued in reliance on the exemption provided by Rule 4(2). During the quarter ended December 31, 2001, the Company issued 94,825 (2,370,631 pre- slit) shares to various consultants for services at the market value, adjusted downwards by 50% for restricted nature of the securities, on the date of agreements. Also, 1,600 (40,000 pre split) shares were issued on July 30, 2001 for services but were cancelled on October 2, 2001 for non- performance of those services. 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, 119,185 (2,979,625 pre split) were issued in connection with previous debt cancellation, pursuant to the terms of the convertible instrument. These shares were issued under Rule 4(2), and the recipient was an accredited investor. On April 10, 2002, the Company issued 9,920 (248,000 pre-split) shares of common stock for conversion of notes payable totaling $32,627. On April 29, 2002, 8,000 (200,000 pre-split) common shares were issued for the purchase of "IN THE GARDEN OF EDEN" album. The value of the shares was $0.06 on the date of contractual agreement, and the shares were issued under Rule 4(2), but later rescinded for failure of the owner to deliver the rights. 15 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 6 - COMMON STOCK TRANSACTIONS (continued) On May 30, 2002, 4,000 (100,000 pre-split) common shares were issued to various people for services, which included writing, arranging, composing and product placement, all connected with the project "MAD DOGS AND OAKIES." The value of the shares was $.03 per share on the date of contract. These shares were issued to non-affiliates under Rule 4(2). 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 (April 15) and $.08 (May 24) per share. On July 1, 2002, 34,000 (850,000 pre-split) common shares were issued for cash, based upon a conversion contract entered into earlier. Also on July 8, 2002, 93,333 (2,333,334 pre-split) shares were issued in connection with a previous debt cancellation, based upon the terms of the note and conversion price therein committed. These shares were issued to an accredited investor under Rule 506 of Regulation D. 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. These shares were originally issued in prior periods, and the expenses associated with these shares were recorded when the shares were issued. During the quarter ended March 31, 2003, a total of 661,400 (16,535,000 pre-split) common shares were issued to individuals for services. This total included issuances to officers and directors, at $0.015 per share (restricted) of 13,450,000 shares (J. Honour (10,000,000), H. Williams (1,500,000), T. Noonan (500,000), J. Bodziak (250,000) and R. Urbisci (100,000)) and outside consultants providing media solicitation services (Ron Kelley, 1,100,000 shares). An additional 101,600 (2,540,000 pre-split) shares were issued to 7 individuals providing various consulting services, all as described in the Form S8 registration statement, filed April 29, 2003. The value of the registered shares was effectively $0.05 per share. The private placement shares were issued under the exemption available through Rule 4(2). On March 26, 2003, 160,000 (4,000,000 pre-split) common shares were issued for conversion of notes payable of $274,932. These shares were issued to an accredited investor, in conversion of pre-existing rights, under Rule 506. During the quarter ended June 30, 2003, 2,156,000 shares were issued to various people for services, which included 2,000,000 shares issued to J. Honour, the Company president, in exchange for $400,000 of past and current services ($0.40 per share or 50% discount to market), and several smaller issuees whose shares were valued at $0.38 per share, as their contract date differed from Honour's. These shares were issued under Rule 4(2). 16 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 6 - COMMON STOCK TRANSACTIONS (continued) 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. These shares were originally issued in a prior period, and the expense associated with these shares was recorded when the shares were issued. On June 25, 2003, 40,000 shares were issued for conversion of debt totaling $15,491, issued to Freddi Sidi, an accredited investor, under Rule 506. On July 8, 2003, 30,000 shares of common stock were issued for conversion of debt totaling $8,465. During the quarter ended September 30, 2003, 1,198,000 shares were issued to various people for services. A registration statement on Form S8 was filed covering 710,000 of these shares to the 5 individuals listed therein, at 100% of market on the date of issuance and registration ($0.55). The value of the unregistered shares, when originally issued, was between $0.47 and $0.52 per share on the various agreement dates. These recipients (Buss, McLane,Tribe, Duke Films, Doug Schwartz, Lawrence Kallet, Edby and Eric Honour) provided consulting services in locating and securing new media projects and received ther shares at a 50% discount to market, as their shares were subject to restrictive legending. These shares were issued under Rule 4(2). On November 17, 2003, 100,000 shares were cancelled for non-performance of services. These shares were originally issued in July 2003, and the expense associated with these shares was recorded when the shares were issued. During the quarter ended December 31, 2003, 523,072 shares were issued for $68,000 in services at $.13 per share (50% discount to market on October 1, 2003). During the quarter, 20,000 shares were issued to Chicago Investment Group and Greg Myers (20,000 total) for financial consulting at $0.26 per share, the market value on the date of issuance (October 1, 2003), and 700,000, cumulative, to Herky Williams (500,000), John Bodziak (100,000) and Tom Noonan (100,000) for employment and consulting services as officers of the Company, at a restricted share valuation of $0.20 ($0.40 market on November 24, 2003). In addition, the Company issued 200,000 shares to pay an accounts payable of $55,500 due Adams Technical Solutions at a price of $0.26 (50% of bid price on October 1, 2003). All shares were issued under the Rule 4(2) exemption. On February 9, 2004, 20,000 shares were cancelled for non-performance of services. These shares were originally issued in October 2003, and the expense associated with these shares was recorded when the shares were issued. The expense related to the issuance of these shares was reversed upon the cancellation of the shares. 