UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)





x
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES AND EXCHANGE ACT OF
      1934





For the
quarterly period ended June 30, 2010





o
            TRANSITION
      REPORT UNDER SECTION 13 OR 15 (D) OF THE EXCHANGE
  ACT





For the
transition period from __________ to __________





COMMISSION FILE NUMBER: 
000-25097





EClips
Media Technologies, Inc.


(Name of
Registrant as specified in its charter)





DELAWARE
            65-0783722(State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      of organization)
            Identification
      No.)





110
Greene Street, Suite 403, New York, New York 10012


(Address
of principal executive office)





(212)
851-6425


(Registrant’s
telephone number)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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   Noo





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o   Noo





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of "large accelerated filer," "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange
Act.





Large
      accelerated filer
            o
            Accelerated
      filer
            oNon-accelerated
      filer
              (Do
      not check if smaller reporting company)
            o
            Smaller
      reporting company
            x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes x  Noo





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.  205,025,338 shares of common
stock are issued and outstanding as of August 16, 2010.








ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY


FORM
10-Q


June
30, 2010




TABLE
OF CONTENTS


Page
      No.PART
      I. - FINANCIAL INFORMATIONItem
      1.
                      Financial
      Statements
                      3Consolidated
      Balance Sheets as of June 30, 2010 (Unaudited) and December 31,
      2009
                      3Consolidated
      Statements of Income for the Three and Six Months Ended June 30, 2010 and
      2009 (unaudited)
                      4Consolidated
      Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009
      (unaudited)
                      5Notes
      to Unaudited Consolidated Financial Statements.
                      6Item
      2.
                      Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                      17Item
      3.
                      Quantitative
      and Qualitative Disclosures About Market Risk.
                      25Item
      4.
                      Controls
      and Procedures.
                      25PART
      II - OTHER INFORMATIONItem
      1.
                      Legal
      Proceedings.
                      26Item
      1A.
                      Risk
      Factors.
                      26Item
      2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds.
                      26Item
      3.
                      Default
      upon Senior Securities.
                      26Item
      4.
                      REMOVED
      AND RESERVED
                      26Item
      5.
                      Other
      Information.
                      26Item
      6.
                      Exhibits.
                      26




OTHER
PERTINENT INFORMATION




Unless
specifically set forth to the contrary, "Eclips," "we," "us," "our" and similar
terms refer to EClips Media Technologies, Inc., a Delaware corporation, and
subsidiary.










ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS




June 30, 2010
                                
                                
                                December 31, 2009(Unaudited)
                                
                                
                                (Audited)ASSETSCURRENT
      ASSETS:Cash
                                
                                $
                                254,622
                                
                                
                                $
                                -Prepaid expenses
                                
                                
                                346,350
                                
                                
                                
                                -Debt issuance cost
                                
                                
                                9,895
                                
                                
                                
                                -Total Current Assets
                                
                                
                                610,867
                                
                                
                                
                                -OTHER
      ASSETS:Property
      and equipment, net
                                
                                
                                36,442
                                
                                
                                
                                -Intangible
      asset, net
                                
                                
                                3,852
                                
                                
                                
                                -Goodwill
                                
                                
                                1,038,577
                                
                                
                                
                                -Deposits
                                
                                
                                8,509
                                
                                
                                
                                -Total Assets
                                
                                $
                                1,698,247
                                
                                
                                $
                                -LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIES:Accounts payable and accrued expenses
                                
                                $
                                219,221
                                
                                
                                $
                                -Unearned revenue
                                
                                
                                5,621
                                
                                
                                
                                -Derivative liabilities
                                
                                
                                1,885,796
                                
                                
                                
                                67,147Liabilities of discontinued operations
                                
                                
                                167,686
                                
                                
                                
                                167,686Total current liabilities
                                
                                
                                2,278,324
                                
                                
                                
                                234,833LONG-TERM
      LIABILITIES:Convertible debentures, net of debt discount
                                
                                
                                98,542
                                
                                
                                
                                7,620Total Liabilities
                                
                                
                                2,376,866
                                
                                
                                
                                242,453Stockholders'
      DeficitPreferred stock,  $.0001 par value; 10,000,000
    authorizedSeries A, 3,000,000 issued and outstanding
                                
                                
                                300
                                
                                
                                
                                300Series B, none issued and outstanding
                                
                                
                                -
                                
                                
                                
                                -Series C, none issued and outstanding
                                
                                
                                -
                                
                                
                                
                                -Series D, none issued and outstandingand outstanding, respectively
                                
                                
                                -
                                
                                
                                
                                -Common stock; $.0001 par value; 750,000,000 sharesauthorized; 203,525,338 and 129,725,338 shares
    issuedand outstanding, respectively
                                
                                
                                20,353
                                
                                
                                
                                12,972Additional paid-in capital
                                
                                
                                28,602,304
                                
                                
                                
                                24,224,685Accumulated deficit
                                
                                
                                (29,301,576
                                )
                                
                                
                                (24,480,410
                                )Total Stockholders' Deficit
                                
                                
                                (678,619
                                )
                                
                                
                                (242,453
                                )Total Liabilities and Stockholders' Deficit
                                
                                $
                                1,698,247
                                
                                
                                $
                                -





See
accompanying notes to unaudited consolidated financial statements.





3




ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS





For the Three Months Ended
                      
                      
                      For the Six Months EndedJune 30,
                      
                      
                      June 30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009(Unaudited)
                      
                      
                      (Unaudited)
                      
                      
                      (Unaudited)
                      
                      
                      (Unaudited)Net
      revenues
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Operating
      expenses:Payroll
      expense and stock based compensation
                      
                      
                      508,798
                      
                      
                      
                      497,551
                      
                      
                      
                      874,215
                      
                      
                      
                      662,429Professional
      and consulting
                      
                      
                      1,932,300
                      
                      
                      
                      48,058
                      
                      
                      
                      2,698,986
                      
                      
                      
                      131,628General
      and administrative expenses
                      
                      
                      256,592
                      
                      
                      
                      105,976
                      
                      
                      
                      275,405
                      
                      
                      
                      117,293Total operating expenses
                      
                      
                      2,697,690
                      
                      
                      
                      651,585
                      
                      
                      
                      3,848,606
                      
                      
                      
                      911,350Loss
      from continuing operations
                      
                      
                      (2,697,690
                      )
                      
                      
                      (651,585
                      )
                      
                      
                      (3,848,606
                      )
                      
                      
                      (911,350
                      )Other
      income (expense)Interest
      income
                      
                      
                      1,725
                      
                      
                      
                      -
                      
                      
                      
                      2,157
                      
                      
                      
                      -Interest
      expense
                      
                      
                      (83,247
                      )
                      
                      
                      (1,827
                      )
                      
                      
                      (113,688
                      )
                      
                      
                      (2,500
                      )Derivative
      liability expense
                      
                      
                      (2,309,910
                      )
                      
                      
                      -
                      
                      
                      
                      (3,260,076
                      )
                      
                      
                      -Change
      in fair value of  derivative liabilities
                      
                      
                      2,018,205
                      
                      
                      
                      -
                      
                      
                      
                      2,399,047
                      
                      
                      
                      -Total
      other income (expense)
                      
                      
                      (373,227
                      )
                      
                      
                      (1,827
                      )
                      
                      
                      (972,560
                      )
                      
                      
                      (2,500
                      )Loss
      from continuing operations before provision for income
    taxes
                      
                      
                      (3,070,917
                      )
                      
                      
                      (653,412
                      )
                      
                      
                      (4,821,166
                      )
                      
                      
                      (913,850
                      )Provision
      for income taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Loss
      from continuing operations
                      
                      
                      (3,070,917
                      )
                      
                      
                      (653,412
                      )
                      
                      
                      (4,821,166
                      )
                      
                      
                      (913,850
                      )Loss
      from discontinued operations, net of tax
                      
                      
                      -
                      
                      
                      
                      (42,280
                      )
                      
                      
                      -
                      
                      
                      
                      (94,641
                      )Net
      loss available to common shareholders
                      
                      $
                      (3,070,917
                      )
                      
                      $
                      (695,692
                      )
                      
                      $
                      (4,821,166
                      )
                      
                      $
                      (1,008,491
                      )Loss
      per common share, basic and diluted:Loss from continuing operations
                      
                      $
                      (0.02
                      )
                      
                      $
                      -
                      
                      
                      $
                      (0.03
                      )
                      
                      $
                      (0.01
                      )Loss from discontinued operations
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -$
                      (0.02
                      )
                      
                      $
                      -
                      
                      
                      $
                      (0.03
                      )
                      
                      $
                      (0.01
                      )Weighted
      average common shares outstanding
                      
                      
                      172,536,325
                      
                      
                      
                      170,900,826
                      
                      
                      
                      156,718,707
                      
                      
                      
                      135,393,436




See
accompanying notes to unaudited consolidated financial statements.





4


ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS






For
      the Six Months EndedJune
      30,2010
                                                                  
                                                                  
                                                                  2009(Unaudited)
                                                                  
                                                                  
                                                                  (Unaudited)Cash
      flows from operating activities:Loss
      from continuing operations
                                                                  
                                                                  $
                                                                  (4,821,166
                                                                  )
                                                                  
                                                                  $
                                                                  (913,850
                                                                  )Adjustments
      to  reconcile loss fromcontinuing
      operations  to net cash used in operating activities:Depreciation
                                                                  
                                                                  
                                                                  1,034
                                                                  
                                                                  
                                                                  
                                                                  -Amortization of intangible asset
                                                                  
                                                                  
                                                                  11
                                                                  
                                                                  
                                                                  
                                                                  -Amortization of prepaid expenses
                                                                  
                                                                  
                                                                  7,058
                                                                  
                                                                  
                                                                  
                                                                  -Amortization of debt issuance costs
                                                                  
                                                                  
                                                                  2,605
                                                                  
                                                                  
                                                                  
                                                                  -Amortization of debt discount
                                                                  
                                                                  
                                                                  98,542
                                                                  
                                                                  
                                                                  
                                                                  -Impairment loss
                                                                  
                                                                  
                                                                  173,257
                                                                  
                                                                  
                                                                  
                                                                  -Change in fair value of  derivative liabilities
                                                                  
                                                                  
                                                                  (2,399,047
                                                                  )
                                                                  
                                                                  
                                                                  -Derivative liablity expense
                                                                  
                                                                  
                                                                  3,260,076
                                                                  
                                                                  
                                                                  
                                                                  -Stock based consulting
                                                                  
                                                                  
                                                                  2,612,500
                                                                  
                                                                  
                                                                  
                                                                  477,457Stock based compensation expense
                                                                  
                                                                  
                                                                  807,292
                                                                  
                                                                  
                                                                  
                                                                  -(Increase) Decrease in:Interest receivable
                                                                  
                                                                  
                                                                  (2,157
                                                                  )
                                                                  
                                                                  
                                                                  -Prepaid expense
                                                                  
                                                                  
                                                                  (188,200
                                                                  )
                                                                  
                                                                  
                                                                  -Deposits
                                                                  
                                                                  
                                                                  (8,509
                                                                  )
                                                                  
                                                                  
                                                                  -Increase (Decrease) in:Accounts payable and accrued expenses
                                                                  
                                                                  
                                                                  82,319
                                                                  
                                                                  
                                                                  
                                                                  -Unearned revenue
                                                                  
                                                                  
                                                                  565
                                                                  
                                                                  
                                                                  
                                                                  -Net
      cash used in continuing operations
                                                                  
                                                                  
                                                                  (373,820
                                                                  )
                                                                  
