U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: JUNE 30, 2005
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 Cabrito Rd., Suite 204, Van Nuys, CA 91406
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(Former address)
Issuer's telephone number (818) 909-7911
---------------
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-
-----
As of October 7, 2005, there were 11,103,537 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 $1,943,119 computed at the average bid and asked price as of
October 7, 2005.
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]
Indicate by check mark whether the registrant is a shell company (as
defined by Rule 12b-2 of the Exchange Act). Yes [ X ] No [ ]
Explanatory Note
We are filing this Amendment to our Annual Report on Form 10-KSB for
the year ended June 30, 2005 to respond to certain comments received by us from
the Staff of the Securities and Exchange Commission ("SEC") in connection with
its review of our Form 10KSB. Our financial position and results of operations
for the periods presented have not been restated from the financial position and
results of operations originally reported.
For convenience and ease of reference we are filing this Annual Report
in its entirety with the applicable changes. Unless otherwise stated, all
information contained in this amendment is as of November 15, 2005, the filing
date of our Annual Report on Form 10-KSB for the fiscal year ended June 30,
2005. Accordingly, this Amendment to the Annual Report on Form 10-KSB should be
read in conjunction with our subsequent filings with the SEC.
2
PART I
ITEM 1. DESCRIPTION OF
BUSINESS
GENERAL
The Company intends to position itself to evolve into a vertically
integrated, diversified media entertainment company. The Company anticipates
generating revenues from several sources, including production of new and
existing feature films in both 2-D and 3-D format for theatrical and direct to
DVD release, as well as expanding into other areas of the entertainment industry
including the production of music albums.
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
3
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 Cabrito
Road., Suite 204, Van Nuys, CA 91406. Its telephone number is (818) 909-7911.
OPERATING LOSSES
The Company has incurred net losses of approximately $1,833,000 and
$2,945,000 for the fiscal years ended June 30, 2005 and 2004. Such operating
losses reflect developmental and other start-up activities for 2005 and 2004.
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 begins production of films and music albums.
"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 will 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
Management believes that StereoVision's principal expertise lies in the
content production segment of the multi-media entertainment industry. The
Company's main line of business will be to provide original 3-D and 2-D
programming, as well as dependable low cost productions for theatrical release
and direct to DVD. Pay-per-view films, television/cable films, and other
4
entertainment related projects, including merchandising 3-D technology and items
related to specific creative content will also be targeted. Unique
self-developed projects will initially focus on low budget films (below $ 3
Million). In addition, the Company will pursue its interests in live
entertainment and the music business.
STEREOVISION ENTERTAINMENT PRODUCTIONS
The film content production business is very capital intensive and
StereoVision will need to raise and secure significant equity and/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,
beginning with composition records, 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 multimedia entertainment company with an initial
concentration on low to medium budget 3-D and 2-D films and the production of
composition albums. StereoVision intends to finance its business expansion
initially 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, television, theatres and home markets
and newly emerging distribution channels such as the Internet.
StereoVision intends to produce and develop 3-D and 2-D 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
5
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 3-D and
2-D 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
where appropriate.
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."
6
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
7
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 October 7, 2005, 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 Cabrito Road,
Suite 204, Van Nuys, CA 91406 and consist of approximately 2,500 square feet of
unfurnished executive suite offices and reception and conference room
arrangements. The lease expires in June 2005. Since the lease expired, the
Company is on a month to month lease. The monthly rent for the property is
$2,500.
8
ITEM 3. 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 on the June 30,
2005 and 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 June 30, 2005, this issue had
not been resolved. No adjustments have been made to the June 30, 2005 financial
statements with regards to this issue.
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, 2005.
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.
9
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, 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
Quarter ended September 30, 2004 $0.90 $0.32
Quarter ended December 31, 2004 $0.70 $0.37
Quarter ended March 31, 2005 $0.72 $0.25
Quarter ended June 30, 2005 $0.50 $0.26
The number of shareholders of record of the Company's Common Stock as
of October 7, 2005 was approximately 179.
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
During the quarter ended September 30, 2004, the Company issued
1,234,333 shares of common stock to nine individuals for services rendered,
including financial advisory, marketing, PR and strategic advice. 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.equal
to 50% of the bid price.
