UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
Commission file number 000-28553
STEREO VISION ENTERTAINMENT, INC.
---------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 95-4786792
------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
15452 Cabrieto Rd., Suite 204, Van Nuys, CA 91406
--------------------------------------------------
(Address of principal executive offices)
(310) 205-7998
(Issuer's telephone number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practical date: 9,982,571 as of November 15,
2004
Transitional Small Business Disclosure Format (check one). Yes ; No X
PART I
ITEM 1. FINANCIAL STATEMENTS
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
ASSETS: September 30, June 30,
-------
2004 2004
------------------ ------------------
Current Assets:
Cash $ 2,727 $ -
Prepaid Expenses 65,513 9,234
------------------ ------------------
Total Current Assets 68,240 9,234
------------------ ------------------
Fixed Assets:
Office Equipment 13,745 13,745
Less Accumulated Depreciation (13,745) (13,745)
------------------ ------------------
Net Fixed Assets - -
------------------ ------------------
Total Assets $ 68,240 $ 9,234
================== ==================
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
BALANCE SHEETS
(Continued)
(Unaudited)
September 30, June 30,
2004 2004
------------------ ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Accounts Payable $ 264,526 $ 246,628
Accrued Expenses 190,926 78,373
Bank Overdraft - 401
Payable to SAG for Route 66 71,493 71,493
Lawsuit Payable 37,411 37,411
Loans from Shareholders 456,334 285,370
------------------ ------------------
Total Current Liabilities 1,020,690 719,676
------------------ ------------------
Stockholders' Equity:
Common Stock, $.001 Par value
Authorized 100,000,000 shares,
Issued 9,982, 571 at September 30, 2004
and 8,348,222 shares at June 30, 2004 9,983 8,348
Additional Paid in Capital 14,809,249 14,249,680
Deficit Accumulated During the Development Stage (15,771,682) (14,968,470)
------------------ ------------------
Total Stockholders' Equity (952,450) (710,442)
------------------ ------------------
Total Liabilities and Stockholders' Equity $ 68,240 $ 9,234
================== ==================
The accompanying notes are an integral part of these financial statements.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
Since May 5,
1999
For the Three Months Ended Inception of
September 30, Development
--------------------------------------
2004 2003 Stage
------------------ ------------------ -------------------
Revenues $ - $ - $ -
------------------ ------------------ -------------------
Expenses
Research & Development - - 293,000
General & Administrative 30,101 95,414 9,092,149
Salaries & Consulting 661,137 630,300 5,080,635
Advertising & Promotion 106,600 - 408,423
------------------ ------------------ -------------------
Operating Loss (797,838) (725,714) (14,874,207)
Other income (expense):
Interest (5,374) (3,910) (399,435)
Investment Fee - - (75,000)
Loss on Sale of Assets - - (15,883)
Loss on Investment - - (570,191)
Lawsuit Settlement - - (104,911)
Write off of Note Receivable - - (191,701)
Gain on Forgiveness of Debt - - 48,516
Gain (Loss) on Trading
Investments - - 412,772
------------------ ------------------ -------------------
Total Other Income (expense) (5,374) (3,910) (895,833)
------------------ ------------------ -------------------
Net Loss Before Taxes (803,212) (729,624) (15,770,040)
Income Tax Expense - - (1,642)
------------------ ------------------ -------------------
Net Loss $ (803,212) $ (729,624) $ (15,771,682)
================== ================== ===================
Basic & Diluted loss Per Share $ (0.09) $ (0.18)
================== ==================
Weighted Average 9,236,443 4,081,759
================== ==================
The accompanying notes are an integral part of these financial statements.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
Since May 5,
1999
For the Three Months Ended Inception of
September 30, Development
------------------------------------
2004 2003 Stage
---------------- ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (803,212) $ (729,624) $ (15,771,682)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and Amortization - 687 3,536,428
Issuance of Common Stock for Expenses 461,233 630,300 8,128,929
Stock Issued for Payment of Accounts Payable - - 20,000
Compensation Expense from Stock Options - - 487,500
Realized gain on trading investments - - (412,773)
Loss on sale of assets - - 15,883
Loss on Investment Written Off - - 569,008
Gain on Forgiveness of Debt - - (48,516)
Cash acquired in merger - - 332
Change in operating assets and liabilities:
