SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

For the fiscal year ended 2001

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1943

For the transition period from ___________________ to ___________________

Commission file number: 0-28219


                        ECLIPSE ENTERTAINMENT GROUP, INC.
                 (Name of small business issuer in its charter)


                   Nevada                                        91-1766849
      (State or other jurisdiction of                          (I.R.S Employer
       incorporation or organization)                        Identification No.)


10520 Venice Boulevard, Culver City, California                    90232
   (Address of principal executive offices)                      (Zip Code)


                   Issuer's telephone number: (310) 836-6790


          Securities registered under 12(b) of the Exchange Act: None

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 in response to Item
405 of  Regulation  S-B 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 [ ]

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State issuer's revenues for its most recent fiscal year: $0.00

     State the aggregate market value of the voting and non-voting common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified  date within the past 60 days: As of March 4th,  2002, the aggregate
market value of shares held by non-affiliates  (based on the close price on that
date $.11) was $1,197,053.

     State the number of shares  outstanding of each of the issuer's  classes of
common  equity,  as of the last  practicable  date:  14,146,821 as of March 5th,
2002.

This form 10KSB contains  forward-looking  statements  within the meaning of the
federal securities laws. These forward-looking  statements are necessarily based
on certain  assumptions and are subject to significant risks and  uncertainties.
These  forward-looking  statements are based on management's  expectations as of
the date hereof, and the Company does not undertake any responsibility to update
any of these  statements in the future.  Actual future  performance  and results
could  differ  from that  contained  in or  suggested  by these  forward-looking
statements as a result of factors set forth in this Form 10KSB  (including those
sections hereof incorporated by reference from other filings with the Securities
and Exchange  Commission),  in particular as set forth in "Business Risks" under
Item 1 and set forth in the "Management's Discussion and Analysis" under Item 6.

ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS DEVELOPMENT.

Eclipse  Entertainment  Group, Inc.  ("Company") was incorporated on January 27,
1997 in the State of Nevada with the objective of satisfying a worldwide  demand
for quality,  American  entertainment  that is developed under carefully managed
budgets.  The Company  will work to  establish a network of foreign and domestic
buyers to produce or acquire  programming  that  directly  meets  their needs in
terms of content and cost.  The Company  currently has no employees,  other than
the officers and directors,  but anticipates  adding several  employees over the
next  twelve  months.  Therefore,  the  business  activities  of the Company are
handled by the officers and directors at this time.

BUSINESS OF THE COMPANY.

The business  objectives of the Company, as developed by its Board of Directors,
are  strongly  focused on the  production  and  acquisition  of action  oriented
feature films with strong domestic and universal appeal that have been developed
and/or produced  within well managed low to medium budgets.  The Company intends
to develop a well  integrated  portfolio of these  feature films by producing or
co-producing  one or two action  feature  films each year and by  acquiring  the
rights to other similar films which are available at attractive prices.

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Eclipse  Entertainment,  through its wholly owned  subsidiary  Ancient  Warriors
Film, LLC, has just completed production of the film, Ancient Warriors. The film
is 70% owned by Ancient Warriors LLC and 30% owned by Franco Columbu,  Eclipse's
CEO and Director.  The anticipated  final budget for the movie is $3,040,000USD.
Pursuant to a contract between Franco Columbu, Ancient Warriors LLC, and Eclipse
Entertainment, the first monies generated from the film are to be used to recoup
costs as follows;  70% of the monies are to be  distributed  to investors in the
film, proportionally until repaid in full.
Ancient Warriors LLC is to receive 10 % of the monies for  administration  fees,
royalties  and  remaining  salaries  and  20%  of  the  monies  are to go to the
distributor of the film, Eclipse Releasing.  Eclipse Releasing is a wholly owned
subsidiary Eclipse Entertainment.

Upon  reimbursement  to the entities and individuals  named above, the remaining
proceeds are to be divided as follows.  Investors  in Ancient  Warrior LLC shall
receive 20% of the net profit as a continuing  royalty,  proportionate  to their
respective  investments.  10% of the net profit is to go to Ancient Warriors LLC
and 20% is to go to Eclipse Releasing. The remaining 30% of the net profit shall
go to Eclipse  Entertainment  directly. In addition,  Franco Columbu,  Eclipse's
Director  and CEO,  will  receive 10 % of the net profit as a Producer  fee. Art
Birzneck,  the Company's  President  and  Director,  will receive 10% of the net
profit  from the film for  performing  the duties of  Executive  Producer on the
film. (See Exhibit 10.4)

Eclipse is currently  pursuing  distribution  through  major and mini major U.S.
studios,  and plans to launch  foreign  sales at the Cannes Film  Festival  this
year. If we do not sign an agreement with a studio, we will actively promote the
movie to major cable companies and video distributors.

The Company has entered into a distribution agreement with Westar Entertainment,
Inc.  ("Westar")  on January 1, 1998  pursuant  to which this firm  markets  the
Company's  products both  domestically  and worldwide  (see Exhibit 10.1 to this
Form  10-KSB)  (thus,  the Company will be  obligated  to  distribute  its films
exclusively through this company).  Under this agreement, the Company and Westar
Entertainment,  Inc.  will share  gross  receipts on a 50-50  basis.  Under this
agreement,  Westar has complete authority to distribute the Company's films. Any
and all  distribution  expense incurred by Westar are to be reimbursed to Westar
by the  Company.  The initial  term of this  agreement  is five years;  it is to
continue for successive one year periods thereafter,  unless cancelled by either
party on sixty days prior written notice.

Working with Westar, the Company is working toward establishing a strong network
of domestic and foreign buyers and will produce  and/or acquire motion  pictures
that meet  their  needs in terms of content  and cost.  The  Company  intends to
develop its portfolio to respond  quickly and  effectively to market needs,  and
has attended and will continue to attend the major film markets in order to stay
in touch with the dictates of the domestic and international  markets. The major
markets  include the American Film Market  ("AFM") in Santa Monica,  California,
the Cannes Film Market (Marche du Film de Cannes) in Cannes,  France,  and MIFED
("E.P. Fiera Internazionale Di Milano") in Milan, Italy.

The AFM is an  annual  one  week  event  which  takes  place  in  Santa  Monica,
California in late  February.  Distributors  of pictures and buyers of rights to
exhibit pictures from around the world meet to make deals.  Westar rents a suite
each year at the Loews Hotel  which is the focal site of the market  where there
are eight  floors of  exhibitor  suites.  Buyers come to the suite to  negotiate
purchases  of rights for  territories.  Distributors  and buyers are  registered
attendees at the Market.  There are  scheduled  screenings  of pictures at local
movie  theaters.  The annual Market is organized by the American Film  Marketing
Association.  Associated  with the  Market  are  film  finance  conferences  and
location exhibitions.

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<PAGE>
MIFED is an annual five day film Market that takes place in Milan,  Italy at the
beginning of October. The venue is the Fiera di Milano (Milan Convention Center)
and operates  under the same  aforementioned  system as the American Film Market
except that films are viewed in screening rooms and theatres  located within the
Fiera di  Milano  itself.  Buyers  and  Distributors  do not  have to leave  the
convention center.

The  Company   has   acquired   the   worldwide   distribution   rights  to  the
action/adventure  films Beretta's Island and Double Cross through a distribution
agreement dated September 2, 1997, with Franco Columbu,  an officer and director
of the Company (this agreement also covered another film to be called Assault of
the Lost  Goddess,  which  was not  produced)  (see  Exhibit  10.2 to this  Form
10-KSB).  The Company paid the sum of $75,000 for the rights to Beretta's Island
and  $150,000  for the  rights to Double  Cross;  the  gross  receipts  from the
distribution  from each film are to be shared  equally.  Under the terms of this
agreement,  the Company has a right of first refusal for a term of five years to
meet any bona fide offer to produce,  finance, or develop any film project which
Mr. Columbu is developing as a producer.  Also, the Company has the right to use
Mr.  Columbu's name and likeness in connection  with the  distribution  of these
films.

In addition, the Company has entered into a distribution agreement dated January
30, 1997 with Pinoy Productions, Inc. covering the martial arts film The Process
(Arthur Birzneck,  an officer and director of the Company,  is also President of
that company)  (see Exhibit 10.3 to this Form 10-KSB).  The Company paid the sum
of $100,000 for the rights to The Process;  the gross  receipts are to be shared
as follows:  (a) on gross receipts to $250,000 U.S.: 100% to the Company; (b) on
gross receipts  between  $250,000 U./S. and $1,000,000  U.S.: 75% to the Company
and 25% to the  licensor;  (c) on gross  receipts  between  $1,000,000  U.S. and
$2,500,000  U.S.:  80% to the Company and 20% to the licensor;  and (d) on gross
receipts  above  $2,500,000  U.S.:  85% to the Company and 15% to the  licensor.
Under this agreement,  which has an initial term of fifty years, the Company has
the right to deduct from gross receipts all reasonable  expenses incurred in the
distribution  of these films.  This  distribution  agreement is exclusive to the
Company and has no limitation on the territory.

Beretta's  Island stars Franco  Columbu (MR.  OLYMPIA) and Ken Kercheval  with a
special appearance by Arnold Schwarzenergger. Double Cross stars Franco Columbu,
William Smith (Conan),  Frank Stallone and Barbara Niven.  The Process stars and
is directed by Ernie Reyes,  Jr. (Red Sonja,  Ninja  Turtles I & II), Cori Nemec
(Drop Zone) and Ernie Reyes, Sr. (Surf Ninjas). Under the agreement with Westar,
the rights  obtained by the  Company to these three films have been  assigned to
Westar for distribution.

To  date,  Westar  has,  in  the  ordinary  course  of  business,  entered  into
distribution agreements covering the films noted above, as follows:

Title             Rights                    Territory          Licensee
-----             ------                    ---------          --------
Beretta's Isl.    TH,V,TV                    Baltics           Taiments
Beretta's Isl.    V                          Benelux           TRS
Beretta's Isl.    HV, TV                     Brazil            Mystic Ent.
Beretta's Isl.    ALL                        Bulgaria          Tandem Video
Beretta's Isl.    V                          China             NATV
Beretta's Isl.    ALL                        C.I.S.            Paradise/MGN
Beretta's Isl.    V                          Germany           VCL
Beretta's Isl.    TH,V,TV                    Greece            CineNet
Beretta's Isl.    TV                         Indonesia         Indo-American
Beretta's Isl.    TH,V,TV                    Japan             Shochiku Co.
Beretta's Isl.    TV                         Korea             William Cooke
Beretta's Isl.    V                          Korea             William Cooke
Beretta's Isl.    TH,V,TV                    Malaysia          Award Gallery
Beretta's Isl.    V/TV                       Middle east       HABIB
Beretta's Isl.    TH, H                      Pakistan          Kamal
Beretta's Isl.    TH,V                       Panama            King Trading
Beretta's Isl.    All                        Spain             Sogedesa/Filmax
Beretta's Isl.    V/TV                       Taiwan            Mystic Ent.
Beretta's Isl.    ALL                        Taiwan            Ta Lai
Beretta's Isl.    V                          Thailand          New World/Star
Beretta's Isl.    TV                         Turkey            Piano
Beretta's Isl.    V,TV                       Turkey            Saran
Beretta's Isl.    V                          U.A.E.            Music Box