10
During the quarter ended December 31, 2004, the Company issued 189,300
shares of common stock as follows: 86,000 shares to five individuals for
services including secretarial, marketing and public relations. This included
issuance of 56,000 S-8 shares valued at the closing price of the stock on the
day prior to issuance and 30,000 restricted shares valued at fifty per cent of
the price of the stock on the day prior to issuance. Consulting expense of
$39,850 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, which was equal to a discount of 50% of the prevailing market price due
for restricted securities.
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, which was equal to a discount of 50% of the prevailing market
price due for restricted securities.
During the quarter ended March 31, 2005, the Company issued 370,000
shares of common stock to various people for services valued at $167,850. The
shares were valued at the market price on the date of the signing of the
agreements, which ranged from $.25 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, at a price of $1 per
share, versus the then market price of $.40 per share. As of June 30, 2005,
these shares had not been issued.
On April 4, 2005, the Company issued 20,000 shares of common stock for
consulting and legal services at $.35 per share, the closing price on the day
prior to issuance, resulting in expense of $7,000 being recognized.
During the quarter ended June 30, 2005, the Company entered into an
agreement to issue 20,000 shares of common stock valued at $.30 per share in
exchange for a 10% interest in JamOakie Productions, Inc. As of June 30, 2005,
the shares had not been issued.
During the quarter ended June 30, 2005, the Company entered into an
agreement to issue 100,000 shares of common stock for payment of $35,000 in
accounts payable. As of June 30, 2005, these shares had not been issued.
During the quarter ended June 30, 2005, the Company entered into three
separate agreements to issue a total of 153,000 shares of common stock for
conversion of notes payable of $32,000. As of June 30, 2005, these shares had
not been issued.
11
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.
SVEI intends to pursue opportunities in four product segments of the
entertainment industry:
Direct to DVD 2-D and 3-D films
Feature length 2-D and 3-D films for theatrical release
Pilots for television series 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 theatrical release and 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, Tennessee and will focus
its initial efforts on the production and distribution of composition albums.
As a development stage company, SVEI has minimal historical operations,
no revenues and negative cash flows. In order to satisfy cash requirements for
SVEI'sproduction 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. 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, 2005 and 2004. SVEI has sustained a net loss of
approximately $1,833,000 for the year ended June 30, 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.
12
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 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 and loans from related
parties. During the year ended June 30, 2005, the Company received approximately
$164,000 from the sale of common stock and $220,000 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.
13
ITEM 8A. 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 this evaluation as of June 30, 2005, there were no significant
changes in the Company's internal controls over financial reporting for the
quarter ended June 30, 2005, 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.
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 ending June 30, 2004. 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. On December 9, the Company terminated its CEO, Lance Robbins, for
cause and subsequentlypointed Theodore Botts acting CEO. In February, 2005, the
Board appointed Douglas Schwartz to the newly created podt of Chief Creative
Officer. Messrs. Botts and Schwartz resigned thgeir positions with the company
in October, 2005 and announced they would continue their affiliation with the
Company as consultants.
14
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: as of June 30, 2005:
Name of Director Age Current Position Position Held Since
Doug Schwartz 60 Chairman/Director July, 2004
Tom Noonan 73 Vice Chairman August, 2000
Theodore Botts 60 CEO/CFO, Director September, 2004
John Honour 53 COO, Director June, 2001
Herky Williams 50 Secretary/Treasurer May, 2000
John C. Bodziak, Jr. 31 Director August, 2000
DOUG SCHWARTZ, Chairman of the Board
Mr. Schwartz was elected Chairman of the Board on July 6, 2004 and was appointed
Chief Creative Officer on December 16, 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.
THEODORE P. BOTTS, CEO/CFO, Director
Mr. Botts was elected to the StereoVision Board of Directors and appointed as
the Chief Financial officer in August, 2004. He assumed the role of CEO in
December, 2005. Prior to his appointments, Mr. Botts had served as Senior
Financial Advisor to the Company's officers and BoardofDirectors.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
15
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 on the Board of Trustees and is the head
of development for REACH Prep, a non-profit children's educational organization.
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.
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, 2005 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.