                                                                  
                                                                  (436,393
                                                                  )Loss
      from discontinued operations
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (94,641
                                                                  )Adjustments
      to reconcile loss from discontinued operations to net cashprovided
      by discontinued operating activities:Depreciation & Amortization
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  89,240(Increase) decrease in discontinued assets
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (138,097
                                                                  )Increase (decrease) in discontinued liabilities
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  299,748Net
      cash provided by discontinued operations
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  156,250Net
      cash used in operating activities
                                                                  
                                                                  
                                                                  (373,820
                                                                  )
                                                                  
                                                                  
                                                                  (280,143
                                                                  )Cash
      flows from investing activities:Cash
      acquired in acquisition
                                                                  
                                                                  
                                                                  9,518
                                                                  
                                                                  
                                                                  
                                                                  -Cash
      used in acquisition
                                                                  
                                                                  
                                                                  (110,000
                                                                  )
                                                                  
                                                                  
                                                                  -Payment
      of leasehold improvement
                                                                  
                                                                  
                                                                  (14,025
                                                                  )
                                                                  
                                                                  
                                                                  -Purchase
      of equipment
                                                                  
                                                                  
                                                                  (23,451
                                                                  )
                                                                  
                                                                  
                                                                  (787
                                                                  )Investment
      in note receivable
                                                                  
                                                                  
                                                                  (171,100
                                                                  )
                                                                  
                                                                  
                                                                  -Net
      cash used in investing activities
                                                                  
                                                                  
                                                                  (309,058
                                                                  )
                                                                  
                                                                  
                                                                  (787
                                                                  )Cash
      flows from financing activities:Proceeds
      from issuance of common stock
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  286,641Net
      proceeds from debentures
                                                                  
                                                                  
                                                                  937,500
                                                                  
                                                                  
                                                                  
                                                                  -Net
      cash provided by financing activities
                                                                  
                                                                  
                                                                  937,500
                                                                  
                                                                  
                                                                  
                                                                  286,641Net
      increase in cash
                                                                  
                                                                  
                                                                  254,622
                                                                  
                                                                  
                                                                  
                                                                  5,711Cash,
      beginning of period
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  370Cash,
      end of period
                                                                  
                                                                  $
                                                                  254,622
                                                                  
                                                                  
                                                                  $
                                                                  6,081SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  -Income Taxes
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  -Supplemental
      disclosure of non-cash investingand
      financing activities:Issuance of common stock in connectionwith acquisition of business
                                                                  
                                                                  $
                                                                  800,000
                                                                  
                                                                  
                                                                  $
                                                                  -




See
accompanying notes to unaudited consolidated financial statements.




5




ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


June 30,
2010




NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES




Organization and Description
of Business





The
Company was incorporated under the name “Swifty Carwash & Quick-Lube, Inc.”
in the state of Florida on September 25, 1997. On October 22, 1999, the Company
changed its name from “Swifty Carwash & Quick-Lube, Inc.” to “SwiftyNet.com,
Inc.” On January 29, 2001, the Company changed its name from “SwiftyNet.com,
Inc.” to “Yseek, Inc.” On June 10, 2003, the Company changed its name from
“Yseek, Inc.” to “Advanced 3-D Ultrasound Services, Inc.”





The
Company merged with a private Florida corporation known as World Energy
Solutions, Inc. effective August 17, 2005. Advanced 3D Ultrasound Services, Inc.
(“A3D”) remained as the surviving entity as the legal acquirer, and the Company
was the accounting acquirer.  On November 7, 2005, the Company changed its
name to World Energy Solutions, Inc. (“WESI”). On November 7, 2005, WESI merged
with Professional Technical Systems, Inc. (“PTS”).  WESI remained as the
surviving entity as the legal acquirer, while PTS was the accounting acquirer.
On February 26, 2009, the Company changed its name to EClips Energy
Technologies, Inc.





On
December 22, 2009, in a private equity transaction (“Purchase Agreement”), the
majority shareholder (the “Seller”) and Chief Executive of the Company entered
into agreement, whereby certain purchasers collectively purchased from the
Seller an aggregate of (i) 50,000,000 shares of Common Stock of the Company and
(ii) 1,500,000 shares of series D preferred stock, $0.001 par value (the
“Preferred Stock”), comprising approximately 82 % of the issued and outstanding
shares of capital stock of the Company, for the aggregate purchase price,
including expenses, of $100,000.





In
connection with the Purchase Agreement, the Company and Seller entered into a
release pursuant to which in consideration for the termination of Seller’s
employment agreement, dated January 31, 2006, the Company issued to Seller
1,100,000 shares of the Company’s common stock.  Furthermore, the Company
agreed to transfer to Seller or Seller’s designee, the Company’s subsidiaries
Pure Air Technologies, Inc., Hydrogen Safe Technologies, Inc., World Energy
Solutions Limited and Advanced Alternative Energy, Inc. and granted to Seller a
five-year option for the purchase of H-Hybrid Technologies, Inc.





On March
16, 2010, the Company filed a definitive information statement on Schedule 14C
(the “Definitive Schedule 14C”) with the Securities and Exchange Commission (the
“SEC”) notifying its stockholders that on March 2, 2010, a majority of the
voting capital stock of the Company took action in lieu of a special meeting of
stockholders authorizing the Company to enter into an Agreement and Plan of
Merger (the “Merger Agreement”) with its newly-formed wholly-owned subsidiary,
EClips Media Technologies, Inc., a Delaware corporation for the purpose of
changing the state of incorporation of the Company to Delaware from Florida.
Pursuant to the Merger Agreement, the Company merged with and into EClips Media
with EClips Media continuing as the surviving corporation  on April 21,
2010. On the effective date of the Merger, (i) each issued and outstanding
share of common stock of the Company shall be converted into two (2) shares of
EClips Media common stock, (ii) each issued and outstanding share of Series D
preferred stock of the Company shall be converted into two (2) shares of EClips
Media Series A preferred stock and (iii) the outstanding share of EClips Media
Common Stock held by the Company shall be retired and canceled and shall resume
the status of authorized and unissued EClips Media common stock. The outstanding
6% convertible debentures of the Company shall be assumed by EClips Media and
converted into outstanding 6% convertible debentures of EClips Media. All
options and rights to acquire the Company’s common stock, and all outstanding
warrants or rights outstanding to purchase the Company’s common stock, will
automatically be converted into equivalent options, warrants and rights to
purchase two (2) times the number of shares of EClips Media common stock at
fifty (50%) percent of the exercise, conversion or strike price of such
converted options, warrants and rights. Trading of the Company’s securities
on a 2:1 basis commenced May 17, 2010 upon approval of the FINRA. All shares and
per share values are retroactively stated at the effective date of
merger.




On
June 21, 2010, the Company, through its wholly-owned subsidiary SD
Acquisition Corp., a New York corporation (“SD”), acquired (the “Acquisition”)
all of the business and assets and assumed certain liabilities of Brand
Interaction Group, LLC, a New Jersey limited liability company which is
described below.





Acquisition of Business of
Brand Interaction Group, LLC




On June
21, 2010, the Company entered into an Asset Purchase Agreement (the “Purchase
Agreement”) by and among the Company, SD and Brand Interaction Group, LLC, a New
Jersey limited liability (“BIG”).  Pursuant to which , the Company, through
its wholly-owned subsidiary SD acquired all of the business and assets and
assumed certain liabilities of BIG owned by Eric Simon , the Company’s Chief
Executive Officer (“CEO”). BIG owned Fantasy Football SUPERDRAFTTM, and
operates as a  sports entertainment and media business focused on promotion
of fantasy league events through live events hosted in various venues such as
Las Vegas, and online, which feature sports and media personalities, and the
sale and marketing of various sports oriented products and
services.




6




ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2010




NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





As
consideration for the Acquisition by SD, the Company agreed to issue BIG
20,000,000 shares of the Company’s common stock valued at $0.04 per share
(applying FASB ASC 805 “Determination of the Measurement Date for the Market
Price of Acquirer Securities Issued in a Purchase Business
Combination” ). The total purchase price was $868,152and includes
common stock valued at $800,000 and incurred legal fees of $68,152. 
Additionally, in May 2010, the Company issued a demand promissory note agreement
and security agreement in the amount of $110,000 with BIG and such promissory
note is included in the liabilities assumed and has been recognized as
intercompany transaction following the acquisition.  Thus such intercompany
transaction has been eliminated in consolidation. The purchase price was
allocated as follows:




Assets
      AcquiredCash
                  
                  $
                  9,518IntangibleTrademark
                  
                  3,863Goodwill
                  
                  1,038,577Total
      assets acquired
                  
                  1,051,958Liabilities
      Assumed
                  
                  183,806Net
      assets acquired
                  
                  $
                  868,152




Goodwill
is expected not to be deductible for income tax purposes.





The
following table summarizes our unaudited consolidated result of operations for
the three and six-month periods ended June 30, 2010, as well as the
unaudited pro forma consolidated results of operations as though the Company and
BIG acquisition  had occurred on January 1, 2010:




Three Months Ended
                  
                  
                  Six Months EndedJune 30, 2010
                  
                  
                  June 30, 2010As Reported
                  
                  
                  Pro Forma
                  
                  
                  As Reported
                  
                  
                  Pro FormaNet
      Revenues
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Loss
      from operations
                  
                  
                  2,697,690
                  
                  
                  
                  2,785,960
                  
                  
                  
                  3,848,606
                  
                  
                  
                  3,988,685Net
      Loss
                  
                  
                  3,070,917
                  
                  
                  
                  3,165,731
                  
                  
                  
                  4,821,166
                  
                  
                  
                  4,973,486Loss
      per common share:Basic
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.03
                  )
                  
                  $
                  (0.03
                  )Diluted
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.03
                  )
                  
                  $
                  (0.03
                  )




The
unaudited pro forma condensed consolidated income statements are for
informational purposes only and should not be considered indicative of actual
results that would have been achieved if the Company and BIG acquisition had
been completed at the beginning of 2010, or results that may be obtained in any
future period.




Discontinued
Operations





The
Company’s operations were developing and manufacturing products and services,
which reduce fuel costs, save power & energy and protect the environment.
The products and services were made available for sale into markets in the
public and private sectors. In December 2009, the Company discontinued
these operations and disposed of certain of its subsidiaries, and prior periods
have been restated in the Company’s financial statements and related footnotes
to conform to this presentation. For the three months ended June 30, 2010 and
2009, the Company recognized total loss from discontinued operations of $0 and
$42,280, respectively, associated with the discontinuance of our subsidiaries.
Included in the loss from discontinued operations, total product sales and cost
of goods sold from discontinued operations were $113,126 and $100,456 for the
three months ended June 30, 2009. Research and development have been
included in the loss from discontinued operations, in the amounts of $54,949 for
the three months ended June 30, 2009. For the
six months ended June 30, 2010 and 2009, the Company recognized total loss from
discontinued operations of $0 and $94,641, respectively, associated with the
discontinuance of our subsidiaries. Included in the loss from discontinued
operations, total product sales and cost of goods sold from discontinued
operations were $199,726 and $161,941 for the six months ended June 30,
2009.  Research and development have been included in the loss from
discontinued operations, in the amounts of $132,426 for the six months ended
June 30, 2009.





7




ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2010




NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Basis of
presentation





The
consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America ("US
GAAP").  The consolidated financial statements of the Company include the
Company and its wholly-owned subsidiaries.  All material intercompany
balances and transactions have been eliminated in consolidation. These financial
statements should be read in conjunction with the audited consolidated financial
statements and related footnotes as of and for the year ended December 31, 2009,
included in the Company’s Form 10-K at  December 31, 2009.





In the
opinion of management, all adjustments (consisting of normal recurring items)
necessary to present fairly the Company's financial position as of June 30,
2010, and the results of operations and cash flows for the six months ending
June 30, 2010 have been included. The results of operations for the six months
ended June 30, 2010 are not necessarily indicative of the results to be expected
for the full year.