17 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 6 - COMMON STOCK TRANSACTIONS (continued) On March 9, 2004, 156,000 shares were cancelled for non-performance of services. These shares were originally issued in September 2003, and the expense associated with these shares was recorded when the shares were issued. The expense related to the issuance of these shares was reversed upon the cancellation of the shares. During the quarter ended March 31, 2004, the Company issued 400,000 shares for cash (cancellation of indebtedness of $100,000) at $.25 per share, the price pre-set in the conversion agreements. The Company also issued 25,000 shares for cash (cancellation of indebtedness of $12,500) at $.50 per share, the price pre-set in the conversion agreements. Also during the quarter, 90,000 shares were issued to Focus Partners West, for financial services and 100,000 shares were issued to pay rent. The value of the 345,000 shares issued to employees and consultants was $.60, and these shares, issued to 7 named individuals, were the subject of a registration statement on Form S8, filed March 5, 2004. On January 20, 2004, the Company converted debt of $35,000 to 200,000 shares of common stock, pursuant to terms of pre-existing contracts. On April 7, 2004, the Company issued 60,000 shares of common stock to Messrs. Goldman and Botts, at $2.04 per share (the then-market price), for financial services. Also, on April 7, 2004 the Company issued 375,000 shares of common stock to for cash of $215,200, valued at $0.57 per share, in accord with previously agreed conversion rights. In addition, approximately $14,200 in loans were converted into 30,000 shares of common stock., converted at $0.47 per share, the pre- agreed conversion price. All shares were issued under the exemption provided by Rule 4(2). On April 14, 2004, the Company issued 100,000 shares of common stock for cash at $0.25 per share, resulting from an option exercise. 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 for cash at $0.75 per share, to acquire distribution rights in BAYWATCH 3 DD, a planned movie. These shares were issued to an accredited investor under Rule 506. 240,000 shares were issued to Jack Fennie for an $80,000 debt of the company which he paid,, at $0.33 per share, representing 50% of the market price on the date of delivery of the executed contract. 18 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 6 - COMMON STOCK TRANSACTIONS (continued) 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. 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. During the quarter ended September 30, 2004, the Company issued 1,234,333 shares of common stock to various people for services rendered. Consulting expense of $461,233 was recognized in connection with these issuances. Also during the quarter 400,000 shares were issued for cash at $0.25 per share. During the quarter ended December 31, 2004, the Company issued 41,000 shares of common stock to various people for services rendered. Consulting expense of $22,000 was recognized in connection with these issuances. Also during the quarter, $39,000 in loans was converted into 103,300 shares of common stock. During the quarter ended March 31, 2005, the Company issued 160,000 shares of common stock for cash of $35,000. These shares were valued at $.25 per share. During the quarter ended March 31, 2005, the Company issued 100,000 shares of common stock for $25,000 of accounts payable. These shares were valued at $.25 per share. During the quarter ended March 31, 2005, the Company issued 355,000 shares of common stock to various people for services valued at $164,100. The shares were valued at the market price on the date of authorization, which ranged from $.28 to $.70 per share. During the quarter ended March 31, 2005, the officers of the Company agreed to convert accrued payroll of $266,666 for the period from September 1, 2004 to March 31, 2005 to 266,666 shares of common stock. As of March 31, 2005, these shares had not been issued. 19 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 7 - 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 8 - COMMITMENTS 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. In addition, the Company has committed to grant various providers of services to the Company a total of 450,000 of its unregistered common stock. On March 30, 2005, the Company entered into a two-year agreement with Mr. Herky Williams, an officer, director and shareholder of the Company, whereby the Company will pay Mr. Williams $5,000 per month ($60,000 per year) in exchange for part-time services related to the music product development of the Company. The annual pay will be increased to $120,000 if and when Mr. Williams services are deemed to be full-time. The annual salary is retroactive to January 1, 2005. NOTE 9 - STOCK OPTIONS Pursuant to a year 2000 Stock Option and Compensation Plan, grants of shares can be made to employees, officers, directors, consultants and independent contractors of non-qualified stock options as well as for the grant of stock options to employees that qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986 or as non-qualified stock options. The Plan is administered by the Board of Directors ("Board"), which has, subject to specified limitations, the full authority to grant options and establish the terms and conditions for vesting and exercise thereof. In order to exercise an option granted under the Plan, the optionee must pay the full exercise price of the shares being purchased. Payment may be made either: (i) in cash; or (ii) at the discretion of the Board, by delivering shares of common stock already owned by the optionee that have a fair market value equal to the applicable exercise price; or (iii) with the approval of the Board, with monies borrowed from the Company. 