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, 2000

                                       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.)

                  130 S. El Camino Dr., Beverly Hills, CA 90212
 -------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip code)

                  11166 Burbank Blvd, North Hollywood, CA 91601
 -------------------------------------------------------------------------------
                                (Former address)


Issuer's telephone number                      (310) 205-7998
                                              ---------------

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  November  15,  2000,   there  were  5,178,000   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  $1,381,745  computed at the average bid and
asked price as of November 15, 2000.


                       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
     -----       ---

<PAGE>

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

Item 3.  Legal Proceedings 15
Item 4.  Submission of Matters to a Vote of Security Holders.....................................................15


PART II

Item 5.  Market for Common Equity and Related Stockholder Matters................................................16

Item 6.  Management's Discussion and Analysis or Plan of Operations..............................................18

Item 7.  Financial Statements....................................................................................20

Item 8.  Changes in and Disagreements With Accountants on Accounting and
                  Financial Disclosure...........................................................................20

PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act..............................................21

Item 10. Executive Compensation..................................................................................24

Item 11. Security Ownership of Certain Beneficial Owners and Management..........................................25

Item 12. Certain Relationships and Related Transactions..........................................................26

Item 13. Exhibits and Reports on Form 8-K........................................................................26
</TABLE>

<PAGE>

                                     PART I


                         ITEM 1 DESCRIPTION OF BUSINESS

General

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

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

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

History

         Stereo Vision Entertainment,  Inc. ("SVEI") was originally incorporated
in the State of Arizona as Arizona Tax Pros & Insurance  Wholesalers,  Inc.,  on
December14,  1993. Arizona Tax Pros & Insurance  Wholesalers,  Inc., changed its
name to Kestrel  Equity  Corporation  ("Kestrel") on September 30, 1997. On July
20, 1999,  Kestrel  entered into an  Acquisition  Agreement  and Plan of Reverse
Merger  with  Stereo  Vision  Entertainment,   Inc.,  a  privately  held  Nevada
corporation  ("Stereo")  (the "Merger").  Pursuant to the Merger,  which was not
actually  consummated  until December 30, 1999,  Stereo was merged with and into
"Kestrel".  Each share of Stereo common stock  outstanding was exchanged for 120
shares of Kestrel's common stock, $.001 par value (the "Common Stock").

         On January 31, 2000,  "Kestrel" changed its state of incorporation from
Arizona to Nevada,  and also  changed its name to Stereo  Vision  Entertainment,
Inc.

         Since the time of its inception until the effective date of the Merger,
Kestrel  Equity  Corporation  was a  development  stage  company  with no active
business  operations and no revenues.  As such, Kestrel was considered a "shell"
corporation  with a principal  purpose of locating and  consummating a merger or
acquisition  with a private  entity.  Beginning  in August  1999,  the  business
activities  of Kestrel,  prior to the  Merger,  encompassed  administrative  and
organizational matters and identifying additional acquisition  opportunities for
operating  companies and intellectual  property assets in the global multi-media
industries.  Upon the  consummation of the Merger,  Kestrel  acquired all of the
assets of Stereo with the intent of continuing  Stereo's  business and expanding
into new areas of the  entertainment  industry.  Stereo was  incorporated in the
State   of    Nevada   on   May   5,   1999   for    purposes    of    acquiring

<PAGE>

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. As is reflected in the
Directors,  Executive  Officers,  and Key Advisors Section of this  registration
statement,  on November 13, 2000 SVEI expanded its Board of Directors  from five
to seven members, all of which have entertainment industry experience.

         As a result of the merger  "SVEI"  acquired  certain  stereoscopic  3-D
assets which  primarily  consisted of but was not limited to numerous 3-D camera
and projection optical units and lenses for the 3-D production and exhibition of
stereoscopic  3-D Films and content.  The  equipment  was  previously  invented,
manufactured,  and assembled by Mr.  Christopher Condon and owned by him and his
spouse,  Marjorie Condon. "Stereo" acquired the assets in 1999 and prior to that
time Mr.  Condon and his family owned the assets.  Since 1994 which was the most
recent date that the Condon family operated as a legally organized  entity,  Mr.
Condon has utilized a portion of the assets as a  semi-retired  consultant.  The
assets were  primarily  invented,  manufactured,  and  assembled  by Mr.  Condon
periodically  during the period of 1970 through 1994. In approximately 1980, Mr.
Condon also secured a patent,  which was an integral  part of the  uniqueness of
the equipment.  The patent expired in  approximately  1997. The valuation of the
equipment which was utilized in determining its acquisition  price, was a result
of arms  length  negotiations  between  Stereo  and the  Condon  family  and was
partially a result of  verification  of recent sale  transactions to other third
parties by the Condon family of similar equipment.  Additionally, an independent
third party  valuation of the assets was  analyzed.  The assets were utilized in
projects by Disney,  Warner  Brothers,  Chevrolet,  Toyota and Kodak. The camera
lenses,  part of the  purchased  assets,  were  also used by James  Cameron  for
Universal's  "Terminator  2- - 3-D" and by Universal for the production of "Jaws
3-D".  The  projection  lenses and units were used in  approximately  6,000 play
dates for such exhibitors as AMC, General Cinema and United Artists.

         SVEI has secured the consulting  services of Mr. Daniel Symmes a thirty
year  acquaintance  and business  associate  of the Condon's who also  possesses

<PAGE>

specialized skills in stereoscopic 3-D. Since 1968, Mr. Symmes has been actively
involved  in  technology  development  and  the  production,   distribution  and
exhibition  of high  quality 35 mm and 70 mm  three-dimensional  ("3-D")  films,
featurettes,  commercials  and film shorts.  SVEI intends to continue to utilize
its 3-D assets and implement a strategy to  theatrically  produce and distribute
new  and  existing  3-D  feature  films.  SVEI  also  intends  to  establish  an
Internet-based music portal and record label site where it can distribute motion
picture  soundtracks  from its proposed 3-D and  independent  films,  as well as
other original recordings that it either acquires or produces.


         The  executive  offices of the  Company are located at 130 S. El Camino
Dr. Beverly Hills, CA 90212. Its telephone number is (310) 205-7998.

OPERATING LOSSES

         The Company has incurred  net losses of  approximately  $2,580,000  for
fiscal year ended June 30, 2000 and  $145,000  for the period from  inception to
June 30, 1999. Such operating  losses reflect  developmental  and other start-up
activities  for 2000 and 1999.  The Company  expects to incur losses in the near
future until profitability is achieved.  The Company's operations are subject to
numerous  risks  associated  with  establishing  any  new  business,   including
unforeseen  expenses,  delays and complications.  There can be no assurance that
the Company will  achieve or sustain  profitable  operations  or that it will be
able to remain in business.

FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING

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

BUSINESS - OVERVIEW

         Currently,  management  believes that SVEI's principal  expertise is in
the content production segment of the multi-media  entertainment  industry. SVEI
also intends to acquire  additional  intellectual  property assets. In utilizing
the SVEI's existing  physical and managerial  assets,  SVEI's initial  operating
activities are anticipated to encompass the production,  acquisition,  marketing
and distribution of music content and the production,  distribution,  exhibition
of stereoscopic 3-D and independent  feature length theatrical films and related
technology  development  of 3-D  optics.  Additionally,  SVEI  will  pursue  the
re-release  of  selected  3-D classic  films.  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.

<PAGE>

MUSIC DIVISION

         SVEI's music division anticipates generating revenues during the fourth
quarter of 2001. SVEI is pursuing opportunities within the global music industry
that may include producing  well-known and new artists and acquiring royalty and
publishing  rights from established  artists.  The company is restructuring  its
agreement  with Wilfield  Entertainment  into a joint venture  agreement for the
purpose of producing  thirteen  albums.  It is anticipated that the Company will
issue 200,000 shares of common stock for its participation in the joint venture.
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.


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  on an  "off-balance  sheet"  basis,  or through major studio joint
ventures.  When feasible, SVEI anticipates each production will be structured as
a stand-alone  limited liability  company,  thus diminishing the equity dilution
impact on SVEI.  SVEI  intends  to act as the  executive  producer  of each film
project.  There is no assurance that SVEI can secure  financing to produce films
or even if films are produced that they can be profitably distributed.

SVX "TRU 3-D" THEATER NETWORK

         SVEI intends to develop a 3-D theater network with the goal of bringing
"theme park quality 3-D" to local multiplex  theaters within the next 18 months.
Using a  low-cost,  efficient  theater  modification  model,  SVEI will  provide
multiplex  theater  owners  with a  turn-key  package  at a no-cost  or  no-risk
arrangement  to the operator.  The multiplex  owner will maintain the ability to
exhibit  conventional  two-dimensional  movies in the  converted  theater  if so
desired.

         SVEI will attempt to establish a branded or co-branded  theater network
with theater  locations in major markets,  both  domestically and in key foreign
locations.  Initially  utilizing  the  SVEI's  inventory  of  approximately  800
projection units, SVEI anticipates expanding its theater network thereafter.  In
addition to 3-D films which may be produced  and/or  co-produced  by SVEI,  SVEI
intends to  generate  revenues  from the  re-release  of selected  existing  3-D
classics and the distribution of other marketable existing or newly produced 3-D
films.  SVEI  shall  attempt  to build and  position  its SVX "Tru 3-D"  theater
network for transition into the proposed  digital  projection  systems which are
anticipated  to be  installed  in most  theaters  within  the next three to five
years.

<PAGE>

3-D CONTENT INDUSTRY

         3-D  entertainment  markets are currently  characterized  by relatively
short content (one hour or less), and explosive action in color, images,  events
or  scenery.   Prime  3-D  markets  include  music  videos,   action  television
programming,   nature  documentaries,   sports  events,   promotional  material,
merchandising   tie-ins,   and  specialized  films  for  location-based   visual
entertainment.  SVEI believes that with continued technological  development the
re-emergence  of  full-length  3-D  movies  will be more in  demand  in the near
future.

         The visual  entertainment  market for SVEI's 3-D technology and content
encompasses  three  distinct  entertainment  industries  -  broadcast  and cable
television,  video  software and motion  pictures.  In addition,  location-based
entertainment  theaters  represent  a  profitable  and  rapidly  growing  market
segment.

         The content  production  business is very  capital  intensive  and SVEI
expects  that it will  require  additional  equity  financing  to  complete  the
capitalization  of its business  plan.  SVEI can give no  assurance  that it can
successfully  negotiate or obtain additional  financing,  or that it will obtain
financing  on terms  favorable  or  acceptable  to it. If SVEI  does not  obtain
adequate  financing or such  financing is not  available  on  acceptable  terms,
SVEI's  ability to finance the  production or  acquisition of 3-D films would be
significantly limited.

BROADCAST AND CABLE TELEVISION INDUSTRY

         Subsequent 3-D penetration of visual broadcast  markets may be pursued,
such as  sports  events,  music  videos  and  special  programming.  As the mass
television  audience  acquires  3-D  viewers,  SVEI  believes  the  scope of 3-D
programming   opportunities  will  expand.  Syndicated  3-D  programs,  or  even
dedicated  time slots or channels may be  broadcast in 3-D and could  facilitate
widespread video software and additional 3-D motion picture opportunities.

Household  television  penetration in the United States now exceeds 98% of total
households,  with  nearly  100% being  color  television  sets.  Currently,  the
television  population in the United States  exceeds 217 million sets,  with the
average  household having a television on for over seven hours each day. Because
of the interest in 3-D productions shown at theme parks and movie theaters, SVEI
believes there is a growing  opportunity  for enhancing the  television  viewing
experience  with 3-D  technology;  provided,  however,  that  technology  can be
developed that will permit a similar high-quality viewing experience.

VIDEO SOFTWARE INDUSTRY

         Over 75 million  households  in the United  States  have  videocassette
recorders.  Currently,  distribution  of 3-D  content to the home  entertainment
market is nearly  non-existent.  The distribution of video software is primarily
controlled by specialty video stores, such as Blockbuster  Entertainment.  These
video specialty stores generate over 80% of total revenue from video rentals.

<PAGE>

LOCATION-BASED ENTERTAINMENT THEATERS

         SVEI  believes  that  there is an  increasing  worldwide  demand  for a
variety of out-of-home entertainment options.  Secondarily to its 3-D theatrical
films and 3-D  theater  network  strategies,  SVEI may  become a  provider  of a
complete  line of services and products to support the design,  development  and
operation of specialty  format theater  attractions.  These products may include
3-D  film-based  software  and  projector  optics  to be  utilized  in the video
simulation, large format and specialty venues attractions.

3-D MOTION PICTURE PRODUCTION AND EXHIBITION EQUIPMENT

         Traditional true stereo or 3-D production  techniques have required the
use of two cameras  locked  together to produce two strips of film,  one for the
right eye and one for the left eye. To project the film two  projectors are also
required along with a reflective screen surface for polarized  viewing.  Because
two cameras and two  projectors  are  required,  as well as twice the film,  the
expense  for  both  production  and  exhibition  of  traditional  3-D  films  is
significantly greater than for standard two-dimensional ("2-D") formats.

         As a result of the Merger with Stereo,  SVEI acquired rights and access
to certain proprietary technology, that allow for high-quality 3-D production at
a cost  equivalent to 2-D formats.  Stereo had originally  acquired these assets
from  the  Condon  Family   Partnership  for  an  aggregate  purchase  price  of
$6,787,400. Mr. Condon, a partner in the selling partnership,  is a key creative
advisor to SVEI.

         This technology employs a dual element, single lens technology that can
shoot 35mm or 70mm 3-D productions with one standard  camera,  as opposed to two
synchronized   cameras,   and  allows  the  films  to  be  exhibited  through  a
singleprojector.  The  system  also  allows  for the  production  of 2-D and 3-D
products  simultaneously.  To create the 3-D effect,  the  audience  uses either
polarized  glasses or  electronic  glasses that  separate the left and right eye
images.  The Company  believes that this 3-D system offers  consumers one of the
most realistic 3-D experiences available today.