                                       4
<PAGE>
Double Cross      TH,V,TV                    Baltics           Taiments
Double Cross      V                          China             NATV
Double Cross      ALL                        C.I.S.            Paradise/MGN
Double Cross      TH,V,TV                    Greece            CineNet
Double Cross      V                          Korea             TTL Korea
Double Cross      TH,V,TV                    Malaysia          Award Gallery
Double Cross      TV                         Mexico            Romari
Double Cross      V,TV                       Middle east       HABIB
Double Cross      TH,H                       Pakistan          Kamal
Double Cross      TH,V                       Panama            King Trading
Double Cross      ALL                        Taiwan            Ta Lai
Double Cross      TH,V,TV                    Turkey            Piano
Double Cross      V                          U.A.E.            Music Box
Double Cross      All                        Spain             Sogedesa/Filmax
Double Cross      V                          Thailand          Crystal Disc
Process           ALL                        Baltics           Taiments
Process           V,DVD,TV                   Brazil            Penta Video
Process           V,TV                       Brazil            Preview
Process           V                          China             NATV
Process           ALL                        C.I.S.            Paradise/MGN
Process           ALL                        C.I.S.            Arpenium
Process           V, TV                      Czech/Slovak      Indigo Film
Process           V                          France            La Petite Reine
Process           TH,V,TV                    Greece            CineNet
Process           All                        Indonesia         PT Menara
Process           V,TV                       Korea             CineTank
Process           All                        Malaysia          Award Gallery
Process           FTV                        Mexico            Romari
Process           V/TV                       Middle east       HABIB
Process           TH, H                      Pakistan          Kamal
Process           TH, V                      Panama            King Trading
Process            TH,V,TV                   Singapore         CineStar
Process           TH/V/TV                    Taiwan            Kings
Process           ALL                        Thailand          New World/Star
Process           TH,V,TV                    Turkey            Piano
Process           V                          U.A.E.            Music Box
Process           All                        U.S.              Mercury
Process           V                          Vietnam           New World/Star
Process           All                        Spain             Sogedesa/Filmax

V = Home Video
TV = Free TV/Pay
TV TH = Theatrical
DVD = Digital
Video Disc H = Hotel

                                       5
<PAGE>
The licensee from each of the countries  listed have licensed  various rights to
the films for 5 year terms.  During this term, these licensees have the right to
exploit  any of the rights  that they have  purchased  within  their  respective
territory.  Upon  receipt  of  payment,  the  licensee  receives a Betacam SP or
Digibeta  tape  version  of the film  and film  trailer.  This  satisfies  their
requirements for Television,  Home Video, and Hotel releases.  While most of the
films have been released on Home Video and Television,  it is impossible for the
Company to track the release within a given territory as Westar is not currently
participating  in any revenue  sharing or tracking  agreements  with the various
licensees.  If a  licensee  wishes to release a film  theatrically,  a 35mm film
print must be released by Westar to that licensee.  To date,  there have been no
known  theatrical  releases  of any of the film  products as no  licensees  have
purchased 35mm film prints from the Company.

Even though  Westar  anticipates  that such  distributions  will result in gross
receipts being generated during the current calendar year, such receipts,  under
the Westar agreement,  must first be applied to expenses incurred by Westar with
respect  to  trailers,  art work,  promotional  materials,  delivery  materials,
advertising,  and any and all other expenses  incurred for the sales,  marketing
and  distribution  of these  films.  Therefore,  the Company may not realize any
revenue  from these  distributions.  Although  the  Company  is, at the  moment,
focused on the production, co-production and acquisition of low to medium budget
action films, it is also within its mandate to branch out into similar genres of
television  programming as well as documentaries and docudramas within budgetary
constraints.  Longer-range  projects  include the  acquisition of a movie studio
project in Sardinia,  Italy,  the formation or  acquisition  of a domestic video
label,  and  acquisition of a music  division.  However,  such projects are only
possibilities  and may not be realized.  The Company does not currently have any
agreements, commitments, or understandings to make any acquisitions.

(a) THE MOTION PICTURE INDUSTRY.

     The motion  picture  industry is divided into two segments:  the financing,
developing  and  production  of feature films and the  marketing,  promotion and
distribution of completed motion pictures through a variety of mediums.

     Historically,  the largest companies,  known as "Majors" and "mini-Majors,"
have  dominated the motion picture  industry by both producing and  distributing
feature films, which generate significant box office receipts. However, over the
past decade  smaller film  production and  distribution  companies like Eclipse,
known as  "Independents,"  have played increasing roles in filling the worldwide
demand for filmed entertainment products.

     The "Majors" and  "mini-Majors"  such as Universal  Pictures,  Warner Bros.
Pictures,  Metro-Goldwyn-Mayer,  Inc.,  Twentieth  Century Fox Film Corporation,
Paramount Pictures Corporation,  Sony Pictures  Entertainment  (Columbia/TriStar
Pictures) and The Walt Disney Company (Buena Vista Pictures, Touchstone Pictures
and Hollywood  Pictures)  usually own their own  production  studios  (including
lots,  sound stages and  post-production  facilities),  and have  nationwide and
worldwide distribution organizations.  These companies normally release pictures
with direct production costs ranging from $25,000,000 to $75,000,000 and provide
a continual  source of pictures to film  exhibitors.  Many of the "Majors"  have
divisions,  which are promoted as "Independent" distributors of motion pictures.
These  "Independent"  include  Miramax  Films (a  division  of The  Walt  Disney
Company),  Sony  Classics  (a  division of Sony  Pictures),  The Samuel  Goldwyn

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Company (a  division  of  Metro-Goldwyn  -Mayer),  October  Films (a division of
Universal Pictures),  New Line (a division of Time Warner) and Republic Pictures
(a  division  of  Viacom).   These   "Independents"   engage  primarily  in  the
distribution of motion pictures produced by companies other than the "Majors".

ANCIENT WARRIORS,  THE PROCESS,  BERETTA'S  ISLAND,  and DOUBLE CROSS are termed
"Independent  feature films". This means that these movies were produced without
the initial backing of a "Major" studio.  During the past decade  "Independents"
enjoyed cash support from "Major" studios.  With the resurgence of "Independent"
filmmaking,  small production  companies are gearing up again and  "Independent"
distributors are returning to the market.

     The  motion  picture  industry  recently   completed  its  second  straight
record-breaking  year both in the US and  overseas.  2001 was a record  breaking
year with Domestic box office receipts of $8.132 billion, an increase of 9% from
2000. In 2000,  U.S.  gross income from ticket sales  totaled $7.5  billion;  up
slightly from 1999 (AC NIELSEN EDI, INC).

     2001 was a good year for smaller films as the independent feature "Memento"
led the way with domestic box office  receipts of $29 million  (VARIETY).  Other
low budget  features over the last few years such as "American  Beauty",  "Being
John Malkovich", "The Blair Witch Project", and "Boys Don't Cry" have left their
mark both at the box office and at the Academy Awards.

     This strong  performance  has been felt at all levels of the film industry,
especially at this year's upcoming American Film Market ("AFM") in Santa Monica,
California.  "The record  number of films at this  year's AFM is clear  evidence
that the independent motion picture and television industry is poised for a very
healthy year," said Jonathan Wolf,  managing  director of the AFM and exec VP of
the American Film Marketing Assn (VARIETY, JANUARY 21, 2002).

(b) MOTION PICTURE PRODUCTION AND FINANCING.

     The production of a motion picture requires the financing of the direct and
indirect  overhead costs of  production.  Direct  production  costs include film
studio rental,  cinematography,  post-production  costs and the  compensation of
creative  and  other   production   personnel.   Indirect  costs  are  those  of
distribution,  which include costs of promotion,  marketing and  advertising and
production costs of the release prints.

     The  "Majors"  generally  have  sufficient  cash  flow from  their  various
operations to pay for production costs. Their physical facilities are maintained
on an ongoing basis and they often enter into contracts with writers,  producers
and other creative personnel for multiple projects or for fixed periods of time.

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     "Independents"  generally  avoid  incurring  substantial  overhead costs by
hiring creative and other production  personnel and retaining the other elements
required  for   pre-production,   principal   photography  and   post-production
activities   only  on  a   project-by-project   basis.   Unlike  the   "Majors,"
"Independents"  typically  finance  their  production  activities  from  various
sources,  including bank loans, equity offerings, joint ventures and "pre-sales"
of the project in question.  Independents  generally  attempt to complete  their
financing of a motion  picture  production  prior to  commencement  of principal
photography,  at which point  substantial  production costs begin to be incurred
and require payment.

     Both  "Majors"  and  "Independents"   often  acquire  motion  pictures  for
distribution  through an  arrangement  known as a "negative  pickup" under which
they agree to acquire  from another  production  company some or all rights to a
film upon its completion.  The  "Independent"  often finances  production of the
motion picture  pursuant to financing  arrangements  with banks or other lenders
wherein  the  lender  obtains  a  security  interest  in  the  film  and  in the
Independent's  rights under its  distribution  arrangement.  When the "Major" or
"Independent" "picks up" the completed motion picture, it may assume some or all
of the production financing  indebtedness  incurred by the production company in
connection with the film. In addition,  the "Independent" producer is often paid
a production fee and is granted a participation in the profits from distribution
of the motion picture.

     Both "Majors" and "Independents" often grant third-party  participations in
connection   with  the   distribution   and  production  of  a  motion  picture.
Participations  are  contractual  rights of  actors,  directors,  screenwriters,
producers,  owners  of rights  and other  creative  and  financial  contributors
entitling  them to share in revenues  or profits  (as defined in the  respective
agreements) from a particular  motion picture.  Except for the most sought-after
talent, participations are generally payable only after the producer recoups all
its expenses.

(c) MOTION PICTURE DISTRIBUTION.

     Distribution  of a motion picture  involves the domestic and  international
licensing of the picture for (i) theatrical  exhibition,  (ii) home video, (iii)
presentation on television, including pay-per-view, video-on-demand, satellites,
pay cable, network, basic cable and syndication, (iv) non-theatrical exhibition,
which includes  airlines,  hotels,  armed forces  facilities and schools and (v)
marketing of the other rights in the picture,  which may include books, CD-ROMs,
merchandise and soundtrack recordings.

     THEATRICAL  DISTRIBUTION  AND  EXHIBITION.   Motion  pictures  are  usually
exhibited  first  in  theatres  open to the  public  where an  admission  fee is
charged.  Theatrical  distribution  involves the  manufacture of release prints;
licensing of motion  pictures to  theatrical  exhibitors;  and  promotion of the
motion picture through marketing and advertising campaigns. The size and success
of the promotional and advertising  campaign will materially affect the revenues
realized  from its  theatrical  release,  generally  referred  to as "box office
gross."

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<PAGE>
     DVD/HOME  VIDEO.  The DVD/Home  video  distribution  business  involves the
promotion and sale of DVD's and  videocassettes  to video  retailers  (including
video specialty stores,  convenience  stores,  record stores and other outlets),
which then rent or sell the DVD's and  videocassettes  to consumers  for private
viewing.  The DVD/home video  marketplace now generates  total revenues  greater
than the domestic theatrical exhibition market.

     PAY-PER-VIEW.  Pay-per-view  television allows cable television subscribers
to purchase  individual  programs,  such as recently released  theatrical motion
pictures,  sporting events and music concerts,  on a "per use" basis.  The fee a
subscriber is charged is typically split among the program distributor, the pay-
per-view operator and the cable operator.

     PAY CABLE.  The  domestic  pay cable  industry  (as it  pertains  to motion
pictures)  currently  consists  primarily  of  HBO/Cinemax,  Showtime/The  Movie
Channel,  Encore/Starz and a number of regional pay services. Pay cable services
are sold to cable system operators for a monthly license fee based on the number
of subscribers receiving the service. Cable system operators in turn offer these
pay programming  services to subscribers for a monthly subscription fee. The pay
television  networks  generally acquire their film programming by purchasing the
distribution rights from motion picture distributors.