ASB Accounting Standards
Codification





The
issuance by the FASB of the Accounting Standards CodificationTM (the
“Codification”) on July 1, 2009 (effective for interim or annual reporting
periods ending after September 15, 2009), changes the way that GAAP is
referenced. Beginning on that date, the Codification officially became the
single source of authoritative nongovernmental GAAP; however, SEC registrants
must also consider rules, regulations, and interpretive guidance issued by the
SEC or its staff. The change affects the way the Company refers to GAAP in
financial statements and in its accounting policies. All existing standards that
were used to create the Codification became superseded. Instead, references to
standards consist solely of the number used in the Codification’s structural
organization.





Use of
Estimates





In
preparing the consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the statements of financial condition, and
revenues and expenses for the years then ended.  Actual results may differ
significantly from those estimates. Significant estimates made by management
include, but are not limited to, the assumptions used to calculate stock-based
compensation, derivative liabilities, debt discount, the useful life of property
and equipment, purchase price fair value allocation for the business
acquisition, valuation and amortization periods of intangible asset, and 
valuation of goodwill.





Reclassification





Certain
amounts in the 2009 consolidated financial statements have been reclassified to
conform to the 2010 presentation. Such reclassifications had no effect on the
reported net loss.





Cash and Cash
Equivalents





The
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. The Company places its
cash with a high credit quality financial institution. The Company’s account at
this institution is insured by the Federal Deposit Insurance Corporation
("FDIC") up to $250,000. For the six months ended June 30, 2010 and for the year
ended December 31, 2009, the Company has not reached bank balances exceeding the
FDIC insurance limit. To reduce its risk associated with the failure of such
financial institution, the Company evaluates at least annually the rating of the
financial institution in which it holds deposits.





Concentrations
of Credit Risk





Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist primarily of cash and cash equivalents, accounts
receivable, and notes payable. The Company’s cash and cash equivalents accounts
are held at financial institutions and are insured by the Federal Deposit
Insurance Corporation (“FDIC”) up to $100,000 between January 2007 and October
2008 and $250,000 for interest-bearing accounts and an unlimited amount for
noninterest-bearing accounts after October 2008. During the six months ended
June 30, 2010, the Company has not reached bank balances exceeding the FDIC
insurance limit. While the Company periodically evaluates the credit quality of
the financial institutions in which it holds deposits, it cannot reasonably
alleviate the risk associated with the sudden failure of such financial
institutions. The Company's investment policy is to invest in low risk, highly
liquid investments. The Company does not believe it is exposed to any
significant credit risk in its cash investment.





8
 
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2010


NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Fair Value of Financial
Instruments





Effective
January 1, 2008, the Company adopted FASB ASC 820, “Fair Value Measurements
and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value
on a recurring basis. ASC 820 establishes a common definition for fair value to
be applied to existing generally accepted accounting principles that require the
use of fair value measurements, establishes a framework for measuring fair value
and expands disclosure about such fair value measurements. The adoption of
ASC 820 did not have an impact on the Company’s financial position or
operating results, but did expand certain disclosures.





ASC 820
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. Additionally, ASC 820 requires the use of valuation
techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs. These inputs are prioritized below:




Level 1:
            Observable
      inputs such as quoted market prices in active markets for identical assets
      or liabilitiesLevel 2:
            Observable
      market-based inputs or unobservable inputs that are corroborated by market
      dataLevel 3:
            Unobservable
      inputs for which there is little or no market data, which require the use
      of the reportingentity’s
      own assumptions.


Cash and
cash equivalents include money market securities that are considered to be
highly liquid and easily tradable as of June 30, 2010 and December 31, 2009.
These securities are valued using inputs observable in active markets for
identical securities and are therefore classified as Level 1 within our
fair value hierarchy.




The
carrying amounts reported in the balance sheet for cash, accounts payable and
accrued expenses approximate their estimated fair market value based on the
short-term maturity of these instruments. The carrying amount of the convertible
debentures at June 30, 2010 and December 31, 2009, approximate their respective
fair value based on the Company’s incremental borrowing rate.





In
addition, FASB ASC 825-10-25 Fair Value Option was effective for January 1,
2008. ASC 825-10-25 expands opportunities to use fair value measurements in
financial reporting and permits entities to choose to measure many financial
instruments and certain other items at fair value. The Company did not elect the
fair value options for any of its qualifying financial instruments.





Property and
equipment





Property
and equipment are carried at cost. The cost of repairs and maintenance is
expensed as incurred; major replacements and improvements are capitalized. 
When assets are retired or disposed of, the cost and accumulated depreciation
are removed from the accounts, and any resulting gains or losses are included in
income in the year of disposition.  The Company examines the possibility of
decreases in the value of fixed assets when events or changes in circumstances
reflect the fact that their recorded value may not be recoverable. Depreciation
is calculated on a straight-line basis over the estimated useful life of the
assets.





Intangible
Asset





The
Company records the purchase of intangible assets not purchased in a
business combination in accordance with ASC 350-10 “Goodwill and Other
Intangible Assets” and records intangible assets acquired in a business
combination or pushed-down pursuant to acquisition in accordance with ASC Topic
805 “Business Combinations”.





Goodwill





The
Company tests goodwill for impairment in accordance with the provisions of ASC
Topic 350, “Goodwill and Other Intangible Assets”. Accordingly, goodwill is
tested for impairment at least annually or whenever events or circumstances
indicate that goodwill might be impaired. The Company has elected to test for
goodwill impairment annually. During the six months ended June 30, 2010, the
Company has determined that no adjustment to the carrying value of goodwill was
required.





Impairment of Long-Lived
Assets





Long-Lived
Assets of the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in ASC 360-10-35-15,“Impairment or Disposal of
Long-Lived Assets” . The Company recognizes an impairment loss when the
sum of expected undiscounted future cash flows is less than the carrying amount
of the asset. The amount of impairment is measured as the difference between the
asset’s estimated fair value and its book value. The Company did not consider it
necessary to record any impairment charges during the six months ended June 30,
2010 and 2009.




9




ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2010




NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)




Income
Taxes




Income
taxes are accounted for under the asset and liability method as prescribed by
ASC Topic 740: Income Taxes (“ASC 740”). Deferred tax assets and liabilities are
recognized 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 operating loss 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. Deferred tax assets are
reduced by a valuation allowance, when in the Company's opinion it is likely
that some portion or the entire deferred tax asset will not be
realized.





Pursuant
to ASC Topic 740-10: Income Taxes related to the accounting for uncertainty in
income taxes, the evaluation of a tax position is a two-step process. The first
step is to determine whether it is more likely than not that a tax position will
be sustained upon examination, including the resolution of any related appeals
or litigation based on the technical merits of that position. The second step is
to measure a tax position that meets the more-likely-than-not threshold to
determine the amount of benefit to be recognized in the financial statements. A
tax position is measured at the largest amount of benefit that is greater than
50% likelihood of being realized upon ultimate settlement. Tax positions that
previously failed to meet the more-likely-than-not recognition threshold should
be recognized in the first subsequent period in which the threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not
criteria should be de-recognized in the first subsequent financial reporting
period in which the threshold is no longer met. The accounting standard also
provides guidance on de-recognition, classification, interest and penalties,
accounting in interim periods, disclosures, and transition.  The adoption
had no effect on the Company’s consolidated financial statements.


Stock
Based Compensation





In
December 2004, the Financial Accounting Standards Board, or FASB, issued FASB
ASC Topic 718: Compensation – Stock Compensation (“ASC 718”). Under ASC 718,
companies are required to measure the compensation costs of share-based
compensation arrangements based on the grant-date fair value and recognize the
costs in the financial statements over the period during which employees are
required to provide services. Share-based compensation arrangements include
stock options, restricted share plans, performance-based awards, share
appreciation rights and employee share purchase plans. Companies may elect to
apply this statement either prospectively, or on a modified version of
retrospective application under which financial statements for prior periods are
adjusted on a basis consistent with the pro forma disclosures required for those
periods under ASC 718. Upon adoption of ASC 718, the Company elected to value
employee stock options using the Black-Scholes option valuation method that uses
assumptions that relate to the expected volatility of the Company’s common
stock, the expected dividend yield of our stock, the expected life of the
options and the risk free interest rate. Such compensation amounts, if any, are
amortized over the respective vesting periods or period of service of the option
grant. For the six months ended June 30, 2010 and 2009, the Company did not
grant any stock options.




Related
Parties





Parties
are considered to be related to the Company if the parties that, directly or
indirectly, through one or more intermediaries, control, are controlled by, or
are under common control with the Company. Related parties also include
principal owners of the Company, its management, members of the immediate
families of principal owners of the Company and its management and other parties
with which the Company may deal if one party controls or can significantly
influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own
separate interests. The Company discloses all related party transactions. All
transactions shall be recorded at fair value of the goods or services exchanged.
Property purchased from a related party is recorded at the cost to the related
party and any payment to or on behalf of the related party in excess of the cost
is reflected as a distribution to related party.




Subsequent
Events





For
purposes of determining whether a post-balance sheet event should be evaluated
to determine whether it has an effect on the financial statements for the six
months ended June 30, 2010, subsequent events were evaluated by the Company as
of August 16, 2010, the date on which the unaudited consolidated financial
statements for the six months ended June 30, 2010, were available to be
issued.




10




ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2010




NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





Net Loss per Common
Share





Net loss
per common share are calculated in accordance with ASC Topic 260: Earnings Per
Share (“ASC 260”). Basic loss per share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding during the
period. The computation of diluted net earnings per share does not include
dilutive common stock equivalents in the weighted average shares outstanding as
they would be anti-dilutive. The outstanding warrants and shares equivalent
issuable pursuant to embedded conversion features amounted to 82,000,000 at June
30, 2010. There were no dilutive common stock equivalents as of June 30,
2009.





Recent Accounting
Pronouncements





In
January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06,
“Improving Disclosures about Fair Value Measurements” an amendment to ASC Topic
820, “Fair Value Measurements and Disclosures.”  This amendment requires an
entity to: (i) disclose separately the amounts of significant transfers in and
out of Level 1 and Level 2 fair value measurements and describe the reasons for
the transfers and (ii) present separate information for Level 3 activity
pertaining to gross purchases, sales, issuances, and settlements.  ASU No.
2010-06 is effective for the Company for interim and annual reporting beginning
after December 15, 2009, with one new disclosure effective after December 15,
2010. The adoption of ASU No. 2010-06 did not have a material impact on the
results of operations and financial condition.




In
February 2010, the FASB issued an amendment to the accounting standards related
to the accounting for, and disclosure of, subsequent events in an entity’s
consolidated financial statements. This standard amends the authoritative
guidance for subsequent events that was previously issued and among other things
exempts Securities and Exchange Commission registrants from the requirement to
disclose the date through which it has evaluated subsequent events for either
original or restated financial statements. This standard does not apply to
subsequent events or transactions that are within the scope of other applicable
GAAP that provides different guidance on the accounting treatment for subsequent
events or transactions. The adoption of this standard did not have a material
impact on the Company’s consolidated financial statements.




In July
2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures
about the Credit Quality of Financing Receivables and the Allowance for Credit
Losses.  ASU 2010-20 requires additional disclosures about the
credit quality of a company’s loans and the allowance for loan losses held
against those loans.  Companies will need to disaggregate new and existing
disclosures based on how it develops its allowance for loan losses and how it
manages credit exposures.  Additional disclosure is also required about the
credit quality indicators of loans by class at the end of the reporting period,
the aging of past due loans, information about troubled debt restructurings, and
significant purchases and sales of loans during the reporting period by
class.  The new guidance is effective for interim- and annual periods
beginning after December 15, 2010.  The Company anticipates that adoption
of these additional disclosures will not have a material effect on its financial
position or results of operations.




