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, 2001

                                       or

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

                        For the transition period from To


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

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

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

                15452 Cabrieto Rd., Suite 204, Van Nuys, CA 91406
 -------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip code)

                  130 S. El Camino Dr., Beverly Hills, CA 90212
 -------------------------------------------------------------------------------
                                (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)


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        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 October 2, 2001, there were 10,122,900  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  $5,162,679  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
                                                                      ---    ---


















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                                TABLE OF CONTENTS


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

PART I

Item 1.        Description of Business........................................4

Item 2.        Description of Property.......................................14

Item 3.        Legal Proceedings.............................................14
Item 4.        Submission of Matters to a Vote of Security Holders...........14


PART II

Item 5.        Market for Common Equity and Related Stockholder Matters......15

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.............20

Item 10.       Executive Compensation........................................23

Item 11.       Security Ownership of Certain Beneficial Owners and Management23

Item 12.       Certain Relationships and Related Transactions................24

Item 13.       Exhibits and Reports on Form 8-K..............................25




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                                     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

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assets  in the  global  multi-media  industries.  Upon the  consummation  of the
Merger,  Kestrel  acquired  all of the  assets  of  Stereo  with the  intent  of
continuing  Stereo's  business and expanding into new areas of the entertainment
industry.  Stereo  was  incorporated  in the  State of Nevada on May 5, 1999 for
purposes of  acquiring  multi-media/entertainment  industry  assets and pursuing
merger  opportunities with an existing publicly traded company.  Mr. Kallett, an
officer and director of Kestrel Equity Corporation,  and Mr. Honour, a principal
shareholder  of  Kestrel,  both owned  common  stock in Stereo  representing  an
aggregate  of 51% of the issued and  outstanding  capital  stock of Stereo.  The
operations and management of the merged  companies  (SVEI) were then  integrated
following  the  replacement  of Stereo's sole officer and director with the then
sole officer and director of Kestrel.

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

        SVEI has  secured  the  consulting  services  of Mr.  Daniel  Symmes who
possesses  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 15452 Cabrieto Rd.,
Suite 204, Van Nuys, CA 91406. Its telephone number is (310) 205-7998.

OPERATING LOSSES

        The Company has  incurred  net losses of  approximately  $4,572,000  and
$2,580,000  for the fiscal  years ended June 30, 2001 and 2000.  Such  operating
losses reflect  developmental  and other start-up  activities for 2001 and 2000.
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.


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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.

MUSIC DIVISION

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


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STEREO VISION ENTERTAINMENT PRODUCTIONS


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


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.  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.

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

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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.

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.

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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.

        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.  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.

        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."

        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. SVEI intends to
update its film distribution  licenses with the owners of these five 3-D feature
films that were previously licensed to Stereo.

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.


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        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.

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

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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,
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.




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RISK OF LOW-PRICED STOCKS

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

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

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

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.
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. 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

                                       12

<PAGE>



of Mr. Daniel Symmes, a longtime 3-D technology  associate,  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.

        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


                                       13

<PAGE>



        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.

EMPLOYEES

        As of October 12, 2001, SVEI employed four employees. SVEI considers its
employee relations to be satisfactory at present.


                         ITEM 2 DESCRIPTION OF PROPERTY


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


                            ITEM 3 LEGAL PROCEEDINGS


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



                        ITEM 4 SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS


        In accordance  with Nevada  corporate  law, no matters were subject to a
vote of security

                                       14

<PAGE>



holders during the year ended June 30, 2001. 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.

                                     PART II

                       ITEM 5 MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS


MARKET INFORMATION

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

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



                                          High             Low
               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
               2001:
Quarter ended September 30, 2000        $       2.13    $       0.75
Quarter ended December 31, 2000         $       1.70    $       0.85
Quarter ended March 31, 2001            $       1.50    $       0.30
Quarter ended June 30, 2001             $       1.00    $       0.30

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

                                       15

<PAGE>



expansion, as well as other factors the Board of Directors deems relevant.

        The number of shareholders of record of the Company's Common Stock as of
June 30, 2001 was approximately 109.