     NON-THEATRICAL  MARKETS.  In addition to the  distribution  media described
above,  a number of  sources of revenue  exist for motion  picture  distribution
through the  exploitation  of other  rights,  including  the right to distribute
films to airlines,  schools,  libraries,  hotels,  armed forces  facilities  and
hospitals.  Film companies are now exploring the viability of distributing films
through secure on-line platforms.

     INTERNATIONAL  MARKETS.  The  worldwide  demand  for  motion  pictures  has
expanded  significantly  as evidenced by the  development  of new  international
markets and media. This growth is primarily driven by the overseas privatization
of television  stations,  introduction of direct broadcast  satellite  services,
growth of DVD/Home video and increased cable penetration.

(d) MOTION PICTURE ACQUISITION.

     In addition to its own production activities,  Eclipse continually seeks to
acquire  the  rights  to films  and  other  programming  from  Independent  film
producers,  distribution companies and others in order to maximize the number of
films it can  distribute  through  its  emerging  new  delivery  systems.  To be
successful,  Eclipse must locate and track the  development  and  production  of
numerous independent feature films at any given time.

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<PAGE>
     TYPES OF MOTION PICTURES  ACQUIRED.  Eclipse  generally seeks to produce or
acquire motion pictures of the action and  action/adventure  genres,  which will
individually  appeal to a targeted  audience.  Eclipse will be very selective in
acquiring  higher budget (over  $10,000,000)  films because of the interest that
the "Majors" have shown in acquiring such films, and the associated  competition
and higher production advances, minimum guarantees and other costs. Eclipse will
acquire  projects  when it  believes  it can  limit its  financial  risk on such
projects through,  significant presales, and when it believes that a project has
significant marketability. In most cases, Eclipse will attempt to acquire rights
to motion  pictures with a  recognizable  "marquis  name"  personality,  thereby
enhancing the promotion of the motion picture in the home video or international
markets.  Eclipse  believes  that this  approach  increases  the  likelihood  of
acquiring  a product  capable of  generating  positive  cash flow and  ancillary
rights income.

     METHODS  OF  ACQUISITION.  Eclipse  typically  acquires  films on  either a
"pick-up" basis or a "pre-buy"  basis. The "pick-up" basis refers to those films
in which the Company acquires  distribution rights following  completion of most
or all of the production and post-production process. These films will generally
be acquired  after the Eclipse  management  team has viewed the film to evaluate
its commercial  viability.  The "pre-buy" basis refers to films in which Eclipse
will acquire distribution rights prior to completion of a substantial portion of
production and post-production.  Management's  willingness to acquire films on a
pre-buy basis is based upon certain factors  including,  but not limited to, the
track  record  and  reputation  of  the  picture's  producer,  the  quality  and
commercial  value of the  screenplay,  the  "package"  elements of the  picture,
including the director and principal cast members, the budget of the picture and
the genre of the picture.  Before making an offer to acquire certain rights to a
film on a pre-buy basis, Eclipse may work with the producer to modify certain of
these elements.  Once the  modifications  are considered  acceptable,  Eclipse's
obligation to accept  delivery and make payment will be contingent  upon receipt
of a finished film conforming to the script and other specifications  considered
important to Eclipse.

     SOURCES OF DISTRIBUTION RIGHTS. Typically,  projects are submitted directly
to Eclipse for  consideration.  Eclipse relies upon the personal contacts of its
senior  officers,  which have been  developed  through their prior  business and
personal dealings with Majors,  other Independents,  legal and accounting firms,
business  management  firms,  talent agencies,  production  lenders and personal
managers who are actively involved in the production community.

     FILM LIBRARY.  Eclipse's  distribution rights, which may include worldwide,
foreign,  or domestic  rights,  will generally  range from an initial  licensing
cycle of 5 to 21 years, to perpetuity.

(e) FEATURE FILM PRODUCTION.

     Eclipse  intends  to produce  three or more low budget  films each year and
intends  to  retain   distribution   rights  for   licensing  to  third  parties
internationally.    Third   parties   generally   distribute   Eclipse's   films
domestically.  In unique  circumstances,  Eclipse may undertake limited domestic
distribution or co-distribution activities.

                                       10
<PAGE>
     Eclipse's  feature film strategy  generally  will be to develop and produce
feature  films when the  production  budgets  for the films are  expected  to be
substantially  covered through a combination of pre-sales,  output arrangements,
equity arrangements and production loans with "gap" financing.  To further limit
Eclipse's  financing  risk or to obtain  production  loans,  Eclipse  intends to
purchase completion bonds to guarantee the completion of production.

ADDITIONAL INFORMATION

We are subject to the informational  requirements of the Securities Exchange Act
of 1934 (the "Exchange  Act") and, in accordance  therewith,  will file reports,
proxy statements and other information with the Commission.  Such reports, proxy
statements and other information may be inspected at public reference facilities
of the Commission at Judiciary  Plaza,  450 Fifth Street N.W.,  Washington  D.C.
20549;  Northwest Atrium Center, 500 West Madison Street,  Suite 1400,  Chicago,
Illinois  60661;  7 World Trade  Center,  New York,  New York,  10048;  and 5670
Wilshire Boulevard,  Los Angeles,  California 90036. Copies of such material can
be obtained  from the Public  Reference  Section of the  Commission at Judiciary
Plaza, 450 Fifth Street N.W.,  Washington,  D.C. 20549 at prescribed  rates. For
further  information,  the SEC maintains a website that contains reports,  proxy
and information statements,  and other information regarding reporting companies
at (http://www.sec.gov).

                                 BUSINESS RISKS

ONLY LIMITED PRIOR OPERATIONS.

The Company has only limited operations and is subject to all the risks inherent
in the creation of a new business.  Since the Company's principal  activities to
date have been limited to organizational activities and prospect development, it
has no record of any revenue-producing operations. Consequently, there is only a
limited operating history upon which to base an assumption that the Company will
be able to achieve its business plans. In addition, the Company has only limited
assets.  As a result,  there can be no assurance  that the Company will generate
significant  revenues  in the  future;  and there can be no  assurance  that the
Company will operate at a profitable  level.  If the Company is unable to obtain
customers and generate  sufficient  revenues so that it can profitably  operate,
the Company's business will not succeed.

NEED FOR ADDITIONAL FINANCING MAY AFFECT OPERATIONS.

Current  funds  available  to the  Company  will  not be  adequate  for it to be
competitive in the areas in which it intends to operate.  Therefore, the Company
will need to raise  additional  funds in order to fully  implement  its business
plan. The Company will attempt to raise  approximately  $2 million in additional
funds  over the next 12  months  through  private  placements  and  through  the

                                       11
<PAGE>
issuance of  convertible  bonds in the German market.  However,  there can be no
assurance that the Company will be successful in raising such additional  funds.
Regardless of whether the  Company's  cash assets prove to be inadequate to meet
the Company's  operational needs, the Company might seek to compensate providers
of services by issuance of stock in lieu of cash.

The Company's  continued  operations  therefore  will depend upon its ability to
raise additional funds through bank borrowings,  equity or debt financing. There
is no assurance that the Company will be able to obtain additional  funding when
needed, or that such funding, if available,  can be obtained on terms acceptable
to the Company.  If the Company cannot obtain needed funds,  it may be forced to
curtail or cease its activities.

If additional  shares are issued to obtain financing,  current  shareholders may
suffer a dilutive effect on their percentage of stock ownership in the Company.

A large portion of the Company's financing to date has been through the issuance
of shares or through equity  financing with share based  collateral.  Though the
Company  hopes  to be  self  sufficient  in one to two  years,  there  can be no
assurances.  Therefore,  the Company may continue to issue shares to further the
business, and existing shareholders may suffer a dilutive effect on the price of
their  shares as well as a loss of voting  power in the  Company.  Further,  the
Company is the process of  completing  a bond  offering in Germany.  These bonds
contain  conversion rights which could potentially dilute the stock ownership of
the Company significantly.

RISKS IN CONNECTION WITH DISTRIBUTION OF FILMS.

The Company  typically  acquires  distribution  rights in a motion picture for a
specified term in one or more territories and media. In some circumstances,  the
Company also acquires the copyright to the motion picture.  The arrangements the
Company enters into to acquire rights may include the Company agreeing to pay an
advance or minimum  guarantee for the rights acquired and/or agreeing to advance
print and  advertising  costs,  obligations  which are independent of the actual
financial  performance  of the  motion  picture  being  distributed.  The  risks
incurred by the Company  dramatically  increase to the extent the Company  takes
such actions.

The Company also incurs significant risk to the extent it engages in development
or  production  activities  itself.  The Company may, in certain  circumstances,
reduce some of the foregoing risks by sub-licensing  certain distribution rights
in  exchange  for  minimum   guarantees  from   sub-licensees  such  as  foreign
sub-distributors. The investment by the Company in a motion picture includes the
cost of acquisition of the distribution rights (including any advance or minimum
guarantee paid to the producer),  the amount of the production financed, and the
marketing and distribution costs borne.

SUBSTANTIAL COMPETITION.

The Company may experience substantial  competition in its efforts to locate and
attract  customers  for its products.  Many  competitors  in the motion  picture
industry have greater experience,  resources,  and managerial  capabilities than
the Company and may be in a better position than the Company to obtain access to
attractive products.  There are a number of larger companies which will directly
compete with the Company.  Such competition could have a material adverse effect
on the Company's profitability or viability.

                                       12
<PAGE>
OTHER EXTERNAL FACTORS MAY AFFECT VIABILITY OF COMPANY.

The motion  picture  industry in general is a  speculative  venture  necessarily
involving some substantial  risk. There is no certainty that the expenditures to
be made by the Company  will result in  commercially  profitable  business.  The
marketability  of its products will be affected by numerous  factors  beyond the
control of the Company.  These  factors  include  market  fluctuations,  and the
general  state of the  economy  (including  the  rate of  inflation,  and  local
economic conditions),  which can affect peoples' discretionary spending. Factors
which leave less money in the hands of  potential  customers of the Company will
likely have an adverse effect on the Company.  The exact effect of these factors
cannot be accurately predicted,  but the combination of these factors may result
in the Company not receiving an adequate return on invested capital.

CONTROL OF THE COMPANY BY OFFICERS AND DIRECTORS OVER AFFAIRS OF THE COMPANY.

The Company's officers and directors  beneficially own approximately 24.81% (see
"Security  Ownership  of  Certain  Beneficial  Owners  and  Management")  of the
outstanding  shares of the Company's  common stock.  As a result,  such persons,
acting  together,  have the ability to exercise  significant  influence over all
matters requiring stockholder approval.  Accordingly,  it could be difficult for
the investors  hereunder to effectuate  control over the affairs of the Company.
Therefore,  it should be assumed that the  officers,  directors,  and  principal
common  shareholders  who control these voting rights will be able, by virtue of
their stock holdings, to control the affairs and policies of the Company.

SUCCESS OF COMPANY DEPENDENT ON MANAGEMENT.

The  Company's  success  is  dependent  upon the  hiring  and  retention  of key
personnel.   None  of  the  officers  or  directors   has  any   employment   or
non-competition agreement with the Company. Therefore, there can be no assurance
that these  personnel will remain  employed by the Company.  Should any of these
individuals  cease to be  affiliated  with the  Company  for any  reason  before
qualified  replacements  could be found, there could be material adverse effects
on the Company's business and prospects.

In addition, all decisions with respect to the management of the Company will be
made  exclusively  by the officers and directors of the Company.  Investors will
only have rights  associated  with minority  ownership  interest  rights to make
decision  which  effect the  Company.  The  success of the  Company,  to a large
extent, will depend on the quality of the directors and officers of the Company.
Accordingly,  no person  should  invest in the  Shares  unless he is  willing to
entrust  all  aspects  of the  management  of the  Company to the  officers  and
directors.

