U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)
 [X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934

                      For Fiscal Year Ended: June 30, 2002

                                       or

 [  ]       TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934

                        For the transition period from To


                        Commission file number 000-28553
                                   ----------

                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                 (Name of small business issuer in its charter)

Nevada                                                        95-4786792
------------------------------------                    --------------------
State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization                             Identification No.)

                15452 Cabrieto Rd., Suite 204, Van Nuys, CA 91406
 ------------------------------------------------------------------------------
               (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

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<PAGE>



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 June 30,  2002,  there  were  18,485,151  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  $524,662  computed  at the average bid and asked price as of
October 7, 2002.


                       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





















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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

Item Number and Caption                                                                                         Page
-----------------------                                                                                         -----

PART I

<S>              <C>                                                                                           <C>
Item 1.           Description of Business.........................................................................4

Item 2.           Description of Property........................................................................10

Item 3.           Legal Proceedings..............................................................................10

Item 4.           Submission of Matters to a Vote of Security Holders............................................10


PART II

Item 5.           Market for Common Equity and Related Stockholder Matters.......................................10

Item 6.           Management's Discussion and Analysis or Plan of Operations.....................................14

Item 7.           Financial Statements...........................................................................16

Item 8.           Changes in and Disagreements With Accountants on Accounting and
                  Financial Disclosure...........................................................................16

PART III

Item 9.           Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act..............................................16

Item 10.          Executive Compensation.........................................................................19

Item 11.          Security Ownership of Certain Beneficial Owners and Management.................................19

Item 12.          Certain Relationships and Related Transactions.................................................20

Item 13.          Exhibits and Reports on Form 8-K...............................................................20


</TABLE>





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<PAGE>



                                     PART I


                         ITEM 1 DESCRIPTION OF BUSINESS


General

     The  Company  intends  to  position  itself  to  evolve  into a  vertically
integrated,  diversified global media entertainment company. The Company intends
to acquire a number of diversified  entertainment  companies that will allow for
the pursuit of opportunities currently available in the global marketplace.

     The  Company   anticipates   generating   revenues  from  several  sources,
including,  production of new and existing  feature films,  as well as expanding
into other areas of the entertainment industry.

     The  Company's  common  stock is traded on the  National  Quotation  Bureau
(NQB)Pink Sheets under the symbol "SVED."

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

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Kestrel Equity Corporation,  and Mr. Honour, a principal shareholder of Kestrel,
both owned common stock in Stereo representing an aggregate of 51% of the issued
and  outstanding  capital stock of Stereo.  The operations and management of the
merged  companies  (SVEI) were then  integrated  following  the  replacement  of
Stereo's  sole officer and  director  with the then sole officer and director of
Kestrel.

     On  December  17,  1999  "Kestrel"  filed  its  Form  10-SB  with  the U.S.
Securities  and  Exchange  Commission.  Upon the  consummation  of the merger on
December  30,  1999,  shortly  thereafter  in January of 2000,  SVEI elected new
officers and directors.  Since January 2000, the Company's  activities have been
developing entertainment projects, both musical and theatrical,  and identifying
and securing  candidates with entertainment  industry experience to serve on the
SVEI  Board  of  Directors  and  identifying  additional  opportunities  for the
acquisition of operating  entertainment  oriented companies as well as acquiring
intellectual  property  assets.  Although  acquisition  opportunities  have been
identified, no transactions have been consummated and there is no guarantee that
any transactions will be consummated in the near future.

     The  executive  offices of the Company are located at 15452  Cabrieto  Rd.,
Suite 204, Van Nuys, CA 91406. Its telephone number is (818) 909-7911.

OPERATING LOSSES

     The  Company  has  incurred  net  losses of  approximately  $2,166,183  and
$4,572,325  for the fiscal  years ended June 30, 2002 and 2001.  Such  operating
losses reflect  developmental  and other start-up  activities for 2002 and 2001.
The Company  expects to incur losses in the near future until  profitability  is
achieved. The Company's operations are subject to numerous risks associated with
establishing  any  new  business,  including  unforeseen  expenses,  delays  and
complications.  There can be no  assurance  that the  Company  will  achieve  or
sustain profitable operations or that it will be able to remain in business.

FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING

     SVEI anticipates  generating operating revenues during its next fiscal year
as it becomes  operational and acquires operating  companies and/or intellectual
property assets. "SVEI" management acknowledges that during its next fiscal year
there is no  assurance  that "SVEI" will  transition  itself from a  development
stage  company to an  operational  one and SVEI's  continued  operations  may be
dependent  upon  additional   shareholder  loans  and/or  proceeds  from  "SVEI"
debt/equity  offerings.  There  currently  are no agreements in place for future
shareholder  loans and management has no assurances as to any market  acceptance
of any future SVEI debt/equity offerings.

BUSINESS - OVERVIEW

     Currently,  management  believes that SVEI's principal  expertise is in the
content production segment of the multi-media  entertainment industry. SVEI also
intends to acquire  additional  intellectual  property assets.  In utilizing the
SVEI's existing physical and managerial assets, SVEI's

                                        5

<PAGE>



initial  operating  activities  are  anticipated  to encompass  the  production,
acquisition,  marketing and  distribution  of music content and the  production,
distribution,  exhibition of  independent  feature length  theatrical  films and
related technology.  SVEI intends to use traditional  distribution  channels for
its content and, when available and if practical,  alternative and complimentary
distribution channels such as the Internet.

MUSIC DIVISION

     The  Company  is also in the  business  of  producing  music  entertainment
products  through  its  March  2000  acquisition  of a joint  venture  interest.
Wilfield Entertainment ("Wilfield").  Mr Herky Williams owns fifty (50%) percent
of Wilfield and simultaneously serves as the Secretary-Treasurer and Director of
Stereo  Vision  Entertainment,  Inc.  The Company and Wilfield , under a revised
Agreement  dated February 21, 2001, have entered into a joint venture to produce
thirteen (13) music albums for sale and distribution by the Company. Pursuant to
that Agreement,  the Company will issue 400,000 shares of its restricted  common
stock to Mr.  Williams  as  consideration  for its  participation  in the  joint
venture. The Agreement calls for the Company to pay for the production costs for
each album  (estimated to be $80,000 per album).  The Company  expects that this
effort will require capital of  approximately  $750,000 to $1,000,000.  From the
anticipated  revenues  generated from the sales of the albums,  the Company will
first  deduct  the  production  costs it has paid and then  share the  remaining
monies,  fifty-one (51%) percent to the Company and forty-nine  (49%) percent to
Wilfield. Historically the joint venture partner has been an active producer for
over 30 years.  Producing  over 40 albums  including  gold and  platinum  albums
produced for Tanya Tucker,  Lee Greenwood,  Anne Murry, and many others.  In the
last three years the joint  venture  partner  has  concentrated  on  publishing,
acquiring or creating  content to be recorded.  In the last three years 2 albums
have been made,  including Lee Greenwood's  "Same River Different  Bridge," Mark
Neslar's "I'm Just that Way."

STEREO VISION ENTERTAINMENT PRODUCTIONS


     The film content  production  business is very capital  intensive  and SVEI
will need to raise and secure  significant equity or debt financing to implement
its  production  objectives.  If SVEI receives such  financing,  it  anticipates
producing  and/or  co-producing 3-D and traditional  independent  feature length
theatrical productions.  Financing for these productions, when possible, will be
accomplished  through  partnerships  or  joint  ventures.  When  feasible,  SVEI
anticipates  each  production  will  be  structured  as  a  stand-alone  limited
liability  company,  thus  diminishing  the equity dilution impact on SVEI. SVEI
intends  to act as the  executive  producer  of each film  project.  There is no
assurance  that SVEI can secure  financing to produce films or even if films are
produced that they can be profitably distributed.


BUSINESS EXPANSION; CAPITAL GROWTH

     SVEI  intends to position  itself to evolve into a  vertically  integrated,
diversified  global media  entertainment  company and SVEI intends to pursue the
acquisition  of diversified  entertainment  companies or  intellectual  property
assets that will allow for the pursuit of opportunities  currently  available in
the global  marketplace.  SVEI believes that synergism  among its divisions will
allow

                                        6

<PAGE>



SVEI to effectively  compete for its incremental  share of the global consumer's
discretionary  expenditures.  SVEI intends to finance its business expansion and
acquisitions  through the sale of equity securities.  SVEI can give no assurance
that any offering of its  securities  will be  successful.  If SVEI is unable to
successfully  raise equity financing or alternative  financing SVEI's ability to
fund its business plan would be significantly limited.