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.

        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%

                                       16

<PAGE>



royalty on sequels).


        On  September  27, 2000 the  Company  entered  into a contract  with Ron
Whiten  to  make  strategic  introductions  on  behalf  of  the  Company  to the
investments  community in exchange for 100,000 common  shares.  On September 29,
2000 the shares were issued at a value of $95,000,  which was the quoted  market
price on the date of issue.  The  contract  is for a period of time  covering  3
quarterly financial statements.  To the best knowledge and belief of the Company
no services have been performed by Mr. Whiten pursuant to this agreement. On May
25, 2001,  the 100,000  shares of stock issued to Mr.  Whiten were  canceled for
non-performance of services.


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

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

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

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

        During the year ended June 30, 2001, the Company issued 1,532,600 shares
to various  consultants for services at the market value on the date of issuance
and 15,000 restricted common shares to individuals for cash at $1.00 per share.

        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.






                                       17

<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
by changes in customer tastes, economic, and demographic trends. Factors such as
inflation, increased supplies

                                       18

<PAGE>



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

Results  of  Operations  - There were no  revenues  from sales for the two years
ended June 30, 2001. SVEI has sustained a net loss of approximately $4.6 million
for the year ended June 30,  2001,  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  400,000 shares
of common stock of New Visual Entertainment,  Inc., from a major shareholder for
a  $400,000  convertible  note in  September  1999.  This  note  was paid by the
issuance of 200,000  shares of common  stock.  The sale of this stock  generated
approximately  $566,000 of net proceeds  during  September 1999 through June 30,
2000, which the Company used to support its operations.

        The  Company  has also  relied on loans  from  officers,  directors  and
shareholders  to  support  its  operations.  During  the  year,  three  persons,
including the  aforementioned  major  shareholder  and one director,  loaned the
Company  $795,000..  However,  there can be no assurances that additional  loans
will be forthcoming from officers, directors, and shareholders.

                                       19

<PAGE>



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


                           ITEM 7 FINANCIAL STATEMENTS


        The  financial  statements  of the  Company and  supplementary  data are
included beginning  immediately following the signature page to this report. See
Item 13 for a list of the financial statements and financial statement schedules
included.


              ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE


        There are not and have not been any  disagreements  between  the Company
and its  accountants  on any  matter  of  accounting  principles,  practices  or
financial statements disclosure.

                                    PART III


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


Executive Officers and Directors

The members of the Board of Directors of the Company serve until the next annual
meeting of  stockholders,  or until  their  successors  have been  elected.  The
officers  serve at the pleasure of the Board of Directors.  The following  table
sets forth the name, age, and position of each executive officer and director of
the Company:
<TABLE>
<CAPTION>
Director's   Name       Age                 Office                       Term Expires
<S>                     <C>    <C>                                    <C>
Thomas E. Noonan        70     Chairman of the Board, Director        next annual meeting
John Honour             50              CEO, President                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
</TABLE>

                                       20
<PAGE>

THOMAS E. NOONAN - CHAIRMAN - BOARD OF  DIRECTORS:  Mr. Noonan has served on the
Board of  Directors  since August 4, 2000.  Tom Noonan is currently  the head of
Columbia/Epic Records Alumni Association,  which was started in 1995, and is now
with 500 Members,  many in top positions in the current  music record  industry.
From 1995 to 2000 he has been President of Noonan Consulting,  a record industry
consulting firm to artists,  labels,  video companies,  music publishers,  trade
publications,  artist managers, new companies and foreign affiliates. Mr. Noonan
was formerly a senior  executive at Billboard  Magazine where he founded the Hot
100 Charts and also evaluated  albums and music assets for the Internal  Revenue
Service.  Furthermore,  Mr.  Noonan has been a U.S.  Government  Expert  Witness
before  investigative   Congressional  Committees.  He  has  provided  marketing
services for major artists such as Barbara  Streisand,  Janet  Jackson,  Michael
Jackson,  George Michael,  Bob Seger, Janis Joplin,  Marvin Gaye, Diana Ross and
the  Supremes,  Bob Dylan,  Johnny  Cash,  Tony  Bennett,  and many other  known
artists.   Mr.   Noonan   holds  a  Bachelor  of  Science   degree  in  Business
Administration from Seton Hall University.