16
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, 2005, the Board consisted of six
individuals and adopted 3 resolutions.
The Board does not currently have any committees, but intends to
establish an audit committee and a compensation committee as soon as formal
operations commence.
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 an independent
"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
$250,000 during any of the Company's last two fiscal years.
ITEM 11. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
17
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
11,103,537 shares of issued and outstanding Common Stock of the Company as of
October 7, 2005 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 *
(6 persons) Common 4,428,842 39.88%
Douglas Schwartz Common 162,500
Theodore Botts Common 941,142 8.84%
Tom Noonan Common 100,000
John Honour Common 2,541,600 24.62%
Herky Williams Common 571,000
John C. Bodziak Common 112,600
*The address of all six officers and directors is in care of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of June 30, 2005 and 2004, the company owes $463,766 and $285,370 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". This agreement has expired.
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
18
services are deemed to be full-time. The annual salary is retroactive to January
1, 2005.
On May 2, 2005, the Company signed an agreement with Mr. Jamie Oldaker
to acquire a 10% interest in JamOakie Productions which entitles the company to
10% of the profits from the album, "Mad Dogs and Oakies" which has subsequently
been released. The Company has the right but not the obligation to finance
future JamOakie projects. The price paid was 20,000 unregistered common shares
of the Company which were worth $6,000 at the time, and $5,893 in cash.
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
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)
19
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 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.
32 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.
(*) 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, 2005.
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, 2005 JUNE 30, 2004
------------- -------------
Audit Fees $ 21,200 $ 13,725
Audit Related Fees NIL NIL
Tax Fees 100 90
All Other Fees NIL NIL
As of June 30, 2005, the Company's Audit Committee did not have a formal,
documented pre-approval policy for the fees of the principal accountant.
20
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
-:-
INDEPENDENT AUDITOR'S REPORT
JUNE 30, 2005 AND 2004
CONTENTS
Page
Independent Auditor's Report............................................F - 1
Balance Sheets
June 30, 2005 and 2004...............................................F - 2
Statements of Operations for the
Years Ended June 30, 2005 and 2004 and the Cumulative
Period May 5, 1999 (inception) to June 30, 2005......................F - 4
Statement of Stockholders' Equity for the
Period May 5, 1999 (Inception) to June 30, 2005 .....................F - 5
Statements of Cash Flows for the
Years Ended June 30, 2005 and 2004 and the Cumulative
Period May 5, 1999 (Inception) to June 30, 2005.....................F - 17
Notes to Financial Statements..........................................F - 19
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, 2005 and 2004
and the related statements of operations, and cash flows for the two years ended
June 30, 2005 and 2004 and the cumulative period May 5, 1999 (inception) to June
30, 2005 and the statement of stockholders equity for the period May 5, 1999
(inception) to June 30, 2005. 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, 2005 and 2004
and the results of its operations and its cash flows for the two years ended
June 30, 2005 and 2004 and the cumulative period May 5, 1999 (inception) to June
30, 2005, 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
November 11, 2005
F - 1
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS: June 30,
2005 $2,004
------------------ ------------------
Current Assets:
Cash $ 1,669 $ -
Prepaid Expenses 10,000 9,234
------------------ ------------------
Total Current Assets 11,669 9,234
------------------ ------------------
Fixed Assets:
Office Equipment 13,745 13,745
Less Accumulated Depreciation (13,745) (13,745)
------------------ ------------------
Net Fixed Assets - -
------------------ ------------------
Intangible and Other Non- Current Assets:
Investment in JamOakie 11,893
Investment in Wilfield Entertainment - -
Films, Manuscripts, Recordings and Similar Property - -
------------------ ------------------
Net Intangible and Other Non-Current Assets 11,893 -
------------------ ------------------
Total Assets $ 23,562 $ 9,234
================== ==================
F - 2
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
BALANCE SHEETS
(Continued)
June 30,
2005 2004
------------------ ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Accounts Payable $ 281,976 $ 246,628
Accrued Expenses 502,799 78,373
Bank Overdraft - 401
Payable to SAG for Route 66 71,493 71,493
Lawsuit Payable 32,411 37,411
