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, 2003

                                       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)



<PAGE>



         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X No

         Check if there is no disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ ]

         State issuer's revenues for its most recent fiscal year. $ -0-
                                                                  ------

         As  of  September  23,  2003,   there  were  4,346,166  shares  of  the
Registrant's  common  stock,  par value  $0.001,  issued  and  outstanding.  The
aggregate market value of the Registrant's  voting stock held by  non-affiliates
of the Registrant was approximately  $1,132,086  computed at the average bid and
asked price as of September 23, 2003.


                       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.....................................15

Item 7.           Financial Statements...........................................................................17

Item 8.           Changes in and Disagreements With Accountants on Accounting and
                  Financial Disclosure...........................................................................17

PART III

Item 9.           Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act..............................................17

Item 10.          Executive Compensation.........................................................................20

Item 11.          Security Ownership of Certain Beneficial Owners and Management.................................21

Item 12.          Certain Relationships and Related Transactions.................................................21

Item 13.          Exhibits and Reports on Form 8-K...............................................................22
</TABLE>


                                        3

<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

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identifying  additional  acquisition  opportunities for operating  companies and
intellectual  property  assets in the global  multi-media  industries.  Upon the
consummation  of the Merger,  Kestrel  acquired all of the assets of Stereo with
the intent of continuing  Stereo's  business and expanding into new areas of the
entertainment industry. Stereo was incorporated in the State of Nevada on May 5,
1999 for purposes of  acquiring  multi-media/entertainment  industry  assets and
pursuing merger  opportunities  with an existing  publicly  traded company.  Mr.
Kallett, an officer and director of Kestrel Equity Corporation,  and Mr. Honour,
a  principal   shareholder  of  Kestrel,  both  owned  common  stock  in  Stereo
representing an aggregate of 51% of the issued and outstanding  capital stock of
Stereo.  The operations and management of the 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  $2,459,447  and
$2,166,183  for the fiscal  years ended June 30, 2003 and 2002.  Such  operating
losses reflect  developmental  and other start-up  activities for 2003 and 2002.
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

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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 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

                                        6

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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  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

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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 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

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

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

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

         Distribution  rights to motion  pictures are granted  legal  protection
under the copyright laws of the United States and most foreign countries.  These
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

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and compete in the global marketplace.

         Most of SVEI's  competitors have operating  histories,  larger customer
bases and  significantly  greater  financial,  marketing  and  other  resources.
Certain of SVEI's  competitors  have the financial  resources to devote  greater
resources to marketing and promotional  campaigns and devote  substantially more
resources to technology development. Increased competition may result in reduced
operating margins.

EMPLOYEES

         As of September 23, 2003, SVEI employed four employees.  SVEI considers
its employee relations to be satisfactory at present.


                         ITEM 2 DESCRIPTION OF PROPERTY


         SVEI's principal  executive  offices are located at 15452 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, 2003.


                                     PART II

                       ITEM 5 MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS


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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." On June 2, 2003,  the Company
changed its trading  symbol to SVSN.OB.  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:



                                                    High                 Low
                   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

Quarter ended September 30, 2002                 $         0.09      $     0.01
Quarter ended December 31, 2002                  $         0.05      $     0.02
Quarter ended March 31, 2003                     $         0.03      $     0.02
Quarter ended June 30, 2003                      $         1.13      $     0.01

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 September 23, 2003 was approximately 145.

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

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number of shares is 100,000,000 with a par value of $.001.

         At inception, the Company issued 61,200 (1,530,000 pre-split) shares of
common stock to its officers and directors  for services  performed and payments
made on the Company's  behalf during its formation.  This transaction was valued
at approximately $0.003 per share or an aggregate approximate $5,000.

         On December 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  106,800  shares of common stock of the
surviving  corporation and acquired assets valued at $4,013,100 or approximately
$1.50 per share.

         On  December  31,  1999 the  Company  issued  14,000  shares to various
employees and consultants for services rendered valued at $2.00 per share.

         On February 14, 2000 the Company issued 4,000 shares of common stock as
payment for services rendered by Mr. Herky Williams.  The services rendered were
for the development of the Company's music division.

         From April to June 2000,  the Company  issued 8,000  restricted  common
shares to various consultants for services and 3,620 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
whereby107,000  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 10,600
restricted  common  shares,  $96,492.73  (payable  $25,000  August 14,  2000 and
$11,915.46 per month from December 14, 2000 to May 14, 2001 and $25,000 plus a 1
1/2% royalty on any merchandise and 2% royalty on sequels).

