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 March 31, 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)
 
 Eclips
Energy Technologies, Inc.
 3900A 31stStreet N., St. Petersburg,
Florida 33714
 (Former
name, former address and former fiscal year, if changed since last
report)
 
 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  No o
 
 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  No o
 
 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 o  No x
 
 Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.  173,525,338 shares of
common stock are issued and outstanding as of May 17,
2010.
 
 
 
 ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 FORM
10-Q
 March
31, 2010
 
 TABLE
OF CONTENTS


Page
      No.PART
      I. - FINANCIAL INFORMATIONItem
      1.
                            Financial
      Statements
                            3Consolidated
      Balance Sheets as of March 31, 2010 (Unaudited) and December 31,
      2009Consolidated
      Statements of Income for the Three Months Ended March 31, 2010 and 2009
      (unaudited)Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2010 and
      2009 (unaudited)Notes
      to Unaudited Consolidated Financial Statements.Item
      2.
                            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                            17Item
      3.
                            Quantitative
      and Qualitative Disclosures About Market Risk.
                            24Item
      4T.
                            Controls
      and Procedures.
                            24PART
      II - OTHER INFORMATIONItem
      1.
                            Legal
      Proceedings.
                            25Item
      1A.
                            Risk
      Factors.
                            25Item
      2.
                            Unregistered
      Sales of Equity Securities and Use of Proceeds.
                            25Item
      3.
                            Default
      upon Senior Securities.
                            25Item
      4.
                            REMOVED
      AND RESERVED
                            25Item
      5.
                            Other
      Information.
                            25Item
      6.
                            Exhibits.
                            25




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 SUBSIDIARYCONSOLIDATED
      BALANCE SHEETS


March
      31, 2010
                                        
                                        
                                        December
      31, 2009(Unaudited)
                                        
                                        
                                        (Audited)ASSETSCURRENT
      ASSETS:Cash
                                        
                                        $
                                        22,096
                                        
                                        
                                        $
                                        -Note
      receivable - related party
                                        
                                        
                                        130,450
                                        
                                        
                                        
                                        -Interest
      receivable
                                        
                                        
                                        432
                                        
                                        
                                        
                                        -Prepaid
      expense
                                        
                                        
                                        275,775
                                        
                                        
                                        
                                        -Debt
      issuance cost
                                        
                                        
                                        11,458
                                        
                                        
                                        
                                        -Total
      Current Assets
                                        
                                        
                                        440,211
                                        
                                        
                                        
                                        -OTHER
      ASSETS:Property
      and equipment, net
                                        
                                        
                                        8,325
                                        
                                        
                                        
                                        -Deposits
                                        
                                        
                                        2,564
                                        
                                        
                                        
                                        -Total
      Assets
                                        
                                        $
                                        451,100
                                        
                                        
                                        $
                                        -LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                                        
                                        $
                                        90,983
                                        
                                        
                                        $
                                        -Derivative
      liability
                                        
                                        
                                        894,091
                                        
                                        
                                        
                                        67,147Liabilities
      of discontinued operations
                                        
                                        
                                        167,686
                                        
                                        
                                        
                                        167,686Total
      current liabilities
                                        
                                        
                                        1,152,760
                                        
                                        
                                        
                                        234,833LONG-TERM
      LIABILITIES:Convertible
      debentures, net of debt discount
                                        
                                        
                                        26,042
                                        
                                        
                                        
                                        7,620Total
      Liabilities
                                        
                                        
                                        1,178,802
                                        
                                        
                                        
                                        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 outstanding and outstanding,
    respectively
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Common
      stock; $.0001 par value; 750,000,000 shares authorized; 149,525,338 and
      129,725,338 shares issued and outstanding, respectively
                                        
                                        
                                        14,953
                                        
                                        
                                        
                                        12,972Additional
      paid-in capital
                                        
                                        
                                        25,487,704
                                        
                                        
                                        
                                        24,224,685Accumulated
      deficit
                                        
                                        
                                        (26,230,659
                                        )
                                        
                                        
                                        (24,480,410
                                        )Total
      Stockholders' Deficit
                                        
                                        
                                        (727,702
                                        )
                                        
                                        
                                        (242,453
                                        )Total
      Liabilities and Stockholders' Deficit
                                        
                                        $
                                        451,100
                                        
                                        
                                        $
                                        -


See
      accompanying notes to unaudited consolidated financial
      statements.