20 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 9 - STOCK OPTIONS (continued) Subject to the foregoing, the Board has broad discretion to decide the terms and conditions applicable to options granted under the Plan. The Board may at any time discontinue granting options under the Plan or otherwise suspend, amend or terminate the Plan and may, with the consent of an optionee, make such modification of the terms and conditions of such optionee's option as the Board shall deem advisable. 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 period of two years. As a result of the grant, $20,000 was recorded as compensation expense. On July 12, 2004, the Board of Directors granted an option to its former President and CEO, Mr. Lance Robbins, to purchase 2,500,000 unregistered common shares at an exercise price of $0.40 per share that vest one year from the grant date. According to the agreement, in the event Mr. Robbins resigned within the first six months of the agreement, he would be entitled to 200,000 options for each months served plus an additional 500,000 options. Mr. Robbins served three months prior to resigning. According to the agreement, Mr. Robbins is entitled to 1,100,000 options. No compensation expense was recorded because the Company feels that the exercise price was equal to or greater than the fair value of the stock on the grant date. (See Note 12 for further information.) The following table sets forth the options and warrants outstanding as of March 31, 2005 and June 30, 2004: March 31, June 30, 2005 2004 --------------------- ----------------- Options Outstanding, Beginning of year 20,000 - Granted 2,500,000 20,000 Expired (1,400,000) - Exercised - - --------------------- ----------------- Options Outstanding, End of year 1,120,000 20,000 ===================== ================= Exercise price for options outstanding, end of period $0.40 - $1.00 $1.00 ===================== ================= 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. 21 STEREO VISION ENTERTAINMENT, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 10- INVESTMENT IN WOW EVENTS, LLC 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 March 31, 2005 and June 30, 2004, the Company had $0 and $0 in film costs that are in the development stage or pre-production stage. For the nine months ended March 31, 2005 and 2004, the Company recorded losses of $0 and $0 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 MacPhearson 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. STEREO VISION ENTERTAINMENT, ET. AL., Case No. LC 0611749, in Los Angeles, California. Subsequently, the parties, on January 26, 2004, entered into a Settlement Agreement, including default provisions if scheduled payments did not occur as agreed. 25,000 shares of restricted stock, valued at $25,000, were delivered and $42,500 of payments were made, but the final $10,000 was not paid. According to the stipulated judgement agreement, this resulted in the plaintiff's entry of a judgment, according to notice received by the company, of $37,411, which was then appealed by the Company as incorrect. The appellate court disagreed and allowed the entry of judgment as filed, stating that the 25,000 shares had "no value" and allowing $37,411 to be imposed against the Company. Therefore, the company has paid $42,500 in cash, $25,000 in restricted stock, and owes $37,411, which has been accrued as a liability in the March 31, 2005 and June 30, 2004 financial statements, for a total lawsuit resolution of $104,911. The Company has informed counsel for its former President and CEO, Lance Robbins, who resigned on December 5, 2004 and was unanimously fired by the Board of Directors for cause on December 9, 2004, that it intends to seek recision of any and all agreements with him as well as return of all sums paid to him, a return of all shares of stock that were issued to him and cancellation of any stock options currently outstanding. As of March 31, 2005, this issue had not been resolved. No adjustments have been made to the March 31, 2005 financial statements with regards to this issue. 22 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. PLAN OF OPERATIONS - The following discussion should be read in conjunction with the Company's audited financial statements. SVEI intends to pursue opportunities in four product segments of the entertainment industry: A. Direct to DVD 2-D and 3-D films B. Feature length 2-D and 3-D films for theatrical release C. Pilots for television series D. Music production StereoVision intends to be the only company in Hollywood focused on developing a library of films using 3-D technology. The company intends to develop four new scripts for Direct to DVD movies each year and will concentrate on the most popular genres including horror, visual thrillers, sci-fi CGI effect movies, comedies and family films. The company also plans to develop its own record label out of Nashville, TN and will focus its initial efforts on the production and distribution of compilation albums. In addition, it will produce the music for all its own movies and retain the rights thereto wherever possible. 