CONFLICTS OF INTEREST MAY AFFECT INDEPENDENCE OF OFFICERS AND DIRECTORS.

The  officers  and  directors  have other  interests  to which they devote time,
either individually or through  partnerships and corporations in which they have
an  interest,  hold an office,  or serve on boards of  directors,  and each will
continue to do so notwithstanding the fact that management time may be necessary
to the business of the Company.  As a result,  certain conflicts of interest may
exist  between the Company and its officers  and/or  directors  which may not be
susceptible to resolution.

In  addition,  conflicts  of  interest  may  arise  in  the  area  of  corporate
opportunities which cannot be resolved through arm's length negotiations. All of
the potential  conflicts of interest  will be resolved only through  exercise by
the directors of such judgment as is consistent with their  fiduciary  duties to
the Company. It is the intention of management,  so as to minimize any potential
conflicts  of  interest,  to  present  first to the  Board of  Directors  to the
Company, any proposed investments for its evaluation.

                                       13
<PAGE>
LIMITATIONS  ON LIABILITY,  AND  INDEMNIFICATION,  OF DIRECTORS AND OFFICERS MAY
RESULT IN EXPENDITURES BY THE COMPANY.

The Company's Articles of Incorporation include provisions to eliminate,  to the
fullest extent  permitted by the Nevada Revised  Statutes as in effect from time
to time, the personal liability of directors of the Company for monetary damages
arising from a breach of their fiduciary duties as directors. The By-Laws of the
Company  include  provisions  to the effect that the Company may, to the maximum
extent permitted from time to time under applicable law, indemnify any director,
officer, or employee to the extent that such  indemnification and advancement of
expense is  permitted  under such law, as it may from time to time be in effect.
Any  limitation  on  the  liability  of  any  director,  or  indemnification  of
directors, officer, or employees, could result in substantial expenditures being
made by the Company in covering any liability of such persons or in indemnifying
them.

ABSENCE OF CASH DIVIDENDS.

The Board of Directors does not  anticipate  paying cash dividends on the common
stock for the  foreseeable  future and intends to retain any future  earnings to
finance the growth of the Company's business. Payment of dividends, if any, will
depend,  among other factors, on earnings,  capital requirements and the general
operating and financial  conditions of the Company as well as legal  limitations
on the payment of dividends out of paid-in capital.

NO CUMULATIVE VOTING.

Holders  of the  shares of  common  stock of the  Company  are not  entitled  to
accumulate their votes for the election of directors or otherwise.  Accordingly,
the  holders of a majority  of the shares  present at a meeting of  shareholders
will be able to elect all of the  directors  of the  Company,  and the  minority
shareholders  will not be able to elect a representative  to the Company's board
of directors.

NO ASSURANCE OF CONTINUED PUBLIC TRADING MARKET; RISK OF LOW PRICED SECURITIES.

Since June 27, 1997,  there has been only a limited public market for the common
stock of the Company.  The common stock of the Company is quoted on the Over the
Counter  Bulletin  Board.  As a result,  an investor  may find it  difficult  to
dispose  of, or to obtain  accurate  quotations  as to the  market  value of the
Company's securities. In addition, the common stock is subject to the low-priced
security or so called "penny stock" rules that impose  additional sales practice
requirements  on  broker-dealers  who  sell  such  securities.   The  Securities
Enforcement  and  Penny  Stock  Reform  Act  of  1990  ("Reform  Act")  requires
additional disclosure in connection with any trades involving a stock defined as
a penny stock (generally,  according to recent  regulations  adopted by the U.S.
Securities and Exchange Commission,  any equity security that has a market price
of less than $5.00 per share,  subject to  certain  exceptions),  including  the
delivery,  prior  to any  penny  stock  transaction,  of a  disclosure  schedule
explaining  the penny  stock  market  and the risks  associated  therewith.  The
regulations governing low- priced or penny stocks sometimes limit the ability of
broker-  dealers to sell the Company's  common stock and thus,  ultimately,  the
ability of the investors to sell their securities in the secondary market.

                                       14
<PAGE>
EFFECTS OF FAILURE TO MAINTAIN MARKET MAKERS.

If the  Company  is unable to  maintain  a National  Association  of  Securities
Dealers,  Inc.  member  broker/dealers  as market  makers,  the liquidity of the
common stock could be impaired, not only in the number of shares of common stock
which could be bought and sold, but also through  possible  delays in the timing
of  transactions,  and lower  prices for the common  stock than might  otherwise
prevail.  Furthermore,  the lack of market  makers could result in persons being
unable to buy or sell shares of the common stock on any secondary market.  There
can be no assurance the Company will be able to maintain such market makers.

ITEM 2. DESCRIPTION OF PROPERTY

The Company  currently rents its offices under a month to month lease for $2,500
per month from Franco Columbu, Chairman of the Board and Chief Executive Officer
of the Company.  The Company has approximately  $5,000 worth of office furniture
and equipment at this location.

ITEM 3. LEGAL PROCEEDINGS

The Company is not presently a party to any litigation,  nor to the knowledge of
management  is any  litigation  threatened  against  the  Company,  which  would
materially affect the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders,  through the solicitation
of proxies or  otherwise,  during  the fourth  quarter of our fiscal  year ended
December 31, 2001.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock is traded in the over-the-counter securities market through the
National  Association of Securities  Dealers Automated  Quotation Bulletin Board
System,  under the symbol "ECLE".  The following  table sets forth the quarterly
high and low bid prices for our Common  Stock as  reported  by the Pink  Sheets,
LLC.  The  quotations  reflect  inter-dealer  prices,  without  retail  mark-up,
markdown or commission, and may not necessarily represent actual transactions.

                                       15
<PAGE>
                                  Closing Ask            Closing Bid
                                  -----------            -----------
Date                              High    Low            High    Low
----                              ----    ---            ----    ---

2001

Jan 2 thru
Mar 30                           .21875   .14           .15625   .125

Apr 2 thru
June 29                          .60      .143          .58      .125

July 2 thru
Sept 28                          .30      .10           .25      .07

Oct 1 thru
Dec 31                           .25      .11           .23      .08

As of March 5,  2002,  we had  approximately  63  stockholders  of  record  (not
including  shares held by brokers or in street  name) of the  14,146,821  shares
outstanding. We have never declared or paid dividends on our Common Stock.

We intend to follow a policy of  retaining  earnings,  if any,  to  finance  the
growth of the business and do not  anticipate  paying any cash  dividends in the
foreseeable  future.  The  declaration  and payment of future  dividends  on the
Common  Stock will be the sole  discretion  of the Board of  Directors  and will
depend on our  profitability  and  financial  condition,  capital  requirements,
statutory  and  contractual  restrictions,  future  prospects  and other factors
deemed relevant.

SALES OF UNREGISTERED SHARES

In October of 2001,  the  Company  issued  10,000  shares of common  stock to an
individual  in error.  The Company has since placed a stop on the 10,000  shares
issued.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This report contains  forward-looking  statements  within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results and events could differ materially from those projected,
anticipated,  or implicit, in the forward-looking  statements as a result of the
risk factors set forth below and elsewhere in this report. With the exception of
historical matters,  the matters discussed herein are forward looking statements
that involve risks and uncertainties.  Forward looking statements  include,  but
are not limited to, statements concerning anticipated trends in revenues and net

                                       16
<PAGE>
income,  the date of  introduction  or completion  of our products,  projections
concerning  operations  and available cash flow. Our actual results could differ
materially from the results discussed in such  forward-looking  statements.  The
following discussion of our financial condition and results of operations should
be read in  conjunction  with our  financial  statements  and the related  notes
thereto appearing elsewhere herein.

BUSINESS STRATEGY

     The overall  strategic plan for Eclipse is to generate  sufficient  profits
from the distribution of medium budget feature films to finance future films, to
develop its domestic video label, record label and motion picture studio.  These
films will be produced  and/or  acquired by Eclipse for worldwide  distribution.
Simultaneous  with the  operation  of these  facilities  Eclipse will expand its
Eclipse distribution arm to penetrate the entire entertainment industry. Eclipse
plans to create  its own sales and  marketing  department  in 2002,  which  will
lessen and  eventually  eliminate the reliance upon Westar.  Eclipse  intends to
aggressively  pursue strategic  partnerships or output deals with one or more of
the US Studios and to begin  discussions with a major German film fund to secure
funding for future film  projects.  It is the  intention of management to expand
operations  with the  present  staff until such time when  sufficient  cash flow
allows for the addition of quality entertainment industry personnel.

TWELVE MONTH PLAN OF OPERATION.

     For the period from the Registrant's  inception through the period reported
by this Form 10-KSB, there have been no revenues. Operating activities have been
related  primarily to establishing the management and operating  infrastructure,
as well as the production of the movie, Ancient Warriors. The Registrant created
the ability to acquire  and license  worldwide  or sell  distribution  rights to
independently produced feature films. The Registrant can obtain rights to motion
pictures at various stages of completion (either completed,  in production or in
development) and licenses  distribution rights (including video, pay television,
free  television,  satellite and other  ancillary  rights) of motion pictures to
various sub-distributors in the United States and in foreign markets.

     The  Registrant  has a  limited  operating  history.  The  Registrant  must
establish  and  maintain  distribution  on  current  rights to motion  pictures,
implement and successfully execute its business and marketing strategy,  provide
superior distribution of motion pictures,  anticipate and respond to competitive
developments,  and attract and retain qualified personnel. There is no assurance
that the Registrant will be successful in addressing these needs.

GENERAL AND ADMINISTRATIVE EXPENSES

General  and  administrative  expenses  consist  of  related  general  corporate
functions,  including  marketing  expenses,  professional  service  expenses and
travel. The Registrant  expects general and administrative  expenses to increase
as it commences to promote and market its motion picture distribution rights and
its recently produced motion picture, Ancient Warriors.

                                       17
<PAGE>
General and  administrative  expenses  totaled  $555,311.00  for the fiscal year
ended  December 31, 2001, as compared to  $100,460.00  for the fiscal year ended
December 31, 2000.  This  increase was due to a temporary  increase in staff and
costs  associated  with the production and promotion of Ancient  Warriors,  LLC.
This  increase  in  expenses  are to be  expected  in years where the company is
involved in the production and distribution of new films.  This amount will vary
from film to film based upon budget and location of film production.

NET LOSS

The Company incurred a net loss of $1,089,000 for the fiscal year ended December
31, 2001, as compared to net loss of $148,148 in the fiscal year ended  December
31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  current  assets  exceed its  current  liabilities  by a total of
$3,062,000 for the fiscal year ended December 31, 2001. As of December 31, 2001,
the Company had an accumulated  deficit of $1,812,222.  This raises  substantial
doubt about the Company's ability to continue as a going concern.

     Film costs represent a major  component of the  Registrant's  assets.  Film
costs  represent  those costs incurred in the  acquisition  and  distribution of
motion pictures or in the acquisition of distribution rights to motion pictures.
This  includes  minimum  guarantees  paid to  producers  or other owners of film
rights,  recoupable  distribution  and production  costs.  The  Registrant  will
amortize film costs using the individual  film forecast  method under which film
costs  are  amortized  for each  film in the ratio  that  revenue  earned in the
current period for such film bears to management's estimate of the total revenue
to be  realized  from all  media  and  markets  for such  film.  The  Registrant
currently has not generated  revenues from such film costs;  however,  the three
movies  which  the  Registrant  has  obtained  the  distribution  rights to (and
subsequently assigned to Westar under the Distribution Agreement) have commenced
distribution,  and revenue from such  distributions  is  anticipated  during the
current  fiscal year.  Net income in future years is in part  dependent upon the
Registrant's amortization of its film costs and may be significantly affected by
periodic  adjustments in such amortization.  It is the Company's hope that, with
the release of Ancient Warriors,  they will be able to effectively package these
older films with Ancient  Warriors and  increase  distribution  and sales of all
Eclipse films.