EXHIBITION AND DISTRIBUTION NETWORK

         The Company intends that theatrical releases of 3-D productions will be
achieved using the SVEI's unique turnkey distribution  solution.  SVEI currently
owns over 800 3-D  projection  systems.  Unlike other wide screen 3-D solutions,
the exhibition of SVEI's 3-D  entertainment  products will not require  spending
millions of dollars on the construction of specialized venues or on the purchase
of specialized  projection  hardware to view "theme park" quality 3-D films.  By
using SVEI's system,  superior 3-D special effects can be achieved at a fraction
of the costs of competing solutions.

         Management believes that the ownership of the proprietary 3-D equipment
is  important to the future  success of SVEI.  Since SVEI intends to produce new
3-D movies,  it believes that it will be more profitable for SVEI to rely on its
own highly specialized equipment. To the best of management's  knowledge,  there
is no  other  suitable  source  in  quantity  of this  type of  equipment.  This

<PAGE>

equipment  was developed by one of SVEI's key creative  advisors,  Chris Condon.
Until recently,  this technology was patent  protected.  Although the patent has
since expired,  improvements  to the  technology are currently  subject to trade
secret protection.

         As a result of the Merger with  Stereo,  SVEI  acquired  the  renewable
rights, and intends to begin distribution of, five 3-D feature films: "Fantastic
Invasion of Planet Earth,"  "Target New York," "The Creeps," "The  Stewardesses"
and "Wild Ride."

         SVEI intends to update its film  distribution  licenses with the owners
of these  five 3-D  feature  films  that were  previously  licensed  to  Stereo.
Management  believes that SVEI can achieve  revenues within the next six months.
This assumption is due to renewed  interest by the public in 3-D films currently
being shown all over the world by IMAX Corp., Disney theme parks and others.

MARKETING, DISTRIBUTION AND PROMOTIONS

         SVEI intends to market its 3-D  technology  by  providing  the industry
with the  necessary  tools to allow for 3-D  production  and viewing  within the
current 2-D infrastructure. The marketing plan includes the following:

         (i)   Producing and distributing 3-D content for the video,
               broadcast television and motion picture industries;

         (ii)  Establishing special theaters for showcasing 3-D content;

         (iii) Creating a mass audience and mainstream distribution channel; and

         (iv)  Licensing the technology to the entertainment industry.

         SVEI also  intends to  include  sponsorship  opportunities  for its own
original productions,  as well as for third parties.  Sponsorship activities may
include  branding 3-D glasses for live events,  and developing  custom corporate
3-D images,  campaigns and messages.  SVEI also intends to offer, and is capable
of  delivering,  3-D products in a full  spectrum of 3-D formats  which  include
film, video, DVD, the Internet and print.

ANCILLARY PRODUCTS, MERCHANDISING AND LICENSING

         In  addition to  servicing  the  proprietary  and  wholesale  promotion
industries,  SVEI  intends to  establish a website  dedicated to the sale of 3-D
related  retail  products.  The website  may offer some or all of the  following
products: 3-D viewers, slides, holograms, lenticular images and various types of
3-D glasses for viewing 3-D content on television or over the Internet.

<PAGE>

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 3-D and  independent  feature
films,  intellectual  property  music  assets,  and  also  providing  integrated
solutions to help organizations  broadcast audio,  video, 3-D video,  animation,
and 3-D  animation  and music over the  Internet.  When  appropriate,  SVEI will
attempt to  acquire  other  assets and  existing  operating  global  multi-media
entertainment companies with seasoned management teams.

MANAGEMENT OF GROWTH

         In order to maximize  potential growth in SVEI's market  opportunities,
SVEI believes that it must expand  rapidly and  significantly  upon its entrance
into the marketplace. This impetus for expansion will place a significant strain
on SVEI's management,  operational and financial  resources.  In order to manage
growth,  SVEI  must  implement  and  continually  improve  its  operational  and
financial systems, expand operations, attract and retain superior management and
train,  manage and expand its employee base. SVEI cannot  guarantee that it will
effectively  manage the rapid  expansion  of its  operations,  that its systems,

<PAGE>

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 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

<PAGE>

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.

         SVEI's success depends  substantially upon its proprietary  technology.
This  technology  includes  optical design  formulas  designed by Mr. Condon and
protected  by trade  secret  law.  The type of  glass,  the  exact  spacing  and
curvatures of the primary  dispersing  optics and the method of controlling  the
exact assembly  tolerances using  custom-made  laboratory  testing equipment are
integral parts of this technology which results in optical resolution  exceeding
100 lines per million and is fully  compatible  with the latest 35mm  Panavision
and Arriflex motion picture  cameras,  as well as high definition video cameras.
The 3-D  projection  optics are fully  compatible  with all 35-mm motion picture
projectors  and  are  designed  for  easy  installation,  even  by  semi-skilled
personnel.  In addition, Mr. Condon has designed and built a 3-D projection unit
compatible with the latest Hughes digital video projectors. This technology will
provide SVEI with a competitive advantage because of the enhanced quality of the
3-D images produced as a result of SVEI's trade secrets. Additionally,  SVEI has
secured the employment  services of Mr. Daniel Symmes, a longtime 3-D technology
associate of  Mr.Condon,  to lead its efforts for research and  development  and
manufacturing  of SVEI's next  generation 3-D production and exhibition  optical
equipment. Mr. Symmes per his employment agreement will be allocating 50% of his
time to SVEI. The Company will rely on a combination of trademark, copyright and
trade  secret  laws,  as well as  confidentiality  agreements,  to  protect  its
proprietary rights. SVEI's predecessor, Stereo, maintained a policy of obtaining
patent  protection and,  consequently,  SVEI currently has the following  patent
pending:

PATENTS PENDING: One-High Speed for Above and Below 3-D Cameras

This  technology  entails  the use of  brighter  optics  for 3-D  single  camera
cinematography, which allows for filming in lower light situations.

<PAGE>

         SVEI  also  has  technology  in  development  that  has  grown  out  of
previously  patented  technology held by Stereo. SVEI is working on a 3-D camera
optical system that has remote  wireless  convergence  control so that it can be
used on the Panaglide and Steadicam. SVEI intends to apply for patent protection
for this  proprietary  technology as well.  SVEI can give no assurance that such
patents will be granted or that third parties will not claim  infringement  with
respect to current or future technology developed by SVEI.

         Distribution   rights  to  motion   pictures  are  also  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.  Currently,  no companies
have  established a substantial  presence in the 3-D video software home market.
The competitive  environment in this market consists of limited suppliers of 3-D
viewers and content (DVD,  CD-ROM,  videotape) kits such as V-REX,  VIDMAX,  and
others.  Conversely,  competition in the special venue markets  (theatrical)  is
much more developed. SVEI's current and potential competitors include:

         o        IMAX, Iwerks, Showscan, Cinema Ride and New Visual
                  Entertainment
         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.  The
Company's  innovative  3-D  technology  combined with lower cost  production and
exhibition is anticipated to achieve favorable results in effectively  competing
and establishing  itself in the  marketplace.  SVEI also intends to use its core
competencies in areas of music  production and production  services to diversify
and compete in the global marketplace.