Loans from Shareholders 463,766 285,370
------------------ ------------------
Total Current Liabilities 1,352,445 719,676
------------------ ------------------
Stockholders' Equity:
Shareholder Receivable - -
Common Stock, $.001 Par value
Authorized 100,000,000 shares,
Issued10,821,855 shares at June 30, 2005
and 8,348,222 shares at June 30, 2004 10,822 8,348
Common Stock to be Issued, 539,666 shares at
June 30, 2005 and -0- shares at June 30, 2004 540 -
Additional Paid in Capital 13,349,736 12,138,180
Deficit Accumulated During the Development Stage (14,689,981) (12,856,970)
------------------
Total Stockholders' Equity (1,328,883) (710,442)
------------------ ------------------
Total Liabilities and Stockholders' Equity $ 23,562 $ 9,234
================== ==================
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
--------------------------------------
2005 2004 Stage
------------------ ------------------ -------------------
Revenues $ - $ - $ -
------------------ ------------------ -------------------
Expenses
Research & Development - - 293,000
General & Administrative 239,699 186,524 8,202,247
Salaries & Consulting 1,452,915 1,781,703 4,872,413
Advertising & Promotion 116,600 31,750 418,423
Loss on Investment - 558,191 558,191
Lawsuit Settlement - 104,911 104,911
------------------ ------------------ -------------------
Operating Loss (1,809,214) (2,663,079) (14,449,185)
Other income (expense):
Interest (22,989) (14,737) (417,050)
Investment Fee - (75,000) (75,000)
Loss on Sale of Assets - - (15,883)
Write off of Note Receivable - (191,701) (191,701)
Gain on Forgiveness of Debt - - 48,516
Gain (Loss) on Available for Sale
Securities - - 412,772
------------------ ------------------ -------------------
Total Other Income (expense) (22,989) (281,438) (238,346)
------------------ ------------------ -------------------
Net Loss Before Taxes (1,832,203) (2,944,517) (14,687,531)
Income Tax Expense (808) (808) (2,450)
------------------ ------------------ -------------------
Net Loss $ (1,833,011) $ (2,945,325) $ (14,689,981)
================== ================== ===================
Basic & Diluted loss Per Share $ (0.18) $ (0.48)
================== ==================
Weighted Average 10,072,272 6,154,874
================== ==================
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
Common Additional During
Common Stock Stock Paid in Development
------------------------------------
Shares Value to be Issued 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 - 35,498 -
Net Loss - - - - (2,680,213)
----------------- ------------------ -------------- ----------------- ------------------
F - 5
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Common Additional During
Common Stock Stock Paid in Development
------------------------------------
Shares Value to be Issued Capital Stage
----------------- ------------------ ----------------- ----------------- ------------------
Balance at June 30, 2000 197,620 $ 198 $ - $ 4,995,136 $ (2,825,190)
September 13, 2000 Stock Issued for
Conversion of notes payable 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 - - 12,500 -
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
Common Additional During
Common Stock Stock Paid in Development
----------------------------------
Shares Value to be Issued 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 Expense 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
Common Additional During
Common Stock Stock Paid in Development
-----------------------------------
Shares Value to be Issued 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
Common Additional During
Common Stock Stock Paid in Development
----------------------------------
Shares Value to be Issued 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 15, 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
Common Additional During
Common Stock Stock Paid in Development
-----------------------------------
Shares Value to be Issued 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 - - - - (1,066,683)
---------------- ------------------ ----------------- ----------------- ------------------
Balance at June 30, 2002 739,406 739 - 8,891,530 (8,464,198)
July 1, 2002 Shares Issued for Cash 34,000 34 - 9,466 -
July 8, 2002 Shares Issued for
Interest on Debt Retirement 85,344 85 - 81,582 -
December 20, 2002, Shares returned
to treasury and cancelled (20,000) (20) - 20 -
December 23, 2002, Shares
Cancelled for non-performance of
Services (104,000) (104) - (1,054,396) -
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
Common Additional During
Common Stock Stock Paid in Development
-----------------------------------
Shares Value to be Issued 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) - (56,988) -
June 12, 2003, Shares Issued for
Services 2,000,000 2,000 - 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 - - - - (1,447,447)
---------------- ------------------ ----------------- ----------------- ------------------
Balance at June 30, 2003 3,828,150 3,828 - 9,378,311 (9,911,645)
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
Common Additional During
Common Stock Stock Paid in Development
-----------------------------------