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

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

JOHN C.  BODZIAK  JR. - BOARD OF  DIRECTOR  MEMBER:  Mr.  Bodziak  has served as
President/CEO  for Stereo Vision  Entertainment,  Inc. since August 4, 2000. Mr.
Bodziak  has  educational  as well as  working  experience  in the  capacity  of
ownership,   management,  and  operating  small  and  large  businesses  in  the
restaurant,  liquor,  and concert  entertainment  arenas.  From 1995 to 1997 Mr.
Bodziak was General Manager for Key Largo  International  (located on the Jannus
Landing block) where his duties included operating and managing Benson's Gourmet
and Tami Ami Nightclub.  Working  alongside the Jannus Landing  Corporation,  in
1997 Mr. Bodziak began

                                       21

<PAGE>



promoting  and  coordinating  entertainment  acts for  nightclubs  on the Jannus
Landing block as well as managing the real estate for which Jannus  Landing owns
including  Pelican  Pub,  Detroit  Liquors,  and the  legendary  Jannus  Landing
Courtyard  which was voted in Rolling Stone Magazine to be the one of the top 10
best  concert  venues in the  nation;  Each year over 75 major acts play  Jannus
Landing  Courtyard's  main  stage.  From 1997 to 2000 Mr.  Bodziak has served as
President/CEO  of  Jannus  Landing  Corporation,  where he  oversees  the  daily
operation and schedules  entertainment,  and acts as  coordinator of the concert
venue.  Mr.  Bodziak  graduated from the University of Florida with a Bachelor's
Degree in  Business  Administration  as well as  Financing  and  Economics.  Mr.
Bodziak was also president of his College Business Fraternity, ALPHA KAPPA SAI.

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

Conflicts of Interest

        Certain  conflicts of interest existed at June 30, 2001 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.



                                       22

<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.



                 ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
                                 AND MANAGEMENT


Principal Shareholders

        The table  below  sets forth  information  as to each  person  owning of
record or who was known by the Company to own  beneficially  more than 5% of the
7,859,100  shares of issued and  outstanding  Common  Stock of the Company as of
June 30, 2001 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.

                                       23

<PAGE>




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


All Executive Officers
and Directors as a Group
(3 persons)                common stock         3,774,851       48%

Jack Fennie, Jr.
4844 Whitewood Ave.
Long Beach, CA 80808       common stock         1,010,000       13%

John Honour
3650 Campus Dr.
Oceanside, CA 92056        common stock         3,214,851       41%

Herky Williams
5025 Stonemeade Dr.
Nashville, TN 37221        common stock           400,000        5%

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


             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



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

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

                                       24

<PAGE>



        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.

1.      Financial Statements                                                Page

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

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

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

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

Statements of Cash Flows for the
   Years Ended June 30, 2001 and 2000......................................F - 8

Notes to Financial Statements.............................................F - 10





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:


                                       25

<PAGE>



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)

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.



                                       26

<PAGE>



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

        (b)     Reports on Form 8-K filed.

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

                                       27

<PAGE>



                                   SIGNATURES


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

                              STEREO VISION ENTERTAINMENT, INC.

Dated: October 15, 2001                     By  /S/     John Honour
                                            ------------------------------------
                                            John Honour,
                                            C.E.O., President,

        Pursuant to the requirements of the Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 15th day of October 2001.

Signatures & Title


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



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



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





                                       28

<PAGE>


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

                                       -:-

                          INDEPENDENT AUDITOR'S REPORT


                             JUNE 30, 2001 and 2000







<PAGE>






                                    CONTENTS


                                                                            Page

Independent Auditor's Report...............................................F - 1

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

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

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

Statements of Cash Flows for the
   Years Ended June 30, 2001 and 2000......................................F - 8

Notes to Financial Statements.............................................F - 10



<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, 2001 and 2000
and the related statements of operations,  stockholders'  equity, and cash flows
for the two years ended June 30, 2001 and 2000.  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, 2001 and 2000
and the  results of its  operations  and its cash flows for the two years  ended
June 30,  2001 and  2000,  in  conformity  with  generally  accepted  accounting
principles.