     Current  funds  available  to the Company will not be adequate for it to be
competitive in the areas in which it intends to operate.  Therefore, the Company
will need to raise  additional  funds in order to fully  implement  its business
plan. The Company will attempt to raise  approximately  $2 million in additional
funds during the next 12 months through a convertible  bond offering in Germany.

                                       18
<PAGE>
These  monies  will  be  used  for  production  of its  next  feature  film  and
acquisition of other films. However,  there can be no assurance that the Company
will be successful in raising such additional  funds.  Regardless of whether the
Company's  cash assets prove to be inadequate to meet the Company's  operational
needs, the Company might seek to compensate providers of services by issuance of
stock in lieu of cash.

GERMAN CONVERTIBLE BOND OFFERING

Eclipse  recently  filed  a  convertible  bond  offering  in  Germany  with  the
Bundesaufsichtsamt  Fur Den  Wertpapierhandel.  Eclipse is anticipating official
approval  of this  offering  for sale  very  shortly.  The  total  amount of the
offering is for 2 million  dollars U.S. with an option to expand the offering to
5  million  dollars  U.S.  Upon  approval  from the  Bundesaufsichtsamt  Fur Den
Wertpapierhandel,  the Company will begin actively  marketing these bonds to the
German public.  The bond is a 5 year note.  There are no assurances  that any of
these bonds will be sold.  If the Company  does not raise  monies  through  this
offering,  they will seek additional method of raising capital.  However, should
the Company fail to raise additional capital,  the Company's ability to continue
as a going concern would be greatly affected.

                                       19
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

                                TABLE OF CONTENTS

                                                                        PAGE NO.
                                                                        --------
Report of Independent Certified Public Accountants                        F-1

Financial Statements

     Balance Sheet                                                        F-2

     Statements of Operations                                             F-3

     Statement of Stockholders' Equity                                    F-4

     Statements of Cash Flows                                             F-5

Notes to Financial Statements                                             F-6

                                       20
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors and Stockholders
Eclipse Entertainment Group, Inc.
Culver City, California

We have audited the accompanying  balance sheet of Eclipse  Entertainment Group,
Inc.  as of  December  31,  2001,  and the  related  statements  of  operations,
stockholders'  equity and cash flows for the years ended  December  31, 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 auditing standards  generally accepted
in the United States. 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 audit  provides 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 Eclipse  Entertainment  Group,
Inc. as of December 31, 2001,  and the results of its  activities and cash flows
for the years ended  December 31, 2001 and 2000 in  conformity  with  accounting
principles generally accepted in the United States.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 11 to the
financial  statements,  the Company has  suffered  losses  from  operations  and
current  liabilities exceed current assets, all of which raise substantial doubt
about its ability to continue as a going concern.  Management's plans in regards
to these matters are also described in Note 11. The financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.


/s/ L.L. Bradford & Company, LLC

L.L. Bradford & Company, LLC
March 25, 2002
Las Vegas, Nevada

                                      F-1
<PAGE>
                        ECLIPSE ENTERTAINMENT GROUP, INC.
                                  BALANCE SHEET
                                DECEMBER 31, 2001


                                     ASSETS


Current assets
    Cash                                                            $     2,669
                                                                    -----------
      Total current assets                                                2,669

Capitalized film costs                                                3,225,733
Fixed assets, net                                                           127
Intangible asset, net                                                     8,082
Other assets                                                                800
                                                                    -----------
      Total other assets                                              3,234,742
                                                                    -----------

      Total assets                                                  $ 3,237,411
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
    Accounts payable and accrued liabilities                        $   338,955
    Due to related parties                                            1,740,628
    Convertible notes payable                                           240,000
    Notes payable                                                       745,000
                                                                    -----------
      Total current liabilities                                       3,064,583
                                                                    -----------

      Total liabilities                                               3,064,583

Stockholders' equity
    Preferred stock - $.001 par value, 10,000,000
      shares authorized, no shares issued                                    --
    Common stock - $.001 par value, 50,000,000
      shares authorized, 13,971,821 shares
      issued and outstanding                                             13,971
    Additional paid in capital                                        1,971,079
    Accumulated deficit                                              (1,812,222)
                                                                    -----------
      Total stockholders' equity                                        172,828
                                                                    -----------

      Total liabilities and stockholders' equity                    $ 3,237,411
                                                                    ===========

                 See Accompanying Notes to Financial Statements

                                       F-2
<PAGE>
                        ECLIPSE ENTERTAINMENT GROUP, INC.
                            STATEMENTS OF OPERATIONS


                                              For the Year        For the Year
                                                 Ended               Ended
                                           December 31, 2001   December 31, 2000
                                           -----------------   -----------------
Revenues                                     $         --        $         --

General and administrative expenses               555,311             100,460
                                             ------------        ------------

Loss from operations                             (555,311)           (100,460)

Other expense
  Interest expense                                180,027                  --
  Impairment on capitalized film costs            353,463              47,688
                                             ------------        ------------

Total other expenses                              533,490              47,688

Provision for income taxes                             --                  --
                                             ------------        ------------

Net loss                                     $ (1,088,801)       $   (148,148)
                                             ============        ============

Basic and diluted loss per common share      $      (0.08)       $      (0.01)
                                             ============        ============

Weighted average number of common
  shares used in per share calculation         13,958,343          12,736,451
                                             ============        ============

                 See Accompanying Notes to Financial Statements

                                       F-3
<PAGE>
                        ECLIPSE ENTERTAINMENT GROUP, INC.
                        STATEMENT OF STOCKHOLDERS' EQUITY
                   FOR THE YEARS ENDED DECEMBER 2001 AND 2000


<TABLE>
<CAPTION>
                                              Common Stock
                                        -------------------------   Additional                     Total
                                          Number                      Paid-In     Accumulated   Stockholders'
                                         of Shares      Amount        Capital       Deficit        Equity
                                        -----------   -----------   -----------   -----------    -----------
<S>                                     <C>           <C>           <C>           <C>            <C>
Balance at January 1, 2000               12,016,140        12,016     1,414,329      (575,273)       851,072

Issuance of common stock, $0.30
  price per share                           700,000           700       209,300            --        210,000

Issuance of common stock for
  services, $0.30 price per share            42,501            42        12,708            --         12,750

Net loss                                         --            --            --      (148,148)      (148,148)
                                        -----------   -----------   -----------   -----------    -----------

Balance at December 31, 2000             12,758,641   $    12,758   $ 1,636,337   $  (723,421)   $   925,674

Issuance of common stock for
  services, $0.81 price per share           100,000           100        81,150            --         81,250

Issuance of common stock for
  stock subscription payable,               167,000           167        49,833            --         50,000
  $.30 price per share

Issuance of common stock for
  services, $0.50 price per share            24,000            24        11,976            --         12,000

Deemed interest expense related to
  conversion features of note payable            --            --        41,700            --         41,700

Issuance of common stock for
  services, $0.31 price per share           190,000           190        58,710            --         58,900

Issuance of common stock for
  services, $0.20 price per share            40,000            40         7,960            --          8,000

Issuance of common stock for
  interest on a promissory note,
  $0.12 price per share                     200,000           200        23,800            --         24,000

Issuance of common stock for
  services, $0.14 price per share            62,180            62         8,643            --          8,705

Issuance of common stock for
  services, $0.12 price per share            20,000            20         2,380            --          2,400

Issuance of common stock for
  services, $0.10 price per share            10,000            10           990            --          1,000

Issuance of common stock for
  interest, $0.12 price per share           200,000           200        23,800            --         24,000

Issuance of common stock for
  interest, $0.12 price per share           200,000           200        23,800            --         24,000

Net loss                                         --            --            --    (1,088,801)    (1,088,801)
                                        -----------   -----------   -----------   -----------    -----------

Balance at December 31, 2001             13,971,821   $    13,971   $ 1,971,079   $(1,812,222)   $   172,828
                                        ===========   ===========   ===========   ===========    ===========
</TABLE>

                 See Accompanying Notes to Financial Statements

                                       F-4
<PAGE>
                        ECLIPSE ENTERTAINMENT GROUP, INC.
                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                              For the Year        For the Year
                                                                 Ended               Ended
                                                           December 31, 2001   December 31, 2000
                                                           -----------------   -----------------
<S>                                                           <C>                 <C>
Cash flows from operating activities:
  Net loss                                                    $(1,088,801)        $  (148,148)
  Adjustments to reconcile net loss to
   net cash used by operating activities:
    Depreciation and amortization                                  42,171                 253
    Impairment on capitalized film costs                          353,463
    Services and expenses paid with common stock                  244,255              12,750
  Changes in operating assets and liabilities:
    Increase in film costs                                     (1,406,291)         (1,063,010)
    Increase in deposits                                             (115)                 --
    Increase in accounts payable
      and accrued liabilities                                     288,140               3,203
                                                              -----------         -----------

       Net cash used by operating activities                   (1,567,178)         (1,194,952)

Cash flows from financing activities:
  Net increase in due to related parties                          632,088             935,375
  Proceeds from notes payable                                     935,000                  --
  Proceeds from issuance of common stock                               --             210,000
                                                              -----------         -----------

       Net cash provided by financing activities                1,567,088           1,145,375
                                                              -----------         -----------

Net decrease in cash                                                  (90)            (49,577)

Beginning balance                                                   2,759               2,336
                                                              -----------         -----------

Ending balance                                                $     2,669         $   (47,241)
                                                              ===========         ===========

Supplementary cash flow information:
  Noncash financing activities:
    Loan fees                                                 $    50,000         $        --
                                                              ===========         ===========

    2,305,520 shares of common stock issued in satisfaction
      of promissory note                                      $        --         $   486,515
                                                              ===========         ===========

    700,000 shares of common stock issued to satisfy
      stock subscriptions payable                             $        --         $   210,000
                                                              ===========         ===========

    167,000 shares of common stock issued to satisfy
      stock subscriptions payable                             $    50,000         $        --
                                                              ===========         ===========
</TABLE>

                 See Accompanying Notes to Financial Statements

                                       F-5
<PAGE>
                        ECLIPSE ENTERTAINMENT GROUP, INC.
                          NOTES TO FINANCIAL STATEMENTS


1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION - Eclipse  Entertainment Group, Inc.  (hereinafter referred to
     as the "Company") was  incorporated  in the state of Nevada in January 1997
     to engage in the business of developing,  producing and marketing films for
     worldwide distribution. The Company's fiscal year ends on December 31.

     REVENUE   RECOGNITION  -  All  revenue  is  recognized   upon  meeting  all
     recognition  requirements of AICPA Statement of Position 00-2,  "Accounting
     by  Producers  or  Distributors  of  Films"  ("SOP  00-2").  Revenues  from
     theatrical  distribution  of feature  films are  recognized on the dates of
     exhibition.  Revenues from direct home video  distribution  are recognized,
     net of an allowance for estimated returns,  together with related costs, in
     the period in which the  product  is  available  for sale by the  Company's
     customers. Revenues from television licensing, together with related costs,
     are recognized when the feature film or television  program is available to
     the licensee for telecast. Payments received in advance of availability are
     classified  as  deferred  revenue  until all SOP 00-2  revenue  recognition
     requirements  have been met. As of December 31,  2001,  the Company has not
     generated any revenues related to its capitalized films costs.

     RECLASSIFICATION  - Certain prior year balances have been  reclassified  to
     conform to the current year presentation.

     USE OF ESTIMATES - The  preparation  of financial  statements in conformity
     with  accounting  principles  generally  accepted  in  the  United  States,
     requires  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.