3





ECLIPS
      MEDIA TECHNOLOGIES, INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF
OPERATIONS


Three
      Months EndedMarch
      31,2010
                              
                              
                              2009(Unaudited)
                              
                              
                              (Unaudited)Net
      revenues
                              
                              $
                              -
                              
                              
                              $
                              -Operating
      expenses:Payroll
      expense and stock based compensation
                              
                              
                              365,417
                              
                              
                              
                              164,878Professional
      and consulting
                              
                              
                              766,686
                              
                              
                              
                              83,570General
      and administrative expenses
                              
                              
                              18,813
                              
                              
                              
                              11,317Total
      operating expenses
                              
                              
                              1,150,916
                              
                              
                              
                              259,765Loss
      from continuing operations
                              
                              
                              (1,150,916
                              )
                              
                              
                              (259,765
                              )Other
      income (expense)Interest
      income
                              
                              
                              432
                              
                              
                              
                              -Interest
      expense
                              
                              
                              (30,441
                              )
                              
                              
                              (673
                              )Derivative
      liability expense
                              
                              
                              (950,166
                              )
                              
                              
                              -Change
      in fair value of  derivative liabilities
                              
                              
                              380,842
                              
                              
                              
                              -Total
      other income (expense)
                              
                              
                              (599,333
                              )
                              
                              
                              (673
                              )Loss
      from continuing operations before provision for income
    taxes
                              
                              
                              (1,750,249
                              )
                              
                              
                              (260,438
                              )Provision
      for income taxes
                              
                              
                              -
                              
                              
                              
                              -Loss
      from continuing operations
                              
                              
                              (1,750,249
                              )
                              
                              
                              (260,438
                              )Loss
      from discontinued operations, net of tax
                              
                              
                              -
                              
                              
                              
                              (52,361
                              )Net
      loss available to common shareholders
                              
                              $
                              (1,750,249
                              )
                              
                              $
                              (312,799
                              )Loss
      per common share, basic and diluted:Loss
      from continuing operations
                              
                              $
                              (0.01
                              )
                              
                              $
                              -Loss
      from discontinued operations
                              
                              $
                              -
                              
                              
                              $
                              -$
                              (0.01
                              )
                              
                              $
                              -Weighted
      average common shares outstanding
                              
                              
                              140,725,336
                              
                              
                              
                              198,032,330





See
      accompanying notes to unaudited consolidated financial
      statements.




4




ECLIPS
      MEDIA TECHNOLOGIES, INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH
FLOWS


Three
      Months EndedMarch
      31,2010
                                                              
                                                              2009(Unaudited)
                                                              
                                                              (Unaudited)Cash
      flows from operating activities:Loss
      from continuing operations
                                                              
                                                              $
                                                              (1,750,249
                                                              )
                                                              
                                                              $
                                                              (260,438
                                                              )Adjustments
      to  reconcile loss from continuing
      operations to net cash used in operating
      activities:Amortization
      of prepaid expenses
                                                              
                                                              
                                                              1,008
                                                              
                                                              
                                                              
                                                              -Amortization
      of debt issuance costs
                                                              
                                                              
                                                              1,042
                                                              
                                                              
                                                              
                                                              -Amortization
      of debt discount
                                                              
                                                              
                                                              26,042
                                                              
                                                              
                                                              
                                                              -Change
      in fair value of  derivative liabilities
                                                              
                                                              
                                                              (380,842
                                                              )
                                                              
                                                              
                                                              -Derivative
      liablity expense
                                                              
                                                              
                                                              950,166
                                                              
                                                              
                                                              
                                                              -Stock
      based consulting
                                                              
                                                              
                                                              690,000
                                                              
                                                              
                                                              
                                                              8,257Stock
      based compensation expense
                                                              
                                                              
                                                              335,417
                                                              
                                                              
                                                              
                                                              -(Increase)
      Decrease in:Interest
      receivable
                                                              
                                                              
                                                              (432
                                                              )
                                                              
                                                              
                                                              -Prepaid
      expense
                                                              
                                                              
                                                              (37,200
                                                              )
                                                              