     The ability of SVEI to  implement  its business  strategy  depends upon its
ability to successfully create,  produce,  and market  entertainment  content or
ancillary products for traditional  real-world  distribution channels including,
but not limited to, retailers, radio, television,  theaters and home markets and
newly emerging distribution channels such as the Internet.  The size and quality
of SVEI's library of film software  titles is a material factor in competing for
sales of SVEI's  attractions  and developing the Company's  products and base of
recurring revenue.

     SVEI  intends to produce  and  develop  specialty  films and videos for its
library,  as well as acquire additional music assets.  While SVEI may enter into
participation,  licensing or other financial  arrangements with third parties in
order to minimize its financial involvement in production,  SVEI will be subject
to substantial financial risks relating to the video software. SVEI expects that
it will typically be required to pay for the  production of software  during the
production  period  prior to  release  but will most  likely be unable to recoup
these costs from  revenues  from  exhibition  licenses  prior to 24 to 36 months
following release.

     SVEI  anticipates  generating  revenues  from several  sources,  including,
production  and  distribution  of new and existing  independent  feature  films,
intellectual  property music assets, and also providing  integrated solutions to
help  organizations  broadcast  audio,  video,  animation,  and  music  over the
Internet.  When  appropriate,  SVEI will  attempt  to acquire  other  assets and
existing  operating  global  multi-media  entertainment  companies with seasoned
management teams.

MANAGEMENT OF GROWTH

     In order to maximize potential growth in SVEI's market opportunities,  SVEI
believes that it must expand  rapidly and  significantly  upon its entrance into
the marketplace.  This impetus for expansion will place a significant  strain on
SVEI's  management,  operational  and  financial  resources.  In order to manage
growth,  SVEI  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. SVEI 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 SVEI's
management  will  successfully  implement  its  business  plan.  If SVEI  cannot
effectively manage its growth, its business,  financial condition and results of
operations could suffer a material adverse effect.

     SVEI expects that it will require additional equity and/or credit financing
prior to becoming cash  self-sufficient.  There can be no  assurances  that SVEI
will  successfully  negotiate or obtain  additional  financing,  or that it will
obtain  financing on terms favorable or acceptable to it. SVEI 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

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SVEI does not obtain  adequate  financing or such  financing is not available on
acceptable  terms,  SVEI's ability to finance its expansion,  develop or enhance
products or services or respond to competitive  pressures would be significantly
limited.  SVEI's  failure to secure  necessary  financing  could have a material
adverse effect on its business,  prospects,  financial  condition and results of
operations.

GOVERNMENT REGULATION

     The  Classification  and  Rating   Administration  of  the  Motion  Picture
Association  of America,  an industry  trade  association,  assigns  ratings for
age-group suitability for motion pictures. SVEI plans to submit its pictures for
such ratings.  Management's  current policy is to produce  motion  pictures that
qualify for a rating no more restrictive than "R."

     The  Company is subject to all  pertinent  Federal,  State,  and Local laws
governing its business.  The Company is subject to licensing and regulation by a
number of authorities in its State or  municipality.  These may include  health,
safety,  and fire  regulations.  The  Company's  operations  are also subject to
Federal and State minimum wage laws governing such matters as working conditions
and overtime.

RISK OF LOW-PRICED STOCKS

     Rules 15g-1 through 15g-9 promulgated under the Securities  Exchange Act of
1934 (the "Exchange  Act") impose sales practice and disclosure  requirements on
certain  brokers  and dealers who engage in certain  transactions  involving  "a
penny stock."

     Currently,  the  Company's  Common  Stock is  considered  a penny stock for
purposes of the  Exchange  Act. The  additional  sales  practice and  disclosure
requirements imposed on certain brokers and dealers could impede the sale of the
Company's  Common  Stock  in the  secondary  market.  In  addition,  the  market
liquidity for the Company's securities may be severely adversely affected,  with
concomitant adverse effects on the price of the Company's securities.

     Under the penny stock  regulations,  a broker or dealer selling penny stock
to  anyone  other  than  an  established   customer  or  "accredited   investor"
(generally,  an  individual  with net worth in excess  of  $1,000,000  or annual
incomes  exceeding  $200,000,  or $300,000 together with his or her spouse) must
make a special suitability  determination for the purchaser and must receive the
purchaser's  written consent to the transaction prior to sale, unless the broker
or dealer or the transaction is otherwise exempt.  In addition,  the penny stock
regulations  require the broker or dealer to deliver,  prior to any  transaction
involving a penny stock,  a disclosure  schedule  prepared by the Securities and
Exchange  Commission (the "SEC") relating to the penny stock market,  unless the
broker or dealer or the transaction is otherwise  exempt.  A broker or dealer is
also  required to disclose  commissions  payable to the broker or dealer and the
registered   representative  and  current  quotations  for  the  Securities.  In
addition,  a broker or dealer is required to send monthly statements  disclosing
recent  price  information  with respect to the penny stock held in a customer's
account and information with respect to the limited market in penny stocks.


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INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

     The  Company  relies  on a  combination  of  trade  secret,  copyright  and
trademark  law,  nondisclosure  agreements  and technical  security  measures to
protect its  products.  Notwithstanding  these  safeguards,  it is possible  for
competitors  of the  company to obtain  its trade  secrets  and to  imitate  its
products.  Furthermore,  others may  independently  develop  products similar or
superior to those developed or planned by the Company.

     Distribution  rights to motion pictures are granted legal  protection under
the  copyright  laws of the United  States  and most  foreign  countries.  These
copyright laws provide substantial civil and criminal sanctions for unauthorized
duplication and exhibition of motion pictures.  Motion pictures,  musical works,
sound recordings,  artwork,  still photography and motion picture properties are
each separate works subject to copyright  under most copyright  laws,  including
the United States Copyright Act of 1976, as amended.

COMPETITION

     SVEI  competes  with a large array of diverse  global media  conglomerates,
upstart  "entertainment,  information and commerce" companies, as well as with a
number  of  smaller,   independent  production  companies.  SVEI's  current  and
potential competitors include:

         o        Fox, Disney, Warner Bros., Universal 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, 2002,  SVEI employed four  employees.  SVEI  considers its
employee relations to be satisfactory at present.




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                         ITEM 2 DESCRIPTION OF PROPERTY


     SVEI's principal executive offices are located at 15452 Cabrieto Rd., Suite
204,  Van  Nuys,  CA 91406 and  consist  of  approximately  400  square  feet of
furnished   executive   suite  offices  and  reception   and   conference   room
arrangements.  The lease expires in six months from October 1, 2001. The monthly
rent for the property is $500 and 1,667 shares.


                            ITEM 3 LEGAL PROCEEDINGS


     As of the date hereof,  SVEI is not a party to any material  pending  legal
proceeding and is not aware of any threatened legal proceeding.


                        ITEM 4 SUBMISSION 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, 2002.

                                     PART II

                       ITEM 5 MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS


MARKET INFORMATION

     The  Company's  Common  Stock is  traded on the NQB Pink  Sheets  under the
symbol "SVED." The following  table presents the high and low bid quotations for
the Common  Stock as reported by the NASD for each  quarter  during the last two
years.  Such prices reflect  inter-dealer  quotations  without  adjustments  for
retail markup,  markdown or commission,  and do not necessarily represent actual
transactions.

     Prior to December 2, 1999, there was no trading market for Company's Common
Stock. As of December 2, 1999,  SVEI's Common Stock has been traded on the "pink
sheets" under the trading symbol "SVED." There has been no  solicitation  of the
sale or  purchase  of the  Common  Stock.  The  price for the  common  stock has
approximately ranged in price as follows:



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<TABLE>
<CAPTION>


                                                    High                 Low
                   2001:
<S>                                              <C>                 <C>
Quarter ended September 30, 2000                 $         2.13      $         0.75
Quarter ended December 31, 2000                  $         1.70      $         0.85
Quarter ended March 31, 2001                     $         1.50      $         0.30
Quarter ended June 30, 2001                      $         1.00      $         0.30
                   2002:
Quarter ended September 30, 2001                 $         0.52      $         0.18
Quarter ended December 31, 2001                  $         0.65      $         0.07
Quarter ended March 31, 2002                     $         0.38      $         0.10
Quarter ended June 30, 2002                      $         0.14      $         0.01
</TABLE>

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.