                                                   Respectfully submitted


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

Salt Lake City, Utah
October 12, 2001





                                      F - 1

<PAGE>




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


                                                                June 30,
                                                        -----------------------
ASSETS: ..............................................     2001         2000
                                                        ----------   ----------

Current Assets:
   Cash ..............................................  $       66   $    9,057
                                                        ----------   ----------

       Total Current Assets ..........................          66        9,057
                                                        ----------   ----------

Fixed Assets:
   Office Equipment ..................................      13,745       13,745
   3-D Production and Exhibition Equipment ...........   3,306,900    3,306,900
   Less Accumulated Depreciation .....................  (3,312,398)    (645,757)
                                                        ----------   ----------

       Net Fixed Assets ..............................       8,247    2,674,888
                                                        ----------   ----------

Intangible and Other Assets:
   Investments 3-D Projects ..........................     350,000      350,000
   Investment in Wilfield Entertainment ..............     220,000         --
   Films, Manuscripts, Recordings and Similar Property     286,292       25,000
   Intellectual Property .............................     100,000      100,000
   Licensing & Distribution Rights ...................     255,000      255,000
   Less Accumulated Amortization .....................    (214,666)    (107,333)
                                                        ----------   ----------

       Net Intangible and Other Assets ...............     996,626      622,667
                                                        ----------   ----------

Total Assets: ........................................  $1,004,939   $3,306,612
                                                        ==========   ==========















                                      F - 2

<PAGE>




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


                                                              June 30,
                                                      -------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY: ..............     2001          2000
                                                      -----------   -----------

Liabilities:
   Accounts Payable ................................  $   271,341   $   250,363
   Accrued Expenses ................................       99,399        26,312
   Payable to SAG for Route 66 .....................       71,493          --
   Loans from Shareholders .........................      989,836       821,792
   Short-term Notes Payable ........................       16,000        38,000
                                                      -----------   -----------

      Total Current Liabilities ....................    1,448,069     1,136,467


Stockholders' Equity:
  Common Stock, $.001 Par value
    Authorized 100,000,000 shares,
    Issued 7,859,100 shares at June 30, 2001
      and 4,940,500 shares at June 30, 2000 ........        7,859         4,941
  Additional Paid in Capital .......................    6,459,026     4,990,394
  Stock Options Outstanding ........................      487,500          --
  Deficit Accumulated During the Development Stage .   (7,397,515)   (2,825,190)
                                                      -----------   -----------

     Total Stockholders' Equity ....................     (443,130)    2,170,145
                                                      -----------   -----------

     Total Liabilities and Stockholders' Equity ....  $ 1,004,939   $ 3,306,612
                                                      ===========   ===========














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

                                      F - 3

<PAGE>



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





                                                                    Cumulative
                                                                    Since May 5,
                                          For the       For the        1999
                                         Year Ended    Year Ended   Inception of
                                          June 30,      June 30,     Development
                                           2001           2000         Stage
                                        -----------   -----------   -----------
Revenues: ............................  $      --     $      --     $      --

Expenses:
Research & Development ...............         --         293,000       293,000
General & Administrative Expenses ....    4,215,353     1,845,471     6,202,083
Consulting ...........................      128,200       849,930       978,130
Advertising & Promotion ..............      148,033          --         148,033
                                        -----------   -----------   -----------

Operating Loss .......................   (4,491,586)   (2,988,401)   (7,621,246)

Other Income (Expense)
   Interest ..........................      (80,739)      (88,701)     (173,158)
   Loss on Sale of Assets ............         --         (15,883)      (15,883)
   Gain on Trading Investments .......         --         412,772       412,772
                                        -----------   -----------   -----------

     Net Loss ........................  $(4,572,325)  $(2,680,213)  $(7,397,515)
                                        ===========   ===========   ===========