Shares Value to be Issued 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
Conversion of Note Payable 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
Common Additional During
Common Stock Stock Paid in Development
------------------------------------
Shares Value to be Issued 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
Common Additional During
Common Stock Stock Paid in Development
------------------------------------
Shares Value to be Issued 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 - 12,138,180 (12,856,970)
July 13, 2004, Shares issued for
Consulting 128,333 128 - 54,805 -
July 22, 2004, Shares issued for
Consulting 280,000 280 - 121,920 -
July 31, 2004, Shares issued for cash 100,000 100 - 24,870 -
August 9, 2004, Shares issued for
Consulting 620,000 620 - 183,380 -
August 26, 2004 Shares issued for cash 100,000 100 - 24,900 -
August 30, 2004 Shares issued for cash 200,000 200 - 49,800 -
August 30, 2004, Shares issued for
Consulting 70,000 70 - 17,430 -
September 17, 2004, Shares issued for
Services 136,000 136 - 82,464 -
December 8, 2004, Shares issued for
Services 36,000 36 - 17,964 -
F - 14
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Common Additional During
Common Stock Stock Paid in Development
-----------------------------------
Shares Value to be Issued Capital Stage
---------------- ------------------ ----------------- ----------------- ------------------
December 15, 2004, Shares Issued for
Services 45,000 $ 45 $ - $ 19,955 $ -
December 15, 2004, Loans Converted
To Shares 103,300 103 - 38,897 -
December 17, 2004, Shares issued for
Services 5,000 5 - 1,845 -
January 24, 2005, Shares issued for
Services 15,000 15 - 3,735 -
January 24, 2005, Shares issued for
Cash 20,000 20 - 4,980 -
February 1, 2005, Shares issued for
Cash 120,000 120 - 24,880 -
February 22, 2005, Shares issued for
Cash 20,000 20 - 4,980 -
March 30, 2005, Shares issued for
Services 355,000 355 - 163,745 -
March 30, 2005, Shares issued for
Accounts payable 100,000 100 - 24,900 -
April 4, 2005, Shares issued for
Services 20,000 20 - 6,980 -
Shares to be issued for payroll - - 267 266,399 -
Shares to be issued for Investment
In JamOakie Productions, Inc. - - 20 5,980 -
Shares to be issued for expenses - - 100 34,900 -
F - 15
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Continued)
Deficit
Accumulated
Common Additional During
Common Stock Stock Paid in Development
-----------------------------------
Shares Value to be Issued Capital Stage
---------------- ------------------ ----------------- ----------------- ------------------
Shares to be issued for conversion of
Loans payable - $ - $ 153 $ 31,847 $ -
Net Loss - - - - (1,833,011)
---------------- ------------------ ----------------- ----------------- ------------------
Balance at June 30, 2005 10,821,855 $ 10,821 $ 540 $ 13,349,736 $ (14,389,981)
================ ================== ================= ================= ==================
The accompanying notes are an integral part of these financial statements.
F - 16
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
------------------------------------
2005 2004 Stage
---------------- ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,833,011) $ (2,945,325) $ (14,689,981)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and Amortization - 2,749 3,536,428
Issuance of Common Stock for Expenses 710,933 1,785,769 6,279,129
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 - - 487,500
Realized gain on trading investments - - (412,773)
Loss on sale of assets - - 15,883
Loss on Investment Written Off - 557,008 557,008
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 (766) (9,234) (10,000)
Accounts Payable 35,348 (21,649) 264,546
Accrued Expenses 424,426 36,331 502,799
Lawsuit Payable (5,000) 37,411 32,411
Payable to SAG for Route 66 - - 71,493
---------------- ------------------ ------------------
Net Cash Used in operating activities (376,404) (536,940) (3,374,083)
---------------- ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment (5,892) (5,892)
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 (5,892) - 597,253
---------------- ------------------ ------------------
F - 17
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, 2005 Development
------------------------------------
2005 2004 Stage
---------------- ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from loans from shareholders $ 220,396 $ 77,766 $ 1,831,513
Proceeds from issuance of common stock 163,970 448,016 882,986
Proceeds from issuance of short-term notes - - 64,000
Bank Overdraft (401) 401 -
---------------- ------------------ ------------------
Net Cash Provided by Financing Activities 383,965 526,183 2,778,499
---------------- ------------------ ------------------
Net (Decrease) Increase in Cash 1,669 (10,757) 1,669
Cash at Beginning of Period - 10,757 -
---------------- ------------------ ------------------
Cash at End of Period $ 1,669 $ - $ 1,669
================ ================== ==================
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 $ 42,000 $ 23,105 $ 1,256,936
The accompanying notes are an integral part of these financial statements.