Other
accounting standards that have been issued or proposed by FASB that do not
require adoption until a future date are not expected to have a material impact
on the consolidated financial statements upon adoption.





NOTE
2 – GOING CONCERN CONSIDERATIONS




The
accompanying consolidated financial statements are prepared assuming the Company
will continue as a going concern.  At June 30, 2010, the Company had an
accumulated deficit of $29,301,576, and a working capital deficiency of
$1,667,457.  Additionally, for the six months ended June 30, 2010, the
Company incurred net losses of $4,821,166 and had negative cash flows from
operations in the amount of $373,820. The ability of the Company to
continue as a going concern is dependent upon increasing sales and obtaining
additional capital and financing. Management intends to attempt to raise
additional funds by way of a public or private offering.  While the Company
believes in the viability of its strategy to raise additional funds, there can
be no assurances to that effect.





11
 
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2010


NOTE
3 – NOTE RECEIVABLE




During
the first quarter of 2010, the Company entered into a secured 6% demand
promissory note (the “Demand Note”) with RootZoo, Inc. (“RZ”).  RZ owned
and operated a website www.rootzoo.com, focused upon providing social networking
to sports fans, statistics and commentary to the sports community. During the
fourth quarter of 2009 the Company had entered into negotiations with the then
fifty (50%) percent owner of the common stock of RZ and one of its then two
directors (the “RZ Part Owner”) to acquire RZ pursuant to an Asset Purchase
Agreement (the “RZ Acquisition”), but negotiations for the RZ Acquisition broke
down and have since been terminated. As a result of the discontinuance of
all negotiations for the RZ Acquisition, the Company elected to foreclose on its
loan and to acquire the RZ business under its foreclosed loan agreement. On
May 15, 2010 the Company demanded repayment of all outstanding amounts
under the Demand Note. On June 6, 2010, RZ entered into a Peaceful
Possession Letter Agreement with the Company pursuant to which RZ granted the
Company all rights of possession in and to the collateral which secures the
Demand Note, representing substantially all of the assets of RZ in partial
satisfaction with the Demand Note debt. Subsequently the Company, through an
Assignment Agreement, assigned the rights and possession of the collateral to
its subsidiary, RZ Acquisition Corp. Following termination of negotiations,
all of the persons associated with the development of the RZ business resigned.
RZ presently has no employees or others who perform services necessary to
maintain and develop RZ business successfully. Due to the termination of
negotiations, the Company believes that the assets of RZ has no value and
worthless. Consequently, the Company recorded a total impairment loss of
$173,257 which represents the principal amount of $171,100 and interest
receivable of $2,157 in connection with the secured 6% demand promissory note
agreement. Such amount is included in the accompanying statements of operations
under general and administrative expenses.


NOTE 4 - PROPERTY
AND EQUIPMENT




Property
and equipment consisted of the following:





Estimated
      life
                  
                  June
      30, 2010Computer
      Equipment
                  3
      years
                  
                  $
                  4,067Office
      Equipment
                  5
      years
                  
                  
                  8,142Furniture
      and fixtures
                  5
      years
                  
                  
                  11,243Leasehold
      improvements
                  5
      years
                  
                  
                  14,02537,476Less:
      Accumulated depreciation
                  
                  
                  
                  (1,034)$
                  36,442





During
the six months ended June 30, 2010, the Company paid for leasehold improvements
of $14,025 on a facility lease by an affiliated company for which our former
Chief Executive officer and director, Greg Cohen, is the President. For the
six months ended June 30, 2010 and 2009, depreciation expense amounted to $1,034
and $0, respectively.




NOTE
5 – INTANGIBLE ASSET




Intangible
asset consist of an acquired sportstrademark.  The Company has classified this cost as
intangible asset and amortize over the period of the expected revenues to be
derived from this asset, generally for 4.30 years. The net carrying amount of
intangible asset was $3,852 as of June 30, 2010.




Amortization
expense was $11 and $0 for the six months ended June 30, 2010 and 2009,
respectively.





Amortization
expense attributable to future periods is as follows:





Year
      ending December 31:2010
                  
                  $
                  4442011
                  
                  
                  8892012
                  
                  
                  8892013
                  
                  
                  8892014
                  
                  
                  741$
                  3,852





12




ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2010




NOTE
6 – DERIVATIVE LIABILITIES





In June
2008, a FASB approved guidance related to the determination of whether a
freestanding equity-linked instrument should be classified as equity or debt
under the provisions of FASB ASC Topic No. 815-40,Derivatives and Hedging –
Contracts in an Entity’s Own Stock . The adoption of this requirement
will affect accounting for convertible instruments and warrants with provisions
that protect holders from declines in the stock price ("down-round" provisions).
Warrants with such provisions will no longer be recorded in equity and would
have to be reclassified to a liability. The Issue is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Earlier application by an entity that
has previously adopted an alternative accounting policy is not
permitted.





Instruments
with down-round protection are not considered indexed to a company's own stock
under ASC Topic 815, because neither the occurrence of a sale of common stock by
the company at market nor the issuance of another equity-linked instrument with
a lower strike price is an input to the fair value of a fixed-for-fixed option
on equity shares.





ASC Topic
815 guidance is to be applied to outstanding instruments as of the beginning of
the fiscal year in which the Issue is applied. The cumulative effect of the
change in accounting principle shall be recognized as an adjustment to the
opening balance of retained earnings (or other appropriate components of equity)
for that fiscal year, presented separately. If an instrument is classified as
debt, it is valued at fair value, and this value is re-measured on an ongoing
basis, with changes recorded on the statement of operations in each reporting
period. The Company did not have outstanding instruments with down-round
provisions as of the beginning of fiscal 2009 thus no adjustment will be made to
the opening balance of retained earnings.





In
connection with the issuance of the 6% Senior Convertible Debentures, the
Company has determined that the terms of the convertible debenture include a
down-round provision under which the conversion price could be affected by
future equity offerings undertaken by the Company until the 18 month
anniversary of such convertible debenture. Accordingly, the convertible
instrument is accounted for as a liability at the date of issuance and adjusted
to fair value through earnings at each reporting date. The Company has
recognized a derivative liability of $ $1,885,796 and $67,147 at June 30, 2010
and December 31, 2009, respectively. Derivative liability expense and the gain
resulting from the decrease in fair value of this convertible instrument was
$3,260,076 and $2,399,047 for the six months ended June 30, 2010. Derivative
liability expense and the gain resulting from the decrease in fair value of this
convertible instrument was $2,309,910 and $2,018,205 for the three months ended
June 30, 2010.




The
Company used the following assumptions for determining the fair value of the
convertible instruments granted under the Black-Scholes option pricing
model:




June
      30, 2010Expected
      volatility
                184%
      - 236%Expected
      term
                1.50-5
      YearsRisk-free
      interest rate
                0.61%-2.62%Expected
      dividend yield
                0%




NOTE
7 – CONVERTIBLE DEBENTURES





On
December 17, 2009, to obtain funding for working capital, the Company entered
into securities purchase agreement with an accredited investor pursuant to which
the Company agreed to issue its 6% Senior Convertible Debentures for an
aggregate purchase price of $75,000.  The Debenture bears interest at 6%
per annum and matures twenty-four months from the date of issuance.  The
Debenture will be convertible at the option of the holder at any time into
shares of common stock, at an initial conversion price equal to the lesser of
(i) $0.05 per share or (ii) until the eighteen (18) months anniversary of the
Debenture, the lowest price paid per share or the lowest conversion price per
share in a subsequent sale of the Company’s equity and/or convertible debt
securities paid by investors after the date of the Debenture.




13




ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2010




NOTE 7 – CONVERTIBLE
DEBENTURES (continued)




On
February 4, 2010 the Company entered into securities purchase agreement with an
accredited investor pursuant to which the Company agreed to issue $200,000 of
its 6% convertible debentures for an aggregate purchase price of $200,000. The
Debenture bears interest at 6% per annum and matures twenty-four months from the
date of issuance. The Debenture is convertible at the option of the holder at
any time into shares of common stock, at an initial conversion price equal to
the lesser of (i) $0.05 per share or (ii) until the eighteen (18) months
anniversary of the Debenture, the lowest price paid per share or the lowest
conversion price per share in a subsequent sale of the Company’s equity and/or
convertible debt securities paid by investors after the date of the
Debenture.  In connection with the Agreement, the Investor received a
warrant to purchase 4,000,000 shares of the Company’s common stock. The Warrant
is exercisable for a period of five years from the date of issuance at an
initial exercise price of $0.05, subject to adjustment in certain circumstances.
The Investor may exercise the Warrant on a cashless basis if the Fair Market
Value (as defined
in the Warrant) of one share of common stock is greater than the Initial
Exercise Price. In accordance with ASC 470-20-25, the convertible debentures
were considered to have an embedded beneficial conversion feature because the
effective conversion price was less than the fair value of the Company’s common
stock. These convertible debentures were fully convertible at the issuance date
thus the value of the beneficial conversion and the warrants were treated as a
discount on the 6% Senior Convertible debentures and were valued at $200,000 to
be amortized over the debenture term. The fair value of this warrant was
estimated on the date of grant using the Black-Scholes option-pricing model
using the following weighted-average assumptions: expected dividend yield of 0%;
expected volatility of 219%; risk-free interest rate of 2.29% and an expected
holding period of five years. The Company paid a legal fee of $12,500 in
connection with this debenture. Accordingly, the Company recorded debt issuance
cost of $12,500 which will be amortized over the term of the debenture. As of
June 30, 2010, amortization of debt issuance cost amounted to $2,605 and is
included in interest expense. As a result of the Merger with EClips Media on
March 16, 2010, the new conversion price of this debenture is equivalent to
$0.025 and the warrants increased to 8,000,000 shares of the Company’s common
stock.





On
February 4, 2010, the Company amended the 6% Senior Convertible Debentures
agreement dated December 17, 2009.  Pursuant to the terms of the original
agreement, the investor was granted the right to receive the benefit of any more
favorable terms or provisions provided to subsequent investors for a period of
18 months following the closing of the transaction.  As a result of
the issuance of the $200,000 note payable above, the investor was issued a
Debenture in the aggregate principal amount of $75,000 and received a warrant to
purchase 1,500,000 shares of the Company’s common stock on the same terms and
conditions as previously described.  The original Debenture was cancelled.
These warrants were treated as an additional discount on the 6% Senior
Convertible debentures amounting to $7,610 to be amortized over the debenture
term. The fair value of this warrant was estimated on the date of grant using
the Black-Scholes option-pricing model using the following weighted-average
assumptions: expected dividend yield of 0%; expected volatility of 219%;
risk-free interest rate of 2.29% and an expected holding period of five
years. As a result of the Merger with EClips Media on March 16, 2010, the
new conversion price of this debenture is equivalent to $0.025 and the warrants
increased to 3,000,000 shares of the Company’s common stock.





Between
March 2010 and June 2010, the Company entered into securities purchase
agreements with accredited investors pursuant to which the Company agreed to
issue an aggregate of $750,000 of its 6% Senior Convertible Debentures with the
same terms and conditions of the debentures issued on February 4, 2010. In
connection with the Agreement, the Investor received warrants to purchase
30,000,000 shares of the Company’s common stock. The Warrant is exercisable for
a period of five years from the date of issuance at an initial exercise price of
$0.025, subject to adjustment in certain circumstances. In accordance with ASC
470-20-25, the convertible debentures were considered to have an embedded
beneficial conversion feature because the effective conversion price was less
than the fair value of the Company’s common stock. These convertible debentures
were fully convertible at the issuance date thus the value of the beneficial
conversion and the warrants were treated as a discount on the 6% Senior
Convertible debentures and were valued at $750,000 to be amortized over the
debenture term. The fair value of this warrant was estimated on the date of
grant using the Black-Scholes option-pricing model using the following
weighted-average assumptions: expected dividend yield of 0%; expected volatility
of 211%; risk-free interest rate of 2.43% and an expected holding period of five
years.