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

<PAGE>

EMPLOYEES

         As of November 13, 2000, SVEI employed three full-time employees.  SVEI
considers its employee relations to be satisfactory at present.



                         ITEM 2 DESCRIPTION OF PROPERTY


         SVEI's principal  executive offices are located at 130 El Camino Drive,
Beverly  Hills,  CA 90212  and  consist  of  approximately  273  square  feet of
furnished   executive   suite  offices  and  reception   and   conference   room
arrangements. The lease expires in six months from November 1, 2000. The monthly
rent for the property is $1,7356.78.  SVEI maintains a research and  development
office and storage warehouse facility at 1611 Rancho Santa Fe Road, Suite E, San
Marcos, CA 92069 that consists of approximately 1,000 square feet. This facility
is also leased on a month-to-month basis for the monthly rent of $650. SVEI also
leases on a  month-to-month  basis various storage  facilities for its equipment
inventory that consists of  approximately  1,500 square feet of additional space
at a monthly rent of $1,500. SVEI also rents housing in Studio City,  California
for office use and use by its out-of-town officers, directors and employees. The
monthly  rent paid for this  corporate  housing  is  $4,000.  SVEI rents a 4,000
square foot studio production and offices facility on a month to month basis for
$1,700 plus 800 shares of common stock.


                            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,  2000.  However  the
actions of the board of directors  to increase the number of board  members from
three to seven was ratified by shareholders controlling 69% of the voting stock.

<PAGE>

                                     PART II

                       ITEM 5 MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS


MARKET INFORMATION

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

         Prior to December 2, 1999,  there was no trading  market for  Company's
Common Stock. As of December 2, 1999, SVEI's Common Stock has been traded on the
"pink sheets" under the trading  symbol  "SVED." For the period from December 2,
1999 through  February 17, 2000,  the price for the Common Stock has ranged from
$5.00 to $5.95 per share. 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:

                       1999:                           High                 Low
Quarter ended September 30, 1998                          -                   -
Quarter ended December 31, 1998                           -                   -
Quarter ended March 31, 1999                              -                   -
Quarter ended June 30, 1999                               -                   -

                       2000:
Quarter ended September 30, 1999                          -                   -
Quarter ended December 31, 1999                       $5.95               $5.00
Quarter ended March 31, 2000                          $5.95               $5.00
Quarter ended June 30, 2000                           $2.00               $0.10

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.

<PAGE>

         The number of shareholders  of record of the Company's  Common Stock as
of November 13, 2000 was approximately 88.

RECENT SALES OF UNREGISTERED SECURITIES

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

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

         On December 3, 1999 the Company  entered into an acquisition  agreement
and plan of reverse merger with Kestrel Equity  Corporation and at the same time
entered into an asset acquisition agreement for the acquisition of 3-D projects,
equipment,  licensing and distribution  rights.  By virtue of the merger and the
asset  acquisition,  the Company issued  2,670,000 shares of common stock of the
surviving  corporation and acquired assets valued at $4,013,100 or approximately
$1.50 per share.

         On  December  31,  1999 the Company  issued  350,000  shares to various
employees and consultants for services rendered valued at $2.00 per share.

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

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

         On April 25, 2000 the Board of  Directors  approved a stock option plan
whereby   2,675,000  common  shares  have  been  set  aside  for  employees  and
consultants to be  distributed at the discretion of the Board of Directors.  The
option  shares  will be  exercisable  on a cashless  basis at a 15%  discount to
market value. No formal plan has been adopted as of the date of this report.

         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.

<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
make 3-D media a  mainstream  entertainment  form.  SVEI plans to reach the mass
market by aligning itself with already-established,  branded products and titles
for the production,  promotion and  distribution of 3-D products.  The Company's
management intends to aggressively evaluate and pursue production  opportunities
in order to increase SVEI's content  library and maintain a leadership  position
as the foremost provider of 3-D products.  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

<PAGE>

by changes in customer tastes, economic, and demographic trends. Factors such as
inflation,  increased  supplies costs and the availability of suitable employees
may adversely  affect the  entertainment  industry in general and the Company in
particular.  In view of the Company's limited financial resources and management
availability,  the  Company  will  continue to be at a  significant  competitive
disadvantage vis-a-vis the Company's competitors.

Results of  Operations  - There were no revenues  from sales for the period from
inception to June 30, 2000. SVEI has sustained a net loss of approximately  $2.5
million  for the  year  ended  June  30,  2000,  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 3-D equipment asset base. On a preliminary  basis, the
Company  estimates  that it will require from  $3,000,000 to  $5,000,000  over a
period of 18 months to fund this plan of operations.  This plan of operations is
expected to include both exploitation of existing 3-D movies and equipment,  and
efforts to arrange development of additional 3-D movies. The Company may attempt
to arrange joint ventures with studios to facilitate the  development of new 3-D
movies.

The Company is also in the business of producing  music  entertainment  products
through  its March  2000  acquisition  of a 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  264,000 shares
of common stock of New Visual Entertainment,  Inc., from a major shareholder for
a  $400,000  convertible  note in  September  1999.  This  note  was paid by the
issuance of 200,000  shares of common  stock.  The sale of this stock  generated
approximately  $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 October 1999 through June 2000, seven persons,
including the  aforementioned  major  shareholder  and one director,  loaned the
Company $750,000. However, there can be no assurances that additional loans will
be forthcoming from officers, directors, and shareholders.

<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.

<PAGE>

                                    PART III


               ITEM 9 DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND
                CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
                                THE EXCHANGE ACT


Executive Officers and Directors

The members of the Board of Directors of the Company serve until the next annual
meeting of  stockholders,  or until  their  successors  have been  elected.  The
officers  serve at the pleasure of the Board of Directors.  The following  table
sets forth the name, age, and position of each executive officer and director of
the Company:
<TABLE>
<CAPTION>

Director's   Name             Age                      Office                              Term Expires
<S>                           <C>        <C>                                            <C>
Thomas E. Noonan              69          Chairman of the Board, Director               next annual meeting
Robert L. Friedman            70         Vice-Chairman, President, Director             next annual meeting
Herky Williams                47           Secretary-Treasurer, Director                next annual meeting
John C. Bodziak, Jr.          27                      Director                          next annual meeting
Rocco Urbisci                 51                      Director                          next annual meeting
Michael J. Solomon            61                      Director                          next annual meeting
Mike Jabara                   48                      Director                          next annual meeting
</TABLE>

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

ROBERT L. FRIEDMAN -  VICE-CHAIRMAN  - BOARD OF DIRECTORS,  PRESIDENT - CEO: Mr.
Friedman has served on the Board of Directors  since  November 13, 2000.  Robert
Friedman is a former president of Columbia  Pictures  distribution and executive
vice-president of United Artists distribution.  From 1995 through November 1999,
Mr. Friedman served as president of the AMC Entertainment  Motion Picture Group.