     PRINCIPLES OF CONSOLIDATION - The financial statements include the accounts
     of the Company and its subsidiaries.  All significant intercompany balances
     and transactions have been eliminated.

     CAPITALIZED  FILM  COSTS  AND  AMORTIZATION  - Costs  of  producing  films,
     including  capitalized  interest,  and costs of  acquiring  film rights are
     recorded  as  capitalized  film  costs.  The  capitalized  film  costs  are
     amortized  using the  individual-film-forecast  method as prescribed by SOP
     00-2 whereby  capitalized  film costs are  amortized in the same ratio that
     current  gross  revenues  bear  to  anticipated  total  ultimate  revenues.
     Estimates of ultimate  revenues are reviewed  regularly by  management  and
     revised where necessary to reflect more current information.

     The  recoverability  of capitalized film costs is dependent upon commercial
     acceptance of the films. If events or circumstances indicate the fair value
     of a film is less than the unamortized  capitalized film costs, the film is
     written  down to fair value by a charge to net income  (loss).  The Company
     determines the fair value of its films using a discounted  cash flow model.
     As December 31, 2001, the Company's  management evaluated the fair value of
     its released films and determined  that the unamortized  capitalized  films
     costs were not  indicative  of the fair  value.  Accordingly,  the  Company
     recorded an  impairment  of $353,463  for the year ended  December 31, 2001
     which is  reflected  on the  statements  of  operations  as  impairment  on
     capitalized film costs.

     STOCK-BASED  COMPENSATION - The Company  accounts for stock-based  employee
     compensation  arrangements  in  accordance  with  provisions  of Accounting
     Principles  Board ("APB")  Opinion No. 25,  "Accounting for Stock Issued to
     Employees,"  and complies with the  disclosure  provisions of SFAS No. 123,
     "Accounting for Stock-Based  Compensation."  Under APB No. 25, compensation
     expense  is  based on the  difference,  if any,  on the date of the  grant,
     between the fair value of the Company's stock and the exercise  price.  The
     Company  accounts for stock issued to  non-employees in accordance with the
     provisions  of SFAS No. 123 and the  Emerging  Issues  Task Force  ("EITF")
     Issue No. 96-18.

                                       F-6
<PAGE>
                        ECLIPSE ENTERTAINMENT GROUP, INC.
                          NOTES TO FINANCIAL STATEMENTS


1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     FIXED  ASSETS  -  Fixed   assets  are  stated  at  cost  less   accumulated
     depreciation.  Depreciation  is provided  principally on the  straight-line
     method over the estimated useful lives of the assets, which are generally 5
     to 7 years.  The cost of repairs and  maintenance  is charged to expense as
     incurred.   Expenditures   for  property   betterments   and  renewals  are
     capitalized.  Upon sale or other  disposition of a depreciable  asset, cost
     and accumulated  depreciation are removed from the accounts and any gain or
     loss is reflected in other income (expense).

     The Company  periodically  evaluates whether events and circumstances  have
     occurred that may warrant  revision of the estimated  useful lives of fixed
     assets or whether the remaining balance of fixed assets should be evaluated
     for  possible  impairment.  The  Company  uses an  estimate  of the related
     undiscounted  cash flows  over the  remaining  life of the fixed  assets in
     measuring their recoverability.

     NET LOSS PER  COMMON  SHARE - The  Company  computes  net loss per share in
     accordance with SFAS No. 128, EARNINGS PER SHARE.  ("SFAS No. 128") and SEC
     Staff  Accounting  Bulletin No. 98 ("SAB 98'). Under the provisions of SFAS
     No. 128 and SAB 98,  basic net loss per share is computed  by dividing  the
     net loss  available to common  stockholders  for the period by the weighted
     average number of shares of common stock outstanding during the period. The
     calculation  of diluted  net loss per share  gives  effect to common  stock
     equivalents,  however, potential common shares are excluded if their effect
     is antidilutive.

     COMPREHENSIVE INCOME - The Company has no components of other comprehensive
     income.  Accordingly,  net  income  equals  comprehensive  income  for  all
     periods.

     ADVERTISING  COSTS -  Advertising  costs  incurred in the normal  course of
     operations are expensed accordingly. No advertising costs were incurred for
     the years ended December 31, 2001 and 2000.

     INCOME TAXES - The Company accounts for its income taxes in accordance with
     Statement  of  Financial  Accounting  Standards  No.  109,  which  requires
     recognition  of  deferred  tax  assets and  liabilities  for the future tax
     consequences  attributable to differences  between the financial  statement
     carrying  amounts of existing assets and  liabilities and their  respective
     tax bases and tax credit carryforwards. Deferred tax assets and liabilities
     are measured using enacted tax rates expected to apply to taxable income in
     the years in which those temporary differences are expected to be recovered
     or settled.  The effect on deferred tax assets and  liabilities of a change
     in tax rates is  recognized  in  income in the  period  that  includes  the
     enactment date.

     IMPAIRMENT  OF LONG-LIVED  ASSETS TO BE DISPOSED - The Company  continually
     monitors events and changes in circumstances  that could indicate  carrying
     amounts of long-lived  assets may not be  recoverable.  When such events or
     changes  in   circumstances   are   present,   the  Company   assesses  the
     recoverability  of long-lived  assets by  determining  whether the carrying
     value of such assets will be recovered through undiscounted expected future
     cash flows. If the total of the future cash flows is less than the carrying
     amount of those assets,  the Company recognizes an impairment loss based on
     the excess of the carrying amount over the fair value of the assets. Assets
     to be disposed of are reported at the lower of the  carrying  amount or the
     fair value less costs to sell.

2.   CAPITALIZED FILM COSTS

     Capitalized  film  costs  totaling  $3,225,773  at  December  31,  2001  is
     comprised of $732,432 of completed and released films,  and $2,493,301 of a
     film in production. As of December 31, 2001 and 2000, amortization expenses
     have not been recorded  since  revenues have been not  recognized for these
     periods. Management believes that these capitalized film costs will provide
     future revenue benefits.  Accordingly, these costs will be amortized in the
     related  periods when such revenues are  generated in  accordance  with SOP
     00-2 as discussed in Note 1.

                                       F-7
<PAGE>
                        ECLIPSE ENTERTAINMENT GROUP, INC.
                          NOTES TO FINANCIAL STATEMENTS


3.   FIXED ASSETS

     Fixed assets consist  primarily of office  equipment with a historical cost
     of $2,196 and accumulated depreciation of $2,069 at December 31, 2001.

4.   LOAN FEES

     Loan fees of $8,082 were  recorded at a cost of $50,000 net of  accumulated
     amortization  of $41,918 at  December  31, 2001 which is  reflected  on the
     balance sheet as intangible asset.

5.   RELATED PARTY TRANSACTIONS

     As of December 31, 2001, due to related parties consist of the following:

       Advances payable to an entity controlled by a
       board director and stockholder of the Company,
       unsecured, imputed interest at 8%, and due on demand           $1,007,128

       Advances from officer and stockholder of the Company,
       unsecured, imputed interest at 8%, and due on demand              625,000

       Promissory note payable to a stockholder of the Company,
       unsecured, bearing interest at 8%, and due on demand              108,500
                                                                      ----------

       Total due to related parties                                   $1,740,628
                                                                      ==========

6.   NOTES PAYABLE

     As of December 31, 2001, notes payable consist of the following:

       Promissory notes from an individual, unsecured, payable
       at an annual interest rate of 9.075%, and due March 2002          400,000

       Promissory notes from an individual, unsecured, payable
       at an annual interest rate of 19.65%, and due March 2002           25,000

       Promissory notes from an individual, unsecured, payable
       at an annual interest rate of 19.65%, and due February 2002       100,000

       Promissory notes from an individual, unsecured, payable
       at an annual interest rate of 9.075%, and due April 2002          120,000

       Promissory notes from an individual, unsecured, payable
       at an annual interest rate of 16.8%, and due March 2002            50,000

       Promissory notes from an individual, unsecured, payable
       at an annual interest rate of 16.8%, and due March 2002            50,000
                                                                      ----------

                                                                      $  745,000
                                                                      ==========

                                       F-8
<PAGE>
                        ECLIPSE ENTERTAINMENT GROUP, INC.
                          NOTES TO FINANCIAL STATEMENTS


6.   NOTES PAYABLE (CONTINUED)

     All  promissory  note  holders  will be  treated  as  investors  in Ancient
     Warriors,  LLC as further  discussed  in Note 12.  Through the date of this
     report, five promissory notes payable totaling $625,000 became past due.

7.   CONVERTIBLE NOTES PAYABLE

     During May 2001, the Company  entered into unsecured loan  agreements  with
     two  individuals  to borrow a principal  amount up to $240,000 of which the
     entire  amount has been drawn on as of December 31,  2001.  The term of the
     loan is for one year,  no stated  interest and maturing in May 2002.  These
     lenders  have the  option of  converting  these  loans  into  shares of the
     Company's  restricted common stock, at $0.25 per share, based on the unpaid
     principal balance of these loans.  Furthermore,  these lenders will receive
     200,000 shares of the Company's restricted common stock as bonus shares.

     Due to the conversion  feature of the debt,  the Company  expects to record
     significant  amounts of deemed  interest over the term of these loans based
     on the difference of the Company's historical closing price of $0.34 of its
     common stock on the loan dates of May 15, 2001  compared to the  conversion
     price of $.25 per share. Additionally, the bonus shares are also considered
     deemed  interest  over  the  term of these  loans  based  on the  Company's
     historical closing price of its common stock on the loan dates.  During the
     twelve  months ended  December 31, 2001,  the Company  recorded  $41,700 of
     deemed interest expense relating to the conversion feature and bonus shares
     and  anticipates  over the term of these  loans  to  record  an  additional
     $69,500 of deemed interest expense.

8.   COMMON STOCK

     In April  1999,  the  Company's  Board of  Directors  adopted a  resolution
     whereby  it  approved  a 1-for-4  reverse  stock  split of the  issued  and
     outstanding shares of common stock. Accordingly, the accompanying financial
     statements have been retroactively  restated to reflect the 1-for-4 reverse
     stock split as if such  reverse  stock split  occurred as of the  Company's
     date of inception.

     In October 1999, the Company issued 125,000 shares of common stock in error
     to an unrelated company. The Company has since placed a stop on the 125,000
     shares issued.  Accordingly,  the 13,971,821  shares of common stock issued
     and outstanding as of December 31, 2001 does not reflect the 125,000 shares
     since these shares were issued in error and a stop has been placed.

     In August 2001,  the Company  issued 40,000 shares of common stock in error
     to an individual.  The Company has since placed a stop on the 40,000 shares
     issued.  Accordingly,  the  13,971,821  shares of common  stock  issued and
     outstanding  as of December  31,  2001 does not  reflect the 40,000  shares
     since these shares were issued in error and a stop has been placed.

     In October 2001,  the Company issued 10,000 shares of common stock in error
     to an individual.  The Company has since placed a stop on the 10,000 shares
     issued.  Accordingly,  the  13,971,821  shares of common  stock  issued and
     outstanding  as of December  31,  2001 does not  reflect the 10,000  shares
     since these shares were issued in error and a stop has been placed.

                                       F-9
<PAGE>
                        ECLIPSE ENTERTAINMENT GROUP, INC.
                          NOTES TO FINANCIAL STATEMENTS


9.   INCOME TAXES

     The Company did not record any current or deferred  income tax provision or
     benefit for any of the periods  presented due to continuing  net losses and
     nominal differences.

     The Company has  provided a full  valuation  allowance  on the deferred tax
     asset,  consisting  primarily of net operating loss, because of uncertainty
     regarding its realizability.