On March
16, 2010, the Company filed the Definitive Schedule 14C with the SEC notifying
its stockholders that on March 2, 2010, a majority of the voting capital stock
of the Company took action in lieu of a special meeting of stockholders
authorizing the Company to enter into the Merger Agreement with its newly-formed
wholly-owned subsidiary, EClips Media Technologies, Inc., a Delaware corporation
for the purpose of changing the state of incorporation of the Company to
Delaware from Florida. Pursuant to the Merger Agreement, the Company merged with
and into EClips Media with EClips Media continuing as the surviving
corporation  on April 21, 2010.  As a result of the Merger with EClips
Media, the outstanding 6% convertible debentures of the Company were assumed by
EClips Media and converted into outstanding 6% convertible debentures of EClips
Media. All options and rights to acquire the Company’s Common Stock, and all
outstanding warrants or rights outstanding to purchase the Company’s Common
Stock, automatically converted into equivalent options, warrants and rights to
purchase two (2) times the number of shares of EClips Media Common Stock at
fifty (50%) percent of the exercise, conversion or strike price of such
converted options, warrants and rights.





At June
30, 2010 and December 31, 2009, convertible debentures consisted of the
following:





June
      30, 2010
                  
                  
                  December
      31, 2009Long-term
      convertible debentures
                  
                  $
                  1,025,000
                  
                  
                  $
                  75,000Less:
      debt discount
                  
                  
                  (926,458
                  )
                  
                  
                  (67,380
                  )Long-term
      convertible debentures – net
                  
                  $
                  98,542
                  
                  
                  $
                  7,620





14
 
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2010


Total
amortization of debt discounts for the convertible debentures amounted to
$98,542 for the six months ended June 30, 2010, and is included in interest
expense. Accrued interest as of June 30, 2010 amounted to $12,082.




In
accordance with ASC Topic 815 “Derivatives and Hedging”, these convertible
debentures include a down-round provision under which the conversion price could
be affected by future equity offerings (see Note 5). Instruments with down-round
protection are not considered indexed to a company's own stock under ASC Topic
815, because neither the occurrence of a sale of common stock by the company at
market nor the issuance of another equity-linked instrument with a lower strike
price is an input to the fair value of a fixed-for-fixed option on equity
shares.




NOTE
8 - STOCKHOLDERS’ DEFICIT





Capital
Structure





On March
16, 2010, the Company filed the Definitive Schedule 14C with the SEC notifying
its stockholders that on March 2, 2010, a majority of the voting capital stock
of the Company took action in lieu of a special meeting of stockholders
authorizing the Company to enter into the Merger Agreement with its newly-formed
wholly-owned subsidiary, EClips Media Technologies, Inc., a Delaware corporation
for the purpose of changing the state of incorporation of the Company to
Delaware from Florida. Pursuant to the Merger Agreement, the Company merged with
and into EClips Media with EClips Media continuing as the surviving
corporation  on April 12, 2010.





On the
effective date of the Merger, (i) each issued and outstanding share of Common
Stock of the Company shall be converted into two (2) shares of EClips Media
Common Stock, (ii) each issued and outstanding share of Series D Preferred Stock
of the Company shall be converted into two (2) shares of EClips Media Series A
Preferred Stock and (iii) the outstanding share of EClips Media Common Stock
held by the Company shall be retired and canceled and shall resume the status of
authorized and unissued EClips Media Common Stock. All shares and per share
values are retroactively stated at the effective date of merger.





The
authorized capital of EClips Media consists of 750,000,000 shares of common
stock, par value $0.0001 per share and 10,000,000 shares of preferred stock, par
value $0.0001 per share of which 3,000,000 shares have been designated as series
A Preferred Stock.





Common
stock





On
February 4, 2010, the Company entered into a Consulting Agreement (the
“Agreement”) with Colonial Ventures, LLC (the “Consultant”), a company
controlled by Chairman and CEO of the Company. Pursuant to the Agreement, the
Company shall pay Consultant $10,000 per month during the term of the Agreement
(the “Base Compensation”). The Company issued 5,000,000 shares (10,000,000
post-merger) pursuant to this consulting agreement, 50% of which vested upon
execution of the Agreement and the remaining 50% of which will vest on the one
year anniversary of the Agreement as long as the Consultant is still engaged by
the Company and Designated Person is still serving as chief executive officer or
as a member of the board of directors of the Company. The Company valued these
common shares at the fair market value on the date of grant at $0.115 per share
or $575,000.  In connection with the issuance of these shares during the
six months ended June 30, 2010, the Company recorded stock based compensation of
$407,292 and prepaid expense of $167,708 to be amortized over the service or
vesting period.




On
February 5, 2010 the Company issued an aggregate of 6,000,000 shares (12,000,000
post-merger) of the Company’s common stock of the Company to two persons for
consulting services rendered. The Company valued these common shares at the fair
market value on the date of grant at $0.115 per share or $690,000. In connection
with the issuance of these shares during the six months ended June 30, 2010, the
Company recorded stock based consulting of $690,000.





On April
15, 2010 the Company issued an aggregate of 24,000,000 shares of the Company’s
common stock of the Company to two consultants for consulting services rendered.
The Company valued these common shares at the fair market value on the date of
grant at $0.08 per share or $1,920,000. In connection with the issuance of
these shares during the six months ended June 30, 2010, the Company recorded
stock based consulting of $1,920,000.





On June
21, 2010, in connection with the Asset Purchase Agreement with BIG, the Company
issued 20,000,000 shares of common stock valued at $0.04 per share or $800,000.
The Company valued these common shares at the fair market value on the date of
grant based on the recent selling price of the Company’s common
stock.





Pursuant
to an Employment Agreement dated on June 21, 2010 the Company issued
10,000,000 shares of common stock to the Company’s Chief Executive Officer. The
Company valued these common shares at the fair market value on the date of grant
at $0.04 per share or $400,000. In connection with the issuance of these
shares during the six months ended June 30, 2010, the Company recorded stock
based compensation of $400,000.





15
 
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
2010


NOTE
8 - RELATED PARTY TRANSACTIONS





On
February 4, 2010, the Company entered into a Consulting Agreement (the
“Agreement”) with Colonial Ventures, LLC (the “Consultant”), a company
controlled by Chairman and CEO of the Company. Pursuant to the Agreement, the
Company shall pay Consultant $10,000 per month during the term of the Agreement
(the “Base Compensation”). The Company issued 5,000,000 shares (10,000,000
post-merger) pursuant to this consulting agreement, 50% of which vested upon
execution of the Agreement and the remaining 50% of which will vest on the one
year anniversary of the Agreement as long as the Consultant is still engaged by
the Company and Designated Person is still serving as chief executive officer or
as a member of the board of directors of the Company.





During
the six months ended June 30, 2010, the Company paid leasehold improvements and
rent of $14,025 and $7,117, respectively on a facility lease by an affiliated
company for which our former Chief Executive officer and director, Greg Cohen,
is the President.





NOTE
9 – COMMITMENTS





Employment
Agreement




Pursuant
to the Employment Agreement of the Company’s Chief Executive Officer (CEO), Mr.
Eric Simon will serve as CEO for two years, with automatic renewals for
successive one year periods thereafter unless either party provides the other
party with written notice of his or its intention not to renew the Employment
Agreement at least three months prior to the expiration of the initial term or
any renewal term of the Employment Agreement. Mr. Simon’s employment
may be terminated in the event of death, disability, or for cause or without
cause as defined in the employment agreement.




Under the
terms of the Employment Agreement Mr. Simon is entitled to receive annual
compensation of $225,000 (the “Base Salary”) and will be eligible to participate
in benefits and awards provided by the Company. The Company is obligated to
issue to Mr. Simon 10,000,000 shares of common stock (the “Salary Shares”).
In addition to the Base Salary, Mr. Simon is eligible to receive an annual
bonus with a target of $78,750 in each year of employment based upon certain
agreed upon performance targets.





Consulting
Agreement





On
June 24, 2010 the Company engaged Brooke Capital Investments, LLC
(“Brooke”) to perform certain investor relations, branding and media relations
services for the Company for a 12 month period (the “Consulting
Agreement”). The Company shall pay to Brooke an amount equal to $150,000, in
cash, on the date of execution of this Agreement. This Agreement may not be
terminated during the term and under no circumstance is Brooke under any
obligation to return all or any portion of the Consulting Fee to the Company. In
connection with this consulting agreement during the six months ended June 30,
2010, the Company recorded investor relations expense of $2,500 and prepaid
expense of $147,500 to be amortized over the term of this
agreement.





NOTE
9 - SUBSEQUENT EVENTS





In July
2010, in connection with the sale of the Company’s common stock, the Company
issued 1,500,000 shares of common stock for net proceeds of approximately
$75,000.




16


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS





Cautionary
Notice Regarding Forward Looking Statements





This
report contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 including those relating to our
liquidity, our belief that we will not have sufficient cash and borrowing
capacity to meet our working capital needs for the next 12 months without
further financing, our expectations regarding acquisitions and new lines of
business, gross profit, gross margins and capital expenditures, Additionally,
words such as “expects,” “anticipates,” “intends,” “believes,” “will” and
similar words are used to identify forward-looking statements.





Some or
all of the results anticipated by these forward-looking statements may not
occur.  Important factors, uncertainties and risks that may cause actual
results to differ materially from these forward-looking statements include, but
are not limited to, the Risk Factors which appear in our filings and reports
made with the Securities and Exchange Commission, our lack of working capital,
the value of our securities, the impact of competition, the continuation or
worsening of current economic conditions, technology and technological
changes,  a potential decrease in consumer spending and the condition of
the domestic and global credit and capital markets. Additionally, these
forward-looking statements are presented as of the date this Form 10-Q is filed
with the Securities and Exchange Commission. We do not intend to update any of
these forward-looking statements.




Overview





The
Company was incorporated under the name “Swifty Carwash & Quick-Lube, Inc.”
in the state of Florida on September 25, 1997. On October 22, 1999, the Company
changed its name from “Swifty Carwash & Quick-Lube, Inc.” to “SwiftyNet.com,
Inc.” On January 29, 2001, the Company changed its name from “SwiftyNet.com,
Inc.” to “Yseek, Inc.” On June 10, 2003, the Company changed its name from
“Yseek, Inc.” to “Advanced 3-D Ultrasound Services, Inc.”  The Company
merged with a private Florida corporation known as World Energy Solutions, Inc.
effective August 17, 2005. Advanced 3D Ultrasound Services, Inc. (“A3D”)
remained as the surviving entity as the legal acquirer, and the Company was the
accounting acquirer.  On November 7, 2005, the Company changed its name to
World Energy Solutions, Inc. (“WESI”).  On November 7, 2005, WESI merged
with Professional Technical Systems, Inc. (“PTS”).  WESI remained as the
surviving entity as the legal acquirer, while PTS was the accounting acquirer.
On February 26, 2009, the Company changed its name to EClips Energy
Technologies, Inc. On March 16, 2010, the Company filed the Definitive Schedule
14C with the SEC notifying its stockholders that on March 2, 2010, a majority of
the voting capital stock of the Company took action in lieu of a special meeting
of stockholders authorizing the Company to enter into the Merger Agreement with
its newly-formed wholly-owned subsidiary, EClips Media, for the purpose of
changing the state of incorporation of the Company to Delaware from Florida.
Pursuant to the Merger Agreement, the Company merged with and into EClips Media
with EClips Media continuing as the surviving corporation  on April
21, 2010.On May 17, 2010, the Company changed its name from "Eclips Energy
Technologies, Inc." to , "Eclips Media Technologies, Inc."