         On  September  27, 2000 the Company  entered  into a contract  with Ron
Whiten  to  make  strategic  introductions  on  behalf  of  the  Company  to the
investments community in exchange for 4,000 common shares. On September 29, 2000
the shares were issued at a value of $95,000,  which was the quoted market price
on the date of issue.  The contract is for a period of time covering 3 quarterly
financial  statements.  To the best  knowledge  and  belief  of the  Company  no
services have been performed by Mr. Whiten  pursuant to this  agreement.  On May
25, 2001, the 4,000 shares of


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stock issued to Mr. Whiten were canceled for non-performance of services.

         On October  27,  2000 the  Company  issued  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  16,000  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,  14,000 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,  68,840  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 61,304 shares
to various  consultants for services at the market value on the date of issuance
and 600 restricted common shares to individuals for cash at $1.00 per share.

         During the quarter ended  September 30,  2001,4,000  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 123,200
shares to various  consultants  for  services at the market value on the date of
issuance and 3,600 restricted  common shares to individuals for cash at $.50 per
share.

         During the quarter ended  December 31, 2001,  the Company issued 25,912
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,  1,600 shares issued on July 30, 2001 for services were
cancelled on October 2, 2001 for non-performance of services.

         On January 15, 2002, 12,000 shares of common stock were issued for cash
at $.33 per share.  Also during the quarter,  106,480 were issued in  connection
with previous debt cancellation.


                                       13

<PAGE>



         During the  quarter  ended June 30,  2002,  the Company  issued  12,000
shares of common stock for cash.  Shares were issued for$.025 to .075 per share.
Also during the  quarter,  10,000  shares were  issued for  consulting  and rent
expense. The value of the shares was between $.03 and $.08 per share.

         On April 29, 2002,  8,000 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,  4,000 common shares were issued to various people for
services  connected  with the  project  "Mad Dog and  Oakies."  The value of the
shares were $.03.

         On July 1, 2002, 34,000 common shares were issued for cash. Shares were
issued for $.01 to $.025 per share. Also on July 8, 2002 , 93,344 were issued in
connection with a previous debt cancellation.

         On December 23, 2002, 132,000 common shares were cancelled from various
shareholders for non-performance of services.

         During the quarter  ended March 31, 2003,  661,400  common  shares were
issued to various people for services.  The value of the shares was between $.01
and $.03 per share.

         On March 26, 2003,  160,000 common shares were issued for conversion of
notes payable of $289,892.

         During the quarter ended June 30, 2003, 2,257,600 shares were issued to
various people for services. The value of the shares was between $.25 to $1.13.

         On June 2, 2003,  88,000  common  shares were issued for  conversion of
debt totaling $20,000.

         On June 3, 2003,  12,000 shares were cancelled for  non-performance  of
services.

         On June 25,  2003,  40,000  shares were issued for  conversion  of debt
totaling $15,491.

         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.





                                       14

<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  of 3-D
products.  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

                                       15

<PAGE>



costs and the  availability  of  suitable  employees  may  adversely  affect the
entertainment industry in general and the Company in particular.  In view of the
Company's limited financial resources and management  availability,  the Company
will  continue to be at a  significant  competitive  disadvantage  vis-a-vis the
Company's competitors.

Results  of  Operations  - There were no  revenues  from sales for the two years
ended June 30, 2003. SVEI has sustained a net loss of approximately $2.5 million
for the year ended June 30,  2003,  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.

                                       16

<PAGE>



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


                           ITEM 7 FINANCIAL STATEMENTS


         The  financial  statements  of the Company and  supplementary  data are
included beginning  immediately following the signature page to this report. 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:


Director's Name     Age      Office                          Term Expires
Thomas E. Noonan     72      Chairman of the Board, Director next annual meeting
John Honour          52      CEO, President                  next annual meeting
Herky Williams       49      Secretary-Treasurer, Director   next annual meeting
John C. Bodziak, Jr. 29      Director                        next annual meeting
Rocco Urbisci        53      Director                        next annual meeting


                                       17
<PAGE>

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 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

                                       18

<PAGE>



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 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, 2003 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

                                       19

<PAGE>



         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  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.



                                       20

<PAGE>

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


All Executive Officers
and Directors as a Group
(5 persons)                      common stock          2,594,495          60%

John Honour
17106 Bluewater
Huntington Beach, CA             common stock          2,433,495          56%

*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.






                                       21

<PAGE>

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

         (a) The following documents are filed as part of this report.

1.       Financial Statements                                              Page

Robison, Hill & Co.'s Independent Auditor's Report........................F - 1

Balance Sheets
   June 30, 2003 and 2002 ................................................F - 2

Statements of Operations for the
   Years Ended June 30, 2003 and 2002 ....................................F - 3

Statement of Stockholders' Equity for the
   Years Ended June 30, 2003 and 2002 ....................................F - 4
Statements of Cash Flows for the
   Years Ended June 30, 2003 and 2002....................................F - 11

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


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.