<PAGE>

From November 1999 through  November 2000, Mr.  Friedman  served as president of
RLF  Entertainment,   an  entertainment  industry  consulting  company,  and  he
continues to serve as a special adviser to the investment banking firm of Chanin
Capital  Partners  and the  Ray-Art  Motion  Picture and  Television  Studios in
addition to other key motion  picture  production  entities.  Mr.  Friedman is a
board member of the executive division of the Academy of Motion Picture Arts and
Sciences,  and on the  boards of  directors  of the Will  Rogers  Hospital,  the
Variety Club of Southern California, DARE America and Motion Picture Pioneers.

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

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

<PAGE>

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.

MICHAEL J.  SOLOMON - BOARD OF  DIRECTORS  MEMBER:  Mr.  Solomon has served as a
Member of the Board of Directors  since October 25, 2000.  Solomon has a 44 year
distinguished career in the entertainment industry. He is currently chairman and
CEO of Solomon International Enterprises and Solomon Broadcasting International.
Career  highlights  include:   co-founding  Telepictures  Corporation;   merging
Telepictures with Lorimar to form Lorimar Telepictures. Solomon became president
of Warner Bros.  International  from 1989 through 1994. He is currently co-owner
of Iguana Productions,  the largest independent television production company in
Latin  America  and  Channel 11 in Peru.  He is in the  process of  building  an
Entertainment  Center in Puerto Rico equipped with film and  television  studios
and complete post production facilities.

MIKE JABARA - BOARD OF DIRECTORS MEMBER: Mr Jabara has served as a Member of the
Board of Directors since November 13, 2000. From 1995 to the present, Mr. Jabara
has served as the manager of Jabara & Co., LLC, a financial  advisory firm. From
November  1997  through  the  present,  Mr.  Jabara  has  served as  manager  to
NewHoldings.com,  LLC, an Internet  investment  company.  From April 2000 to the
present,  Mr.  Jabara has served as  chairman  and CEO of  Itruckers,  Inc.,  an
Internet truck  transportation  service company. Mr. Jabara received an MBA from
U.C. Berkeley.

Conflicts of Interest

Certain conflicts of interest existed at June 30, 2000 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.

<PAGE>


Board Meetings and Committees

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

         On November 13, 2000 the Company  entered  into a five year  employment
agreement  with  Robert L.  Friedman.  The  agreement  provides  for a salary of
$21,000 per month for the first six months and $25,000 per month there after,  a
bonus  payable on  December  31, 2001 of 50% of the annual  salary,  appropriate
health,  life,  medical,  dental  and  pharmaceutical  plan,  $1,000  per  month
automobile  allowance,  and stock options to purchase  250,000  shares of common
stock at $.01 per share.

         On September  28, 2000 the company  entered into a two year  consulting
agreement with Michael J. Solomon.  The agreement  provides for  compensation of
$300,000  per year,  payable at a minimum of $10,000  per month with the balance
due September  28, 2001.  In addition Mr.  Solomon will receive stock options to
purchase 250,000 common shares at $.01 per share.


<PAGE>

                 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
4,940,500  shares of issued and  outstanding  Common  Stock of the Company as of
June 30, 2000 and information as to the ownership of the Company's Stock by each
of its  directors  and  executive  officers and by the  directors  and executive
officers  as a group.  Except  as  otherwise  indicated,  all  shares  are owned
directly,  and the persons  named in the table have sole  voting and  investment
power with respect to shares shown as beneficially owned by them.

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


All Executive Officers
and Directors as a Group
(4 persons)                      common stock              366,000          7%

John Honour
12490 Viewcrest
Studio City, CA 91604            common stock            2,465,918          50%

Lawrence Kallet
2201 San Dieguito
Del Mar, CA 92014                common stock              376,549          8%

Dr. Dale A. Rorabaugh
P.O. Box 3799
Rancho Santa Fe, CA
 92061                           common stock              311,400          6%

Max McDade III
P.O. Box 1864
Rancho Santa Fe, CA
 92067                           common stock              400,000          8%

*The address of all four directors is in care of the Company.

<PAGE>

             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 is restructuring its agreement with an affiliate company of
Mr.  Williams  (the  Secretary-Treasurer  and  Director of the  Company)  called
Wilfield  Entertainment.  It is anticipated  that the Company will issue 200,000
shares of common stock for its  participation  in the joint  venture.  The joint
venture with Wilfield is for the production of thirteen music albums.  SVEI will
supply the necessary funding for the production of said albums and after capital
repayment  has  occurred,  the Company  will receive 51% of the profits from the
projects. The estimated production costs per album is projected to be $80,000.

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


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


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

1.       Financial Statements Page

<S>                                                                                                            <C>
Report of Robison, Hill & Co., Independent Certified Public Accountants.........................................F-1

Balance Sheets as of June 30, 2000 and 1999.....................................................................F-2


Statements of Operations for the year ended
     June 30, 2000 and the Period May 5, 1999 (inception) to June 30, 1999......................................F-3

Statement of Stockholders' Equity for the year ended
     June 30, 2000 and the Period May 5, 1999 (inception) to June 30, 1999......................................F-4

Statements of Cash Flows for the year ended
     June 30, 2000 and the Period May 5, 1999 (inception) to June 30, 1999......................................F-5

Notes to Financial Statements...................................................................................F-7

</TABLE>
<PAGE>

2.       Financial Statement Schedules

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

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

3.       Exhibits

                  The following exhibits are included as part of this report:

Exhibit
Number   Title of Document


2.1 *  Acquisition Agreement and Plan of Reverse Merger by and between Stereo
       Vision Entertainment, Inc. and Kestrel Equity Corporation dated December
       3, 1999. (incorporated by reference to Form 10-SB filed with the SEC on
       December 17, 1999)

2.2 *  Agreement and Plan of Merger by and between Kestrel Equity Corporation
       and SVE Merger, Inc. dated January 10, 2000.

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

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

3.3    * Articles of Amendment of Articles of  Incorporation  of Kestrel  Equity
       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)


<PAGE>

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.

10.2   Consulting  Contract between Registrant and Daniel Symmes dated April 26,
       2000.

10.3 Consulting Contract between SVEI and Rick Ducommun dated July 19, 1999.

10.4 Consulting Contract between SVEI and Rocco Urbisci dated October 4, 1999.

10.5   Acquisition Agreement between SVEI and Wilfield Entertainment dated March
       10, 2000 for the acquisition of 51% of Wilfield Entertainment.

27.1   Financial Data Schedule.

(1)      Incorporated by reference to the Registrant's registration statement on
         Form 10-SB filed on August 9, 2000.


(b)      Reports on Form 8-K filed.

         There were no Form 8-K's filed during the quarter ended June 30, 2000.

<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: November 20, 2000             By  /S/     Robert L. Friedman
                                     -----------------------------------
                                     Robert L. Friedman,
                                     C.E.O., Vice-Chairman, President, Director

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the  Registrant  and in the  capacities  indicated  on this 20th day of November
2000.