F - 18
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 $14,690,000 for the period from May 5, 1999 (inception) to June
30, 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,
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 - 19
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, 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 media entertainment company. The Company anticipates
generating revenues from several sources, including production of new and
existing feature films in both 2-D and 3-D format for theatrical and direct to
DVD release, as well as expanding into other areas of the entertainment industry
including the production of composition music albums
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 - 20
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 two years ended June 30, 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.
F - 21
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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, 2005 and 2004 and are thus
not considered. At June 30, 2005 and 2004, the total number of potentially
dilutive common stock equivalents was 1,120,000 and 20,000, respectively.
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, 2005, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $16,801,000 that may be
offset against future taxable income through 2025. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY/ GOING CONCERN
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage. Continuation of the Company as a going concern is dependent
upon obtaining the additional working capital necessary to be successful in its
planned activity, and the management of the Company has developed a strategy,
which it believes will accomplish this objective through additional equity
funding and long term financing, which will enable the Company to operate for
the coming year.
NOTE 4 - RENT EXPENSE
The Company has entered into lease agreements for various office,
storage and warehouse facilities on a month to month basis. For the two years
ended June 30, 2005 and 2004, rent expense was $73,309 and $49,723.
F - 22
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 5 - LOANS FROM SHAREHOLDERS AND OTHER RELATED PARTY
TRANSACTIONS
As of June 30, 2005 and 2004, the company owes $463,766 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.
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. On June 8, 2004, the company
received an extension on this agreement, for which the Company granted Baywatch
LLC 100,000 unregistered shares of common stock valued at $0.75 per share, 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". The $75,000 investment
fee has been recorded as other expense in the financial statements. The
agreement has since expired.
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
(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.
F - 23
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (continued)
On December 31, 1999, the Company issued 14,000 (350,000 pre-split)
shares to several employees (Rick Ducommun and Rocco Urbisci) and a consultant
for project related services rendered and to be 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 $1.00 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 to Shauna Gilibarti as payment for marketing related services
valued at $100,000. They were cancelled on May 25, 2001 for failure to perform.
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 to Profit Earth as payment for market development services services
valued at $100,000. They were cancelled for non performance on September 25,
2001.
On June 30, 2000, the Company issued 1,420 (35,500 pre-split) shares of
common stock for cash of $35,500.
On September 13, 2000, the Company issued 5,000 (125,000 pre-split)
shares of common stock for conversion of notes payable totaling $141,250. The
value of these shares was $1.13 per share, according to the terms of the
original loan agreement.
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).
F - 24
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (continued)
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, according to the terms of the
original loan agreement.
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 according to the terms of the original
agreement.
On November 22, 2000, the Company issued 4,080 (102,000 pre-split)
shares of common stock to Daniel Symmes as payment for 3-D 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 to Rod Whiton as payment for advertising services valued
at $106,000. These shares were cancelled for non-performance on May 25, 2001.
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 to six individuals as payment for services valued at
$64,950. These services included advising on the film "On Route 66" as well as
website design. On May 25, 2001, 2,000 of these shares were cancelled for
non-performance.
On March 10, 2001, the Company issued 8,000 (200,000 pre-split) shares
of common stock to Herky Williams (100,000) and Jerry Crutchfiels (100,000)
valued at $154,000 as payment for services regarding the production of a record
album.
On April 9, 2001, the Company issued 3,600 (90,000 pre-split) shares of
common stock to Charles Marshall 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
F - 25
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (continued)
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 years ended June 30, 2001 and 2000 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, according to the
terms of the original agreement.