                                       22

<PAGE>


3.1 *    Articles of  Incorporation of Kestrel Equity  Corporation  filed with
         the State of Arizona on December 14, 1993.  (incorporated  by reference
         to Form 10-SB filed with the SEC on December 17, 1999)

3.2 *    Articles of Amendment of Articles of  Incorporation of Kestrel Equity
         Corporation  filed  with  the  State  of  Arizona  on  June  18,  1997.
         (incorporated by reference to Form 10-SB filed with the SEC on December
         17, 1999)

3.3 *    Articles of Amendment of Articles of  Incorporation of Kestrel Equity
         Corporation  filed  with the State of Arizona on  September  30,  1997.
         (incorporated by reference to Form 10-SB filed with the SEC on December
         17, 1999)

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

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

3.6 *    Bylaws of SVE Merger, Inc.

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

4.2 *    Specimen Stock Certificate of SVE Merger, Inc.

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

31.1     Certification  of  Principal  Executive  Officer  Pursuant  to 18 U.S.C
         Section 1350 as Adopted  Pursuant to Section 302 of the  Sarbanes-Oxley
         Act of 2002.

31.2     Certification  of  Principal  Financial  Officer  Pursuant  to 18 U.S.C
         Section 1350 as Adopted  Pursuant to Section 302 of the  Sarbanes-Oxley
         Act of 2002.

32.1     Certification  of  Principal  Executive  Officer  Pursuant  to 18 U.S.C
         Section 1350 as Adopted  Pursuant to Section 906 of the  Sarbanes-Oxley
         Act of 2002.

32.2     Certification  of  Principal  Financial  Officer  Pursuant  to 18 U.S.C
         Section 1350 as Adopted  Pursuant to Section 906 of the  Sarbanes-Oxley
         Act of 2002.


                                       23

<PAGE>




(*)      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, 2003.


                        ITEM 14. CONTROLS AND PROCEDURES


         We have established  disclosure  controls and procedures to ensure that
material  information  relating  to  the  Company,  including  its  consolidated
subsidiaries,  is made known to the officers who certify the Company's financial
reports and to other members of senior management and the Board of Directors.


         Based on their evaluation,  as of the end of the period covered by this
Annual  Report on Form 10-KSB,  the  principal  executive  officer and principal
financial  officer of Stereo  Vision  Entertainment,  Inc. have  concluded  that
Stereo  Vision  Entertainment,  Inc's  disclosure  controls and  procedures  (as
defined in Rules  13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of
1934) are effective in ensuring that the information required to be disclosed by
the Company in reports that it files or submits  under the  Securities  Exchange
Act of 1934 is recorded,  processed,  summarized  and  reported  within the time
periods specified in the SEC's rules and forms.

         There were no significant changes in Stereo Vision Entertainment, Inc's
internal  control over financial  reporting  during the Company's  fourth fiscal
quarter that has  materially  affected,  or is  reasonably  likely to materially
affect, the Company's internal control over financial reporting.


                                       24

<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 14, 2003                              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 14th day of October 2003.

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






                                       25
<PAGE>
                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)

                                       -:-

                          INDEPENDENT AUDITOR'S REPORT


                             JUNE 30, 2003 and 2002



















<PAGE>



                                                     CONTENTS
<TABLE>
<CAPTION>
                                                                                                             Page

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

Balance Sheets
   June 30, 2003 and 2002.....................................................................................F - 2

Statements of Operations for the
   Years Ended June 30, 2003 and 2002.........................................................................F - 3

Statement of Stockholders' Equity for the
   Period May 5, 1999 (Inception) to June 30, 2003 ...........................................................F - 4

Statements of Cash Flows for the
   Years Ended June 30, 2003 and 2002........................................................................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  sheets of  Stereo  Vision
Entertainment,  Inc. (a development  stage company) as of June 30, 2003 and 2002
and the related statements of operations, and cash flows for the two years ended
June 30, 2003 and 2002 and the statement of  stockholders  equity for the period
May 5, 1999  (inception) to June 30, 2003.  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, 2003 and 2002
and the  results of its  operations  and its cash flows for the two years  ended
June 30, 2003 and 2002,  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
October 13, 2003

                                      F - 1

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                            June 30,
                                                                             --------------------------------------
ASSETS:                                                                             2003                2002
-------
                                                                             ------------------  ------------------

Current Assets:
<S>                                                                          <C>                 <C>
   Cash                                                                      $           10,757  $            1,007
                                                                             ------------------  ------------------
       Total Current Assets                                                              10,757               1,007
                                                                             ------------------  ------------------