The
Company’s operations were developing and manufacturing products and services,
which reduce fuel costs, save power & energy and protect the environment.
The products and services were made available for sale into markets in the
public and private sectors. In December 2009, the Company discontinued
these operations and disposed of certain of its subsidiaries, and prior periods
have been restated in the Company’s financial statements and related footnotes
to conform to this presentation.





On
December 22, 2009, the Company entered into a Purchase Agreement (the “Croxton
Purchase Agreement”) by and among the Company, Benjamin C. Croxton (the
“Seller”), and certain purchasers of securities owned by the Seller,
representing a controlling interest in the Company  (each a “ Purchaser ”
and collectively the "Purchasers").  The Croxton Purchase Agreement was
subsequently amended on January 12, 2010.  As amended the Croxton Purchase
Agreement contemplates a change of control of the Company through the
resignation of the existing officers and directors, and the purchase, in
privately negotiated transactions, of outstanding shares of the Company from the
Seller, and the appointment of Greg Cohen as director and Chief Executive
Officer.  Pursuant to the Croxton Purchase Agreement, Purchasers agreed to
purchase from the Seller an aggregate of (i) 50,000,000 shares of common stock,
$0.001 par value (“Common Stock”) and (ii) 1,500,000 shares of Series D
preferred stock (the “Series D Preferred Stock” and collectively with the Common
Stock, the “Shares”), comprising approximately 82% of the issued and outstanding
shares of voting stock of the Company. The closing of the purchase of the Shares
occurred on February 4, 2010.




In June
2010, the Croxton Stock Purchase Agreement has been restructured and the
undocumented advance made on behalf of the various contemplated purchasers has
been modified into a direct purchase by one individual (the “Buyer”) of all of
the 50,000,000 shares sold by Mr. Croxton pursuant to the Croxton Stock
Purchase Agreement (100,000,000 shares of common stock following the 2:1 forward
exchange effected May 17, 2010) which is anticipated to be followed by
offers made to various private purchases (the “Private Purchases”) by various
other persons in an amount to be agreed, and at a purchase price to be agreed,
with such seller.




17




During
the first quarter of 2010, the Company entered into a secured 6% demand
promissory note (the “Demand Note”) with RootZoo, Inc. (“RZ”).  RZ owned
and operated a website www.rootzoo.com, focused upon providing social networking
to sports fans, statistics and commentary to the sports community. During the
fourth quarter of 2009 the Company had entered into negotiations with the then
fifty (50%) percent owner of the common stock of RZ and one of its then two
directors (the “RZ Part Owner”) to acquire RZ pursuant to an Asset Purchase
Agreement (the “RZ Acquisition”), but negotiations for the RZ Acquisition broke
down and have since been terminated. As a result of the discontinuance of all
negotiations for the RZ Acquisition, the Company elected to foreclose on its
loan and to acquire the RZ business under its foreclosed loan agreement. On
May 15, 2010 the Company demanded repayment of all outstanding amounts
under the Demand Note. On June 6, 2010, RZ entered into a Peaceful
Possession Letter Agreement with the Company pursuant to which RZ granted the
Company all rights of possession in and to the collateral which secures the
Demand Note, representing substantially all of the assets of RZ in partial
satisfaction with the Demand Note debt. Subsequently the Company, through an
Assignment Agreement, assigned the rights and possession of the collateral to
its subsidiary, RZ Acquisition Corp. Following termination of negotiations,
all of the persons associated with the development of the RZ business resigned.
RZ presently has no employees or others who perform services necessary to
maintain and develop RZ business successfully. Due to the termination of
negotiations, the Company believes that the assets of RZ has no value and
worthless. Consequently, the Company recorded a total impairment loss of
$173,257 which represents the principal amount of $171,100 and interest
receivable of $2,157 in connection with the secured 6% demand promissory note
agreement.




On June
21, 2010, the Company entered into an Asset Purchase Agreement (the “Purchase
Agreement”) by and among the Company, SD and Brand Interaction Group, LLC, a New
Jersey limited liability (“BIG”). pursuant to which, the Company, through its
wholly-owned subsidiary SD, acquired all of the business and assets and assumed
certain liabilities of BIG owned by Eric Simon our Chief Executive Officer
(“CEO”). BIG owned Fantasy Football SUPERDRAFTTM, a
sports entertainment and media business focused on promotion of fantasy league
events through live events hosted in various venues such as Las Vegas, and
online, which feature sports and media personalities, and the sale and marketing
of various sports oriented products and services.




For the
six months ended June 30, 2010, we had a net loss of $ 4,821,166 and $373,820 of
net cash used in operations. At June 30, 2010 we had a working capital
deficiency of $1,667,457. Additionally at June 30, 2010, we had an accumulated
deficit of $29,301,576. These matters and the Company’s expected needs for
capital investments required to support operational growth raise substantial
doubt about its ability to continue as a going concern. The Company’s unaudited
financial statements do not include any adjustments to reflect the possible
effects on recoverability and classification of assets or the amounts and
classification of liabilities that may result from our inability to continue as
a going concern. These figures reflect only 9 days of its SD Acquisition’s
operations.




Critical
Accounting Policies and Estimates





Our
financial statements and accompanying notes are prepared in accordance with
generally accepted accounting principles in the United States. Preparing
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue and expenses. These
estimates and assumptions are affected by management's applications of
accounting policies. Critical accounting policies for our company include
revenue recognition and accounting for stock based compensation.





Stock
based Compensation





In
December 2004, the Financial Accounting Standards Board, or FASB, issued FASB
ASC Topic 718: Compensation – Stock Compensation (“ASC 718”). Under ASC 718,
companies are required to measure the compensation costs of share-based
compensation arrangements based on the grant-date fair value and recognize the
costs in the financial statements over the period during which employees are
required to provide services. Share-based compensation arrangements include
stock options, restricted share plans, performance-based awards, share
appreciation rights and employee share purchase plans. Companies may elect to
apply this statement either prospectively, or on a modified version of
retrospective application under which financial statements for prior periods are
adjusted on a basis consistent with the pro forma disclosures required for those
periods under ASC 718. Upon adoption of ASC 718, the Company elected to value
employee stock options using the Black-Scholes option valuation method that uses
assumptions that relate to the expected volatility of the Company’s common
stock, the expected dividend yield of our stock, the expected life of the
options and the risk free interest rate. Such compensation amounts, if any, are
amortized over the respective vesting periods or period of service of the option
grant.





Use
of Estimates




In
preparing the consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the statements of financial condition, and
revenues and expenses for the years then ended.  Actual results may differ
significantly from those estimates. Significant estimates made by management
include, but are not limited to, the assumptions used to calculate stock-based
compensation, derivative liabilities, debt discount, the useful life of property
and equipment, purchase price fair value allocation for the business
acquisition, valuation and amortization periods of intangible asset, and 
valuation of goodwill.





18


Property
and Equipment





Property
and equipment are carried at cost. The cost of repairs and maintenance is
expensed as incurred; major replacements and improvements are capitalized. 
When assets are retired or disposed of, the cost and accumulated depreciation
are removed from the accounts, and any resulting gains or losses are included in
income in the year of disposition.  The Company examines the possibility of
decreases in the value of fixed assets when events or changes in circumstances
reflect the fact that their recorded value may not be recoverable. Depreciation
is calculated on a straight-line basis over the estimated useful life of the
assets.





Valuation
of Long-Lived and Intangible Assets and Goodwill




Pursuant
to ASC Topic 350, Goodwill and Other Intangible Asset and ASC 360-10-35-15,
“Impairment or Disposal of Long-Lived Assets”, we assess the impairment of
identifiable intangibles, long-lived assets and goodwill annually or whenever
events or circumstances indicate that the carrying value of these assets may not
be recoverable.  Factors we consider include and are not limited to the
following:




·
            Significant
      changes in performance relative to expected operating
    results




·
            Significant
      changes in the use of the assets or the strategy of our overall
      business




·
            Significant
      industry or economic trends




As
determined in accordance with ASC Topic 350, if the carrying amount of goodwill
of a reporting unit exceeds its fair value, the impairment loss is measured as
the amount by which the carrying amount exceeds the fair market value of the
assets.  In accordance with ASC 360-10-35-15, in determining if impairment
exists, we estimate the undiscounted cash flows to be generated from the use and
ultimate disposition of these assets.  The impairment loss is measured as
the amount by which the carrying amount of the assets exceeds the fair market
value of the assets.




Derivative
Liabilities





In June
2008, a FASB approved guidance related to the determination of whether a
freestanding equity-linked instrument should be classified as equity or debt
under the provisions of FASB ASC Topic No. 815-40,Derivatives and Hedging –
Contracts in an Entity’s Own Stock . The adoption of this requirement
will affect accounting for convertible instruments and warrants with provisions
that protect holders from declines in the stock price ("down-round" provisions).
Warrants with such provisions will no longer be recorded in equity and would
have to be reclassified to a liability. Instruments with down-round protection
are not considered indexed to a company's own stock under ASC Topic 815, because
neither the occurrence of a sale of common stock by the company at market nor
the issuance of another equity-linked instrument with a lower strike price is an
input to the fair value of a fixed-for-fixed option on equity shares. ASC Topic
815 guidance is to be applied to outstanding instruments as of the beginning of
the fiscal year in which the Issue is applied. The cumulative effect of the
change in accounting principle shall be recognized as an adjustment to the
opening balance of retained earnings (or other appropriate components of equity)
for that fiscal year, presented separately. If an instrument is classified as
debt, it is valued at fair value, and this value is re-measured on an ongoing
basis, with changes recorded on the statement of operations in each reporting
period.





Income Taxes




Income
taxes are accounted for under the asset and liability method as prescribed by
ASC Topic 740: Income Taxes (“ASC 740”). It requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been recognized in our financial statements or tax returns. The charge
for taxation is based on the results for the year as adjusted for items, which
are non-assessable or disallowed. It is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet date.




Deferred
tax is accounted for using the balance sheet liability method in respect of
temporary differences arising from differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax
basis used in the computation of assessable tax profit. In principle,
deferred tax liabilities are recognized for all taxable temporary differences,
and deferred tax assets are recognized to the extent that it is probably that
taxable profit will be available against which deductible temporary differences
can be utilized.




Deferred
tax is calculated using tax rates that are expected to apply to the period when
the asset is realized or the liability is settled. Deferred tax is charged or
credited in the income statement, except when it is related to items credited or
charged directly to equity, in which case the deferred tax is also dealt with in
equity.




Deferred
tax assets and liabilities are offset when they relate to income taxes levied by
the same taxation authority and we intend to settle our current tax assets
and liabilities on a net basis.





19


Pursuant
to accounting standards related to the accounting for uncertainty in income
taxes, a tax position is recognized as a benefit only if it is “more likely than
not” that the tax position would be sustained in a tax examination, with a tax
examination being presumed to occur. The amount recognized is the largest amount
of tax benefit that is greater than 50% likely of being realized on examination.
For tax positions not meeting the “more likely than not” test, no tax
benefit is recorded. The adoption had no effect on our financial
statements.




Recent
accounting pronouncements





In June
2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally
Accepted Accounting Principles” (ASC Topic 105) which establishes the FASB
Accounting Standards Codification (“the Codification” or “ASC”) as the official
single source of authoritative U.S. generally accepted accounting principles
(“GAAP”). All existing accounting standards are superseded. All other accounting
guidance not included in the Codification will be considered non-authoritative.
The Codification also includes all relevant Securities and Exchange Commission
(“SEC”) guidance organized using the same topical structure in separate sections
within the Codification.





Following
the Codification, the Board will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts.
Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to
update the Codification, provide background information about the guidance and
provide the basis for conclusions on the changes to the
Codification.





The
Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented. The Codification is effective for our third-quarter
2009 financial statements and the principal impact on our financial statements
is limited to disclosures as all future references to authoritative accounting
literature will be referenced in accordance with the Codification.