Basic & Diluted loss per share........  $     (0.77)  $     (0.81)
                                        ===========   ===========













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


                                      F - 4

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                 Deficit
                                                                               Accumulated
                                                                 Additional       During
                                             Common Stock         Paid in      Development
                                       ------------------------
                                          Shares       Value      Capital         Stage
                                       ------------  ---------- ------------  --------------
May 5, 1999 Stock Issued for Services
<S>                                    <C>           <C>        <C>           <C>
  and Payment of Accounts Payable         1,530,000  $    1,530 $      3,470  $            -

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

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

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

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

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

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

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

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

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

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

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

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

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

                                     F - 5
<PAGE>

                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (Continued)
<TABLE>
<CAPTION>
                                                                                 Deficit
                                                                               Accumulated
                                                                 Additional       During
                                             Common Stock         Paid in      Development
                                       ------------------------
                                          Shares       Value      Capital         Stage
                                       ------------  ---------- ------------  --------------

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

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

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

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

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

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

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

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

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

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

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

April 18, 2001 Stock Issued for
  Acquisition of Wilfield Entertainment     400,000         400      219,600               -
</TABLE>
                                     F - 6
<PAGE>

                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (Continued)
<TABLE>
<CAPTION>
                                                                                 Deficit
                                                                               Accumulated
                                                                 Additional       During
                                             Common Stock         Paid in      Development
                                       ------------------------
                                          Shares       Value      Capital         Stage
                                       ------------  ---------- ------------  --------------

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

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

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

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

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

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

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

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

</TABLE>











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

                                      F - 7

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                  Cumulative
                                                                                 Since May 5,
                                                           For the                   1999
                                                         Years Ended             Inception of
                                                           June 30,              Development
                                                ------------------------------
                                                     2001            2000           Stage
                                                ---------------  -------------  --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S>                                             <C>              <C>            <C>
Net Loss                                        $    (4,572,325) $  (2,680,213) $   (7,397,515)
Adjustments to reconcile net loss to net
cash used in operating activities:
   Depreciation and Amortization                      2,773,974        753,978       3,528,181
   Issuance of Common Stock for Expenses                571,900      1,000,000       1,576,900
   Issuance of Common Stock for Investment in
        Wilfield Entertainment                          220,000              -         220,000
   Issuance of Stock Options                            487,500              -         487,500
   Notes Payable Converted to Stock                     664,651              -         664,651
   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                                      20,978        136,665         253,911
   Accrued Expenses                                      73,087         22,594          99,399
   Payable to SAG for Route 66                           71,493              -          71,493
                                                ---------------  -------------  --------------
  Net Cash Used in operating activities                 311,258     (1,163,534)       (892,038)
                                                ---------------  -------------  --------------

CASH FLOWS FROM INVESTING
ACTIVITIES:
   Purchase of equipment                                      -              -         (13,745)
   Investment in films, manuscripts, recordings
      and similar property                             (481,292)        25,000        (456,292)
   Proceeds from sale of assets                               -         51,117          51,117
   Proceeds from sale of investments                          -        565,773         565,773
                                                ---------------  -------------  --------------
Net cash used in investing activities                  (481,292)       641,890         146,853
                                                ---------------  -------------  --------------

CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from loans from shareholders                   793,181        750,708       1,598,889
Payments of principal on loans from shareholders       (673,138)      (350,000)     (1,023,138)
Proceeds from issuance of common stock                   15,000         90,500         105,500
</TABLE>
                                     F - 8
<PAGE>

                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                            STATEMENTS OF CASH FLOWS
                                   (Continued)
<TABLE>
<CAPTION>
                                                                                  Cumulative
                                                                                 Since May 5,
                                                           For the                   1999
                                                         Years Ended             Inception of
                                                          June 30,               Development
                                               -------------------------------
                                                    2001            2000            Stage
                                               --------------- ---------------  --------------
<S>                                            <C>             <C>              <C>
 Proceeds from issuance of short-term notes    $        26,000 $        32,000  $       64,000
                                               --------------- ---------------  --------------
Net Cash Provided by
   Financing Activities                                161,043         523,208         745,251
                                               --------------- ---------------  --------------