Investment in films, manuscripts, recordings
and similar property - (25,000) (272,008)
Prepaid Expense (56,279) - (65,513)
Accounts Payable 17,898 12,781 247,096
Accrued Expenses 112,553 3,909 190,926
Bank Overdraft (401) 2,690 -
Lawsuit Payable - - 37,411
Payable to SAG for Route 66 - - 71,493
---------------- ------------------ ------------------
Net Cash Used in operating activities (268,208) (104,257) (3,265,486)
---------------- ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment - - (13,745)
Proceeds from sale of assets - - 51,117
Proceeds from sale of investments - - 565,773
---------------- ------------------ ------------------
Net cash provided (used) in investing activities - - 603,145
---------------- ------------------ ------------------
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Cumulative
Since May 5,
1999
For the Three Months Ended Inception of
September 30, Development
------------------------------------
2004 2003 Stage
---------------- ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans from shareholders $ 175,615 $ 38,000 $ 2,195,728
Payments of principal on loans from shareholders (4,650) - (413,646)
Proceeds from issuance of common stock 99,970 55,500 818,986
Proceeds from issuance of short-term notes - - 64,000
---------------- ------------------ ------------------
Net Cash Provided by Financing Activities 270,935 93,500 2,665,068
---------------- ------------------ ------------------
Net (Decrease) Increase in Cash 2,727 (10,757) 2,727
Cash at Beginning of Period - 10,757 -
---------------- ------------------ ------------------
Cash at End of Period $ 2,727 $ - $ 2,727
================ ================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ 26 $ 43,799
---------------- ------------------ ------------------
Income taxes $ - $ - $ -
---------------- ------------------ ------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Common Stock Issued for Investment in
Wilfield Entertainment $ - $ - $ 220,000
Common Stock Issued for Investment in
Mad Dogs & Oakies Project - - 3,000
Common Stock Issued for Investment in
In the Garden of Evil Project - - 12,000
Notes Payable Converted to Stock - 392,090 1,214,936
The accompanying notes are an integral part of these financial statements.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Stereo Vision Entertainment,
Inc. is presented to assist in understanding the Company's financial statements.
The accounting policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the financial statements.
The unaudited financial statements as of September 30, 2004 and for the
three months then ended reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to fairly state the
financial position and results of operations for the three months. Operating
results for interim periods are not necessarily indicative of the results which
can be expected for full years.
Nature of Operations and Going Concern
The accompanying financial statements have been prepared on the basis
of accounting principles applicable to a "going concern", which assumes that the
Company will continue in operation for at least one year and will be able to
realize its assets and discharge its liabilities in the normal course of
operations.
Several conditions and events cast doubt about the Company's ability to
continue as a "going concern". The Company has incurred net losses of
approximately $15,772,000 for the period from May 5, 1999 (inception) to
September 30, 2004, has a liquidity problem, and requires additional financing
in order to finance its business activities on an ongoing basis. The Company is
actively pursuing alternative financing and has had discussions with various
third parties, although no firm commitments have been obtained. In the interim,
shareholders of the Company have committed to meeting its minimal operating
expenses.
The Company's future capital requirements will depend on numerous
factors including, but not limited to, continued progress developing its
products and market penetration and profitable operations.
These financial statements do not reflect adjustments that would be
necessary if the Company were unable to continue as a "going concern". While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial statements, there can be
no assurance that these actions will be successful.
If the Company were unable to continue as a "going concern", then
substantial adjustments would be necessary to the carrying values of assets, the
reported amounts of its liabilities, the reported expenses, and the balance
sheet classifications used.
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 September 30, 2004 is in the development stage,
and has not commenced planned principal operations.