Fixed Assets:
   Office Equipment                                                                      13,745              13,745
   Less Accumulated Depreciation                                                        (10,996)             (8,247)
                                                                             ------------------  ------------------
       Net Fixed Assets                                                                   2,749               5,498
                                                                             ------------------  ------------------

Intangible and Other Assets:
   Investment in Wilfield Entertainment                                                 220,000             220,000
   Films, Manuscripts, Recordings and Similar Property                                  337,008             318,461
                                                                             ------------------  ------------------
       Net Intangible and Other Assets                                                  557,008             538,461
                                                                             ------------------  ------------------

Total Assets:                                                                $          570,514  $          544,966
                                                                             ==================  ==================


LIABILITIES AND STOCKHOLDERS' EQUITY:

Liabilities:
   Accounts Payable                                                          $          268,277  $          201,407
   Accrued Expenses                                                                      42,042              69,051
   Payable to SAG for Route 66                                                           71,493              71,493
   Loans from Shareholders                                                              230,708             386,944
                                                                             ------------------  ------------------
      Total Current Liabilities                                                         612,520             728,895
                                                                             ------------------  ------------------

Stockholders' Equity:
  Common Stock, $.001 Par value
    Authorized 100,000,000 shares,
    Issued 3,828,150 shares at June 30, 2003
      and 739,406 shares at June 30, 2002                                                 3,828                 739
  Additional Paid in Capital                                                         11,489,811           8,891,530
  Stock Options Outstanding                                                             487,500             487,500
  Deficit Accumulated During the Development Stage                                  (12,023,145)         (9,563,698)
                                                                             ------------------  ------------------
     Total Stockholders' Equity                                                         (42,006)           (183,929)
                                                                             ------------------  ------------------

     Total Liabilities and Stockholders' Equity                              $          570,514  $          544,966
                                                                             ==================  ==================
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F - 2

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>


                                                                                                     Cumulative
                                                                                                    Since May 5,
                                                                        For the                         1999
                                                                      Year Ended                    Inception of
                                                                       June 30,                     Development
                                                        ---------------------------------------
                                                               2003                 2002               Stage
                                                        ------------------   ------------------  ------------------
<S>                                                     <C>                  <C>                 <C>
Revenues:                                               $                -   $                -  $                -

Expenses:
Research & Development                                                   -                    -             293,000
General & Administrative Expenses                                  648,250            2,026,025           8,876,358
Consulting                                                       1,648,940               10,725           2,637,795
Advertising & Promotion                                            122,040                    -             270,073
                                                        ------------------   ------------------  ------------------

Operating Loss                                                  (2,419,230)          (2,036,750)        (12,077,226)

Other Income (Expense)
   Interest                                                        (76,733)            (129,433)           (379,324)
   Loss on Sale of Assets                                                -                    -             (15,883)
   Loss on Investment                                              (12,000)                   -             (12,000)
   Gain on Forgiveness of Debt                                      48,516                    -              48,516
   Gain on Trading Investments                                           -                    -             412,772
                                                        ------------------   ------------------  ------------------

     Net Loss                                           $       (2,459,447)  $       (2,166,183) $      (12,023,145)
                                                        ==================   ==================  ==================

Basic & Diluted loss per share                          $           (2.00)   $           (3.98)
                                                        ==================   ==================
</TABLE>










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

                                      F - 3

<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
                                                --------------  ------------ ----------------  -----------------
<S>                                             <C>             <C>          <C>               <C>
May 5, 1999 Stock Issued for Services
  and Payment of Accounts Payable                    1,530,000  $      1,530 $          3,470  $                -

Net Loss                                                     -             -                            (144,977)
                                                --------------  ------------ ----------------  -----------------

Balance at June 30, 1999                             1,530,000         1,530            3,470           (144,977)

Retroactive Adjustment for 25:1
  Stock Split May 30, 2003                          (1,468,800)       (1,469)           1,469                  -
                                                --------------  ------------ ----------------  -----------------

Restated Balance June 30, 1999                          61,200            61            4,939           (144,977)

December 2, 1999 Stock Issued in
   Exchange for Assets                                  58,800            59        4,011,841                  -

December 3, 1999 Stock Issued in
   Connection to Merger with Kestrel
   Equity Corporation                                   48,000            48         (112,114)                 -

December 31, 1999 Stock Issued
   for Services                                         14,000            14          699,986                  -

February 14, 2000 Stock Issued
   for Services                                          4,000             4           99,996                  -

April 17, 2000 Stock Issued for
   Services                                              4,000             4           99,996                  -

May 4, 2000 Stock Issued for Cash                        2,200             2           54,998                  -