     The number of  shareholders  of record of the Company's  Common Stock as of
June 30, 2002 was approximately 128.

RECENT SALES OF UNREGISTERED SECURITIES

     The Company was initially  incorporated  to allow for the issuance of up to
25,000  shares of no par value  common  stock.  As a result of the  merger  with
Kestrel Equity Corporation the authorized number of shares is 100,000,000 with a
par value of $.001.

     At inception,  the Company issued  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.

     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 February 14, 2000 the Company  issued  100,000 shares of common stock as
payment for services rendered by Mr. Herky Williams.  The services rendered were
for the development of the

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Company's music division.

     From April to June 2000,  the  Company  issued  200,000  restricted  common
shares to various  consultants for services and 90,500  restricted common shares
to individuals for cash all at $1.00 per share.

     On April 25,  2000 the Board of  Directors  approved  a stock  option  plan
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 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).


     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 100,000  common  shares.  On  September  29, 2000 the
shares were issued at a value of $95,000,  which was the quoted  market price on
the date of issue.  The  contract  is for a period of time  covering 3 quarterly
financial  statements.  To the best  knowledge  and  belief  of the  Company  no
services have been performed by Mr. Whiten  pursuant to this  agreement.  On May
25, 2001,  the 100,000  shares of stock issued to Mr.  Whiten were  canceled for
non-performance of services.


     On October 27, 2000 the Company issued 12,500 shares of common stock valued
at $1.00 per share to National Financial Group for services previously rendered.

     Pursuant to an  agreement  made with an affiliate  company of Mr.  Williams
(the  Secretary-   Treasurer  and  Director  of  the  Company)  called  Wilfield
Entertainment,  the company  issued  400,000  shares of common stock at a market
price of $.55 per share on April  18,  2001 for its  participation  in the joint
venture. The joint venture with Wilfield is for the production of thirteen music
albums. The Company will supply the necessary funding for the production of said
albums and after capital repayment has occurred, the Company will receive 51% of
the profits  from the  projects.  The  estimated  production  costs per album is
projected to be $80,000.

     On May 25,  2001,  350,000  shares that were  issued to various  people for
services were  cancelled.  These shares were  cancelled for  non-performance  of
services.

     During the year  ending  June 30,  2001,  1,721,000  shares were issued for
conversion of notes payable totaling $664,651.  The value of these shares ranged
from $.26 to $.51 per share.

     During the year ended June 30, 2001, the Company issued 1,532,600 shares to
various

                                       12

<PAGE>



consultants  for services at the market value on the date of issuance and 15,000
restricted common shares to individuals for cash at $1.00 per share.

     During the quarter ended September 30,  2001,100,000 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  3,080,000
shares to various  consultants  for  services at the market value on the date of
issuance and 90,000 restricted common shares to individuals for cash at $.50 per
share.

     During the quarter  ended  December 31, 2001,  the Company  issued  647,795
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  2,370,631
shares to various  consultants  for  services at the market value on the date of
issuance.  Also,  40,000  shares  issued  on July  30,  2001 for  services  were
cancelled on October 2, 2001 for non-performance of services.

     On January 15, 2002, 300,000 shares of common stock were issued for cash at
$.33 per share.  Also during the quarter,  2,662,000  were issued in  connection
with previous debt cancellation.

     During the quarter ended June 30, 2002,  the Company  issued 300,000 shares
of common stock for cash.  Shares were issued  for$.025 to .075 per share.  Also
during the quarter,  250,000 shares were issued for consulting and rent expense.
The value of the shares was between $.03 and $.08 per share.

     On April 29, 2002,  200,000  common  shares were issued for the purchase of
"In the Garden of Evil" album. The value of the shares were $.06.

     On May 30, 2002,  100,000  common shares were issued to various  people for
services  connected  with the  project  "Mad Dog and  Oakies."  The value of the
shares were $.03.

     No  underwriter  was involved in any of the above  issuances of securities.
All of the above  securities  were issued in reliance  upon the  exemptions  set
forth in Section 4(2) of the Securities  Act  (including,  in certain  instances
Regulation  promulgated  there  under) on the basis that they were issued  under
circumstances  not involving a public offering.  These  transactions were exempt
from  registration  pursuant to Section 4(2) of the  Securities  Act because all
such individuals were believed to be sophisticated  and given sufficient  access
to all information regarding SVEI, Kestrel, and/ or their predecessors.





                                       13

<PAGE>




                       ITEM 6 MANAGEMENT'S DISCUSSION AND
                         ANALYSIS OR PLAN OF OPERATIONS


Plan of Operations - The following discussion should be read in conjunction with
the Company's audited financial statements.

     The Company was organized  for the purpose of creating a corporate  vehicle
to seek, investigate and, if such investigation warrants, acquire an interest in
one or more  business  opportunities  presented to it by persons or firms who or
which desire to seek perceived advantages of a publicly held corporation.

     The Company may incur significant  post-merger or acquisition  registration
costs in the event  management  wishes to register a portion of their shares for
subsequent  sale. The Company will also incur  significant  legal and accounting
costs in connection with the acquisition  including the costs of preparing post-
effective amendments, Forms 8-K, agreements and related reports and documents.

     The  Company  will not have  sufficient  funds  (unless it is able to raise
funds  in  a  private  placement)  to  undertake  any  significant  development,
marketing and manufacturing of the products acquired. Accordingly, following the
acquisition,  the Company  will, in all  likelihood,  be required to either seek
debt or equity  financing or obtain funding from third parties,  in exchange for
which the  Company  may be  required  to give up a  substantial  portion  of its
interest in the acquired product. There is no assurance that the Company will be
able  either to  obtain  additional  financing  or  interest  third  parties  in
providing  funding for the further  development,  marketing and manufacturing of
any products acquired.

     The current plan of SVEI incorporates operational resources that will reach
the mass market by aligning itself with  already-established,  branded  products
and  titles  for the  production,  promotion  and  distribution.  The  Company's
management intends to aggressively evaluate and pursue production  opportunities
in order to increase  SVEI's content  library.  As a development  stage company,
SVEI has minimal historical operations,  no revenues and negative cash flows. In
order to satisfy cash  requirements  for SVEI's  production  and revenue  goals,
management must obtain working capital through either debt or equity financing.

     The  entertainment  industry is an intensely  competitive one, where price,
service,  location,  and  quality  are  critical  factors.  The Company has many
established  competitors,  ranging from similar local single unit  operations to
large  multi-national  operations.  Some of these competitors have substantially
greater financial  resources and may be established or indeed become established
in areas where the Company operates.  The entertainment industry may be affected
by changes in customer tastes, economic, and demographic trends. Factors such as
inflation,  increased  supplies costs and the availability of suitable employees
may adversely  affect the  entertainment  industry in general and the Company in
particular. In view of the Company's limited financial resources and

                                       14

<PAGE>



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, 2002. SVEI has sustained a net loss of approximately $2.2 million
for the year ended June 30,  2002,  which was due to general and  administrative
expenses  incurred by SVEI. From May 5, 1999 the Company was a development stage
company and had not begun principal  operations.  Accordingly,  comparisons with
prior periods are not meaningful.

LIQUIDITY AND CAPITAL RESOURCES

     The Company is in the process of  developing a detailed  plan of operations
to exploit its asset base. On a preliminary basis, the Company estimates that it
will require from  $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   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 of another  Company and
loans from related parties. The Company purchased  approximately  400,000 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  $566,000 of net proceeds  during  September 1999 through June 30,
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  the  year,  three  persons,
including the  aforementioned  major  shareholder  and one director,  loaned the
Company $795,000. 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

                                       15

<PAGE>



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. See Item 13
for a  list  of the  financial  statements  and  financial  statement  schedules
included.


              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.