Nature of Business
The Company intends to position itself to evolve into a vertically
integrated, diversified global media entertainment company. The Company intends
to acquire a number of diversified entertainment companies that will allow for
the pursuit of opportunities currently available in the global marketplace.
The Company anticipates generating revenues from several sources,
including, production of and exhibition of new and existing feature films and
providing integrated solutions to help organizations broadcast audio, video,
animation, and music over the Internet as well as expanding into other areas of
the entertainment industry.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 $106,600 and $0
advertising expense for the three months ended September 30, 2004 and 2003.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements. The Company maintains the majority of its cash
balances with one financial institution, in the form of demand deposits.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Intangible Assets
Intangible assets consist of movie and music licensing rights and
production costs and are valued at cost. As of September 30, 2004 and June 30,
2004, the Company had $0 and $0 in film costs that are in the development stage
or pre-production stage.
The Company identifies and records impairment losses on intangible
assets when events and circumstances indicate that such assets might be impaired
or when the property is not set for production within three years of
acquisition. The Company considers factors such as significant changes in the
regulatory or business climate and projected future cash flows from the
respective asset. Impairment losses are measured as the amount by which the
carrying amount of intangible asset exceeds its fair value.
Loss per Share
Basic loss per share has been computed by dividing the loss for the
year applicable to the common stockholders by the weighted average number of
common shares outstanding during the years. The effect of outstanding common
stock equivalents would be anti-dilutive for September 30, 2004 and 2003 and are
thus not considered.
Reclassification
Certain reclassifications have been made in the 2003 financial
statements to conform with the 2004 presentation.
NOTE 2 - INCOME TAXES
As of June 30, 2004, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $14,805,000 that may be
offset against future taxable income through 2023. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 3 - DEVELOPMENT STAGE COMPANY/ GOING CONCERN
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage. Continuation of the Company as a going concern is dependent
upon obtaining the additional working capital necessary to be successful in its
planned activity, and the management of the Company has developed a strategy,
which it believes will accomplish this objective through additional equity
funding and long term financing, which will enable the Company to operate for
the coming year.
NOTE 4 - RENT EXPENSE
The Company has entered into lease agreements for various office,
storage and warehouse facilities on a month to month basis. For the three months
ended September 30, 2004 and 2003, rent expense was $6,984 and $12,500.
NOTE 5 - LOANS FROM SHAREHOLDERS AND OTHER RELATED PARTY
TRANSACTIONS
As of September 30, 2004 and June 30, 2004, the company owes $456,334
and $285,370 to various shareholders and officers/directors. The loans are
unsecured with interest at rates of between 4.00% to 12% and have no fixed terms
of repayment.
NOTE 6 - COMMON STOCK TRANSACTIONS
The Company was initially incorporated to allow for the issuance of up
to 25,000 shares of no par value common stock. As a result of the merger with
Kestrel Equity Corporation the authorized number of shares is 100,000,000 with a
par value of $.001.
At inception, the Company issued 61,200 (1,530,000 pre split) shares of
common stock to its officers and directors for services performed and payments
made on the Company's behalf during its formation. This transaction was valued
at approximately $0.003 per share or an aggregate approximate $5,000.
On December 2, 1999, the Company issued 58,800 (1,470,000 pre split)
shares of common stock in exchange for $350,000 investment in 3-D projects,
$255,000 licensing and distribution rights, $3,306,900 3-D film production and
exhibition equipment, and $100,000 patent pending. On September 25, 2001 the
asset acquisition was rescinded. The assets acquired were returned and the
common stock was returned to treasury.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (Continued)
In addition to the asset acquisition, on December 3, 1999, the Company
entered into an acquisition agreement and plan of reverse merger with Kestrel
Equity Corporation whereby the Company acquired $332 cash, $153,001 trading
investments, $100,686 reduction in accounts payable, and $366,084 notes payable
in exchange for 48,000 (1,200,000 pre split) shares of common stock. By virtue
of the merger and the asset acquisition, the Company issued 106,800 (2,670,000
pre split) shares of common stock of the surviving corporation and acquired
assets valued at $4,013,100 or approximately $1.50 per share.