Signatures & Title


/S/     Robert L. Friedman                   /S/   Tom Noonan
---------------------------------           -----------------------------------
Robert L. Friedman                                 Tom Noonan
C.E.O., Vice-Chairman, President, Director         Chairman, Director
(Principal Executive Officer)



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



/S/    John C. Bodziak                       /S/   Rocco Urbisci
---------------------------------           -----------------------------------

John C. Bodziak                                    Rocco Urbisci
Director                                           Director



/S/   Mike Jabara
---------------------------------
Mike Jabara
Director


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

                                       -:-

                          INDEPENDENT AUDITOR'S REPORT


                             JUNE 30, 2000 and 1999







<PAGE>
<TABLE>
<CAPTION>


                                    CONTENTS


                                                                                                          Page

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

Balance Sheets
   June 30, 2000 and 1999 .................................................................................F - 2

Statements of Operations for the
   Year Ended June 30, 2000 and the
   Period May 5, 1999 (inception) to June 30, 1999 ........................................................F - 3

Statement of Stockholders' Equity for the
   Year Ended June 30, 2000 and the
   Period May 5, 1999 (inception) to June 30, 1999 ........................................................F - 4

Statements of Cash Flows for the
   Year Ended June 30, 2000 and the
   Period May 5, 1999 (inception) to June 30, 1999 ........................................................F - 5

Notes to Financial Statements..............................................................................F - 7

</TABLE>


<PAGE>


                          INDEPENDENT AUDITOR'S REPORT

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

         We have  audited  the  accompanying  balance  sheet  of  Stereo  Vision
Entertainment,  Inc. (a development  stage company) as of June 30, 2000 and 1999
and the related statements of operations,  stockholders'  equity, and cash flows
for the year ended June 30, 2000 and the period May 5, 1999  (inception) to June
30, 1999.  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 generally  accepted  auditing
standards.  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, 2000 and 1999
and the results of its operations and its cash flows for the year ended June 30,
2000 and the period May 5,1999  (inception) to June 30, 1999, in conformity with
generally accepted accounting principles.


                                              Respectfully submitted


                                              /s/ Robison, Hill & Co.
                                              ---------------------------------
                                              Certified Public Accountants

Salt Lake City, Utah
November 10, 2000


                                      F-1
<PAGE>


                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                  June 30,
                                                         --------------------------
                                                             2000           1999
                                                         -----------    -----------
Current Assets:
<S>                                                      <C>            <C>
   Cash ..............................................   $     9,057    $     7,493
   Trading Investments ...............................          --             --
                                                         -----------    -----------
       Total Current Assets ..........................         9,057          7,493
                                                         -----------    -----------
Fixed Assets:
   Office Equipment ..................................        13,745         13,745
   3-D Production and Exhibition Equipment ...........     3,306,900           --
   Less Accumulated Depreciation .....................      (645,757)          (229)
                                                         -----------    -----------
       Net Fixed Assets ..............................     2,674,888         13,516
                                                         -----------    -----------
Intangible and Other Assets:
   Investments 3-D Projects ..........................       350,000           --
   Films, Manuscripts, Recordings and Similar Property        25,000
   Intellectual Property .............................       100,000           --
   Licensing & Distribution Rights ...................       255,000           --
   Less Accumulated Amortization .....................      (107,333)          --
                                                         -----------    -----------
       Net Intangible and Other Assets ...............       622,667
                                                         -----------    -----------

Total Assets: ........................................   $ 3,306,612    $    21,009
                                                         ===========    ===========

Liabilities
   Accounts Payable ..................................   $   250,363    $    96,268
   Accrued Expenses ..................................        26,312          3,718
   Loans from Shareholders ...........................       821,792         55,000
   Short-term Notes Payable ..........................        38,000          6,000
                                                         -----------    -----------
      Total Current Liabilities ......................     1,136,467        160,986
                                                         -----------    -----------
Stockholders' Equity:
  Common Stock, $.001 Par value
    Authorized 100,000,000 shares,
    Issued 4,940,500 shares at June 30, 2000
      and 1,530,000 shares at June 30, 1999 ..........         4,941          1,530
  Additional Paid in Capital .........................     4,990,394          3,470
  Deficit Accumulated During the
    Development Stage ................................    (2,825,190)      (144,977)
                                                         -----------    -----------
     Total Stockholders' Equity ......................     2,170,145       (139,977)
                                                         -----------    -----------
     Total Liabilities and
       Stockholders' Equity ..........................   $ 3,306,612    $    21,009
                                                         ===========    ===========

</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




                                                                    Cumulative
                                                   For the Period      since
                                        For the      May 5, 1999     inception
                                       Year Ended   (Inception) to      of
                                        June 30,       June 30,     development
                                         2000            1999          stage
                                      -----------    -----------    -----------
Revenues: .........................   $      --      $      --      $      --

Research & Development ............      (293,000)          --         (293,000)
General & Administrative
   Expenses .......................    (2,695,401)      (141,259)    (2,836,660)
Other Income (Expense)
   Interest .......................       (88,701)        (3,718)       (92,419)
   Loss on Sale of Assets .........       (15,883)          --          (15,883)
   Gain on Trading Investments ....       412,772           --          412,772
                                      -----------    -----------    -----------

     Net Loss .....................   $(2,680,213)   $  (144,977)   $(2,825,190)
                                      ===========    ===========    ===========

Basic & Diluted loss per share ....                  $     (0.81)   $     (0.09)
                                                     ===========    ===========













   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 Issuance of Stock
  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)

December 2, 1999 Issuance of Stock in
   exchange for Assets ...............     1,470,000         1,470     4,010,430           --

December 3, 1999 Issuance of Stock
   in connection with merger with
   Kestrel Equity Corporation ........     1,200,000         1,200      (113,266)          --

December 31, 1999 Issuance of Stock
   for services ......................       350,000           350       699,650           --

February 14, 2000 Issuance of Stock
   for services ......................       100,000           100        99,900           --

April 17, 2000 Issuance of Stock for
   services ..........................       100,000           100        99,900           --

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

June 2, 2000 Issuance of Stock for
   services ..........................       100,000           100        99,900           --

June 30, 2000 Issuance of Stock for
   Cash ..............................        35,500            36        35,465

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

Balance at June 30, 2000 .............     4,940,500   $     4,941   $ 4,990,394    $(2,825,190)
                                         ===========   ===========   ===========    ===========
</TABLE>




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


                                      F-4
<PAGE>

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

                                                                                 Cumulative
                                                                For the Period     Since
                                                     For the     May 5, 1999     Inception
                                                    Year Ended  (inception) to       of
                                                     June 30,      June 30,      Development
                                                      2000           1999           Stage
                                                   -----------    -----------    -----------
<S>                                                <C>            <C>            <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss .......................................   $(2,680,213)   $  (144,977)   $(2,825,190)
Adjustments to reconcile net loss to net
cash used in operating activities:
   Depreciation and amortization ...............       753,978            229        754,207
   Issuance of common stock for expenses .......     1,000,000          5,000      1,005,000
   Realized gain on trading investments ........      (412,773)          --         (412,773)
   Loss on sale of assets ......................        15,883           --           15,883
   Cash acquired in merger .....................           332           --              332
Change in operating assets and liabilities:
   Accounts Payable ............................       136,665         96,268        232,933
   Accrued Expenses ............................        22,594          3,718         26,312
                                                   -----------    -----------    -----------
  Net Cash Used in operating activities ........    (1,163,534)       (39,762)    (1,203,296)
                                                   -----------    -----------    -----------