                                    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 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:
<TABLE>
<CAPTION>


Director's   Name             Age                      Office                              Term Expires
<S>                           <C>         <C>                                           <C>
Thomas E. Noonan              71          Chairman of the Board, Director               next annual meeting
John Honour                   51                   CEO, President                       next annual meeting
Herky Williams                48           Secretary-Treasurer, Director                next annual meeting
John C. Bodziak, Jr.          28                      Director                          next annual meeting
Rocco Urbisci                 52                      Director                          next annual meeting
</TABLE>

THOMAS E. NOONAN - CHAIRMAN - BOARD OF  DIRECTORS:  Mr. Noonan has served on the
Board of  Directors  since August 4, 2000.  Tom Noonan is currently  the head of
Columbia/Epic Records Alumni Association,  which was started in 1995, and is now
with 500 Members,  many in top positions in the current  music record  industry.
From 1995 to 2000 he has been President of

                                       16

<PAGE>



Noonan Consulting,  a record industry consulting firm to artists,  labels, video
companies, music publishers, trade publications,  artist managers, new companies
and foreign affiliates.  Mr. Noonan was formerly a senior executive at Billboard
Magazine where he founded the Hot 100 Charts and also evaluated albums and music
assets for the Internal Revenue Service. Furthermore, Mr. Noonan has been a U.S.
Government Expert Witness before investigative  Congressional Committees. He has
provided marketing  services for major artists such as Barbara Streisand,  Janet
Jackson,  Michael Jackson, George Michael, Bob Seger, Janis Joplin, Marvin Gaye,
Diana Ross and the Supremes,  Bob Dylan,  Johnny Cash,  Tony  Bennett,  and many
other known  artists.  Mr. Noonan holds a Bachelor of Science degree in Business
Administration from Seton Hall University.

JOHN HONOUR - CEO AND  PRESIDENT:  Mr.  Honour,  the  architect of Stereo Vision
Entertainment,  Inc., has much like the company a rather  diversified story. The
core of his business and personal  philosophy  was  constructed  by the military
training  he received  while a member of an elite  amphibious  support  team and
Honor Guard at the White House during the Nixon  Administration.  Mr. Honour has
started a variety of businesses including; Real Estate management,  restaurants,
and an import/export  trading company.  Two and a half years ago, an opportunity
presented itself to run a small public 3-D entertainment company, he took it. He
realized  it  was  time  to  capitalize  on  the  transition  from   traditional
entertainment to state of the art multimedia entertainment.  He gathered the top
people in the necessary fields and brought them under the umbrella of the public
company, Stereo Vision Entertainment, Inc.

HERKY WILLIAMS - BOARD OF DIRECTORS MEMBER:  Mr. Williams has served as a Member
of the Board of Directors for Stereo Vision Entertainment since May 5, 2000. Mr.
Williams  has an extensive  background  and  knowledge in various  facets of the
Music  Industry.  Mr.  Williams  served as Senior  Director  of A&R for  Capitol
Records in  1995-1996,  where his duties  included  signing  artists  and artist
development.  Such artists include Willie Nelson, Garth Brooks, Charlie Daniels,
Asleep at the Wheel,  and Tanya Tucker.  From 1997-2000,  he went on to serve as
Senior  Director of Creativity  for A.S.C.A.P.  (American  Society of Composers,
Authors,  and  Publishers,  established  in 1914).  A.S.C.A.P is a  member-owned
company,  which  collected  over  $500,000,000  this year for its  artists.  Mr.
Williams'  duties  include  securing  publishing and record deals for A.S.C.A.P.
members as well as placing songs with artists, labels, and producers.

JOHN C.  BODZIAK  JR. - BOARD OF  DIRECTOR  MEMBER:  Mr.  Bodziak  has served as
President/CEO  for Stereo Vision  Entertainment,  Inc. since August 4, 2000. Mr.
Bodziak  has  educational  as well as  working  experience  in the  capacity  of
ownership,   management,  and  operating  small  and  large  businesses  in  the
restaurant,  liquor,  and concert  entertainment  arenas.  From 1995 to 1997 Mr.
Bodziak was General Manager for Key Largo  International  (located on the Jannus
Landing block) where his duties included operating and managing Benson's Gourmet
and Tami Ami Nightclub.  Working  alongside the Jannus Landing  Corporation,  in
1997  Mr.  Bodziak  began  promoting  and  coordinating  entertainment  acts for
nightclubs  on the Jannus  Landing block as well as managing the real estate for
which  Jannus  Landing owns  including  Pelican Pub,  Detroit  Liquors,  and the
legendary Jannus Landing  Courtyard which was voted in Rolling Stone Magazine to
be the one of the top 10 best  concert  venues in the nation;  each year over 75
major acts play Jannus  Landing  Courtyard's  main stage.  From 1997 to 2000 Mr.
Bodziak has served as  President/CEO  of Jannus  Landing  Corporation,  where he
oversees the daily operation and schedules entertainment, and

                                       17

<PAGE>



acts as  coordinator  of the  concert  venue.  Mr.  Bodziak  graduated  from the
University  of Florida with a Bachelor's  Degree in Business  Administration  as
well as Financing and  Economics.  Mr. Bodziak was also president of his College
Business Fraternity, ALPHA KAPPA SAI.

ROCCO  URBISCI - BOARD OF  DIRECTORS  MEMBER:  Mr.  Urbisci has served as a
Member of the Board of Directors since May 5, 2000. From the years 1995 to 2000,
Mr. Urbisci worked as an Independent  Contractor to the Entertainment  Industry.
Mr. Urbisci has a vast repertoire of producing and directing  credits.  Over the
past five years,  some of his credits and completed  projects  include  numerous
George Carlin HBO Specials,  which Mr. Urbisci  produced and directed.  Three of
these  specials  were live,  which  creates a natural  linkage to the  company's
business plan. In 1998, Mr. Urbisci's  remarkable  diversity was apparent in his
receiving  the  Writer's  Guild Award for  writing  "The Earth Day  Special",  a
three-hour ABC  prime-time  special,  starring Bette Midler,  Dustin Hoffman and
Kevin Costner,  which he also produced.  Mr. Urbisci most recently is busy under
production with several projects,  including the animated television show, "Max"
with Rhythm & Hues, a 3-D digital  animation  company that worked on Universal's
Flintstones  sequel, "The Flintstones in Viva Rock Vegas." Mr. Urbisci graduated
from the Cooper School of Art in 1969.

Conflicts of Interest

     Certain  conflicts of interest existed at June 30, 2002 and may continue to
exist  between the Company and its officers and  directors  due to the fact that
each has other  business  interests  to which he devotes his primary  attention.
Each officer and director  may continue to do so  notwithstanding  the fact that
management time should be devoted to the business of the Company.

     Certain  conflicts  of  interest  may exist  between  the  Company  and its
management,  and  conflicts  may  develop in the  future.  The  Company  has not
established  policies or procedures  for the  resolution of current or potential
conflicts of  interests  between the  Company,  its  officers  and  directors or
affiliated entities.  There can be no assurance that management will resolve all
conflicts  of interest in favor of the  Company,  and failure by  management  to
conduct the  Company's  business in the  Company's  best  interest may result in
liability to the  management.  The officers and directors are accountable to the
Company as  fiduciaries,  which means that they are  required  to exercise  good
faith and integrity in handling the Company's affairs.  Shareholders who believe
that the  Company  has been  harmed by  failure of an  officer  or  director  to
appropriately  resolve any conflict of interest may,  subject to applicable rule
of  civil  procedure,  be able to bring a class  action  or  derivative  suit to
enforce their rights and the Company's rights.

Board Meetings and Committees

     The Directors and Officers  currently do not receive cash remuneration from
the  Company  and may not until cash flow from  operations  permits,  all in the
discretion of the Board of Directors.  The Company intends on  compensating  its
officers and directors with common stock in the Company, which is anticipated to
be included in a future stock option plan. Directors may be paid their expenses,
if any, of attendance at such meeting of the Board of Directors, and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as Director. No such payment shall preclude any Director from serving the
Corporation in any other capacity and

                                       18

<PAGE>



receiving  compensation  therefor.  No  compensation  has been  paid to the
Directors.  The Board of  Directors  may  designate  from  among its  members an
executive  committee and one or more other  committees.  No such committees have
been appointed.

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  $100,000
during any of the Company's last two fiscal years.


                 ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
                                 AND MANAGEMENT


Principal Shareholders

     The table below sets forth  information  as to each person owning of record
or who  was  known  by the  Company  to own  beneficially  more  than  5% of the
7,859,100  shares of issued and  outstanding  Common  Stock of the Company as of
June 30, 2002 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.

<TABLE>
<CAPTION>

Name and Address
of Beneficial Owners /           Nature of               Shares
Directors                        Ownership                Owned              Percent
--------------------------------------------------------------------------------------------


All Executive Officers
and Directors as a Group
<C>                                                        <C>               <C>
(5 persons)                      common stock               5,368,601          29%

John Honour
3650 Campus Dr.