On December 31, 1999, the Company issued 14,000 (350,000 pre split)
shares to various employees and consultants for services rendered valued at
$2.00 per share.
On February 14, 2000, the Company issued 4,000 (100,000 pre split)
shares of common stock as payment for services rendered by Mr. Herky Williams
valued at $2 per share. The services rendered were for the development of the
Company's music division.
On August 10, 2000, the Company purchased a motion picture entitled
"ROUTE 66" including all rights and materials, the rights as the creator and the
writer of the original screenplay, all copyright rights, trade names and
trademarks and all other forms of exploitation of the Property, and all
ancillary, merchandise, music and book-publishing rights in exchange for 10,600
(265,000 per split) restricted common shares, $96,492.73 (payable $25,000 August
14, 2000 and $11,915.46 per month from December 14, 2000 to May 14, 2001 and
$25,000 plus a 1 1/2% royalty on any merchandise and 2% royalty on sequels).
On September 27, 2000, the Company entered into a contract with Ron
Whiten to make strategic introductions on behalf of the Company to the
investments community in exchange for 4,000 (100,000 pre split) common shares.
On September 29, 2000, the shares were issued at a value of $95,000, which was
the quoted market price on the date of issue. The contract is for a period of
time covering 3 quarterly financial statements. To the best knowledge and belief
of the Company no services have been performed by Mr. Whiten pursuant to this
agreement. On May 25, 2001, the 4,000 shares of stock issued to Mr. Whiten were
canceled for non-performance of services.
On October 27, 2000, the Company issued 500 (12,500 pre split) shares
of common stock valued at $1.00 per share to National Financial Group for
services previously rendered.
Pursuant to an agreement made with an affiliate company of Mr. Williams
(the Secretary- Treasurer and Director of the Company) called Wilfield
Entertainment, the company issued 16,000 (400,000 pre split) shares of common
stock at a market price of $.55 per share on April 18, 2001 for its
participation in the joint venture. The joint venture with Wilfield is for the
production of thirteen music albums. The Company will supply the necessary
funding for the production of said albums and after capital repayment has
occurred, the Company will receive 51% of the profits from the projects. The
estimated production costs per album is projected to be $80,000.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (Continued)
On May 25, 2001, 14,000 (350,000 pre split) shares that were issued to
various people for services were cancelled. These shares were cancelled for
non-performance of services.
During the quarter ended September 30, 2001, 4,000 (100,000 pre split)
shares were issued for conversion of notes payable totaling $25,600. The value
of these shares was $.26 per share.
During the quarter ended September 30, 2001, the Company issued 123,200
(3,080,000 pre split) shares to various consultants for services at the market
value on the date of issuance and 3,600 (90,000 pre split) restricted common
shares to individuals for cash at $.50 per share.
During the quarter ended December 31, 2001, the Company issued 25,912 (
647,795 pre split) shares of stock for conversion of notes payable totaling
$135,596, for accrued interest on the notes payable of $12,275, and for
consulting services of $20,778. The value of the shares was between $.14 and
$.35 per share.
During the quarter ended December 31, 2001, the Company issued 94,825
(2,370,631 pre split) shares to various consultants for services at the market
value on the date of issuance. Also, 1,600 (40,000 pre split) shares were issued
on July 30, 2001 for services were cancelled on October 2, 2001 for
non-performance of services.
On January 15, 2002, 12,000 (300,000 pre split) shares of common stock
were issued for cash at $0.33 per share. Also during the quarter, 106,480
(2,662,000 pre split) were issued in connection with previous debt cancellation.
On April 29, 2002, 8,000 (200,000 pre split) common shares were issued
for the purchase of "In the Garden of Evil" album. The value of the shares were
$0.06.
On May 30, 2002, 4,000 (100,000 pre split) common shares were issued to
various people for services connected with the project "Mad Dogs and Oakies."