Net (Decrease) Increase in
  Cash and Cash Equivalents                             (8,991)          1,564              66
Cash and Cash Equivalents
  at Beginning of Period                                 9,057           7,493               -
                                               --------------- ---------------  --------------
Cash and Cash Equivalents
  at End of Period                             $            66 $         9,057  $           66
                                               =============== ===============  ==============

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:










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

                                      F - 9

<PAGE>




                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        This summary of  accounting  policies for Stereo  Vision  Entertainment,
Inc. is presented to assist in understanding the Company's financial statements.
The accounting policies conform to generally accepted accounting  principles and
have been consistently applied in the preparation of the financial statements.

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, 2001 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 - 10

<PAGE>




                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
                                   (Continued)

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

Property and Equipment

        Property and equipment are stated at cost.  Depreciation is provided for
in amounts  sufficient  to relate the cost of  depreciable  assets to operations
over their estimated service lives,  principally on a straight-line basis from 3
to 5 years.

        Upon sale or other  disposition of property and equipment,  the cost and
related  accumulated  depreciation or amortization are removed from the accounts
and any gain or loss is included in the determination of income or loss.

        Expenditures  for  maintenance  and  repairs  are  charged to expense as
incurred.  Major overhauls and betterments are capitalized and depreciated  over
their useful lives.

        The Company  identifies  and  records  impairment  losses on  long-lived
assets such as property and  equipment  when events and  circumstances  indicate
that such assets  might be  impaired.  The  Company  considers  factors  such as
significant  changes in the regulatory or business  climate and projected future
cash flows from the  respective  asset.  Impairment  losses are  measured as the
amount by which the carrying amount of intangible asset exceeds its fair value.

Stock Compensation for Non-Employees

        The Company accounts for the fair value of its stock compensation grants
for  non-employees in accordance with FASB Statement 123. The fair value of each
grant is equal to the market price of the  Company's  stock on the date of grant
if an  active  market  exists  or  at a  value  determined  in  an  arms  length
negotiation between the Company and the non-employee.

Concentration of Credit Risk

        The  Company  has no  significant  off-balance-sheet  concentrations  of
credit  risk such as foreign  exchange  contracts,  options  contracts  or other
foreign  hedging  arrangements.  The Company  maintains the majority of its cash
balances with one financial institution, in the form of demand deposits.




                                      F - 11

<PAGE>




                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
                                   (Continued)

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

Loss per Share

        The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
<TABLE>
<CAPTION>
                                                                                  Per-Share
                                                  Income           Shares           Amount
                                                  ------           ------           ------
                                                (Numerator)     (Denominator)

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

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

        The  effect  of   outstanding   common   stock   equivalents   would  be
anti-dilutive  for June 30,  2001  and  2000  and are thus not  considered.  The
Company has $436,000  debt  convertible  into 872,000  shares at $.50 per share,
$10,000 debt  convertible into 50,000 at $.20 per share and commitments to issue
approximately 600,000 shares (see note 8).


Reclassification

        Certain  reclassifications have been made in the June 30, 2000 financial
statements to conform with the June 30, 2001 presentation.

Joint Venture Operations Accounting

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

Advertising Costs

        Advertising  costs are  expensed as  incurred.  Advertising  expense was
$148,033 and $0 for the years ended June 30, 2001 and 2000, respectively.

                                      F - 12

<PAGE>




                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
                                   (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF 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:
<TABLE>
<CAPTION>
                                                                June 30, 2001
                                               -----------------------------------------------
                                                    Gross           Gross
                                                 Unrealized      Unrealized          Fair
                                                    Gain            Loss            Value
                                               --------------- ---------------  --------------
<S>                                            <C>             <C>              <C>
Trading Securities                             $             - $             -  $            -
                                               =============== ===============  ==============


                                                                June 30, 2000
                                               -----------------------------------------------
                                                    Gross           Gross
                                                 Unrealized      Unrealized          Fair
                                                    Gain            Loss            Value
                                               --------------- ---------------  --------------
Trading Securities                             $             - $             -  $            -
                                               =============== ===============  ==============
</TABLE>