                                       19

<PAGE>



Name and Address
Oceanside, CA 92056              common stock               4,077,351          22%
</TABLE>

*The address of all five officers and directors is in care of the Company.


             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



     On  September  25,  1999,  pursuant  to  the  terms  of an  asset  exchange
agreement,   SVEI  acquired   certain  assets  from  John  Honour,  a  principal
shareholder of SVEI. The assets  consisted of 400,000  freely-trading  shares of
New Visual Entertainment Inc., common stock.  Pursuant to the terms of the asset
exchange agreement,  SVEI issued a convertible  promissory note in the aggregate
principal amount of Four Hundred Thousand Dollars ($400,000) in exchange for the
assets (the  "Note").  On September 25, 1999,  the Note was  converted  into Two
Hundred  Thousand  (200,000) shares of Company Common Stock which was the agreed
value of $2.00 per share.

     The company has restructured its agreement with an affiliate company of Mr.
Williams (the  Secretary-Treasurer  and Director of the Company) called Wilfield
Entertainment.  The Company  will issue  400,000  shares of common stock for its
participation  in the joint venture.  The joint venture with Wilfield is for the
production of thirteen music albums.  SVEI 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.

     In the opinion of the  disinterested  members of SVEI's board of directors,
the above  transactions  were fair and were  made upon  terms  that were no less
favorable to SVEI than would have been obtained if negotiated with  unaffiliated
third parties.


                   ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K


(a)      The following documents are filed as part of this report.
<TABLE>
<CAPTION>

1.       Financial Statements                                                                                  Page

<S>                                                                                                          <C>
Robison, Hill & Co.'s Independent Auditor's Report............................................................F - 1

Balance Sheets
   June 30, 2001 and 2000 ....................................................................................F - 2

Statements of Operations for the
   Years Ended June 30, 2001 and 2000 ........................................................................F - 4

                                                        20

<PAGE>



Statement of Stockholders' Equity for the
   Years Ended June 30, 2001 and 2000 ........................................................................F - 5

Statements of Cash Flows for the
   Years Ended June 30, 2001 and 2000........................................................................F - 11

Notes to Financial Statements................................................................................F - 13


</TABLE>



2.       Financial Statement Schedules

     The following  financial statement schedules required by Regulation S-X are
included herein.

     All schedules are omitted  because they are not  applicable or the required
information is shown in the financial statements or notes thereto.

3.       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

                                       21

<PAGE>



         Corporation filed with the State of Arizona on September 30, 1997.
         (incorporated by reference to Form 10-SB filed with the SEC on December
         17, 1999)

3.4 *    Bylaws of the Kestrel Equity Corporation. (incorporated by reference to
          Form 10-SB filed with the SEC on December 17, 1999)

3.5 *    Articles of Incorporation of SVE Merger, Inc. filed with the State of
         Nevada on December 23, 1999.

3.6 *    Bylaws of SVE Merger, Inc.

4.1 *    Specimen Stock Certificate of Kestrel Equity Corporation. (incorporated
         by reference to Form 10-SB filed with the SEC on December 17, 1999)

4.2 *    Specimen Stock Certificate of SVE Merger, Inc.

10.1*    Stock Purchase Agreement by and between Kestrel Equity Corporation and
         John Honour, dated September 25, 1999.

99.1     Certification Pursuant to 18 U.S.C. ss 1350, As Adopted Pursuant to
         Section 906 ofthe Sarbanes-Oxley Act of 2002.

99.2     Certification Pursuant to 18 U.S.C. ss 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.

         (b)       Reports on Form 8-K filed.

         There were no Form 8-K's filed during the quarter ended June 30, 2001.

                                       22

<PAGE>




                                   SIGNATURES


     Pursuant  to the  requirements  of  section  13 or 15(d) of the  Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on it behalf by the undersigned, thereunto duly authorized.

                        STEREO VISION ENTERTAINMENT, INC.

Dated: October 8, 2002                 By  /S/     John Honour
                                       -----------------------------------------
                                        John Honour,
                                         C.E.O., President,

     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 8th day of October 2002.

Signatures & Title


/S/     John Honour
--------------------------------------------------
John Honour
C.E.O., President, Director
(Principal Executive Officer)



/S/     Herky Williams
-----------------------------------------------------------
Herky Williams
Secretary-Treasurer, Director
(Principal Financial and Accounting Officer)



/S/    John C. Bodziak
-----------------------------------------------------------
John C. Bodziak
Director


I, John Honour, certify that:

         1.       I have reviewed this annual report on Form 10-KSB of Stereo
         Vision Entertainment,Inc..


                                       23

<PAGE>


     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit 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 annual
report.

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report.


Date: 10/08/02



John Honour
CEO, President, and Director
(Principal Executive Officer)


I, Herky William, certify that:

     1. I have  reviewed  this  annual  report on Form  10-KSB  of Stereo  Vison
Entertainment, Inc.

     2. Based on my  knowledge,  this annual  report does not contain any untrue
statement of a material fact or omit 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 annual
report.

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report.


Date: 10/08/02



Herky Williams
Secretary, Treasurer and Director
(Principal Financial and Accounting Officer)



                                                        24

<PAGE>

                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)

                                       -:-

                          INDEPENDENT AUDITOR'S REPORT


                             JUNE 30, 2002 and 2001




















<PAGE>

<TABLE>
<CAPTION>


                                                     CONTENTS



                                                                                                             Page

<S>                                                                                                          <C>
Independent Auditor's Report..................................................................................F - 1

Balance Sheets
   June 30, 2002 and 2001.....................................................................................F - 2

Statements of Operations for the
   Years Ended June 30, 2002 and 2001.........................................................................F - 4

Statement of Stockholders' Equity for the
   Period May 5, 1999 (Inception) to June 30, 2002 ...........................................................F - 5

Statements of Cash Flows for the
   Years Ended June 30, 2002 and 2001........................................................................F - 11

Notes to Financial Statements................................................................................F - 13

</TABLE>


























<PAGE>





                          INDEPENDENT AUDITOR'S REPORT



Stereo Vision Entertainment, Inc.
(A Development Stage Company)

     We  have  audited  the   accompanying   balance   sheet  of  Stereo  Vision
Entertainment,  Inc. (a development  stage company) as of June 30, 2002 and 2001
and the related statements of operations, and cash flows for the two years ended
June 30, 2002 and 2001 and the statement of  stockholders  equity for the period
May 5, 1999  (inception) to June 30, 2002.  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 audit in  accordance  with  auditing  standards  generally
accepted in the United States of America.  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, 2002 and 2001 and the results
of its  operations  and its cash flows for the two years ended June 30, 2002 and
2001, 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
September 19, 2002

                                      F - 1

<PAGE>



                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                                  BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                                            June 30,
                                                                             --------------------------------------
ASSETS:                                                                             2002                2001
-------
                                                                             ------------------  ------------------

Current Assets:
<S>                                                                          <C>                 <C>
   Cash                                                                      $            1,007  $               66
                                                                             ------------------  ------------------

       Total Current Assets                                                               1,007                  66
                                                                             ------------------  ------------------

Fixed Assets:
   Office Equipment                                                                      13,745              13,745
   3-D Production and Exhibition Equipment                                                    -           3,306,900
   Less Accumulated Depreciation                                                         (8,247)         (3,312,398)
                                                                             ------------------  ------------------

       Net Fixed Assets                                                                   5,498               8,247
                                                                             ------------------  ------------------

Intangible and Other Assets:
   Investments 3-D Projects                                                                   -             350,000
   Investment in Wilfield Entertainment                                                 220,000             220,000
   Films, Manuscripts, Recordings and Similar Property                                  318,461             286,292
   Intellectual Property                                                                      -             100,000
   Licensing & Distribution Rights                                                            -             255,000
   Less Accumulated Amortization                                                              -            (214,666)
                                                                             ------------------  ------------------

       Net Intangible and Other Assets                                                  538,461             996,626
                                                                             ------------------  ------------------

Total Assets:                                                                $          544,966  $        1,004,939
                                                                             ==================  ==================
</TABLE>















                                                       F - 2

<PAGE>



                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                                  BALANCE SHEETS
                                                    (Continued)


<TABLE>
<CAPTION>

                                                                                            June 30,
                                                                             --------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:                                               2002                2001
-------------------------------------
                                                                             ------------------  ------------------

Liabilities:
<S>                                                                          <C>                 <C>
   Accounts Payable                                                          $          201,407  $          271,341
   Accrued Expenses                                                                      69,051              99,399
   Payable to SAG for Route 66                                                           71,493              71,493
   Loans from Shareholders                                                              386,944             989,836
   Short-term Notes Payable                                                                   -              16,000
                                                                             ------------------  ------------------

      Total Current Liabilities                                                         728,895           1,448,069
                                                                             ------------------

Stockholders' Equity:
  Common Stock, $.001 Par value
    Authorized 100,000,000 shares,
    Issued 18,485,151 shares at June 30, 2002
      and 7,859,100 shares at June 30, 2001                                              18,485               7,859
  Additional Paid in Capital                                                          8,873,784           6,459,026
  Stock Options Outstanding                                                             487,500             487,500
  Deficit Accumulated During the Development Stage                                   (9,563,698)         (7,397,515)
                                                                             ------------------  ------------------

     Total Stockholders' Equity                                                        (183,929)           (443,130)
                                                                             ------------------  ------------------

     Total Liabilities and Stockholders' Equity                              $          544,966  $        1,004,939
                                                                             ==================  ==================

</TABLE>













   The accompanying notes are an integral part of these financial statements.