     As of December 31, 2001, the Company had net operating loss  carry-forwards
     of approximately  $1,812,222 for both federal and state income tax purposes
     to offset future taxable income,  if any.  Utilization of the net operating
     loss  carry-forwards,  which begins to expire at various times  starting in
     2012,  may be subject  to  certain  limitations  under  section  382 of the
     Internal  Revenue Service Code of 1986, as amended,  and other  limitations
     under state and foreign tax laws.

     Deferred income taxes reflect the net tax effects of temporary  differences
     between  the  carrying  amounts of assets  and  liabilities  for  financial
     reporting   purposes  and  the  amounts  used  for  income  tax   purposes.
     Significant   components   of  the   Company's   deferred  tax  assets  are
     approximately as follows:

                                                   December 31,   December 31,
                                                      2001           2000
                                                   -----------    -----------
     Net operating loss                            $(1,812,222)   $  (723,421)
     Depreciation                                           --             --
                                                   -----------    -----------
     Total deferred tax assets                      (1,812,222)      (723,421)
     Valuation allowance for deferred tax assets    (1,812,222)      (723,421)
                                                   -----------    -----------

     Net deferred tax assets                       $        --    $        --
                                                   ===========    ===========

10.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts of cash, accounts payable,  accrued  liabilities,  and
     due to related  parties  approximate  fair value because of the  short-term
     maturity of these instruments.

11.  GOING CONCERN

     The Company  incurred a net loss of  approximately  $1,089,000 and $148,000
     for the years ended December 31, 2001 and 2000,  respectively,  and current
     liabilities  exceed  current  assets  by  approximately  $3,062,000  as  of
     December 31, 2001. The Company plans to earn revenue through the release of
     completed films during 2002. The Company will also seek additional  sources
     of capital through the issuance of debt or equity financing,  but there can
     be no  assurance  the  Company  will be  successful  in  accomplishing  its
     objectives.

     The ability of the Company to continue as a going  concern is  dependent on
     additional  sources of capital and the success of the Company's  plan.  The
     financial statements do not include any adjustments that might be necessary
     if the Company is unable to continue as a going concern.

                                      F-10
<PAGE>
                        ECLIPSE ENTERTAINMENT GROUP, INC.
                          NOTES TO FINANCIAL STATEMENTS


12.  GROSS PROCEEDS FROM ANCIENT WARRIORS ALLOCATION AGREEMENT

     In December  2001,  the Company  entered into an agreement  whereby  future
     gross proceeds generated by Ancient Warriors, a film in production totaling
     $2,493,301 as discussed in note 2, are to be allocated as follow:

     First:

          70% to all investors as discussed in Note 6, proportionally until
              repaid in full;
          20% to the distributor, Eclipse Releasing, Inc., a wholly owned entity
              of the Company's consolidated financial statement;
          10% to Ancient Warriors, LLC, 100% beneficially owned by the Company;

     Thereafter,  the gross proceeds from future sale and/or distribution of the
     film shall be distributed proportionally as follow:

          20% to the distributor, Eclipse Releasing;
          10% to Ancient Warriors, LLC;
          10% to Franco Columbu, officer, director and stockholder of the
              Company, for producer's fee;
          10% to Art Birzneck, president, director and stockholder of the
              Company, for executive producer's fee;
          20% continuing royalty to specified investors as discussed in Note 6,
              proportionally to their respective investments; and
          30% to the Company.

13.  NEW ACCOUNTING PRONOUNCEMENT

     In July 2001, the FASB issued SFAS No. 141, BUSINESS COMBINATIONS, and SFAS
     No. 142, GOODWILL AND INTANGIBLE ASSETS.  SFAS No. 141 is effective for all
     business combinations completed after September 30, 2001; however,  certain
     provisions of this Statement apply to goodwill and other intangible  assets
     acquired between July 1, 2001 and the effective date of SFAS No. 142. Major
     provisions of these  Statements and their  effective  dates for the Company
     are as follows:

     *    all business  combinations  initiated after June 30, 2001 must use the
          purchase  method of  accounting.  The  pooling of  interest  method of
          accounting is prohibited except for transactions initiated before July
          1, 2001

     *    intangible assets acquired in a business  combination must be recorded
          separately from goodwill if they arise from contractual or other legal
          rights or are  separable  from the  acquired  entity  and can be sold,
          transferred,  licensed, rented or exchanged, either individually or as
          part of a related contract, asset or liability.

     *    goodwill, as well as intangible assets with indefinite lives, acquired
          after June 30, 2001, will not be amortized. Effective January 1, 2002,
          all  previously   recognized   goodwill  and  intangible  assets  with
          indefinite lives will no longer be subject to amortization.

     *    effective  January  1,  2002,  goodwill  and  intangible  assets  with
          indefinite  lives will be tested for impairment  annually and whenever
          there is an impairment indicator.

     *    All acquired goodwill must be assigned to reporting units for purposes
          of impairment testing and segment reporting.

     Although  it  is  still  reviewing  the  provisions  of  these  Statements,
     management's  preliminary assessment is that these Statements will not have
     a  material  impact on the  Company's  financial  position  or  results  of
     operations.

                                      F-11
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

No changes on this Report.

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

The names, ages, and respective  positions of the directors,  executive officers
and key employees of Eclipse are set forth below. The directors named below will
serve until the next annual  meeting of  Eclipse's  stockholders  or until their
successors  are duly  elected and have  qualified.  Directors  are elected for a
one-year  term at the annual  stockholders'  meeting.  Officers  will hold their
positions  at  the  will  of the  board  of  directors,  absent  any  employment
agreement,  of which  none  currently  exist or are  contemplated.  There are no
arrangements,  agreements or understandings between non-management  shareholders
and  management  under  which   non-management   shareholders  may  directly  or
indirectly  participate  in or influence the  management  of Eclipse's  affairs.
There are no other promoters or control  persons of Eclipse.  There are no legal
proceedings involving the directors of Eclipse.

FRANCO COLUMBU, CHAIRMAN OF THE BOARD & CEO, 60

     Dr.  Columbu  oversees all film and television  activities of Eclipse.  Dr.
Columbu's  extensive  career in  bodybuilding  and power  lifting has earned him
every major title  including  the  prestigious  MR.  OLYMPIA,  MR. WORLD and MR.
UNIVERSE  titles.  His  connections in the film industry are  extensive,  having
appeared in film such as PUMPING IRON, STAY HUNGRY, CONAN THE BARBARIAN, RUNNING
MAN, and  TERMINATOR.  He has produced two feature films,  BERETTA'S  ISLAND and
DOUBLECROSS, through his production company Franco Columbu Productions, Inc. and
is currently Producer of the Company's current feature, ANCIENT WARRIORS. He has
also been featured in several national  commercials and been a guest on numerous
talk shows.  In addition to his industry  experience,  Dr. Columbu  maintains an
active chiropractic  practice and has been providing private health consultation
for over five years. From 1998 to the present,  Mr. Columbu has also served as a
Director of Westar Entertainment.

ART BIRZNECK, PRESIDENT & COO/DIRECTOR, 33

     Mr.  Birzneck has been with Eclipse since its inception and is  responsible
for overseeing all  operational  activities and the  development of its domestic
and  international  ventures.  He is Executive  Producer of the Company's  first
feature  film,  THE PROCESS  and current  feature,  ANCIENT  WARRIORS.  Prior to
Eclipse, Mr. Birzneck spent three years as president of Pinoy Productions, Inc.,
a Vancouver, Canada based production company. He has participated financially in
several film projects  including the Company's  features THE PROCESS and ANCIENT
WARRIORS and HPP  Production's  HERO OF THE PLANET.  Mr.  Birzneck also has been
involved in  promoting  numerous  Hip-Hop  music  groups.  As a principal  of MB
Productions,  his clients  included Hip Hop artists CANDY MAN,  LIGHTER SHADE OF
BROWN and the RASCALZ. From 1998 to the present, Mr. Birzneck has also served as
a Director of Westar Entertainment.

JOHN G. SMITH, VICE PRESIDENT, SECRETARY, LEGAL AFFAIRS/DIRECTOR, 66

     Mr.  Smith is a  Cambridge,  England  educated  lawyer,  who has  practiced
corporate and commercial  law in Western  Canada for more than 30 years,  with a
specialization  in  entertainment  and  communications  law. He is a  principal,
co-owner,  and corporate  counsel of The Beacon Group of Companies  that managed
the production, marketing, distribution and financing of motion pictures, studio
projects  and  entertainment  software.  He is a  member  of  the  Canadian  Bar
Association  and the Law  Society  of British  Columbia;  and was  previously  a
governor of the Canadian Tax  Foundation and a director of the BC Motion Picture
Association, as well as a variety of performing arts organizations. From 1998 to
the present, Mr. Smith has also served as a Director of Westar Entertainment.

                                       21
<PAGE>
BRENT NELSON, TREASURER/DIRECTOR. 40

     Mr. Nelson has been with Eclipse since its  inception.  He has more than 15
years experience in corporate and project  financing and serves on the boards of
several companies in the United States and abroad Esarati Electric  Technologies
Inc.,  Interactive  Objects,  Inc., Mobile PET Technologies Inc., and Innovative
Communications  Technologies  Inc. Mr. Nelson has  participated  financially  in
several  film and music  industry  projects,  including MB  Productions  and the
Canadian Hip Hop label Masiv Music. Approximately five years ago, he founded and
became  Managing  Director of Northwest  Capital  Partners,  L.L.C.  a Bellevue,
Washington  based venture capital company.  Northwest  Capital is very active in
both private and public financing on an international  basis. Mr. Nelson is also
an  executive  producer of the  Company's  feature  film THE PROCESS and current
feature, ANCIENT WARRIORS.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Section 16(a) of the Securities  Exchange Act of 1934 requires the  Registrant's
directors,  certain officers and persons holding 10% or more of the Registrant's
common stock to file reports  regarding  their  ownership  and  regarding  their
acquisitions  and  dispositions  of  the  Registrant's  common  stock  with  the
Securities and Exchange Commission. Such persons are required by SEC regulations
to furnish the Registrant with copies of all Section 16(a) forms they file.

Based solely upon a review of Forms 3 and 4 and amendments  thereto furnished to
the registrant  under Rule 16a-3(d) during fiscal 2001,  Forms 5 with respect to
fiscal 2002, and certain  written  representations  from executive  officers and
directors,  the Registrant is aware that Franco Columbu and John Smith failed to
file a form 4 regarding the  acquisition of shares for services in July of 2001.
These  individuals  are  currently  in the process of  preparing  the  necessary
filings.

ITEM 10. EXECUTIVE COMPENSATION.

The  following  officers  and  directors  received  restricted  shares  for past
services  rendered  pursuant  to a Board  Resolution  on July  1st of this  year
pursuant to the following table:

Name                       Position                # of restricted shares issued
----                       --------                -----------------------------
Franco Columbu         CEO/Director                           85,000
Art Birzneck           President/Director                     85,000
John Smith             Secretary/Director                     20,000

Art Birzneck has yet to receive  these shares and the 85,000  shares owed to him
remains unissued.

                                       22
<PAGE>
There are no  annuity,  pension or  retirement  benefits  proposed to be paid to
officers,  directors,  or employees of the Registrant in the event of retirement
at  normal  retirement  date  as  there  is no  existing  plan  provided  for or
contributed to by the Registrant.