        Realized  Gains and  losses  are  determined  on the  basis of  specific
identification.  During the years ended June 30, 2001 and 2000,  sales  proceeds
and  gross  realized  gains and  losses  on  securities  classified  as  trading
securities were:
<TABLE>
<CAPTION>
                                                                       For the
                                                                     Years Ended
                                                                       June 30,
                                                        --------------------------------------
                                                               2001                2000
                                                        ------------------  ------------------

<S>                                                     <C>                 <C>
Sale Proceeds                                           $                -  $          565,773
                                                        ==================  ==================

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

Gross Realized Gains                                    $                -  $          412,796
                                                        ==================  ==================
</TABLE>



                                     F - 13

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
                                   (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  amortization  period is
management's  estimate  of  useful  economic  life  of the  asset.  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.

NOTE 2 - INCOME TAXES

        As of June 30, 2001, the Company had a net operating  loss  carryforward
for income tax reporting purposes of approximately  $7,40,000 that may be offset
against future taxable income through 2021. Current tax laws limit the amount of
loss  available to be offset  against  future  taxable income when a substantial
change in ownership  occurs.  Therefore,  the amount  available to offset future
taxable  income may be limited.  Accordingly,  the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same amount.

NOTE 3 - DEVELOPMENT STAGE COMPANY / GOING CONCERN

        The Company has not begun  principal  operations and as is common with a
development  stage  company,  the Company has had  recurring  losses  during its
development  stage.  Continuation of the Company as a going concern is dependent
upon obtaining the additional  working capital necessary to be successful in its
planned  activity,  and the  management of the Company has developed a strategy,
which it believes will  accomplish  this  objective  through  additional  equity
funding  and long term  financing,  which will enable the Company to operate for
the coming year.

                                     F - 14

<PAGE>




                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
                                   (Continued)


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.  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 in Beverly Hill, CA for
$1,736.78 per month. Beginning October 1, 2001, the Company will begin leasing a
new office space located in Van Nuys, CA for $500 plus 1,667 shares a month. For
the years  ended June 30,  2001 and 2000 the rental  payments  were  $38,129 and
$58,500 respectively.

NOTE 5 - LOANS FROM SHAREHOLDERS AND OTHER RELATED PARTY
TRANSACTIONS

        The loans are  payable  to  various  shareholders,  are  unsecured  with
interest at rates of between  6.1% to15% and have no fixed  terms of  repayment.
Approximately  $436,000 of the loans are  convertible  into  common  shares at a
conversion  price of $.50 per share and $10,000 of loans are convertible at $.20
per share. At the time of the issuance of the notes to  shareholders  there were
no beneficial conversion features. To the best knowledge of management the stock
was not trading at that time, and the note was not "in the money" at that time.

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

NOTE 6 - SHORT-TERM NOTES PAYABLE

        Short-Term Notes on June 30, 2001 and 2000 in the Amounts of $16,000 and
$38,000  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.


                                     F - 15

<PAGE>




                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
                                   (Continued)

NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)

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

        On December 2, 1999 the Company issued  1,470,000 shares of common stock
in exchange for $350,000  investment  in 3-D  projects,  $255,000  licensing and
distribution  rights,  $3,306,900 3-D film production and exhibition  equipment,
and $100,000 patent pending.  In addition to the asset acquisition,  on December
3, 1999 the Company  entered into an  acquisition  agreement and plan of reverse
merger with Kestrel Equity  Corporation  whereby the Company acquired $332 cash,
$153,001trading  investments,   $100,686  reduction  in  accounts  payable,  and
$366,084  notes  payable in exchange for 1,200,000  shares of common  stock.  By
virtue of the merger and the asset  acquisition,  the Company  issued  2,670,000
shares of common stock of the surviving  corporation  and acquired assets valued
at $4,013,100 or approximately $1.50 per share.

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

        On February 14, 2000 the Company  issued  100,000 shares of common stock
as payment for services  rendered by Mr. Herky Williams  valued at $2 per share.
The services rendered were for the development of the Company's music division.