The value of the shares were $.03.
During the quarter ended June 30, 2002, the Company issued 12,000
(300,000 pre split) shares of common stock for cash. Shares were issued for$.025
to .075 per share. Also during the quarter, 10,000 (250,000 pre split) shares
were issued for consulting and rent expense. The value of the shares was between
$.03 and $.08 per share.
On July 1, 2002, 34,000 (850,000 pre split) common shares were issued
for cash. Shares were issued for $.01 to $.025 per share. Also on July 8, 2002 ,
93,333 (2,333,334 pre split) were issued in connection with a previous debt
cancellation.During the quarter ended June 30, 2002, the Company issued 12,000
(300,000 pre split) shares of common stock for cash. Shares were issued for$.025
to .075 per share. Also during the quarter, 10,000 (250,000 pre split) shares
were issued for consulting and rent expense. The value of the shares was between
$.03 and $.08 per share.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (Continued)
On July 1, 2002, 34,000 (850,000 pre split) common shares were issued
for cash. Shares were issued for $.01 to $.025 per share. Also on July 8, 2002 ,
93,333 (2,333,334 pre split) were issued in connection with a previous debt
cancellation.
On December 20, 2002 and December 23, 2002, 132,000 (3,300,000 pre
split) common shares were cancelled from various shareholders for
non-performance of services.
During the quarter ended March 31, 2003, 661,400 (16,535,000 pre split)
common shares were issued to various people for services. The value of the
shares was between $.01 and $.03 per share.
On March 26, 2003, 120,000 (3,000,000 pre split) common shares were
issued for conversion of notes payable of $289,892.
During the quarter ended June 30, 2003, 2,257,600 shares were issued to
various people for services. The value of the shares was between $.25 to $1.13.
On June 2, 2003, 88,000 common shares were issued for conversion of
debt totaling $20,000.
On June 3, 2003, 12,000 shares were cancelled for non-performance of
services.
On June 25, 2003, 40,000 shares were issued for conversion of debt
totaling $15,491.
During the quarter ended September 30, 2003, 1,198,000 shares were
issued to various people for services. The value of the shares was between $.45
to $.57.
On July 8, 2003, 30,000 shares of common stock were issued for
conversion of debt totaling $8,465.
During the quarter ended December 31, 2003, 623,072 shares were issued
for cash from $.13 to $.25 per share. Also during the quarter, 720,000 shares
were issued to various people for services. The value of the shares was $.25. In
addition, the Company issued 100,000 shares to pay an accounts payable of
$20,000.
During the quarter ended March 31, 2004, the Company issued 425,000 shares for
cash from $.25 to $.50 per share. Also during the quarter, 435,000 shares were
issued to various people for services and 100,000 shares were issued to pay
rent. The value of these shares was $.25 to $2.00. In addition, the Company
canceled 176,000 shares for nonperformance of services.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (Continued)
On January 20, 2004, the Company converted debt of $35,000 to 200,000
shares of common stock.
On April 7, 2004, the Company issued 60,000 shares of common stock to
various people for consulting services. Also, on April 7, 2004 the Company
issued 375,000 shares of common stock to various people for cash of at $0.25 to
$0.75 per share. In addition, approximately $14,200 in loans were converted into
30,000 shares of common stock.
On April 14, 2004, the Company issued 100,000 shares of common stock
for cash at $0.25 per share.
On May 6, 2004, the Company issued 10,000 shares of common stock for
cash at $0.50 per share.
On May 25, 2004, the Company issued 50,000 shares of common stock
valued at $0.81 per share for consulting services.
On June 8, 2004, the Company issued 100,000 shares of common stock in
connection with extension of acquiring ownership in Baywatch 3D Production, LLC.
The shares were valued at $0.75 per share
On June 16, 2004, the Company issued 240,000 shares of common stock for
consulting expenses paid by a shareholder to a third party. The amount paid for
the consulting services was $80,000.