                                                       F - 3

<PAGE>



                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                             STATEMENTS OF OPERATIONS




<TABLE>
<CAPTION>
                                                                                                     Cumulative
                                                                                                    Since May 5,
                                                             For the              For the               1999
                                                            Year Ended           Year Ended         Inception of
                                                             June 30,             June 30,          Development
                                                               2002                 2001               Stage
                                                        ------------------   ------------------  ------------------
<S>                                                     <C>                  <C>                 <C>
Revenues:                                               $                -   $                -  $                -

Expenses:
Research & Development                                                   -                    -             293,000
General & Administrative Expenses                                2,026,025            4,215,353           8,228,108
Consulting                                                          10,725              128,200             988,855
Advertising & Promotion                                                  -              148,033             148,033
                                                        ------------------   ------------------  ------------------

Operating Loss                                                  (2,036,750)          (4,491,586)         (9,657,996)

Other Income (Expense)
   Interest                                                       (129,433)             (80,739)           (302,591)
   Loss on Sale of Assets                                                -                    -             (15,883)
   Gain on Trading Investments                                           -                    -             412,772
                                                        ------------------   ------------------  ------------------

     Net Loss                                           $       (2,166,183)  $       (4,572,325) $       (9,563,698)
                                                        ==================   ==================  ==================

Basic & Diluted loss per share                          $           (0.16)   $           (0.77)
                                                        ==================   ==================

</TABLE>













   The accompanying notes are an integral part of these financial statements.

                                                       F - 4

<PAGE>



                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                         STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                                    Deficit
                                                                                                  Accumulated
                                                                                Additional          During
                                                        Common Stock             Paid in          Development
                                                ----------------------------
                                                    Shares         Value         Capital             Stage
                                                --------------  ------------ ----------------  -----------------
May 5, 1999 Stock Issued for Services
<S>                                                  <C>        <C>          <C>               <C>
  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)

December 2, 1999 Stock Issued in
   Exchange for Assets                               1,470,000         1,470        4,010,430                  -

December 3, 1999 Stock Issued in
   Connection to Merger with Kestrel
   Equity Corporation                                1,200,000         1,200         (113,266)                 -

December 31, 1999 Stock Issued
   for Services                                        350,000           350          699,650                  -

February 14, 2000 Stock Issued
   for Services                                        100,000           100           99,900                  -

April 17, 2000 Stock Issued for
   Services                                            100,000           100           99,900                  -

May 4, 2000 Stock Issued for Cash                       55,000            55           54,945                  -

June 2, 2000 Stock Issued for Services                 100,000           100           99,900                  -

June 30, 2000 Stock Issued for Cash                     35,500            36           35,465                  -

Net Loss                                                     -             -                -         (2,680,213)
                                                --------------  ------------ ----------------  -----------------

Balance at June 30, 2000                             4,940,500         4,941        4,990,394         (2,825,190)

September 13, 2000 Stock Issued for
   Services                                            125,000           125          141,125                  -
</TABLE>


                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                         STATEMENT OF STOCKHOLDERS' EQUITY
                                                    (Continued)

<TABLE>
<CAPTION>

                                                                                                    Deficit
                                                                                                  Accumulated
                                                                                Additional          During
                                                        Common Stock             Paid in          Development
                                                ----------------------------
                                                    Shares         Value         Capital             Stage
                                                --------------  ------------ ----------------  -----------------

September 29, 2000 Stock Issued for
<S>                                                    <C>      <C>          <C>               <C>
  Advertising                                          100,000  $        100 $         94,900  $               -

October 27, 2000 Stock Issued for
  Advertising                                           12,500            12           12,487                  -

November 15, 2000 Stock Issued for
  Conversion of Note Payable                           800,000           800          406,338                  -

November 22, 2000 Stock Issued for
  Conversion of Note Payable                            50,000            50           24,950                  -

November 22, 2000 Stock Issued for
  Consulting                                           102,000           102          101,898                  -

December 4, 2000 Stock Issued for
   Services                                             10,000            10           10,190                  -

December 14, 2000 Stock Issued for
   Services                                            100,000           100          105,900                  -

January 23, 2001 Stock Issued for
   Cash                                                 15,000            15           14,985                  -

January 30, 2001 Stock Issued for
   Services                                            118,100           118           64,832                  -

March 10, 2001 Stock Issued for
   Services                                            200,000           200          153,800                  -

April 9, 2001 Stock Issued for
   Advertising                                          90,000            90           49,410                  -

April 18, 2001 Stock Issued for
  Acquisition of Wilfield Entertainment                400,000           400          219,600                  -

</TABLE>


                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                         STATEMENT OF STOCKHOLDERS' EQUITY
                                                    (Continued)

<TABLE>
<CAPTION>

                                                                                                    Deficit
                                                                                                  Accumulated
                                                                                Additional          During
                                                        Common Stock             Paid in          Development
                                                ----------------------------
                                                    Shares         Value         Capital             Stage
                                                --------------  ------------ ----------------  -----------------

May 25, 2001 Shares Cancelled for
   Non-Performance of Advertising and
<S>                                                   <C>       <C>          <C>               <C>
   Services                                           (350,000) $       (350)$       (328,150) $               -

June 1, 2001 Shares Issued for
   Conversion of Notes Payable                          21,000            21            7,492                  -

June 15, 2001 Shares Issued for
   Services                                             25,000            25           14,975                  -

June 28, 2001 Shares Issued for
   Advertising                                         100,000           100           59,900                  -

June 28, 2001 Shares Issued for
   Services                                            150,000           150           89,850                  -

June 29, 2001 Shares Issued for
   Conversion of Notes Payable                         850,000           850          224,150                  -

Net Loss                                                     -             -                -         (4,572,325)
                                                --------------  ------------ ----------------  -----------------

Balance at June 30, 2001                             7,859,100         7,859        6,459,026         (7,397,515)

July 3, 2001 Shares Issued for Expenses                 25,000            25            9,975                  -

July 3, 2001 Shares Issued for Services                125,000           125           74,875                  -

July 25, 2001 Shares Issued for Cash                    40,000            40           19,960                  -

July 30, 2001 Shares Issued for
    Consulting                                         110,000           110           44,990                  -

August 29, 2001 Shares Issued for
    Interest on Notes Payable                          335,000           335          100,165                  -
</TABLE>


                                                       F - 5

<PAGE>



                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                         STATEMENT OF STOCKHOLDERS' EQUITY
                                                    (Continued)
<TABLE>
<CAPTION>


                                                                                                    Deficit
                                                                                                  Accumulated
                                                                                Additional          During
                                                        Common Stock             Paid in          Development
                                                ----------------------------
                                                    Shares         Value         Capital             Stage
                                                --------------  ------------ ----------------  -----------------
September 10, 2001 Shares Issued for
<S>                                                     <C>     <C>          <C>               <C>
    Services                                            20,000  $         20 $          5,980  $               -

September 10, 2001 Shares Issued for
   Conversion of Note Payable                          100,000           100           25,500                  -

September 25, 2001 Shares Canceled
   For Non-Performance of Contract                    (100,000)         (100)          70,632                  -

September 27, 2001 Shares Issued for
    Services                                         2,525,000         2,525        1,133,725                  -

September 27, 2001 Shares Issued for
   Cash and Commission                                  50,000            50           24,950                  -

