UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
[ ] 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)
10 Universal City Plaza, Ste 2000, Universal City, CA 91608
(Address of principal executive offices)
(818) 760-7007
(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: September 3, 2000 5,200,000
Transitional Small Business Disclosure Format (check one). Yes ; No X
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PART I
Item 1. Financial Statements
INDEPENDENT ACCOUNTANT'S REPORT
Stereo Vision Entertainment, Inc.
(A Development Stage Company)
We have reviewed the accompanying balance sheet of Stereo Vision
Entertainment, Inc. (a development stage company) as of March 31, 2000 and June
30, 1999, and the related statements of operations for the three and nine
months, and cash flows for the nine month periods ended March 31, 2000 and 1999.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statement taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
Respectfully submitted
\s\ Robison, Hill & Co.
Certified Public Accountants
Salt Lake City, Utah
September 3, 2000
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STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, June 30,
2000 1999
--------- ---------
Current Assets:
Cash ........................................ $ 16,091 $ 7,493
Trading Investments ......................... 119,001 --
--------- ---------
Total Current Assets .................... 135,092 7,493
--------- ---------
Fixed Assets:
Transportation Equipment .................... 67,000 --
Office Equipment ............................ 13,745 13,745
3-D Production and Exhibition Equipment ..... 3,306,900 --
Less Accumulated Depreciation ............... (226,100) (229)
--------- ---------
Net Fixed Assets ........................ 3,161,545 13,516
--------- ---------
Intangible and Other Assets:
Investments Music Albums .................... 200,000 --
Investments 3-D Projects .................... 357,500 --
Intellectual Property ....................... 100,000 --
Licensing & Distribution Rights ............. 255,000 --
Less Accumulated Amortization ............... (86,668) --
--------- ---------
Net Intangible and Other Assets ......... 825,832
--------- ---------
Total Assets: .................................. $ 4,122,469 $ 21,009
========= =========
Liabilities
Accounts Payable ............................ $ 114,800 $ 96,268
Accrued Expenses ............................ 11,722 3,718
Loans from Shareholders ..................... 1,027,685 --
Short-term Notes Payable .................... 49,000 61,000
--------- ---------
Total Current Liabilities ................ 1,203,207 160,986
--------- ---------
Stockholders' Equity:
Common Stock, $.001 Par value
Authorized 100,000,000 shares,
Issued 4,750,000 shares at March 31,
2000 and 1,530,000 shares at June 30, 1999 . 4,750 1,530
Additional Paid in Capital ................... 4,980,054 3,470
Common Stock to be Issued .................... 30 --
Deficit Accumulated During the
Development Stage .......................... (2,065,572) (144,977)
--------- ---------
Total Stockholders' Equity ................ 2,919,262 (139,977)
--------- ---------
Total Liabilities and
Stockholders' Equity .................... $ 4,122,469 $ 21,009
========= =========
See accompanying notes and accountants' report.
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STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
Since May 5,
For the Three Months For the Nine Months 1999
Ended Ended Inception of
March 31, March 31, Development
--------------------- -----------------------
2000 1999 2000 1999 Stage
---------- --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Revenues ................ $ -- $ -- $ -- $ -- $ --
---------- --------- ------------ --------- -----------
Expenses
Research & Development .. 282,000 -- 293,000 -- 293,000
General & Administrative 557,066 -- 1,588,508 -- 1,729,766
---------- --------- ------------ --------- -----------
Operating Loss .......... (839,066) -- (1,881,508) -- (2,022,766)
Other income (expense):
Interest expense ..... (35,764) -- (43,575) -- (47,294)
Gain (loss) on Trading
Investments ....... 4,511 -- 4,488 -- 4,488
Reorganization items:
Administrative fees .. -- -- -- -- --
---------- --------- ------------ --------- -----------
Loss before taxes
Income taxes ............ -- -- -- -- --
---------- --------- ------------ --------- -----------
Net Loss ......... $ (870,319) $ -- $ (1,920,595) $ -- $(2,065,572)
========== ========= ============ ========= ===========
</TABLE>
See accompanying notes and accountants' report.