During the quarter ended September 30, 2004, the Company issued
1,234,333 shares of common stock to various people for services rendered.
Consulting Expense of $461,233 was recognized in connection with these
issuances. Also during the quarter 400,000 shares were issued for cash at $0.25
per share.
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.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 8 - COMMITMENTS
On August 10, 2000, the Company purchased a motion picture entitled
"ROUTE 66" including all rights and materials, the rights as the creator and the
writer of the original screenplay, all copyright rights, trade names and
trademarks and all other forms of exploitation of the Property, and all
ancillary, merchandise, music and book-publishing rights in exchange for 265,000
restricted common shares, $96,492.73 (payable $25,000 August 14, 2000 and
$11,915.46 per month from December 14, 2000 to May 14, 2001 and $25,000 plus a 1
1/2% royalty on any merchandise and 2% royalty on sequels). Currently, this
project is being restructured.
On April 25, 2000, the Board of Directors approved a stock option plan
whereby 2,675,000 common shares have been set aside for employees and
consultants to be distributed at the discretion of the Board of Directors. The
option shares will be exercisable on a cashless basis at a 15% discount to
market value. No formal plan has been adopted as of the date of this report.
On September 28, 2000, the Company signed a consulting agreement with
Solomon Broadcasting International for consulting services on a non-exclusive
basis for the purposes of financing, production, acquisition and distribution of
Stereo Vision products in various media throughout the world. The contract is
for 2 years at $300,000 per year plus an option to purchase 250,000 common
shares at $.01 per share. The option is exercisable after September 28, 2002.
During the year ended June 30, 2004, these stock options were canceled for
non-performance.
On March 11, 2004, the Company granted its attorney an option to
purchase 20,000 shares of its common stock at an exercise price of $1.00 for an
exercise price of two years. As a result of the grant, $20,000 was recorded as
compensation expense.
NOTE 9 - STOCK OPTIONS
Pursuant to a 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 us.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 9 - STOCK OPTIONS (Continued)
Subject to the foregoing, the Board has broad discretion to describe
the terms and conditions applicable to options granted under the Plan. The Board
may at any time discontinue granting options under the Plan or otherwise
suspend, amend or terminate the Plan and may, with the consent of an optionee,
make such modification of the terms and conditions of such optionee's option as
the Board shall deem advisable.
On July 12, 2004, the Board of Directors granted the option to purchase
2,500,000 unregistered common shares to there President at an exercise price of
$0.40 per share a vest in one year from the grant date. No compensation expense
was recorded because the Company feels that the exercise price was equal to or
greater than the fair value of the stock on the grant date.
The following table sets forth the options and warrants outstanding as
of September 30, 2004 and June 30, 2004:
September 30, June 30,
2004 2004
--------------------- -----------------
Options Outstanding, Beginning of year - -
Granted 2,500,000 -
Expired - -
Exercised - -
--------------------- -----------------
Options Outstanding, End of year 2,500,000 -
===================== =================
Exercise price for options outstanding, end of period $0.40 -
===================== =================
NOTE 10- INVESTMENT IN WOW EVENTS, LLC
On September 3, 2003, the Company entered into an agreement to form WOW
Events, LLC with David McLane Enterprises, Inc., David McLane, Jeanie Buss, and
John Corcoran, wherein Stereo Vision Entertainment, Inc. contributed services
and an agreement to provide loans to the Company to fund WOW's startup costs for
a 50 percent ownership in the LLC. In the event that Stereo Vision Entertainment
fails or refuses to disburse all or any part of the agreed upon loan their
percentage interest and units shall be reduced and assigned and transferred to
David McLane Enterprises.
During the quarter ending June 2004, the Company ceased its funding of
the project and was later issued a notice of termination and default, wherein
its ownership was decreased to 3.167%. The Company had loaned WOW Events, LLC
$190,000 which is to be repaid in the event that WOW Events, LLC becomes
profitable. As the repayment is contingent on the profitability of WOW, it is
uncertain if the loan will be collectible, and thus it has been written off and
will be recorded as a gain in future years if the loan is repaid.
STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 11 - FILM AND MUSIC COSTS
The Company has intangible assets which consist of movie and music
licensing rights and production costs and are valued at cost. As of September
30, 2004 and June 30, 2004, the Company had $0 and $0 in film costs that are in
the development stage or pre-production stage.
For the three months ended September 30, 2004 and 2003, the Company
recorded losses of $0 and $0 for projects that have been abandoned for various
reasons or have not been set for production.
NOTE 12 - LEGAL PROCEEDINGS
In September of 2001 the Company entered into a promissory note with
Duncan MacPherson to be payable within the year. A dispute arose and the note
was not timely paid, which led to a court action styled R. DUNCAN MACPHEARSON
VS. STEREOVISION ENTERTAINMENT, ET, AL, Case No. LC 0611749 in Los Angeles,
California. Subsequently, the parties, on January 26, 2004, entered into a
Settlement Agreement, including provisions if scheduled payments do not occur as
agreed. 25,000 shares of restricted stock were delivered and $40,000 of payments
were made, with the final $10,000 not paid according to the stipulated
agreement. This resulted in the plaintiff's entry of a judgment, according to
notice received by the company, of slightly over $37,500, which has been
appealed by the Company as incorrect and excessive. The $37,500 has been accrued
as liability on the September 30, 2004 financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
General
Currently, the ordinary week-to-week working of the company involves
administrative activities, regulatory compliance, capital formation, and content
development and planning. In the future the Company intends to position itself
to evolve into a vertically integrated, diversified global media entertainment
company. The Company intends to acquire a number of diversified entertainment
companies that will allow for the pursuit of opportunities currently available
in the global marketplace.
The Company anticipates generating revenues from several sources,
including, production of new and existing feature films, as well as expanding
into other areas of the entertainment industry.
The Company's common stock is traded on the over-the-counter and
reported on the OTC Bulletin Board (OTCBB) under the symbol "SVED."
Results of Operations
There were no revenues from sales from the period from inception to
September 30, 2004. The Company has sustained a net loss of approximately $15.77
million for the period from inception to September 30, 2004, which was primarily
due to general and administrative expenses. The Company is a development stage
company and had not begun principal operations. Accordingly, comparisons with
prior periods are not meaningful.
Liquidity and Capital Resources
The Company is in the process of developing a detailed plan of
operations to exploit its asset base. On a preliminary basis, the Company
estimates that it will require up to $8,000,000 over a period of 18 months to
fund this plan of operations. This plan of operations is expected to include
both exploitation of existing movies and equipment, and efforts to arrange
development of additional movies. The Company may attempt to arrange joint
ventures with studios to facilitate the development of new movies.
The Company is also in the business of producing music entertainment
products through its March 2000 acquisition of a joint venture interest in a
music producer. During the forthcoming year, the Company, through this joint
venture, expects to produce 13 country and western and pop albums. The Company
expects that this effort will require capital of approximately $750,000 to
$1,000,000.
The aforementioned estimates of capital required are still preliminary
in nature and are subject to substantial and continuing revisions. Although the
Company has not yet commenced any formal capital raising efforts, the Company
expects that any capital that it raises will be in the form of one or more debt
or equity financings. However, there can be no assurances that the Company will
be successful in raising any required capital on a timely basis and/or under
acceptable terms and conditions. To the extent that the Company does not raise
sufficient capital to implement its plan of
operations on a timely basis, it will have to curtail, revise and/or delay its
business plans. The Company has financed its operations to date from the sale of
stock and loans from related parties.
The Company has also relied on loans from officers, directors and
shareholders to support its operations. However, there can be no assurances that
additional loans will be forthcoming from officers, directors, and shareholders.
Government Regulations
The Company is subject to all pertinent Federal, State, and Local laws
governing its business. The Company is subject to licensing and regulation by a
number of authorities in its Province (State) or municipality. These may include
health, safety, and fire regulations. The Company's operations are also subject
to Federal and State minimum wage laws governing such matters as working
conditions and overtime.