In
January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06,
“Improving Disclosures about Fair Value Measurements” an amendment to ASC Topic
820, “Fair Value Measurements and Disclosures.”  This amendment requires an
entity to: (i) disclose separately the amounts of significant transfers in and
out of Level 1 and Level 2 fair value measurements and describe the reasons for
the transfers and (ii) present separate information for Level 3 activity
pertaining to gross purchases, sales, issuances, and settlements.  ASU No.
2010-06 is effective for the Company for interim and annual reporting beginning
after December 15, 2009, with one new disclosure effective after December 15,
2010. The adoption of ASU No. 2010-06 did not have a material impact on the
results of operations and financial condition.





In
February 2010, the FASB issued an amendment to the accounting standards related
to the accounting for, and disclosure of, subsequent events in an entity’s
consolidated financial statements. This standard amends the authoritative
guidance for subsequent events that was previously issued and among other things
exempts Securities and Exchange Commission registrants from the requirement to
disclose the date through which it has evaluated subsequent events for either
original or restated financial statements. This standard does not apply to
subsequent events or transactions that are within the scope of other applicable
GAAP that provides different guidance on the accounting treatment for subsequent
events or transactions. The adoption of this standard did not have a material
impact on the Company’s consolidated financial statements.





In July
2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures
about the Credit Quality of Financing Receivables and the Allowance for Credit
Losses.  ASU 2010-20 requires additional disclosures about the
credit quality of a company’s loans and the allowance for loan losses held
against those loans.  Companies will need to disaggregate new and existing
disclosures based on how it develops its allowance for loan losses and how it
manages credit exposures.  Additional disclosure is also required about the
credit quality indicators of loans by class at the end of the reporting period,
the aging of past due loans, information about troubled debt restructurings, and
significant purchases and sales of loans during the reporting period by
class.  The new guidance is effective for interim- and annual periods
beginning after December 15, 2010.  The Company anticipates that adoption
of these additional disclosures will not have a material effect on its financial
position or results of operations.





Other
accounting standards that have been issued or proposed by FASB that do not
require adoption until a future date are not expected to have a material impact
on the consolidated financial statements upon adoption.





20


Results
of Operations





Six
months Ended June 30, 2010 Compared to the Six months Ended June 30,
2009





Net
revenues





We have
not generated meaningful revenues during the six months ended June 30,
2010.





Operating
Expenses





Costs
associated with the administration of the Company were included in continued
operations and in relation to the public entity. Payroll and stock based
compensation expenses were $874,215 and 662,429 for the six months ended June
30, 2010 and 2009, respectively, an increase of approximately of $211,786 or
32%.  The increase was primarily attributable to the issuance of our common
stock to our former CEO pursuant to a consulting agreement in February 2010. In
addition, Pursuant to an Employment Agreement dated on June 21, 2010 we
issued 10,000,000 shares of common stock to our Chief Executive Officer valued
at $0.04 per share or $400,000.





Professional
and consulting expenses were $2,698,986 and $131,628 for the six months ended
June 30, 2010 and 2009, respectively, an increase of approximately of
$2,567,358 or 1950%.  Professional expenses were incurred for the audits
and public filing requirements.  The increase was primarily attributable to
the issuance of our common stock to four consultants for services rendered
amounting to $2,610,000 during the six months ended June 30, 2010.




General
and administrative expenses, which consist of office expenses, insurance, rent
and general operating expenses totaled $275,405 for the six months ended June
30, 2010, as compared to $117,293 for the six months ended June 30, 2009, an
increase of approximately $158,112 or 135%. The increase is primarily
attributable to the impairment loss of $173,258 in connection with the issuance
of a secured 6% demand promissory note  to RootZoo Inc. (“RZ”), an entity
the Company contemplated acquiring  but negotiations broke down and have
since been terminated. As a result of the discontinuance of all
negotiations for RZ, the Company elected to foreclose on its loan and to acquire
the RZ business under its foreclosed loan agreement. On May 15, 2010 the
Company demanded repayment of all outstanding amounts under the Demand Note. On
June 6, 2010, RZ entered into a Peaceful Possession Letter Agreement with
the Company pursuant to which RZ granted the Company all rights of possession in
and to the collateral which secures the Demand Note,
representing substantially all of the assets of RZ in partial satisfaction
with the Demand Note debt. Subsequently the Company, through an Assignment
Agreement, assigned the rights and possession of the collateral to its
subsidiary, RZ Acquisition Corp. Due to the termination of this negotiation, we
believe RZ is financially unable to satisfy its obligations to us and the
foreclosed assets of RZ has no value and  are worthless. Such increase was
offset by decrease in rent expense of $26,204 during the six months ended June
30, 2010.




Total
Other Expense





Our total other expenses in the six months ended June
30, 2010 primarily include expenses associated with derivative liabilities and
interest expense.





CHANGE IN
FAIR VALUE OF DERIVATIVE LIABILITIES AND DERIVATIVE LIABILITIES EXPENSE





We recorded derivative liability expense of
$3,260,076 in connection with the issuance of the convertible debentures with
warrants for the six months ended June 30, 2010. Change in fair value of
derivative liabilities expense consist of income or expense associated with the
change in the fair value of derivative liabilities as a result of the
application of FASB ASC Topic No. 815-40,Derivatives and Hedging –
Contracts in an Entity’s Own Stock , to our financial statements. The
variation in fair value of the derivative liabilities between measurement dates
amounted to a decrease of $2,399,047 during the six months ended June 30, 2010.
The increase/decrease in fair value of the derivative liabilities has been
recognized as other expense/income.  We did not have a comparable other
expense during the same period in 2009 for we have issued convertible debentures
beginning in December 2009.





The adoption of ASC Topic No. 815-40’s requirements
will affect accounting for convertible instruments and warrants with provisions
that protect holders from declines in the stock price (“down-round”
provisions).  Warrants with such provisions will no longer be recorded in
equity. Instruments with down-round protection are not considered indexed to a
company’s own stock under ASC Topic No. 815-40, because neither the occurrence
of a sale of common stock by the company at market nor the issuance of another
equity-linked instrument with a lower strike price is an input to the fair value
of a fixed-for-fixed option on equity shares. In connection with the issuance of
the 6% Senior Convertible Debentures beginning on December 17, 2009, the Company
has determined that the terms of the convertible debenture include a down-round
provision under which the conversion price could be affected by future equity
offerings undertaken by the Company until the 18 month anniversary of
such convertible debenture.





21


So long as convertible instruments and warrants with
down-round provisions that protect holders from declines in the stock price
remain outstanding we will recognize other income or expense in future periods
based upon the fluctuation of the market price of our common stock.  This
non-cash income or expense is reasonably anticipated to materially affect our
net loss in future periods.  We are, however, unable to estimate the amount
of such income/expense in future periods as the income/expense is partly based
on the market price of our common stock at the end of a future measurement
date.  In addition, in the future if we issue securities which are
classified as derivatives we will incur expense and income items in future
periods.  Investors are cautioned to consider the impact of this non-cash
accounting treatment on our financial statements.





INTEREST
EXPENSE





Interest expense consists primarily of interest
recognized in connection with the amortization of debt discount, amortization of
debt issuance cost and interest on our convertible debentures. The increase in
interest expense during the six months ended June 30, 2010 when compared to the
same period in 2009 is primarily attributable to the amortization of the debt
discount amounting to approximately $98,542 associated with the 6% convertible
debenture.





Discontinued
Operations





For the
six months ended June 30, 2010 and 2009, we recorded total loss from
discontinued operations of $0 and $94,641, respectively, associated with the
discontinuance of our subsidiaries. Included in the loss from discontinued
operations, total product sales and cost of goods sold from discontinued
operations were $199,726 and $161,941 for the six months ended June 30,
2009.  Research and development have been included in the loss from
discontinued operations, in the amounts of $132,426 for the six months ended
June 30, 2009.





Loss
from continuing operations





We
recorded loss from continuing operations of $4,821,166 for the six months ended
June 30, 2010 as compared to $913,850 for the six months ended June 30,
2009.





Net
Loss





We
recorded net loss of $4,821,161 for the six months ended June 30, 2010 as
compared to $1,008,491 for the six months ended June 30, 2009.





Three
months Ended June 30, 2010 Compared to the Three months Ended June 30,
2009





Net
revenues





We have
not generated meaningful revenues during the three months ended June 30,
2010.





Operating
Expenses





Costs
associated with the administration of the Company were included in continued
operations and in relation to the public entity. Payroll and stock based
compensation expenses were $508,798 and 497,551 for the three months ended June
30, 2010 and 2009, respectively, an increase of approximately of $11,247 or
2%.  The increase was primarily attributable to the issuance of our common
stock to our CEO pursuant to an employment agreement in June
2010.





Professional
and consulting expenses were $1,932,300 and $48,058 for the three months ended
June 30, 2010 and 2009, respectively, an increase of approximately of
$1,884,242 or 3921%.  Professional expenses were incurred for the audits
and public filing requirements.  The increase was primarily attributable to
the issuance of our common stock to two consultants for services rendered
amounting to $1,920,000 during the three months ended June 30,
2010.




General
and administrative expenses, which consist of office expenses, insurance, rent
and general operating expenses totaled $256,592 for the three months ended June
30, 2010, as compared to $105,976 for the three months ended June 30, 2009, an
increase of approximately $150,616 or 142%. The increase is primarily
attributable to the impairment loss of $173,258 in connection with the issuance
of a secured 6% demand promissory note agreement to, RZ, an entity the Company
contemplated acquiring  but negotiations broke down and have since been
terminated. As a result of the discontinuance of all negotiations for RZ,
the Company elected to foreclose on its loan and to acquire the RZ business
under its foreclosed loan agreement. On May 15, 2010 the Company demanded
repayment of all outstanding amounts under the Demand Note. On June 6,
2010, RZ entered into a Peaceful Possession Letter Agreement with the Company
pursuant to which RZ granted the Company all rights of possession in and to the
collateral which secures the Demand Note, representing substantially all of
the assets of RZ in partial satisfaction with the Demand Note debt. Subsequently
the Company, through an Assignment Agreement, assigned the rights and possession
of the collateral to its subsidiary, RZ Acquisition Corp. Due to the
termination of this negotiation, we believe the foreclosed assets of RZ has no
value and are worthless. Such increase was offset by a decrease in rent expense
of approximately $33,000 during the six months ended June 30, 2010.





22


Total
Other Expense





Our total other expenses in the three months ended
June 30, 2010 primarily include expenses associated with derivative liabilities
and interest expense.





CHANGE IN
FAIR VALUE OF DERIVATIVE LIABILITIES AND DERIVATIVE LIABILITIES EXPENSE





We recorded derivative liability expense of
$2,309,910 in connection with the issuance of the convertible debentures with
warrants for the three months ended June 30, 2010. Change in fair value of
derivative liabilities expense consist of income or expense associated with the
change in the fair value of derivative liabilities as a result of the
application of FASB ASC Topic No. 815-40,Derivatives and Hedging –
Contracts in an Entity’s Own Stock , to our financial statements. The
variation in fair value of the derivative liabilities between measurement dates
amounted to a decrease of $2,018,205 during the three months ended June 30,
2010. The increase/decrease in fair value of the derivative liabilities has been
recognized as other expense/income.  We did not have a comparable other
expense during the same period in 2009 for we have issued convertible debentures
beginning in December 2009.