CASH FLOWS FROM INVESTING
ACTIVITIES:
   Purchase of equipment .......................          --          (13,745)       (13,745)
   Investment in films, manuscripts, recordings
      and similar property .....................        25,000           --           25,000
   Proceeds from sale of assets ................        51,117           --           51,117
   Proceeds from sale of investments ...........       565,773           --          565,773
                                                   -----------    -----------    -----------
Net cash used in investing activities ..........       641,890        (13,745)       628,145
                                                   -----------    -----------    -----------

CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from loans from shareholders ..........       750,708         55,000        805,708
Payments of principal on loans form shareholders      (350,000)          --         (350,000)
Proceeds from issuance of common stock .........        90,500           --           90,500
 Proceeds from issuance of short-term notes ....        32,000          6,000         38,000
                                                   -----------    -----------    -----------
Net Cash Provided by
   Financing Activities ........................       523,208         61,000        584,208
                                                   -----------    -----------    -----------
</TABLE>



                                      F-5
<PAGE>


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

<TABLE>
<CAPTION>

                                                                                 Cumulative
                                                                For the Period     Since
                                                     For the     May 5, 1999     Inception
                                                    Year Ended  (inception) to       of
                                                     June 30,      June 30,      Development
                                                      2000           1999           Stage
                                                   -----------    -----------    -----------
<S>                                                <C>            <C>            <C>
Net (Decrease) Increase in
  Cash and Cash Equivalents .....................  $     1,564    $     7,493    $     9,057
Cash and Cash Equivalents
  at Beginning of Period ........................        7,493           --             --
                                                    ----------    -----------    -----------
Cash and Cash Equivalents
  at End of Period ..............................   $    9,057    $     7,493    $     9,057
                                                    ==========    ===========    ===========

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

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:


On December  2, 1999 the  Company  issued  1,470,000  shares of common  stock in
exchange  for  $350,000  investment  in 3-D  projects,  $255,000  licensing  and
distribution  rights,  $3,306,900 3-D film production and exhibition  equipment,
and $100,000 patent pending.

On  December  3,  1999 in a reverse  merger  the  Company  acquired  $332  cash,
$153,001trading  investments,   $100,686  reduction  in  accounts  payable,  and
$366,084 notes payable in exchange for 1,200,000 shares of common stock.





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

                                       F-6
<PAGE>

                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED JUNE 30, 2000 AND
               THE PERIOD MAY 5, 1999 (INCEPTION) TO JUNE 30, 1999

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.

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, 2000 is in the  development  stage,  and
has not commenced planned principal operations.

Nature of Business

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

         The Company  anticipates  generating  revenues  from  several  sources,
including,  production  of and  exhibition of new and existing 3-D feature films
and providing integrated solutions to help organizations broadcast audio, video,
3-D video,  animation,  and 3-D animation and music over the Internet as well as
expanding into other areas of the entertainment industry .

Cash and Cash Equivalents

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

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-7
<PAGE>

                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED JUNE 30, 2000 AND
             FOR THE PERIOD MAY 5, 1999 (INCEPTION) TO JUNE 30, 1999
                                   (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.

Loss per Share

         The  reconciliations  of the numerators and  denominators  of the basic
loss per share computations are as follows:

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

                        For the Year ended June 30, 2000
Basic Loss per Share
Loss to common shareholders ........   $(2,680,213)     3,318,878   $     (0.81)
                                       ===========    ===========   ===========

                 Period May 5, 1999 (inception) to June 30, 1999
Basic Loss per Share
Loss to common shareholders ........   $  (144,977)     1,530,000   $     (0.09)
                                       ===========    ===========   ===========

         The  effect  of   outstanding   common  stock   equivalents   would  be
anti-dilutive for June 30, 2000 and 1999 and are thus not considered.

                                      F-8

<PAGE>

                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED JUNE 30, 2000 AND
             FOR THE PERIOD MAY 5, 1999 (INCEPTION) TO JUNE 30, 1999
                                   (Continued)

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

Investments

         The  Company's   securities   investments  that  are  bought  and  held
principally  for the purpose of selling them in the near term are  classified as
trading securities. Trading securities are recorded at fair value on the balance
sheet in  current  assets,  with the  change in fair  value  during  the  period
included in earnings.

         Investments in securities are summarized as follows:

                                                    June 30, 2000
                                         ---------------------------------------
                                            Gross         Gross
                                          Unrealized    Unrealized      Fair
                                            Gain           Loss         Value
                                         -----------   -----------   -----------
Trading Securities ...................   $      --     $      --     $      --
                                         ===========   ===========   ===========

                                                    June 30, 1999
                                         ---------------------------------------
                                            Gross         Gross
                                          Unrealized    Unrealized      Fair
                                            Gain           Loss         Value
                                         -----------   -----------   -----------
Trading Securities ...................   $      --     $      --     $      --
                                         ===========   ===========   ===========

         Realized  Gains and  losses  are  determined  on the basis of  specific
identification.  During the years ended June 30, 2000 and 1999,  sales  proceeds
and  gross  realized  gains and  losses  on  securities  classified  as  trading
securities were:

                                                                  For the Period
                                                      For the        May 5, 1999
                                                     Year Ended   (Inception) to
                                                       June 30,        June 30,
                                                        2000             1999
                                                    -----------      -----------

Sale Proceeds .................................     $   565,773      $      --
                                                    ===========      ===========

Gross Realized Losses .........................     $       (23)     $      --
                                                    ===========      ===========

Gross Realized Gains ..........................     $   412,796      $      --
                                                    ===========      ===========



                                      F-9
<PAGE>


                        STEREO VISION ENTERTAINMENT, INC.
                        ---------------------------------
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND
             FOR THE PERIOD MAY 5, 1999 (INCEPTION) TO JUNE 30, 1999
                                   (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF 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  initial  valuation  of
licensing  and  distribution  rights for the 3-D products were derived from what
Management believes to be arms length negotiation.

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

         There  have  been no  production  costs  as of  June  30,  2000.  It is
anticipated  that when production  costs are incurred the income forecast method
will  be  used to  amortize  the  cost of  production  for  films,  manuscripts,
recordings and similar property.

         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.

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.

Reclassification

         Certain reclassifications have been made in the June 30, 1999 financial
statements to conform with the June 30, 2000 presentation.