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

        On  September  27, 2000 the  Company  entered  into a contract  with Ron
Whiten  to  make  strategic  introductions  on  behalf  of  the  Company  to the
investments  community in exchange for 100,000 common  shares.  On September 29,
2000 the shares were issued at a value of $95,000,  which was the quoted  market
price on the date of issue.  The  contract  is for a period of time  covering  3
quarterly financial statements.  To the best knowledge and belief of the Company
no services have been performed by Mr. Whiten pursuant to this agreement. On May
25, 2001,  the 100,000  shares of stock issued to Mr.  Whiten were  canceled for
non-performance of services.

                                     F - 16

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
                                   (Continued)

NOTE 7 - COMMON STOCK TRANSACTIONS (Continued)

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

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

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

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

        During the year ended June 30, 2001, the Company issued 1,532,600 shares
to various  consultants for services at the market value on the date of issuance
and 15,000 restricted common shares to individuals for cash at $1.00 per share.

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.



                                     F - 17

<PAGE>



                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
                                   (Continued)

NOTE 8 - COMMITMENTS (Continued)

        On April 26, 2000 the Company  entered into a consulting  agreement with
Natural Vision Corporation  (Daniel Symmes).  Mr. Symmes provided  consulting in
3-D technologies in exchange for 17,000 shares valued at $102,000.  The contract
provided for a topping up of the shares in the event that the  Company's  common
stock was not selling for $6 per share or greater. On November 22, 2000, 102,000
shares,  valued at $1 per share,  were issued to Mr.  Symmes.  In addition,  the
Company agreed to pay Natural Vision Corporation $1,000 per week for Mr. Symmes'
consulting  services for a 2 year period.  Mr.  Symmes  spends  between 15 to 20
hours each week in performing the consulting services and will provided services
on an as needed basis for the  remainder of the  contract.  Natural  Vision will
also receive  options  based on gross income of the Company over four  six-month
intervals. The exercise price of the options is $6 per share and they expire two
years after grant.

        On September  28, 2000 the Company  signed a consulting  agreement  with
Solomon  Broadcasting  International for consulting  services on a non-exclusive
basis for the purposes of financing, production, acquisition and distribution of
Stereo Vision  products in various media  throughout the world.  The contract is
for 2 years at  $300,000  per year  plus an option to  purchase  250,000  common
shares at $.01 per share. The option is exercisable after September 28, 2002. On
the date of grant the difference between the fair market value of the option and
the option price has been recorded as an expense.

        On October 27, 2000 The Company  entered into an  agreement  with Jannus
Records Inc. (which is owned and controlled by John C. Bodziack,  Jr. a Director
of the Company) to engage in the promotion and development of concerts, records,
and Internet  broadcasting  of the concert  events.  It is the  intention of the
Company to utilize "Jannus  landing",  Mr.  Bodziack's  concert venue to jointly
present  entertainment  and recordings of the concerts in  conjunction  with the
Wilfield  Entertainment  Agreement..  The  agreement  calls for the  Company  to
contribute  up to $225,000 in the form of a  convertible  loan at the rate of 9%
interest, payable within twenty-four months after the date the loan is funded by
the Company.  At the option of the Company,  the loan amount plus 100,000 shares
of the common stock of the Company,  may be converted to 51% of the  outstanding
common  stock of Jannus  Records.  To date,  no funds  have been paid under this
agreement and the 100,000 shares have not been issued.

        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

                                     F - 18

<PAGE>


                        STEREO VISION ENTERTAINMENT, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
                                   (Continued)

NOTE 8 - COMMITMENTS (Continued)

share. The options are exercisable  beginning  November 13, 2005. On the date of
grant the difference  between the fair market value of the option and the option
price has been recorded as an expense.  In January 2001, Mr.  Friedman  tendered
his resignation  because he had an opportunity to assume a similar position with
a competitor  company in the  entertainment  industry.  Upon  acceptance  of his
resignation by the board, the Agreement was canceled and no further sums are due
Mr. Friedman.



                                     F - 19