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 three and nine months ended March 31, 2005 and 2004. SVEI has sustained a net loss of approximately $1.5 million for the nine months ended March 31, 2005, 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 has developed a detailed plan of operations to exploit the opportunities it sees in the entertainment industry and to take advantage of the skills and experience of its management 23 team. On a preliminary basis, the Company estimates that it will require approximately $1,000,000 over a period of 12 months to fund initial development of existing projects as well as operate the company. In order to fund the actual production of a feature film, the Company estimates it will require approximately an additional $3,000,000 which it will obtain from a variety of sources including partner distributors, tax rebates for on site production in certain jurisdictions as well as debt and equity sources. 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 as well as loans from related parties. During the nine months ended March 31, 2005 and 2004, the Company received approximately $135,000 and $395,000 from the sale of common stock, and $230,000 and $127,000 from related party loans. However, there can be no assurances that additional loans will be forthcoming from officers, directors, and shareholders. ITEM 3. CONTROLS AND PROCEDURES The Company's Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company. (a) Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's President, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based upon the evaluation, the Company's President concluded that, as of the end of the period, the Company's disclosure controls and procedures were effective in timely alerting him to material information relating to the Company required to be included in the reports that the Company files and submits pursuant to the Exchange Act. (b) Changes in Internal Controls Based on his evaluation as of March 31, 2005, there were no significant changes in the Company's internal controls over financial reporting or in any other areas that could significantly affect the Company's internal controls subsequent to the date of his most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 24 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In September of 2001 the company entered into a promissory note with Duncan MacPhearson 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. STEREO VISION ENTERTAINMENT, ET. AL., Case No. LC 0611749, in Los Angeles, California. Subsequently, the parties, on January 26, 2004, entered into a Settlement Agreement, including default provisions if scheduled payments did not occur as agreed. 25,000 shares of restricted stock, valued at $25,000, were delivered and $42,500 of payments were made, but the final $10,000 was not paid. According to the stipulated judgement agreement, this resulted in the plaintiff's entry of a judgment, according to notice received by the company, of $37,411, which was then appealed by the Company as incorrect. The appellate court disagreed and allowed the entry of judgment as filed, stating that the 25,000 shares had "no value" and allowing $37,411 to be imposed against the Company. Therefore, the company has paid $42,500 in cash, $25,000 in restricted stock, and owes $37,411, which has been accrued as a liability in the March 31, 2005 and June 30, 2004 financial statements, for a total lawsuit resolution of $104,911. The Company has informed counsel for its former President and CEO, Lance Robbins, who resigned on December 5, 2004 and was unanimously fired by the Board of Directors for cause on December 9, 2004, that it intends to seek recision of any and all agreements with him as well as return of all sums paid to him, a return of all shares of stock that were issued to him and cancellation of any stock options currently outstanding. As of March 31, 2005, this issue had not been resolved. No adjustments have been made to the March 31, 2005 financial statements with regards to this issue. The Company filed suit against Mr. Robbins on December 23, 2004 in Miami/Dade County, Florida alleging breach of fiduciary duty and self dealing. Mr. Robbins has denied the charges and the matter is pending. ITEM 2. CHANGES IN SECURITIES During the quarter ended March 31, 2005, the Company issued 160,000 shares of common stock for cash of $35,000. These shares were valued at $.25 per share. During the quarter ended March 31, 2005, the Company issued 100,000 shares of common stock for $25,000 of accounts payable. These shares were valued at $.25 per share. During the quarter ended March 31, 2005, the Company issued 355,000 shares of common stock to various people for services valued at $164,100. The shares were valued at the market price on the date of authorization, which ranged from $.28 to $.70 per share. During the quarter ended March 31, 2005, the officers of the Company agreed to convert accrued payroll of $266,666 for the period from September 1, 2004 to March 31, 2005 to 266,666 shares of common stock. As of March 31, 2005, these shares had not been issued. 25 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 5. OTHER INFORMATION During the quarter ended March 31, 2005, Kevin Elder resigned as CFO of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are included as part of this report: Exhibit Number Exhibit 3.1 Articles of Incorporation (1) 3.2 Amended Articles of Incorporation (1) 3.3 Bylaws (1) 31 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1) Incorporated by reference to the Registrant's registration statement on Form 10-SB filed on August 9, 2000. (b) Reports on Form 8-K filed. None. 26 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereto duly authorized. STEREO VISION ENTERTAINMENT, INC. (Registrant) Dated: May 16, 2005 By /S/ Theodore Botts ---------------------------------------------- Theodore Botts, 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. Signatures & Title /S/ Theodore Botts Theodore Botts, C.E.O., President, Director (Principal Executive and Financial Officer) 27