October 2, 2001 Shares Issued for
   Services                                            450,000           450          242,550                  -

October 31, 2001 Shares Issued for
   Conversion of Note Payable                          254,557           255           88,840                  -

November 1, 2001 Shares Issued for
   Services                                             70,631            71           14,055                  -

November 7, 2001 Shares Issued for
   Conversion of Note Payable                          222,738           223           55,462                  -

December 19, 2001 Shares Issued for
   Services                                          1,100,000         1,100          152,900                  -

December 19, 2001 Shares Issued for
   Conversion of Note Payable                          170,500           170           23,700                  -

</TABLE>



                                                       F - 6

<PAGE>



                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                         STATEMENT OF STOCKHOLDERS' EQUITY
                                                    (Continued)

<TABLE>
<CAPTION>

                                                                                                    Deficit
                                                                                                  Accumulated
                                                                                Additional          During
                                                        Common Stock             Paid in          Development
                                                ----------------------------
                                                    Shares         Value         Capital             Stage
                                                --------------  ------------ ----------------  -----------------
December 20, 2001 Shares Issued for
<S>                                                    <C>      <C>          <C>               <C>
   Services                                            750,000  $        750 $        156,750  $               -

January 1, 2002 Shares Issued for Cash                 300,000           300           99,700                  -

January 24, 2002 Shares Issued for
  Previous Conversion of Note Payable                1,391,500         1,391           (1,392)                 -

February 25, 2002 Shares Issued for
  Previous Conversion of Note Payable                1,588,124         1,588           (1,588)                 -

April 10, 2002 Shares Issued for
  Conversion of Note Payable                           248,000           248           32,379                  -

April 15, 2002 Shares Issued for Rent                   50,000            50            3,950                  -

April 15, 2002 Shares Issued for Cash                  100,000           100            2,900                  -

April 29, 2002 Shares Issued for
   Project Agreement                                   200,000           200           11,800                  -

April 29, 2002 Shares Issued for
   Consulting                                          100,000           100            5,900                  -

May 8, 2002 Shares Issued for Cash                     100,000           100            2,400                  -

May 24, 2002 Shares Issued for
   Consulting                                          100,000           100            3,400                  -

May 30, 2002 Shares Issued for
  Project Agreement                                    100,000           100            2,900                  -

June 24, 2002 Shares Issued for Cash                   100,001           100            7,400                  -

</TABLE>


                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                         STATEMENT OF STOCKHOLDERS' EQUITY
                                                    (Continued)


<TABLE>
<CAPTION>
                                                                                                    Deficit
                                                                                                  Accumulated
                                                                                Additional          During
                                                        Common Stock             Paid in          Development
                                                ----------------------------
                                                    Shares         Value         Capital             Stage
                                                --------------  ------------ ----------------  -----------------
<S>                                             <C>             <C>          <C>               <C>
Net Loss                                                     -  $          -  $            -   $      (2,166,183)
                                                --------------  ------------ ----------------  -----------------

Balance at June 30, 2002                            18,485,151  $     18,485 $      8,873,784  $      (9,563,698)
                                                ==============  ============ ================  =================


</TABLE>




























   The accompanying notes are an integral part of these financial statements.

                                                       F - 7

<PAGE>




                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                             STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                                                                     Cumulative
                                                                                                    Since May 5,
                                                                         For the                        1999
                                                                       Years Ended                  Inception of
                                                                         June 30,                   Development
                                                           ------------------------------------
                                                                  2002               2001              Stage
                                                           ------------------   ---------------  ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S>                                                        <C>                  <C>              <C>
Net Loss                                                   $       (2,166,183)  $    (4,572,325) $       (9,563,698)
Adjustments to reconcile net loss to net
cash used in operating activities:
   Depreciation and Amortization                                        2,749         2,773,974           3,530,930
   Issuance of Common Stock for Expenses                            2,023,580           571,900           3,600,480
   Issuance of Stock Options                                                -           487,500             487,500
   Realized gain on trading investments                                     -                 -            (412,773)
   Loss on sale of assets                                                   -                 -              15,883
   Cash acquired in merger                                                  -                 -                 332

Change in operating assets and liabilities:
   Accounts Payable                                                   (69,934)           20,978             183,977
   Accrued Expenses                                                   (30,348)           73,087              69,051
   Payable to SAG for Route 66                                              -            71,493              71,493
                                                           ------------------   ---------------  ------------------
  Net Cash Used in operating activities                              (240,136)         (573,393)         (2,016,825)
                                                           ------------------   ---------------  ------------------

CASH FLOWS FROM INVESTING
ACTIVITIES:
   Purchase of equipment                                                    -                 -             (13,745)
   Investment in films, manuscripts, recordings
      and similar property                                            (17,169)         (261,292)           (253,461)
   Proceeds from sale of assets                                             -                 -              51,117
   Proceeds from sale of investments                                        -                 -             565,773
                                                           ------------------   ---------------  ------------------
Net cash used in investing activities                                 (17,169)         (261,292)            349,684
                                                           ------------------   ---------------  ------------------


CASH FLOWS FROM FINANCING
ACTIVITIES:

Proceeds from loans from shareholders                                 110,646           793,181           1,709,535

</TABLE>


                                                       F - 8

<PAGE>



                                         STEREO VISION ENTERTAINMENT, INC.
                                         ---------------------------------
                                           (A Development Stage Company)
                                           -----------------------------
                                             STATEMENTS OF CASH FLOWS
                                             -------------------------
                                                    (Continued)

<TABLE>
<CAPTION>

                                                                                                     Cumulative
                                                                                                    Since May 5,
                                                                         For the                        1999
                                                                       Years Ended                  Inception of
                                                                        June 30,                    Development
                                                          -------------------------------------
                                                                2002                2001               Stage
                                                          -----------------  ------------------  ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
<S>                                                       <C>                <C>                 <C>
Payments of principal on Shareholder Loans                $          (8,400) $           (8,487) $         (366,887)
Proceeds from issuance of common stock                              156,000              15,000             261,500
Proceeds from issuance of short-term notes                                -              26,000              64,000
                                                          -----------------  ------------------  ------------------

Net Cash Provided by Financing Activities                           258,246             825,694           1,668,148
                                                          -----------------  ------------------  ------------------

Net (Decrease) Increase in
  Cash and Cash Equivalents                                             941              (8,991)              1,007
Cash and Cash Equivalents
  at Beginning of Period                                                 66               9,057                   -
                                                          -----------------  ------------------  ------------------
Cash and Cash Equivalents
  at End of Period                                        $           1,007  $66                 $            1,007
                                                          =================  ==================  ==================

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
  Interest                                                $                  $-          43,773  $           43,773
                                                          -----------------  ------------------  ------------------
  Income taxes                                            $                  $-                  $                   -
                                                          -----------------  ------------------  ------------------

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:


Common Stock Issued for Investment in
   Wilfield Entertainment                                                 -             220,000             220,000
Common Stock Issued for Investment in
   Mad Dogs & Oakies Project                                          3,000                   -               3,000
Common Stock Issued for Investment in
  In the Garden of Evil Project                                      12,000                   -                   -
Notes Payable Converted to Stock                                    193,823             664,651             858,474
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                                       F - 9

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001

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 $9,563,698 for the period from May 5, 1999 (inception) to June 30,
2002, 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 in 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 - 10

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
                                   (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, 2002 is in the  development  stage,  and has
not commenced planned principal operations.

Nature of Business

     The  Company  intends  to  position  itself  to  evolve  into a  vertically
integrated,  diversified global media entertainment company. The Company intends
to acquire a number of diversified  entertainment  companies that will allow for
the pursuit of opportunities currently available in the global marketplace.

     The  Company   anticipates   generating   revenues  from  several  sources,
including,  production of and  exhibition of new and existing  feature films and
providing  integrated  solutions to help organizations  broadcast audio,  video,
animation,  and music over the Internet as well as expanding into other areas of
the entertainment industry .

Cash and Cash Equivalents

     For purposes of the  statement  of cash flows,  the Company  considers  all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.

Pervasiveness of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  required  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.






                                     F - 11

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
                                   (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.