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STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
Since
May 5, 1999
For the Nine Months Ended inception of
March 31, Development
---------------------
2000 1999 Stage
----------- ------- -----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C>
Net Loss ................................................ $(1,920,595) $ -- $(2,065,572)
-----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ........................ 312,539 -- 312,768
Issuance of common stock for expenses ................ 880,000 -- 885,000
Gain on trading investments .......................... (4,488) (4,488)
Cash acquired in merger .............................. 332 332
Change in operating assets and liabilities:
Accounts Payable ..................................... 86,522 -- 167,804
Accrued Expenses ..................................... 8,004 -- 11,722
----------- ------- -----------
Net Cash Used in operating activities ................. (637,686) -- (692,434)
----------- ------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of equipment ................................ (67,000) -- (80,745)
Proceeds from sale of investments .................... 38,488 -- 38,488
----------- ------- -----------
Net cash used in investing activities ................... (28,512) -- (42,257)
----------- ------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from loans from shareholders ................... 674,358 -- 674,358
Payments of principal on notes payable .................. (16,758) -- (16,758)
Proceeds from issuance
of short-term notes .................................. -- -- 61,000
----------- ------- -----------
Net Cash Provided by
Financing Activities ................................. 657,600 -- 718,600
----------- ------- -----------
Net (Decrease) Increase in
Cash and Cash Equivalents ............................. 8,598 -- 16,091
Cash and Cash Equivalents
at Beginning of Period ................................ 7,493 -- --
----------- ------- -----------
Cash and Cash Equivalents
at End of Period ...................................... $ 16,091 $ -- $ 16,091
=========== ======= ===========
</TABLE>
<PAGE>
STEREO VISION ENTERTAINMENT, INC
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (Continued)
Cumulative
Since
May 5, 1999
For the Nine Months Ended Inception of
March 31, Development
2000 1999 Stage
-------------- ----------- --------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest .................... $ 14,096 $ -- $ 14,096
-------------- ----------- --------
Income taxes ................ $ -- $ -- $ --
-------------- ----------- --------
SUPPLEMENTAL DISCLOSURE OF NON-
CASH INVESTING AND FINANCING
ACTIVITIES:
On December 2, 1999 the Company issued 1,470,000 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 December 3, 1999 in a reverse merger the Company acquired $332 cash,
$153,001trading investments, $100,686 reduction in accounts payable, and
$366,084 notes payable in exchange for 1,200,000 shares of common stock.
On March 10, 2000 the Company issued 200,000 shares of common stock in exchange
for 51% ownership in 13 albums to be produced by Wilfield Entertainment over a
period of 12 months.
See accompanying notes and accountants' report.
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STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
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 June 30, 2000 and for the nine
months then ended reflect, in the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to fairly state the
financial position and results of operations for the three months and nine
months. Operating results for interim periods are not necessarily indicative of
the results which can be expected for full years.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Nevada on May
5, 1999. The Company as of March 31, 2000 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, 3-D film production, distribution, exhibition and technology
development, and music production, publishing and distribution and providing
integrated solutions to help organizations broadcast audio, video, 3-D video,
animation, and 3-D 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.
6
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STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
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.
Intangible Assets
Intangible assets are valued at cost and are being amortized on the
straight-line basis over a period of five years. The initial valuation of
licensing and distribution rights for the 3-D products were derived from what
Management believes to be arms length negotiation.
The Company identifies and records impairment losses on intangible assets
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.