Competition
SVEI competes with a large array of diverse global media conglomerates,
upstart "entertainment, information and commerce" companies, as well as with a
number of smaller, independent production companies. SVEI's current and
potential competitors include:
o Fox, Disney, Warner Bros., Universal and others
o Globcast, Vyvx and COMSAT World Systems
o Universal music, EMI, BMG and others
A portion of these companies compete for motion picture projects and
talent and are producing motion pictures that compete for exhibition time at
theaters, on television, and on home video with pictures produced by the
Company. Other companies compete in areas of satellite production and
transmission services and music production, distribution and promotion. SVEI
also intends to use its core competencies in areas of music production and
production services to diversify and compete in the global marketplace.
Most of SVEI's competitors have operating histories, larger customer
bases and significantly greater financial, marketing and other resources.
Certain of SVEI's competitors have the financial resources to devote greater
resources to marketing and promotional campaigns and devote substantially more
resources to technology development. Increased competition may result in reduced
operating margins.
Employees
As of September 30, 2004, SVEI employed four employees. SVEI considers
its employee relations to be satisfactory at present.
ITEM 3. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on an evaluation conducted within 90 days prior to the filing
date of this Quarterly Report on Form 10-QSB, that the Company's disclosure
controls and procedures have functioned effectively so as to provide those
officers the information necessary whether:
(i) this Quarterly Report on Form 10-QSB contains any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this
Quarterly Report on Form 10-QSB, and
(ii) the financial statements, and other financial information
included in this Quarterly Report on Form 10-QSB, fairly
present in all material respects the financial condition,
results of operations and cash flows of the Company as of, and
for, the periods presented in this Quarterly Report on Form
10-QSB.
There have been no significant changes in the Company's internal
controls or in other factors since the date of the Chief Executive Officer's and
Chief Financial Officer's evaluation that could significantly affect these
internal controls, including any corrective actions with regards to significant
deficiencies and material weaknesses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In September of 2001 the Company entered into a promissory note with Duncan
MacPherson to be payable within the year. A dispute arose and the note was not
timely paid, which led to a court action styled R. DUNCAN MACPHEARSON VS.
STEREOVISION ENTERTAINMENT, ET, AL., Case No. LC 0611749 in Los Angeles,
California. Subsequently, the parties, on January 26, 2004, entered into a
Settlement Agreement, including provisions if scheduled payments do not occur as
agreed. 25,000 shares of restricted stock were delivered and $40,000 of payments
were made, with the final $10,000 not paid according to the stipulated
agreement. This resulted in the plaintiff's entry of a judgment, according to
notice received by the company, of slightly over $37,500, which has been
appealed by the Company as incorrect and excessive.
ITEM 2. CHANGES IN SECURITIES
During the quarter ended September 30, 2004, the Company issued
1,234,333 shares of common stock to various people for services rendered.
Consulting Expense of $461,233 was recognized in connection with these
issuances. Also during the quarter 400,000 shares were issued for cash at $0.25
per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included as part of this report:
Exhibit
Number Exhibit
3.1 Articles of Incorporation (1)
3.2 Amended Articles of Incorporation (1)
3.3 Bylaws (1)
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(1) Incorporated by reference to the Registrant's registration statement on
Form 10-SB filed on August 9, 2000.
(b) Reports on Form 8-K filed.
On September 13, 2004, the Company filed an 8-K to announce the
resignation of its current CEO and President and to announce the appointment of
a new CEO, CFO and COO.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized.
STEREO VISION ENTERTAINMENT, INC.
(Registrant)
Dated: November 18, 2004 By /S/ Lance Robbins
---------------------------
Lance Robbins,
C.E.O., President, Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated.
Signatures & Title
/S/ Lance Robbins
Lance Robbins,
C.E.O., President, Director
(Principal Executive Officer)
/S/ Theodore Botts
Theodore Botts
CFO, Director
(Principal Financial and Accounting Officer)