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 - 12

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
                                   (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:

<TABLE>
<CAPTION>


                                                                                                     Per-Share
                                                              Income              Shares               Amount
                                                              ------              ------               ------
                                                           (Numerator)         (Denominator)

                                                                     For the Year Ended June 30, 2002
Basic Loss per Share
<S>                                                     <C>                          <C>         <C>
Loss to common shareholders                             $       (2,166,183)          13,611,695  $           (0.16)
                                                        ==================  ===================  ==================

                                                                     For the Year Ended June 30, 2001
Basic Loss per Share
Loss to common shareholders                             $       (4,572,325)           5,959,122  $           (0.77)
                                                        ==================  ===================  ==================
</TABLE>


     The effect of outstanding  common stock  equivalents would be anti-dilutive
for June 30, 2002 and 2001 and are thus not considered.  The Company has $66,950
debt  convertible into 133,900 shares at $.50 per share and commitments to issue
approximately 600,000 shares (see note 7).

Reclassification

     Certain  reclassifications  have been made in the June 30,  2001  financial
statements to conform with the June 30, 2002 presentation.

Joint Venture Operations Accounting

     Joint  venture  operations  are  accounted  for under the equity  method of
accounting.

Advertising Costs

     Advertising costs are expensed as incurred.  Advertising expense was $0 and
$148,033 for the years ended June 30, 2002 and 2001, respectively.


                                     F - 13

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
                                   (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Intangible Assets

     Intangible  assets  are  valued  at cost  and are  being  amortized  on the
straight-line  basis over a period of five  years.  The  amortization  period is
management's estimate of useful economic life of the asset.

     Films, manuscripts,  recordings and similar property are valued at cost and
will be amortized on the income forecast method.

     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.

NOTE 2 - INCOME TAXES

     As of June 30, 2002, the Company had a net operating loss  carryforward for
income tax reporting  purposes of  approximately  $9,564,000  that may be offset
against future taxable income through 2022. 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.





                                     F - 14

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
                                   (Continued)

NOTE 4 - RENT EXPENSE

     The Company has entered into lease  agreements for various office,  storage
and  warehouse  facilities.  Beginning  October 1, 2001,  the Company will begin
leasing a new office space  located in Van Nuys, CA for $500 plus 1,667 shares a
month.  For the years  ended  June 30,  2002 and 2001 the rental  payments  were
$4,000 and $38,129, respectively.

NOTE 5 - LOANS FROM SHAREHOLDERS AND OTHER RELATED PARTY
TRANSACTIONS

     The loans are payable to various shareholders,  are unsecured with interest
at  rates  of  between  4.75%  to12%  and  have no  fixed  terms  of  repayment.
Approximately  $66,950  of the loans are  convertible  into  common  shares at a
conversion  price of $.50 per share. At the time of the issuance of the notes to
shareholders there were no beneficial conversion features. To the best knowledge
of management  the stock was not trading at that time,  and the note was not "in
the money" at that time.

     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 at 6.1% interest.

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  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.

     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 September 25, 2001 the asset  acquisition was
rescinded.  The assets  acquired were returned and the common stock was returned
to treasury.




                                     F - 15

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
                                   (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 1,200,000  shares of common  stock.  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 February 14, 2000 the Company  issued  100,000 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 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).

     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 100,000  common  shares.  On  September  29, 2000 the
shares were issued at a value of $95,000,  which was the quoted  market price on
the date of issue.  The  contract  is for a period of time  covering 3 quarterly
financial  statements.  To the best  knowledge  and  belief  of the  Company  no
services have been performed by Mr. Whiten  pursuant to this  agreement.  On May
25, 2001,  the 100,000  shares of stock issued to Mr.  Whiten were  canceled for
non-performance of services.

     On October 27, 2000 the Company issued 12,500 shares of common stock valued
at $1.00 per share to National Financial Group for services previously rendered.

     Pursuant to an  agreement  made with an affiliate  company of Mr.  Williams
(the  Secretary-   Treasurer  and  Director  of  the  Company)  called  Wilfield
Entertainment,  the company  issued  400,000  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.

                                     F - 16

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
                                   (Continued)

NOTE 6 - COMMON STOCK TRANSACTIONS (Continued)
----------------------------------

     The Company will supply the  necessary  funding for the  production of said
albums and after capital repayment has occurred, the Company will receive 51% of
the profits  from the  projects.  The  estimated  production  costs per album is
projected to be $80,000.

     On May 25,  2001,  350,000  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,  2001,100,000 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  3,080,000
shares to various  consultants  for  services at the market value on the date of
issuance and 90,000 restricted common shares to individuals for cash at $.50 per
share.

     During the quarter  ended  December 31, 2001,  the Company  issued  647,795
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  2,370,631
shares to various  consultants  for  services at the market value on the date of
issuance.  Also,  40,000  shares  issued  on July  30,  2001 for  services  were
cancelled on October 2, 2001 for non-performance of services.

     On January 15, 2002, 300,000 shares of common stock were issued for cash at
$.33 per share.  Also during the quarter,  2,662,000  were issued in  connection
with previous debt cancellation.

     During the quarter ended June 30, 2002,  the Company  issued 300,000 shares
of common stock for cash.  Shares were issued  for$.025 to .075 per share.  Also
during the quarter,  250,000 shares were issued for consulting and rent expense.
The value of the shares was between $.03 and $.08 per share.

     On April 29, 2002,  200,000  common  shares were issued for the purchase of
"In the Garden of Evil" album. The value of the shares were $.06.

     On May 30, 2002,  100,000  common shares were issued to various  people for
services  connected  with the  project  "Mad Dog and  Oakies."  The value of the
shares were $.03.

                                     F - 17

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
                                   (Continued)

NOTE 7 - 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 April 26, 2000 the Company  entered  into a  consulting  agreement  with
Natural Vision Corporation  (Daniel Symmes).  Mr. Symmes provided  consulting in
3-D technologies in exchange for 17,000 shares valued at $102,000.  The contract
provided for a topping up of the shares in the event that the  Company's  common
stock was not selling for $6 per share or greater.

     On November 22, 2000,  102,000 shares,  valued at $1 per share, were issued
to Mr. Symmes. In addition, the Company agreed to pay Natural Vision Corporation
$1,000 per week for Mr.  Symmes'  consulting  services for a 2 year period.  Mr.
Symmes  spends  between 15 to 20 hours each week in  performing  the  consulting
services and will  provided  services on an as needed basis for the remainder of
the contract.  Natural Vision will also receive options based on gross income of
the Company over four six-month intervals.  The exercise price of the options is
$6 per share and they expire two years after grant.

     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.
Currently the terms of the stock options are being reviewed.

     On October 27,  2000 The  Company  entered  into an  agreement  with Jannus
Records Inc. (which is owned and controlled by John C. Bodziack,  Jr. a Director
of the Company) to engage in the promotion and development of concerts, records,
and Internet  broadcasting  of the concert  events.  It is the  intention of the
Company to utilize "Jannus  landing",  Mr.  Bodziack's  concert venue to jointly
present  entertainment  and recordings of the concerts in  conjunction  with the
Wilfield

                                     F - 18

<PAGE>


                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
                                   (Continued)

NOTE 7 - COMMITMENTS (Continued)
--------------------

     Entertainment Agreement.. The agreement calls for the Company to contribute
up to $225,000  in the form of a  convertible  loan at the rate of 9%  interest,
payable  within  twenty-four  months  after  the date the loan is  funded by the
Company.  At the option of the Company,  the loan amount plus 100,000  shares of
the common  stock of the Company,  may be  converted  to 51% of the  outstanding
common  stock of Jannus  Records.  To date,  no funds  have been paid under this
agreement and the 100,000 shares have not been issued. This project is currently
being restructured.

     On  November  13,  2000 the  Company  entered  into a five year  employment
agreement  with  Robert L.  Friedman.  The  agreement  provides  for a salary of
$21,000 per month for the first six months and $25,000 per month there after,  a
bonus  payable on  December  31, 2001 of 50% of the annual  salary,  appropriate
health,  life,  medical,  dental  and  pharmaceutical  plan,  $1,000  per  month
automobile  allowance,  and stock options to purchase  250,000  shares of common
stock at $.01 per share.  The options are  exercisable  beginning  November  13,
2005. On the date of grant the  difference  between the fair market value of the
option and the option price has been  recorded as an expense.  In January  2001,
Mr. Friedman tendered his resignation  because he had an opportunity to assume a
similar position with a competitor company in the entertainment  industry.  Upon
acceptance of his  resignation  by the board,  the Agreement was canceled and no
further sums are due Mr. Friedman.  Currently the terms of the stock options are
being reviewed.


                                     F - 19

<PAGE>