June 2, 2000 Stock Issued for Services                   4,000             4           99,996                  -

June 30, 2000 Stock Issued for Cash                      1,420             2           35,499                  -

Net Loss                                                     -             -                -         (2,680,213)
                                                --------------  ------------ ----------------  -----------------
</TABLE>
                                      F - 4
<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
                                                --------------  ------------ ----------------  -----------------
<S>                                             <C>             <C>          <C>               <C>
Balance at June 30, 2000                               197,620  $        198 $      4,995,137  $      (2,825,190)

September 13, 2000 Stock Issued for
   Services                                              5,000             5          141,245                  -

September 29, 2000 Stock Issued for
  Advertising                                            4,000             4           94,996                     -

October 27, 2000 Stock Issued for
  Advertising                                              500             -           12,499                  -

November 15, 2000 Stock Issued for
  Conversion of Note Payable                            32,000            32          407,106                  -

November 22, 2000 Stock Issued for
  Conversion of Note Payable                             2,000             2           24,998                  -

November 22, 2000 Stock Issued for
  Consulting                                             4,080             4          101,996                  -

December 4, 2000 Stock Issued for
   Services                                                400             -           10,200                  -

December 14, 2000 Stock Issued for
   Services                                              4,000             4          105,996                  -

January 23, 2001 Stock Issued for
   Cash                                                    600             1           14,999                  -


January 30, 2001 Stock Issued for
   Services                                              4,724             4           64,946                  -

March 10, 2001 Stock Issued for
   Services                                              8,000             8          153,992                  -
</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
                                                --------------  ------------ ----------------  -----------------
<S>                                             <C>             <C>          <C>               <C>
April 9, 2001 Stock Issued for
   Advertising                                           3,600  $          4 $         49,496  $               -

April 18, 2001 Stock Issued for
  Acquisition of Wilfield Entertainment                 16,000            16          219,984                  -

May 25, 2001 Shares Cancelled for
   Non-Performance of Advertising and
   Services                                            (14,000)          (14)        (328,486)                 -

June 1, 2001 Shares Issued for
   Conversion of Notes Payable                             840             1            7,512                  -

June 15, 2001 Shares Issued for
   Services                                              1,000             1           14,999                  -

June 28, 2001 Shares Issued for
   Advertising                                           4,000             4           59,996                  -

June 28, 2001 Shares Issued for
   Services                                              6,000             6           89,994                  -

June 29, 2001 Shares Issued for
   Conversion of Notes Payable                          34,000            34          224,966                  -

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

Balance at June 30, 2001                               314,364           314        6,466,571         (7,397,515)

July 3, 2001 Shares Issued for Expenses                  1,000             1            9,999                  -

July 3, 2001 Shares Issued for Services                  5,000             5           74,995                  -

July 25, 2001 Shares Issued for Cash                     1,600             1           19,999                  -
</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
                                                --------------  ------------ ----------------  -----------------
<S>                                             <C>             <C>          <C>               <C>
July 30, 2001 Shares Issued for
    Consulting                                           4,400  $          4 $         45,096  $               -

August 29, 2001 Shares Issued for
    Interest on Notes Payable                           13,400            13          100,487                  -

September 10, 2001 Shares Issued for
    Services                                               800             1            5,999                  -

September 10, 2001 Shares Issued for
   Conversion of Note Payable                            4,000             4           25,596                  -

September 25, 2001 Shares Canceled
   For Non-Performance of Contract                      (4,000)           (4)          70,536                  -

September 27, 2001 Shares Issued for
    Services                                           101,000           101        1,136,149                  -



September 27, 2001 Shares Issued for
   Cash and Commission                                   2,000             2           24,998                  -

October 2, 2001 Shares Issued for
   Services                                             18,000            18          242,982                  -

October 31, 2001 Shares Issued for
   Conversion of Note Payable                           10,182            10           89,085                  -

November 1, 2001 Shares Issued for
   Services                                              2,825             3           14,123                  -

November 7, 2001 Shares Issued for
   Conversion of Note Payable                            8,910             9           55,676                  -
</TABLE>
                                     F - 7
<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
                                                --------------  ------------ ----------------  -----------------
<S>                                             <C>             <C>          <C>               <C>
December 19, 2001 Shares Issued for
   Services                                             44,000  $         44 $        153,956  $               -

December 19, 2001 Shares Issued for
   Conversion of Note Payable                            6,820             7           23,863                  -

December 20, 2001 Shares Issued for
   Services                                             30,000            30          157,470                  -

January 1, 2002 Shares Issued for Cash                  12,000            12           99,988                  -

January 24, 2002 Shares Issued for
  Previous Conversion of Note Payable                   55,660            56              (57)                 -