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STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the Three Months ended March 31, 2000
Basic Loss per Share
Loss to common shareholders $ (870,319) 4,596,667 $ (0.19)
============== =============== ============
For the Nine Months ended March 31, 2000
Basic Loss per Share
Loss to common shareholders $ (1,920,595) 2,373,858 $ (0.81)
============== =============== ============
The effect of outstanding common stock equivalents would be anti-dilutive
for March 31, 2000 and are thus not considered.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit
risk such as foreign exchange contracts, options contracts or other foreign
hedging arrangements. The Company maintains the majority of its cash balances
with one financial institution, in the form of demand deposits.
Investments
The Company's securities investments that are bought and held principally
for the purpose of selling them in the near term are classified as trading
securities. Trading securities are recorded at fair value on the balance sheet
in current assets, with the change in fair value during the period included in
earnings.
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STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Investments (Continued)
Investments in securities are summarized as follows:
March 31, 2000
------------------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Gain Loss Value
---------------- ---------------- ------------------
Trading Securities -- -- $ 119,001
================ ================ ==================
March 31, 1999
------------------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Gain Loss Value
---------------- ---------------- ------------------
Trading Securities -- -- --
================ ================ ==================
Realized Gains and losses are determined on the basis of specific
identification. During the Three and Nine months ended March 31, 2000 and 1999,
sales proceeds and gross realized gains and losses on securities classified as
trading securities were:
For the Nine For the Three
Months Ended Months Ended
March 31, March 31,
2000 1999
--------------- ---------------
Sale Proceeds $ 38,488 $ --
=============== ===============
Gross Realized Losses $ (23) $ --
=============== ===============
Gross Realized Gains $ 4,511 $ --
=============== ===============
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STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(Continued)
NOTE 2 - INCOME TAXES
As of March 31, 2000, the Company had a net operating loss carryforward for
income tax reporting purposes of approximately $2,000,000 that may be offset
against future taxable income through 2014. 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
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.
NOTE 4 - COMMITMENTS
As of March 31, 2000 some of the activities of the Company have been
conducted by corporate officers from shared office space with the Law Firm of
Phillips, Haskett & Ingwalson in San Diego, California. The Company does not pay
rent or the use of this space. Currently, there are no outstanding debts owed by
the company for the use of these facilities and there are no commitments for
future use of the facilities.
NOTE 5 - 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.
On December 3, 1999 the Board of Directors authorized 120 to1 stock split.
As a result of the split, 1,517,250 shares were issued. All references in the
accompanying financial statements to the number of common shares and per-share
amounts for 1999 have been restated to reflect the stock split.
At inception, the Company issued 1,530,000 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.
10
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STEREO VISION ENTERTAINMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(Continued)
NOTE 5 - COMMON STOCK TRANSACTIONS (Continued)
On December 3, 1999 the Company entered into an acquisition agreement
and plan of reverse merger with Kestrel Equity Corporation and at the same time
entered into an asset acquisition agreement for the acquisition of 3-D projects,
equipment, licensing and distribution rights. By virtue of the merger and the
asset acquisition, the Company issued 2,670,000 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 350,000 shares to various
employees and consultants for services rendered valued at $2.00 per share.
On March 10, 2000 the Company issued 200,000 shares of common stock
in exchange for 51% ownership in 13 albums to be produced by Wilfield
Entertainment over a period of 12 months.
NOTE 6 - SHORT-TERM NOTES PAYABLE
Short-Term Notes on March 31, 2000 and June 30, 1999 in the Amounts of
$49,000 and $61,000 respectively, are due on demand with interest at 10%.
NOTE 7 - LOANS FROM SHAREHOLDERS
The loans are payable to various shareholders, are unsecured with interest
at 10% and have no fixed terms of repayment.
Management at present anticipates the need to raise approximately $500,000
in additional operating capital. Such funding may be accomplished through public
financial markets, private offerings of equity or debt, and joint venture
opportunities. The Company's stockholders, officers and/or directors have
committed to advancing the operating costs of the Company.