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 to Vision Publishing (100,000) and Jim and Cynthia Pitochelli
(150,000) 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, according to
the terms of the original loan agreement.
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,
according to the terms of the original loan agreement.
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.
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.
F - 26
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (continued)
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 $0.30
to $0.45 per share.
During the quarter ended September 30, 2001, 3,600 (90,000 pre-split)
restricted common shares were issued to individuals for cash at $0.50 per share
trading value. 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 $20,779. 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, 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 twelve different individuals for services at the
market value on the date of the agreements, between $0.21 and $0.54 per share.
Such services included financial and market advisory as well as project
advisory.
On January 15, 2002, 12,000 (300,000 pre-split) shares of common stock
were issued for cash at $0.33 per share.
During the quarter ended March 30, 2002, 119,185 (2,979,625 pre split)
shares 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 according to
the terms of the original agreement.
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.
These shares were cancelled on June 3, 2003.
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).
F - 27
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (continued)
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.
During the quarter ended June 30, 2002, 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 of $9,500, based upon a conversion contract entered into earlier.
On July 8, 2002, 85,334 (2,133,334 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, 20,000 (500,000 pre-split) shares were returned
to the treasury and cancelled.
On December 23, 2002, 104,000 (2,600,000 pre split) common shares were
cancelled from various shareholders for non-performance of services. 750,000
shares were initially issued December 20, 2001, 1,500,000 shares were initially
issued September 27, 2001, and 450,000 shares were initially issued October 2,
2001. The shares were recorded as a prepaid asset at the time of issuance. The
entry recording the issuance of the shares was reversed upon cancellation.
During the quarter ended March 31, 2003, a total of 559,800 (13,995,000
pre-split) common shares were issued to individuals for services. This total
included issuances to officers and directors, at $0.029 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).
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.
On May 9, 2003, 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 $0.01 per share. The private placement shares were issued
under the exemption available through Rule 4(2).
F - 28
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 according to the terms of the original agreement.
On June 3, 2003, 12,000 shares were cancelled for non-performance of
services. These shares were originally issued during the year ended June 30,
2002. 8,000 shares were initially issued April 29, 2002 and recorded as other
assets. 4,000 shares were initially issued September 27, 2001 and recorded as a
prepaid asset. The journal entries recording the issuance of these shares was
reversed upon cancellation.
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.
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 Jack
Honour, the Company President, in exchange for $600,000 of past and current
services ($.30 per share or a 50% discount to market), and 156,000 shares issued
to nine additional issuees for services whose shares were valued from $.60 per
share to $1.13 per share (market value on the date of issuance) as their
contract dates differed from Honour's. These shares were issued under Rule 4(2).
On July 8, 2003, 30,000 shares of common stock were issued for
conversion of debt totaling $8,905, according to the terms of the original
agreement.
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 ($0.57). 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. 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 to Rod McLane 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.
F - 29
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (continued)
During the quarter ended December 31, 2003, 523,072 shares were issued
for $68,000 in services at approximately $0.13 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 for financial consulting services at $0.26 per
share, the market value on the date of issuance (October 1, 2003).
In addition, 700,000 shares total were issued to Herky Williams (500,000), John
Bodziak (100,000) and Tom Noonan (100,000) for employment and consulting
services as officers and directors of the company, at approximately $0.20 per
share (50% discount to market on November 23, 2003). Also, the Company issued
200,000 shares to pay an accounts payable of $55,500 due to Adams Technical
Solutions at a price of approximately $0.26 per share, (market value on date of
issuance on October 1, 2003). All shares were issued under the Rule 4 (2)
exemption.
On January 12, 2004, 90,000 shares were issued to Focus Partners West,
for financial services valued at $54,000.
On January 20, 2004, the Company converted debt of $35,046 to 200,000
shares of common stock, pursuant to terms of pre-existing contracts.
On February 9, 2004, 20,000 shares were cancelled for non-performance
of services. These shares were originally issued to Chicago investment Group and
Greg Myers 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.
On March 9, 2004, 156,000 shares were cancelled for non-performance of
services. These shares were originally issued to Tribe Communications for
provision of advertising services 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.
On March 9, 2004, 100,000 shares were issued to pay rent valued at
$25,000, according to the terms of a previous agreement.