February 25, 2002 Shares Issued for
  Previous Conversion of Note Payable                   63,525            64              (64)                 -

April 10, 2002 Shares Issued for
  Conversion of Note Payable                             9,920            10           32,617                  -

April 15, 2002 Shares Issued for Rent                    2,000             2            3,998                  -

April 15, 2002 Shares Issued for Cash                    4,000             4            2,996                  -

April 29, 2002 Shares Issued for
   Project Agreement                                     8,000             8           11,992                  -

April 29, 2002 Shares Issued for
   Consulting                                            4,000             4            5,996                  -

May 8, 2002 Shares Issued for Cash                       4,000             4            2,496                  -

May 24, 2002 Shares Issued for
   Consulting                                            4,000             4            3,496                  -
</TABLE>

                                     F - 8
<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
                                                --------------  ------------ ----------------  -----------------
<S>                                             <C>             <C>          <C>               <C>
May 30, 2002 Shares Issued for
  Project Agreement                                      4,000  $          4 $          2,996  $               -

June 24, 2002 Shares Issued for Cash                     4,000             4            7,496                  -

Net Loss                                                     -             -                 -        (2,166,183)
                                                --------------  ------------ ----------------  -----------------

Balance at June 30, 2002                               739,406           739        8,891,530         (9,563,698)

July 1, 2002 Shares Issued for Cash                     34,000            34            9,466                  -

July 8, 2002 Shares Issued for
  Interest on Debt Retirement                           93,344            93           81,574                  -

December 23, 2002, Shares
  Cancelled for non-performance of
  Services                                            (132,000)         (132)             132                  -

January 1, 2003, Shares Issued for
  Services                                             494,000           494          370,006                  -

March 18, 2003, Shares Issued for
  Services                                              52,600            53           26,247                  -

March 26, 2003, Shares Issued for
  Conversion of Debt                                   160,000           160          274,772                  -

March 26, 2003, Shares Issued for
  Services                                              13,200            13            6,587                  -

May 9, 2003, Shares Issued for
  Services                                             101,600           102           25,298                  -
</TABLE>
                                     F - 9
<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
                                                --------------  ------------ ----------------  -----------------
<S>                                             <C>             <C>          <C>               <C>
May 29, 2003, Shares Issued for
  Services                                             108,000  $        108 $        121,932  $               -

June 2, 2003, Shares Issued for
  Services                                              38,000            38           42,902                  -

June 2, 2003, Shares Issued for
  Conversion of Debt                                    88,000            88           19,912                  -

June 3, 2003, Shares Cancelled for
  Non-Performance of Service                           (12,000)          (12)              12                  -

June 12, 2003, Shares Issued for
  Services                                           2,000,000         2,000        1,598,000                  -

June 20, 2003, Shares Issued for
  Services                                              10,000            10            5,990                  -

June 25, 2003, Shares Issued for
  Conversion of Debt                                    40,000            40           15,451                  -

Net Loss                                                     -             -                -         (2,459,447)
                                                --------------  ------------ ----------------  -----------------

Balance at June 30, 2003                             3,828,150  $      3,828 $     11,489,811  $     (12,023,145)
                                                ==============  ============ ================  =================
</TABLE>








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

                                     F - 10

<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
                                                           ------------------------------------
                                                                  2003               2002              Stage
                                                           ------------------   ---------------  ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S>                                                        <C>                  <C>              <C>
Net Loss                                                   $       (2,459,447)  $    (2,166,183) $      (12,023,145)
Adjustments to reconcile net loss to net
cash used in operating activities:
   Depreciation and Amortization                                        2,749             2,749           3,533,679
   Issuance of Common Stock for Expenses                            2,281,447         2,023,580           5,881,927
   Issuance of Stock Options                                                -                 -             487,500
   Realized gain on trading investments                                     -                 -            (412,773)
   Loss on sale of assets                                                   -                 -              15,883
   Cash acquired in merger                                                  -                 -                 332
   Loss on Investment Written Off                                      12,000                 -              12,000
   Gain on Forgiveness of Debt                                        (48,516)                -             (48,516)

Change in operating assets and liabilities:
   Accounts Payable                                                    66,870           (69,934)            250,847
   Accrued Expenses                                                   (27,009)          (30,348)             42,042
   Payable to SAG for Route 66                                              -                 -              71,493
                                                           ------------------   ---------------  ------------------
  Net Cash Used in operating activities                              (171,906)         (240,136)         (2,188,731)
                                                           ------------------   ---------------  ------------------