The adoption of ASC Topic No. 815-40’s requirements
will affect accounting for convertible instruments and warrants with provisions
that protect holders from declines in the stock price (“down-round”
provisions).  Warrants with such provisions will no longer be recorded in
equity. Instruments with down-round protection are not considered indexed to a
company’s own stock under ASC Topic No. 815-40, because neither the occurrence
of a sale of common stock by the company at market nor the issuance of another
equity-linked instrument with a lower strike price is an input to the fair value
of a fixed-for-fixed option on equity shares. In connection with the issuance of
the 6% Senior Convertible Debentures beginning on December 17, 2009, the Company
has determined that the terms of the convertible debenture include a down-round
provision under which the conversion price could be affected by future equity
offerings undertaken by the Company until the 18 month anniversary of
such convertible debenture.





So long as convertible instruments and warrants with
down-round provisions that protect holders from declines in the stock price
remain outstanding we will recognize other income or expense in future periods
based upon the fluctuation of the market price of our common stock.  This
non-cash income or expense is reasonably anticipated to materially affect our
net loss in future periods.  We are, however, unable to estimate the amount
of such income/expense in future periods as the income/expense is partly based
on the market price of our common stock at the end of a future measurement
date.  In addition, in the future if we issue securities which are
classified as derivatives we will incur expense and income items in future
periods.  Investors are cautioned to consider the impact of this non-cash
accounting treatment on our financial statements.





INTEREST
EXPENSE





Interest expense consists primarily of interest
recognized in connection with the amortization of debt discount, amortization of
debt issuance cost and interest on our convertible debentures. The increase in
interest expense during the three months ended June 30, 2010 when compared to
the same period in 2009 is primarily attributable to the amortization of the
debt discount amounting to approximately $72,500 associated with the 6%
convertible debenture.





Discontinued
Operations





For the
three months ended June 30, 2010 and 2009, we recorded total loss from
discontinued operations of $0 and $42,280, respectively, associated with the
discontinuance of our subsidiaries. Included in the loss from discontinued
operations, total product sales and cost of goods sold from discontinued
operations were $113,126 and $100,456 for the three months ended June 30,
2009. Research and development have been included in the loss from
discontinued operations, in the amounts of $54,949 for the three months ended
June 30, 2009.





Loss
from continuing operations





We
recorded loss from continuing operations of $3,070,917for the three months ended
June 30, 2010 as compared to $653,412 for the three months ended June 30,
2009.





Net
Loss





We
recorded net loss of $3,070,917 for the three months ended June 30, 2010 as
compared to $695,692 for the three months ended June 30, 2009.





23


Liquidity
and Capital Resources





Liquidity
is the ability of a company to generate funds to support its current and future
operations, satisfy its obligations, and otherwise operate on an ongoing basis.
At June 30, 2010, we had a cash balance of $254,622. Our working capital deficit
is $1,667,457 at June 30, 2010. We reported a net loss of $4,821,166 and
$1,008,491 during the six months ended June 30, 2010 and 2009,
respectively.  We do not anticipate we will be profitable in fiscal
2010.





We
reported a net increase in cash for the six months ended June 30, 2010 of
$254,622. While we currently have no material commitments for capital
expenditures, at June 30, 2010 we owed $1,025,000 under various convertible
debentures.  During the six months ended June 30, 2010, we have raised net
proceeds of $937,500 from convertible debentures. We do not presently have any
external sources of working capital.




We do not
have revenues to fund our operating expenses.  We presently do not have any
available credit, bank financing or other external sources of liquidity. We will
need to obtain additional capital in order to expand operations and become
profitable. In order to obtain capital, we may need to sell additional shares of
our common stock or borrow funds from private lenders. There can be no assurance
that we will be successful in obtaining additional funding.  Additional
capital is being sought, but we cannot guarantee that we will be able to obtain
such investments. Financing transactions may include the issuance of equity or
debt securities, obtaining credit facilities, or other financing mechanisms.
However, the trading price of our common stock and a downturn in the U.S. equity
and debt markets could make it more difficult to obtain financing through the
issuance of equity or debt securities. Even if we are able to raise the funds
required, it is possible that we could incur unexpected costs and expenses, fail
to collect significant amounts owed to us, or experience unexpected cash
requirements that would force us to seek alternative financing. Furthermore, if
we issue additional equity or debt securities, stockholders may experience
additional dilution or the new equity securities may have rights, preferences or
privileges senior to those of existing holders of our common stock. If
additional financing is not available or is not available on acceptable terms,
we will have to curtail our operations.





Operating
activities





Net cash
flows used in operating activities for the six months ended June 30, 2010
amounted to $373,820 and was primarily attributable to our net losses of
$4,821,166, offset by amortization of debt discount and debt issuance costs of
$101,147, stock based expenses of $3,419,792, derivative liability expense of
$3,260,076, change in fair value of derivative liabilities of ($2,399,047),
depreciation and amortization of $8,103 and add back total changes in assets and
liabilities of $115,982. Net cash flows used in operating activities for the six
months ended June 30, 2009 amounted to $280,143 and was primarily attributable
to our net losses of $913,850, offset by stock based expenses of $477,457,
discontinued operating activities such as depreciation of $89,240, and total
changes in assets and liabilities of $161,651.





Investing activities





Net cash
flows used in investing activities was $309,058 for the six months ended June
30, 2010. We paid leasehold improvement of $14,025, purchase of equipment of
$23,451, cash used in acquisition (net of cash acquired) of $100,482 and
invested $171,100 on a 6% demand promissory note receivable. Net cash flows used
in investing activities was $787 for the six months ended June 30,
2009.





Financing
activities





Net cash
flows provided by financing activities was $937,500 for the six months ended
June 30, 2010. We received net proceeds from convertible debentures of $950,000
offset by debt issuance cost of $12,500. Net cash flows provided by financing
activities was $286,641 for the six months ended June 30, 2009. We received net
proceeds from sale of our stock of $286,641.





Debenture
Financing





Between
December 2009 and June 2010, the Company entered into various securities
purchase agreement with accredited investors pursuant to which the Company
agreed to issue an aggregate of $1,025,000 of its 6% Convertible Debentures for
an aggregate purchase price of $1,025,000. The Debentures bear interest at 6%
per annum and matures twenty-four months from the date of issuance. The
Debentures are convertible at the option of the holder at any time into shares
of common stock, at a conversion price equal to the lesser of (i) $0.025 per
share or (ii) until the eighteen (18) months anniversary of the Debenture, the
lowest price paid per share or the lowest conversion price per share in a
subsequent sale of the Company’s equity and/or convertible debt securities paid
by investors after the date of the Debenture.  In connection with the
Agreements, the Investors received an aggregate of 41,000,000 warrants to
purchase shares of the Company’s common stock. The Warrants are exercisable for
a period of five years from the date of issuance at an exercise price of $0.025,
subject to adjustment in certain circumstances. The Investor may exercise the
Warrant on a cashless basis if the Fair Market Value (as defined in the Warrant)
of one share of common stock is greater than the Initial Exercise
Price.





24


Contractual
Obligations





We have
certain fixed contractual obligations and commitments that include future
estimated payments. Changes in our business needs, cancellation provisions,
changing interest rates, and other factors may result in actual payments
differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our consolidated financial position, results of operations, and cash
flows.





The
following tables summarize our contractual obligations as of June 30, 2010, and
the effect these obligations are expected to have on our liquidity and cash
flows in future periods.




PaymentsDuebyPeriodTotal
                      
                      
                      Lessthan1
                        year
                      
                      
                      1-3
                        Years
                      
                      
                      4-5
                        Years
                      
                      
                      5Years
                        +Contractual
      Obligations :Long
      term loans
                      
                      $
                      —
                      
                      
                      
                      —
                      
                      
                      
                      1,025,000
                      
                      
                      
                      —
                      
                      
                      
                      —Total
      Contractual Obligations:
                      
                      $
                      —
                      
                      
                      
                      —
                      
                      
                      
                      1,025,000
                      
                      
                      
                      —
                      
                      
                      
                      —




Off-balance
Sheet Arrangements





We have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
stockholder’s equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity.





ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





Not required for smaller
reporting companies.





ITEM 4.
CONTROLS AND PROCEDURES.





Disclosure
Controls and Procedures.





We
maintain “disclosure controls and procedures,” as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
(the “Exchange Act”), that are designed to ensure that information required to
be disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified
in Securities and Exchange Commission rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer, to allow timely decisions regarding required disclosure. In designing
and evaluating our disclosure controls and procedures, management recognized
that disclosure controls and procedures, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the disclosure controls and procedures are met. Additionally, in
designing disclosure controls and procedures, our management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible disclosure controls and procedures. The design of any disclosure
controls and procedures also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions.





With
respect to the quarterly period ending June 30, 2010, under the supervision and
with the participation of our management, we conducted an evaluation of the
effectiveness of the design and operations of our disclosure controls and
procedures. Based upon this evaluation, the Company’s management has concluded
that its disclosure controls and procedures were not effective as of June 30,
2010 due to the Company’s limited internal resources and lack of ability to have
multiple levels of transaction review.





Management
is in the process of determining how best to change our current system and
implement a more effective system to insure that information required to be
disclosed in this quarterly report on Form 10-Q has been recorded, processed,
summarized and reported accurately. Our management acknowledges the existence of
this problem, and intends to developed procedures to address them to the extent
possible given limitations in financial and manpower resources. While management
is working on a plan, no assurance can be made at this point that the
implementation of such controls and procedures will be completed in a timely
manner or that they will be adequate once implemented.





25


Changes
in Internal Controls.





There
have been no changes in the Company’s internal control over financial reporting
during the six months ended June 30, 2010 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal controls over
financial reporting.





PART II -
OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS.





None.





ITEM 1A.
RISK FACTORS.





Not required for smaller
reporting companies.





ITEM
2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.





On April
15, 2010 the Company issued an aggregate of 24,000,000 shares of the Company’s
common stock of the Company to two consultants for consulting services rendered.
The securities were issued pursuant to the exemption from registration provided
by Section 4(2) of the Securities Act of 1933, as amended.





On June
21, 2010, the Company issued 20,000,000 shares of common stock to Brand
Interaction Group, LLC. The securities were issued pursuant to the exemption
from registration provided by Section 4(2) of the Securities Act of 1933,
as amended.





Pursuant
to an Employment Agreement dated on June 21, 2010 the Company issued
10,000,000 shares of common stock to the Company’s Chief Executive Officer. The
securities were issued pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended.





In July
2010, in connection with the sale of the Company’s common stock, the Company
issued 1,500,000 shares of common stock for net proceeds of approximately
$75,000. The securities were issued in a private transaction pursuant to the
exemption from registration provided by Section 4(2) of the Securities Act
of 1933, as amended, the proceeds of which were used for general working
capital.





Between
April 2010 and June 2010, the Company entered into securities purchase agreement
with an accredited investor pursuant to which the Company agreed to issue
$700,000 of its 6% Convertible Debentures for an aggregate purchase price of
$700,000 with the same terms and conditions of the debentures issued on February
4, 2010. In connection with the Agreement, the Investor received a warrant to
purchase 28,000,000 shares of the Company’s common stock. The Warrant is
exercisable for a period of five years from the date of issuance at an initial
exercise price of $0.025, subject to adjustment in certain circumstances. The
securities were issued in a private transaction pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as
amended, the proceeds of which were used for general working
capital.





ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.





None.





ITEM
4.  (REMOVED AND RESERVED).





ITEM
5.  OTHER INFORMATION.





None.





ITEM
6. EXHIBITS





31.1
              Certification
      of the Chief Executive Officer  and Chief Financial Officer
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002*32.1
              Certification
      of Chief Executive Officer  and Chief Financial Officer pursuant
      to Section 906 of the Sarbanes-Oxley Act of
  2002*


* Filed herein




26




SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.




ECLIPS
      MEDIA TECHNOLOGIES, INC.Date:
      August 16, 2010
                By:
                /s/ Eric
      SimonEric
      SimonChief
      Executive Officer(principal
      executive officer, principal financialand
      accounting officer)




27