NOTE 8 - RENT EXPENSE
The Company has entered into lease agreements for various office, storage
and warehouse facilities. The rental agreements are on a month to month basis
with total rent of $6,750 per month. For the Three and Nine months ended March
31, 2000 the rental payments were $39,650 and $53,600 respectively. The Company
is currently negotiating a three-year lease for a suite in Universal City Plaza
that is adjacent to Universal Studios in Los Angeles. The monthly lease
obligation is expected to be approximately $9,700.
11
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Item 2. Management's Discussion and Analysis or Plan of Operation.
General
The Company intends to position itself to evolve into a vertically
integrated, diversified global media entertainment company. The Company intends
to acquire a number of diversified entertainment companies that will allow for
the pursuit of opportunities currently available in the global marketplace.
The current plan of the Company incorporates operational resources that
will make 3-D media a mainstream entertainment form. The Company plans to reach
the mass market by aligning itself with already-established, branded products
and titles for the production, promotion and distribution of 3-D products. The
Company's management intends to aggressively evaluate and pursue production
opportunities in order to increase the Company's content library and maintain a
leadership position as the foremost provider of 3-D products. As a development
stage company, Stereo Vision entertainment, Inc. has minimal historical
operations, no revenues and negative cash flows. In order to satisfy cash
requirements for the Company's production and revenue goals, management must
obtain working capital through either debt or equity financing.
Results of Operations
There were no revenues from sales for the period from inception to March
31, 2000. The Company has sustained a net loss of approximately $2 million for
the period ended March 31, 2000, which was due to primarily to general and
administrative expenses.
Liquidity and Capital Resources
The Company is in the process of developing a detailed plan of operations
to exploit its 3-D equipment asset base. On a preliminary basis, the Company
estimates that it will require from $3,000,000 to $5,000,000 over a period of 18
months to fund this plan of operations. This plan of operations is expected to
include both exploitation of existing 3-D movies and equipment, and efforts to
arrange development of additional 3-D movies. The Company may attempt to arrange
joint ventures with studios to facilitate the development of new 3-D movies
The Company is also in the business of producing music entertainment
products through its March 2000 acquisition of a 51% interest in a music
producer. During the forthcoming year, the Company, through this subsidiary,
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
12
<PAGE>
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 of
another Company and loans from related parties. The company purchased
approximately 264,000 shares of common stock of New Visual Entertainment, Inc.,
from a major shareholder for a $400,000 convertible note in September 1999. This
note was paid by the issuance of 200,000 shares of common stock. The sale of
this stock generated approximately $422,000 of net proceeds during September
1999 through June 2000, which the Company used to support its operations.
The Company has also relied on loans from officers, directors and
shareholders to support its operations. During October 1999 through May 2000,
four persons, including the aforementioned major shareholders and one director,
loaned the Company $1,032,442. However, there can be no assurance 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
The Company faces competition from a wide variety of entertainment
distributors, many of which have substantially greater financial, marketing and
technological resources than the Company.
Employees
As of July 21, 2000, the Company had three employees.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not engaged in any legal proceedings other than the ordinary
routine litigation incidental to its business operations, which the Company does
not believe, in the aggregate, will have a material adverse effect on the
Company, or its operations.
13
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Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included as part of this report:
Exhibit
Number Exhibit
3.1 Articles of Incorporation (1)
3.2 Amended Articles of Incorporation (1)
3.3 Bylaws (1)
27.1 Financial Data Schedule
(1) Incorporated by reference to the Registrant's registration statement on
Form 10-SB filed on August 9, 2000.
(b) The Company has not filed a report on Form 8-K for the period ended
March 31, 2000.
14
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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)
Date: September 5, 2000 By: /s/ John C. Bodziak, Jr
--------------------------
John C. Bodziak, Jr.
C.E.O., President, Director
(Principal Executive Officer)
Date: September 5, 2000 By: /s/ Rick Ducommun
---------------------
Rick Ducommun
Secretary-Treasurer, Director
(Principal Financial and Accounting Officer)
15