CASH FLOWS FROM INVESTING
ACTIVITIES:
   Purchase of equipment                                                    -                 -             (13,745)
   Investment in films, manuscripts, recordings
      and similar property                                            (18,547)          (17,169)           (272,008)
   Proceeds from sale of assets                                             -                 -              51,117
   Proceeds from sale of investments                                        -                 -             565,773
                                                           ------------------   ---------------  ------------------
Net cash used in investing activities                                 (18,547)          (17,169)            331,137
                                                           ------------------   ---------------  ------------------
</TABLE>






                                     F - 11

<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
                                                          -------------------------------------
                                                                2003                2002               Stage
                                                          -----------------  ------------------  ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
<S>                                                       <C>                <C>                 <C>
Proceeds from loans from shareholders                     $         198,067  $          110,646  $        1,907,602
Payments of principal on Shareholder Loans                           (7,364)             (8,400)           (374,251)
Proceeds from issuance of common stock                                9,500             156,000             271,000
Proceeds from issuance of short-term notes                                -                   -              64,000
                                                          -----------------  ------------------  ------------------

Net Cash Provided by Financing Activities                           200,203             258,246           1,868,351
                                                          -----------------  ------------------  ------------------

Net (Decrease) Increase in
  Cash and Cash Equivalents                                           9,750                 941              10,757
Cash and Cash Equivalents
  at Beginning of Period                                              1,007                  66                   -
                                                          -----------------  ------------------  ------------------
Cash and Cash Equivalents
  at End of Period                                        $          10,757  $1,007              $           10,757
                                                          =================  ==================  ==================

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
  Interest                                                $              26  $                -  $           43,799
                                                          -----------------  ------------------  ------------------
  Income taxes                                            $               -  $                -  $                -
                                                          -----------------  ------------------  ------------------

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:


Common Stock Issued for Investment in
   Wilfield Entertainment                                                 -                   -             220,000
Common Stock Issued for Investment in
   Mad Dogs & Oakies Project                                              -               3,000               3,000
Common Stock Issued for Investment in
  In the Garden of Evil Project                                           -              12,000                   -
Notes Payable Converted to Stock                                    392,090             193,823           1,250,564
</TABLE>

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

                                     F - 12

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002

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  $12,023,145  for the period from May 5, 1999  (inception) to June
30, 2003, has a liquidity problem, and requires additional financing in order to
finance its business  activities  on an ongoing  basis.  The Company is actively
pursuing  alternative  financing  and has had  discussions  with  various  third
parties,  although  no firm  commitments  have been  obtained.  In the  interim,
shareholders  of the Company  have  committed  to meeting its minimal  operating
expenses.

         The  Company's  future  capital  requirements  will  depend on numerous
factors  including,  but not  limited  to,  continued  progress  developing  its
products and market penetration and profitable operations.

         These  financial  statements do not reflect  adjustments  that would be
necessary  if the Company  were unable to continue as a "going  concern".  While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial  statements,  there can be
no assurance that these actions will be successful.

         If the  Company  were unable to  continue  as a "going  concern",  then
substantial adjustments would be necessary to the carrying values of assets, the
reported  amounts of its  liabilities,  the reported  expenses,  and the balance
sheet classifications used.






                                     F - 13

<PAGE>




                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
                                   (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, 2003 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 - 14

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
                                   (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 - 15

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
                                   (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, 2003
Basic Loss per Share
<S>                                                     <C>                           <C>        <C>
Loss to common shareholders                             $       (2,459,447)           1,232,591  $           (2.00)
                                                        ==================  ===================  ==================

                                                                     For the Year Ended June 30, 2002
Basic Loss per Share
Loss to common shareholders                             $       (2,166,183)             544,597  $           (3.98)
                                                        ==================  ===================  ==================
</TABLE>

         The  effect  of   outstanding   common  stock   equivalents   would  be
anti-dilutive  for June 30,  2003  and  2002  and are thus not  considered.  The
Company has commitments to issue approximately 24,000 shares (see note 9).

Reclassification

         Certain reclassifications have been made in the June 30, 2002 financial
statements to conform with the June 30, 2003 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
$122,040 and $0 for the years ended June 30, 2003 and 2002, respectively.


                                     F - 16

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
                                   (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, 2003, the Company had a net operating loss  carryforward
for income tax  reporting  purposes  of  approximately  $12,023,145  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 - 17

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
                                   (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, 2003 and 2002 the rental  payments
were $0 and $4,000, respectively.

NOTE 6 - FORGIVENESS OF DEBT

         During the first  quarter of 2003,  the Company was relieved of $48,516
worth of debt in  connection  with the  return of the 3-D  equipment  previously
disposed of.

NOTE 7 - LOANS FROM SHAREHOLDERS AND OTHER RELATED PARTY
TRANSACTIONS

         The loans are  payable  to various  shareholders,  are  unsecured  with
interest at rates of between 4.25% to12% and have no fixed terms of repayment.