Other than as set forth  below,  no  remuneration  is proposed to be paid in the
future directly or indirectly by the Registrant to any officer or director since
there is no existing plan which  provides for such payment:  At a meeting of the
Board  of  Directors  on  October  23,  2000,   the   Registrant   approved  the
establishment of an Incentive Stock Option Pool of 2,000,000 shares,  and that a
Non-Qualified  Stock Option Pool of 2,500,000 shares, with options to be granted
by the  Company's  Compensation  Committee on such terms as that  Committee  may
determine, within the terms and conditions of an Incentive Stock Option Plan and
a Non-Qualified Stock Option Plan. No options have been granted under this plan.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following  table sets forth certain  information  as of March 5th, 2002 with
respect to the  beneficial  ownership  of common stock by (i) each person who to
the  knowledge  of the Company,  beneficially  owned or had the right to acquire
more than 5% of the Outstanding  common stock, (ii) each director of the Company
and (iii) all executive offices and directors of the Company as a group.

Title of      Name and Address                  Amount of               Percent
 Class      of Beneficial Owner            Beneficial Ownership         of Class
 -----      -------------------            --------------------         --------
Common      Brent Nelson                       2,771,270 (3)             19.59%
Stock       10900 N.E. 8th Street
            Bellevue, WA 98004

Common      Arthur Birzneck(5)                   424,500                  3.00%
Stock       10520 Venice Boulevard
            Culver City, California 90232

Common      Franco Columbu,                      153,750                  1.00%
Stock       10520 Venice Boulevard
            Culver City, California 90232

Common      John G. Smith                         20,000                  0.00%
Stock       1185 West Georgia Street
            Suite 910 Vancouver,
            British Columbia V6E 4E6

Common      Shares Of All Directors and
Stock       executive officers as a group      3,369,520                 24.81%
            (5 persons)

                                       23
<PAGE>
----------
(1)  Except as noted in footnote 2 below,  each person has sole voting power and
     sole dispositive power as to all of the shares shown as beneficially  owned
     by them
(2)  In October 1999, the Company issued 125,000 shares of common stock in error
     to an unrelated company. The Company has since placed a stop on the 125,000
     shares issued.  Accordingly,  the 12,758,641  shares of common stock issued
     and  outstanding  as of March 31, 2001 does not reflect the 125,000  shares
     since these shares were issued in error and a stop has been placed. None of
     these  security  holders  has the right to acquire any amount of the shares
     within sixty days from options,  warrants, rights, conversion privilege, or
     similar obligations.
(3)  This figure  includes  the  2,605,520  shares  owned by  Northwest  Capital
     Partners, L.L.C., 10900 N.E. 8th Street, Bellevue,  Washington 98004, since
     Mr. Nelson is the managing director of this firm.
(4)  Mr Rossa resigned as Director of the Company effective July 1st, 2001.
(5)  This figure does not represent  85,000 shares that have been  authorized by
     the Board of Directors but remain unissued.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Other  than as set forth  below,  during  the past two years  there have been no
relationships,  transactions,  or proposed  transactions to which the Registrant
was or is to be a party, in which any of the named persons set forth  previously
had or is to have a direct or indirect material interest.

(a) There was a  promissory  note for  $442,285  payable  to  Northwest  Capital
Partners, L.L.C., a shareholder of the Registrant controlled by Brent Nelson, an
officer and director of the  Registrant.  The note was  unsecured and payable on
demand.  In October 1999 the Registrant  issued 2,305,520 shares of Common Stock
pursuant to Rule 504 Regulation D of the Securities Act of 1933 in  satisfaction
of that note.

(b) Northwest  Capital  Partners,  L.L.C. has advanced the Registrant the sum of
$995,040.  There  are  no  specific  repayment  terms  on  this  advance,  it is
unsecured,  with an imputed  interest  at 8%, and due on demand.  The purpose of
this advance was that the  Registrant  required  additional  funding to continue
operating.

(c) The Registrant entered into a marketing agreement with Westar Entertainment,
Inc.,  on January 1, 1998 under which this firm is providing  marketing  for the
Registrant's  products both domestically and worldwide (see Exhibit 10.1 to this
Form 10- KSB).  Messrs.  Columbu,  Birzneck,  and Smith are  directors of Westar
Entertainment,   Inc.   Currently,   Messrs.   Birzneck  and  Columbu  each  own
approximately 40% of the issued and outstanding shares of Westar  Entertainment,
Inc., and Mr. Smith owns approximately 10%.

                                       24
<PAGE>
(d) The Registrant has entered into distribution  agreement with Mr. Columbu, an
officer and director of the Registrant,  covering the films Beretta's Island and
Double Cross (see Exhibit 10.2 to this Form 10-KSB). In addition, the Registrant
has entered into a distribution agreement with Pinoy Productions,  Inc. covering
the film The Process (Mr.  Birzneck,  an officer and director of the Registrant,
is also President of that company) (see Exhibit 10.3 to this Form 10-KSB).

(e) On September 1, 2000, the Registrant entered into a Share Purchase Agreement
with Westar  Entertainment,  Inc., Frano Columbu,  Arthur Birzneck,  and John G.
Smith (all  shareholders of that firm) (see Exhibit 2 to this Form 10-KSB).  The
purpose  of this  agreement  was for  Westar  Entertainment,  Inc.  to  become a
wholly-owned  subsidiary  of the  Registrant.  Although  this  contract has been
executed by the  parties,  they  subsequently  decided  not to proceed  with the
transaction.

(f) The Company  currently  rents its  offices  under a month to month lease for
$2,500 per month from Franco Columbu,  Chairman of the Board and Chief Executive
Officer of the Company.

(g) Alec Rossa has advanced  the  Registrant  the sum of $113,500.  There are no
specific  repayment  terms on this  advance,  it is  unsecured,  with an imputed
interest  at 8%, and due on demand.  The  purpose of this  advance  was that the
Registrant required additional funding to continue operating.

(h) During the last  quarter of fiscal  2000,  the  Company  loaned  $262,010 to
Westar  Entertainment,  Inc.  There  are no  specific  repayment  terms  on this
advance, it is unsecured, and due on demand.

(i)  The  Company  has  acquired  the  worldwide   distribution  rights  to  the
action/adventure  films Beretta's Island and Double Cross through a distribution
agreement dated September 2, 1997, with Franco Columbu,  an officer and director
of the Company (this agreement also covered another film to be called Assault of
the Lost  Goddess,  which  was not  produced)  (see  Exhibit  10.2 to this  Form
10-KSB).  The Company paid the sum of $75,000 for the rights to Beretta's Island
and  $150,000  for the  rights to Double  Cross;  the  gross  receipts  from the
distribution  from each film are to be shared  equally.  Under the terms of this
agreement,  the Company has a right of first refusal for a term of five years to
meet any bona fide offer to produce,  finance, or develop any film project which
Mr. Columbu is developing as a producer.  Also, the Company has the right to use
Mr.  Columbu's name and likeness in connection  with the  distribution  of these
films

(j) The Company has entered into a distribution agreement dated January 30, 1997
with Pinoy Productions,  Inc. covering the martial arts film The Process (Arthur
Birzneck,  an officer and  director of the  Company,  is also  President of that
company)  (see  Exhibit 10.3 to this Form  10-KSB).  The Company paid the sum of
$100,000 for the rights to The Process;  the gross  receipts are to be shared as
follows:  (a) on gross  receipts to $250,000 U.S.:  100% to the Company;  (b) on
gross receipts  between  $250,000 U./S. and $1,000,000  U.S.: 75% to the Company
and 25% to the  licensor;  (c) on gross  receipts  between  $1,000,000  U.S. and
$2,500,000  U.S.:  80% to the Company and 20% to the licensor;  and (d) on gross
receipts  above  $2,500,000  U.S.:  85% to the Company and 15% to the  licensor.
Under this agreement,  which has an initial term of fifty years, the Company has
the right to deduct from gross receipts all reasonable  expenses incurred in the
distribution  of these films.  This  distribution  agreement is exclusive to the
Company and has no limitation on the territory.

(k) Franco  Columbu,  the  Company's  Director and CEO,  will receive 10% of the
profits from the film Ancient Warriors.  Further,  Mr. Columbu directly owns 30%
of the film Ancient Warriors.

(l) Art Birzneck,  the Company's  President,  will receive 10% of the profits of
Ancient Warriors as Executive Producer fees.

                                       25
<PAGE>
(m) Brian F.  Faulkner,  the Company's  former legal  counsel,  received  86,180
shares of Eclipse  pursuant to an S-8 for legal  services  rendered.  The shares
were placed in the name of Lynette Faulkner.

For each of the transactions noted above, the transaction was negotiated, on the
part of the  Registrant,  on the basis of what is in the best  interests  of the
Registrant  and its  shareholders.  In  addition,  in each  case the  interested
affiliate  did vote in  favor of the  transaction;  however,  the full  board of
directors  did  make the  determination  that the  terms  in each  case  were as
favorable as could have been obtained from non-affiliated parties.

Certain of the officers and  directors  of the  Registrant  are engaged in other
businesses,  either  individually or through  partnerships  and  corporations in
which they have an interest,  hold an office,  or serve on a board of directors.
As a result,  certain potential  conflicts of interest,  such as those set forth
above with the  transactions,  may arise between the Registrant and its officers
and directors. The Registrant will attempt to resolve such conflicts of interest
in favor of the Registrant by carefully  reviewing each proposed  transaction to
determine its fairness to the  Registrant and its  shareholders  and whether the
proposed terms of the transaction are at least as favorable as those which could
be  obtained  from  independent  sources.  The  officers  and  directors  of the
Registrant are  accountable to it and its  shareholders  as  fiduciaries,  which
requires that such  officers and directors  exercise good faith and integrity in
handling the Registrant's  affairs. A shareholder may be able to institute legal
action on behalf of the  Registrant  or on behalf of itself and other  similarly
situated  shareholders  to recover  damages or for other  relief in cases of the
resolution of conflicts is in any manner prejudicial to the Registrant.

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

Exhibit           Description
-------           -----------

2                 Share Purchase Agreement between the Registrant and Westar
                  Entertainment, Inc., Frano Columbu, Arthur Birzneck, and John
                  G. Smith, dated September 1, 2000. *

3.1               Articles of Incorporation. **

3.2               Bylaws. **

4.1               Convertible Promissory Note issued by the Registrant to
                  Michael Wiesmann. Dated May 15th, 2001. ****

4.2               Convertible Promissory Note issued by the Registrant to Martin
                  McCurry, dated May 15th, 2001.****

10.1              Distribution Agreement between the Registrant and Westar
                  Entertainment, Inc., dated January 1, 1998. ***

10.2              Agreement between the Registrant and Franco Columbu, dated
                  September 2, 1997. **

                                       26
<PAGE>
10.3              Distribution Agreement between the Registrant and Pinoy
                  Productions, Inc., dated January 30, 1997. **

10.4              Contract between Eclipse Entertainment Group, Inc., Ancient
                  Warrior Films, LLC, and Franco Columbu.

21                Subsidiaries of Registrant


----------
*    Incorporated  by  reference.  (filed with  Company's  Form 10-QSB  filed on
     December 6, 2000)
**   Incorporated by reference. (filed with Company's Form 10-SB/A filed on June
     27th, 2000.)
***  Incorporated by reference. (filed with Company's Form 10-KSB filed on April
     11th, 2000)
**** Incorporated  by  reference.  (filed with  Company's  Form 10-QSB  filed on
     August 23rd, 2001)

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        ECLIPSE ENTERTAINMENT GROUP, INC.

                                        /s/ Art Birzneck
                                        ----------------------------------------
                                        By: Art Birzneck. President/Director
                                        Date: May 15th, 2002


                                        /s/ Brent Nelson
                                        ----------------------------------------
                                        By: Brent Nelson. Treasurer/Director
                                        Date: May 16th, 2002

                                        /s/ John G. Smith
                                        ----------------------------------------
                                        By: John G. Smith. Secretary/Director
                                        Date: May 16th, 2002

                                       27