Joint Venture Operations Accounting

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

                                      F-10
<PAGE>


                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED JUNE, 30, 2000 AND
             FOR THE PERIOD MAY 5, 1999 (INCEPTION) TO JUNE 30, 1999
                                   (Continued)

NOTE 2 - INCOME TAXES

         As of June 30, 2000, the Company had a net operating loss  carryforward
for income tax reporting purposes of approximately $2,800,000 that may be offset
against future taxable income through 2014. Current tax laws limit the amount of
loss  available to be offset  against  future  taxable income when a substantial
change in ownership  occurs.  Therefore,  the amount  available to offset future
taxable  income may be limited.  Accordingly,  the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same amount.

NOTE 3 - DEVELOPMENT STAGE COMPANY

         The Company has not begun principal  operations and as is common with a
development  stage  company,  the Company has had  recurring  losses  during its
development stage.

NOTE 4 - RENT EXPENSE

         The Company  has  entered  into lease  agreements  for various  office,
storage and warehouse facilities.  The rental agreements are on a month to month
basis with total rent of $6,750 per month.  For the year ended June 30, 2000 and
the period May 5, 1999  (inception)  to June 30, 1999 the rental  payments  were
$58,500  and $3,630  respectively.  On October  1, 2000 the  Company  occupied a
production  and office  facility  on a month to month  basis for $1,700 plus 800
common shares per month.  The Company has negotiated a six month lease beginning
November 1, 2000 for a furnished  office space at 130 El Camino  Drive,  Beverly
Hill, CA for $1,736.78 per month.

NOTE 5 - LOANS FROM SHAREHOLDERS

         The loans are  payable  to various  shareholders,  are  unsecured  with
interest at rates of between  6.1% to15% and have no fixed  terms of  repayment.
Approximately  $238,000 of the loans are  convertible  into  common  shares at a
conversion price of $.50 per share.

         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.


                                      F-11

<PAGE>

                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED JUNE 30, 2000 AND
             FOR THE PERIOD MAY 5, 1999 (INCEPTION) TO JUNE 30, 1999
                                   (Continued)

NOTE 6 - SHORT-TERM NOTES PAYABLE

         Short-Term  Notes on June 30,  2000 and 1999 in the  Amounts of $38,000
and $6,000 respectively,  are due on demand with interest rates between 6.1% and
10%.

NOTE 7 - COMMON STOCK TRANSACTIONS

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

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

         On December 3, 1999 the Company  entered into an acquisition  agreement
and plan of reverse merger with Kestrel Equity  Corporation and at the same time
entered into an asset acquisition agreement for the acquisition of 3-D projects,
equipment,  licensing and distribution  rights.  By virtue of the merger and the
asset  acquisition,  the Company issued  2,670,000 shares of common stock of the
surviving  corporation and acquired assets valued at $4,013,100 or approximately
$1.50 per share.

         On  December  31,  1999 the Company  issued  350,000  shares to various
employees and consultants for services rendered valued at $2.00 per share.

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

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


                                      F-12
<PAGE>


                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED JUNE 30, 2000 AND
             FOR THE PERIOD MAY 5, 1999 (INCEPTION) TO JUNE 30, 1999
                                   (Continued)

NOTE 8 - COMMITMENTS

         On August 10, 2000,  the Company  purchased a motion  picture  entitled
"ROUTE 66" including all rights and materials, the rights as the creator and the
writer  of the  original  screenplay,  all  copyright  rights,  trade  names and
trademarks  and  all  other  forms  of  exploitation  of the  Property,  and all
ancillary, merchandise, music and book-publishing rights in exchange for 265,000
restricted  common  shares,  $96,492.73  (payable  $25,000  August 14,  2000 and
$11,915.46 per month from December 14, 2000 to May 14, 2001 and $25,000 plus a 1
1/2% royalty on any merchandise and 2% royalty on sequels).

         On April 25, 2000 the Board of  Directors  approved a stock option plan
whereby   2,675,000  common  shares  have  been  set  aside  for  employees  and
consultants to be  distributed at the discretion of the Board of Directors.  The
option  shares  will be  exercisable  on a cashless  basis at a 15%  discount to
market value. No formal plan has been adopted as of the date of this report.

         On April 26, 2000 the Company entered into a consulting  agreement with
Natural Vision Corporation  (Daniel Symmes).  Mr. Symmes provided  consulting in
3-D technologies in exchange for 17,000 shares valued at $102,000.  The contract
provided for a topping up of the shares in the event that the  Company's  common
stock  was not  selling  for $6 per  share  or  greater.  As of the date of this
report,  no shares have been issued for this contract.  The $102,000 is included
in accounts  payable at June 30,  2000.  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 has spent  approximately 1/2 time 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 are $6 per share and they expire two years after grant.

         On  September  27,  2000 the  Company  entered  into an  agreement  for
advertising and promotional services in exchange for 100,000 common shares.

         On September 28, 2000 the Company  signed a consulting  agreement  with
Solomon  Broadcasting  International for consulting  services on a non exclusive
basis for the purposes of financing, production, acquisition and distribution of
Stereo Vision  products in various media  throughout the world.  The contract is
for 2 years at  $300,000  per year  plus an option to  purchase  250,000  common
shares at $.01 per share.


                                      F-13

<PAGE>

                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEAR ENDED JUNE 30, 2000 AND
             FOR THE PERIOD MAY 5, 1999 (INCEPTION) TO JUNE 30, 1999
                                   (Continued)

NOTE 8 - COMMITMENTS (continued)

         On October 27, 2000 The Company  entered into an agreement  with Jannus
Records Inc. to engage in the promotion and  development  of concerts,  records,
and Internet stream. The Company will contribute up to $225,000 in the form of a
convertible loan at a rate of 9% interest,  payable in twenty-four  months.  The
loan  plus  100,000  common  shares of the  Company  may be  converted  into the
equivalent of 51% of Jannus's outstanding stock.

Also on October 27, 2000 the Company  entered  into an agreement  with  National
Financial Group for promotional services in exchange for 12,500 shares of common
stock.

         The company is restructuring its agreement with an affiliate company of
Mr.  Williams  (the  Secretary-Treasurer  and  Director of the  Company)  called
Wilfield  Entertainment.  It is anticipated  that the Company will issue 200,000
shares of common stock for its  participation  in the joint  venture.  The joint
venture  with  Wilfield is for the  production  of thirteen  music  albums.  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 November 13, 2000 the Company  entered  into a five year  employment
agreement  with  Robert L.  Friedman.  The  agreement  provides  for a salary of
$21,000 per month for the first six months and $25,000 per month there after,  a
bonus  payable on  December  31, 2001 of 50% of the annual  salary,  appropriate
health,  life,  medical,  dental  and  pharmaceutical  plan,  $1,000  per  month
automobile  allowance,  and stock options to purchase  $250,000 shares of common
stock at $.01 per share.

         As of June 30, 2000 some of the  activities  of the  Company  have been
conducted by corporate  officers  from shared  office space with the Law Firm of
Phillips, Haskett & Ingwalson in San Diego, California. The Company does not pay
rent for the use of this space.  Currently,  there are no outstanding debts owed
by the company for the use of these  facilities and there are no commitments for
future use of the facilities.

                                      F-14