On March 11, 2004, 345,000 shares were issued to employees and
consultants at $2.00, which was the market price on the date of issuance, and
these shares, issued to 7 named individuals, were the subject of a registration
statement on Form S8, filed March 5, 2004.
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.
F - 30
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (continued)
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 the
provision of financial advisory services.
On April 7, 2004 the Company issued 375,000 shares of common stock for
cash of $215,000, valued at $0.57 per share, in accordance with previously
agreed conversion rights. In addition, approximately $14,200 in loans were
converted into 30,000 shares of common stock, at a conversion price of $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 to
Var Growth valued at $0.81 per share for marketing 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.
On June 16, 2004, 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.
During the quarter ended September 30, 2004, the Company issued
1,234,333 shares of common stock to nine individuals for services rendered,
including financial advisory, marketing, PR and strategic advice. 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.equal
to 50% of the bid price.
During the quarter ended December 31, 2004, the Company issued 189,300
shares of common stock as follows: 86,000 shares to five individuals for
services including secretarial, marketing and public relations. This included
issuance of 56,000 S-8 shares valued at the closing price of the stock on the
day prior to issuance and 30,000 restricted shares valued at fifty per cent of
the price of the stock on the day prior to issuance. Consulting expense of
$39,850 was recognized in connection with these issuances. Also during the
quarter, $39,000 in loans was converted into 103,300 shares of common stock.
F - 31
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (continued)
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, which was equal to a discount of 50% of the prevailing market price due
for restricted securities.
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, which was equal to a discount of 50% of the prevailing market
price due for restricted securities.
During the quarter ended March 31, 2005, the Company issued 370,000
shares of common stock to various people for services valued at $167,850. The
shares were valued at the market price on the date of the signing of the
agreements, which ranged from $.25 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, at a price of $1 per
share, versus the then market price of $.40 per share. As of June 30, 2005,
these shares had not been issued.
On April 4, 2005, the Company issued 20,000 shares of common stock for
consulting and legal services at $.35 per share, the closing price on the day
prior to issuance, resulting in expense of $7,000 being recognized.
During the quarter ended June 30, 2005, the Company entered into an
agreement to issue 20,000 shares of common stock valued at $.30 per share in
exchange for a 10% interest in JamOakie Productions, Inc. As of June 30, 2005,
the shares had not been issued.
During the quarter ended June 30, 2005, the Company entered into an
agreement to issue 100,000 shares of common stock for payment of $35,000 in
accounts payable. As of June 30, 2005, these shares had not been issued.
During the quarter ended June 30, 2005, the Company entered into three
separate agreements to issue a total of 153,000 shares of common stock for
conversion of notes payable of $32,000. As of June 30, 2005, these shares had
not been issued.
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.
F - 32
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
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.
F - 33
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 9 - STOCK OPTIONS (continued)
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. These options have been cancelled for non- performance.
The following table sets forth the options and warrants outstanding as
of June 30, 2005 and 2004:
June 30, 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
===================== =================
*Cancelled for non-performance on November 9, 2005.
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.
F - 34
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 - 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 June 30,
2005 and 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 June 30, 2005, this issue had
not been resolved. No adjustments have been made to the June 30, 2005 financial
statements with regards to this issue.
NOTE 12 - INVESTMENT IN JAMOAKIE PRODUCTIONS
On May 2, 2005, the Company signed an agreement with Mr. Jamie Oldaker
to acquire a 10% interest in JamOakie Productions which entitles the company to
10% of the profits from the album, "Mad Dogs and Oakies" which has subsequently
been released. The Company has the right but not the obligation to finance
future JamOakie projects. The price paid was 20,000 unregistered common shares
of the Company which were worth $6,000 at the time, and $5,893 in cash.
F - 35
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: December 21, 2005 By /S/ John Honour
-----------------------
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 21st day of December
2005.
Signatures & Title
/S/ John Honour
John Honour
C.E.O., President, Director
(Principal Executive and Financial Officer)
Tom Noonan
Vice Chairman
/S/ Herky Williams
Herky Williams
Secretary-Treasurer/Director
/S/ John C. Bodziak
John C. Bodziak
Director
21