         Management  at  present  anticipates  the need to  raise  approximately
$500,000 in  additional  operating  capital.  Such  funding may be  accomplished
through public financial markets, private offerings of equity or debt, and joint
venture  opportunities.  The Company's  stockholders,  officers and/or directors
have committed to advancing the operating costs of the Company at 6.1% interest.

NOTE 8 - COMMON STOCK TRANSACTIONS

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

         At inception, the Company issued 61,200 (1,530,000 pre split) shares of
common stock to its officers and directors  for services  performed and payments
made on the Company's  behalf during its formation.  This transaction was valued
at approximately $0.003 per share or an aggregate approximate $5,000.

         On December 2, 1999 the Company issued 58,800 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 - 18

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
                                   (Continued)

NOTE 8 - COMMON STOCK TRANSACTIONS (Continued)

         In addition to the asset  acquisition,  on December 3, 1999 the Company
entered into an  acquisition  agreement and plan of reverse  merger with Kestrel
Equity  Corporation  whereby the Company  acquired $332 cash,  $153,001  trading
investments,  $100,686 reduction in accounts payable, and $366,084 notes payable
in exchange for 48,000 shares of common  stock.  By virtue of the merger and the
asset  acquisition,  the Company  issued  106,800  shares of common stock of the
surviving  corporation and acquired assets valued at $4,013,100 or approximately
$1.50 per share.

         On December  31,  1999,  the Company  issued  14,000  shares to various
employees and consultants for services rendered valued at $2.00 per share.

         On February 14, 2000,  the Company  issued 4,000 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 10,600
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 4,000  shares of stock  issued to Mr.  Whiten were  canceled for
non-performance of services.

         On October  27,  2000,  the Company  issued 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  16,000  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 - 19

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
                                   (Continued)

NOTE 8 - 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,  14,000 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,  4,000 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 123,200
shares to various  consultants  for  services at the market value on the date of
issuance and 3,600 restricted  common shares to individuals for cash at $.50 per
share.

         During the quarter ended  December 31, 2001,  the Company issued 25,912
shares of stock for conversion of notes payable totaling  $135,596,  for accrued
interest  on the notes  payable  of  $12,275,  and for  consulting  services  of
$20,778. The value of the shares was between $.14 and $.35 per share.

         During the quarter ended  December 31, 2001,  the Company issued 94,825
shares to various  consultants  for  services at the market value on the date of
issuance.  Also1 ,600 shares issued on July 30, 2001 for services were cancelled
on October 2, 2001 for non-performance of services.

         On January 15, 2002, 12,000 shares of common stock were issued for cash
at $.33 per share.  Also during the quarter,  106,480 were issued in  connection
with previous debt cancellation.

         During the  quarter  ended June 30,  2002,  the Company  issued  12,000
shares of common stock for cash.  Shares were issued for$.025 to .075 per share.
Also during the  quarter,  10,000  shares were  issued for  consulting  and rent
expense. The value of the shares was between $.03 and $.08 per share.

         On April 29, 2002,  8,000 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,  4,000 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 - 20

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
                                   (Continued)

NOTE 8 - COMMON STOCK TRANSACTIONS (Continued)

         On July 1, 2002, 34,000 common shares were issued for cash. Shares were
issued for $.01 to $.025 per share. Also on July 8, 2002 , 93,344 were issued in
connection with a previous debt cancellation.

         On December 23, 2002, 132,000 common shares were cancelled from various
shareholders for non-performance of services.

         During the quarter  ended March 31, 2003,  661,400  common  shares were
issued to various people for services.  The value of the shares was between $.01
and $.03 per share.

         On March 26, 2003,  160,000 common shares were issued for conversion of
notes payable of $289,892.

         During the quarter ended June 30, 2003, 2,257,600 shares were issued to
various people for services. The value of the shares was between $.25 to $1.13.

         On June 2, 2003,  88,000  common  shares were issued for  conversion of
debt totaling $20,000.

         On June 3, 2003,  12,000 shares were cancelled for  non-performance  of
services.

         On June 25,  2003,  40,000  shares were issued for  conversion  of debt
totaling $15,491.

NOTE 9 - 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 10,600
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  107,000 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.



                                     F - 21

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
                                   (Continued)

NOTE 9 - COMMITMENTS (Continued)

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 680  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, 4,080 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 10,000 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  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 4,000 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 4,000 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  10,000  shares of common
stock at $.01 per share.  The options are  exercisable  beginning  November  13,
2005. On the date of grant the

                                     F - 22

<PAGE>


                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
                                   (Continued)

NOTE 9 - COMMITMENTS (Continued)


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 - 23