                                                              
                                                              -Deposits
                                                              
                                                              
                                                              (2,564
                                                              )
                                                              
                                                              
                                                              -Increase
      (Decrease) in:Accounts
      payable and accrued expenses
                                                              
                                                              
                                                              90,983
                                                              
                                                              
                                                              
                                                              -Net
      cash used in continuing operations
                                                              
                                                              
                                                              (76,629
                                                              )
                                                              
                                                              
                                                              (252,181
                                                              )Loss
      from discontinued operations
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (52,361
                                                              )Adjustments
      to reconcile loss from discontinued operations to net
      cashprovided by discontinued operating
      activities:Depreciation
      & Amortization
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              50,075(Increase)
      decrease in discontinued assets
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (142,345
                                                              )Increase
      (decrease) in discontinued liabilities
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              244,636Net
      cash provided by discontinued operations
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              100,005Net
      cash used in operating activities
                                                              
                                                              
                                                              (76,629
                                                              )
                                                              
                                                              
                                                              (152,176
                                                              )Cash
      flows from investing activities:Payment
      of leasehold improvement
                                                              
                                                              
                                                              (8,325
                                                              )
                                                              
                                                              
                                                              -Purchase
      of equipment
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (789
                                                              )Investment
      in note receivable
                                                              
                                                              
                                                              (130,450
                                                              )
                                                              
                                                              
                                                              -Net
      cash used in investing activities
                                                              
                                                              
                                                              (138,775
                                                              )
                                                              
                                                              
                                                              (789
                                                              )Cash
      flows from financing activities:Proceeds
      from issuance of common stock
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              154,654Net
      proceeds from debentures
                                                              
                                                              
                                                              237,500
                                                              
                                                              
                                                              
                                                              -Net
      cash provided by financing activities
                                                              
                                                              
                                                              237,500
                                                              
                                                              
                                                              
                                                              154,654Net
      increase in cash
                                                              
                                                              
                                                              22,096
                                                              
                                                              
                                                              
                                                              1,689Cash,
      beginning of period
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              370Cash,
      end of period
                                                              
                                                              $
                                                              22,096
                                                              
                                                              
                                                              $
                                                              2,059SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              -Income
      Taxes
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              -


See
      accompanying notes to unaudited consolidated financial
      statements.




5




ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
2010




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





Organization





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.





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 March 31, 2010 and
2009, the Company recognized total loss from discontinued operations of $0 and
$52,361, 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 $86,600 and $61,485 for the
three months ended March 31, 2009. Research and development have been
included in the loss from discontinued operations, in the amounts of $77,477 for
the three months ended March 31, 2009.


6
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
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 subsidiary, H-Hybrid Technologies,
Inc.  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 March 31,
2010, and the results of operations and cash flows for the three months ending
March 31, 2010 have been included. The results of operations for the three
months ended March 31, 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, and debt discount, and the
useful life of property and equipment.





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 three months ended March 31, 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.


7
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
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 reporting
              entity’s
      own assumptions.




Cash and
cash equivalents include money market securities that are considered to be
highly liquid and easily tradable as of March 31, 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, note receivable,
interest receivable, and accounts payable approximate their estimated fair
market value based on the short-term maturity of these instruments. The carrying
amount of the convertible debentures at March 31, 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.





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 three months ended March
31, 2010 and 2009.


8
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
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 three months ended March 31, 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.


9
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
2010


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





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 three
months ended March 31, 2010, subsequent events were evaluated by the Company as
of May 14, 2010, the date on which the unaudited consolidated financial
statements for the three months ended March 31, 2010, were available to be
issued.





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 16,000,000 at
March 31, 2010. There were no dilutive common stock equivalents as of March 31,
2009.





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 May
2009, the FASB issued (ASC Topic 855), “Subsequent Events” (ASC Topic 855). This
guidance is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. It is effective for
interim and annual reporting periods ending after June 15, 2009.  The
adoption of this guidance did not have a material impact on our consolidated
financial statements.





In June
2009, the FASB issued ASC Topic 810-10, “Amendments to FASB Interpretation No.
46(R)”. This updated guidance requires a qualitative approach to identifying a
controlling financial interest in a variable interest entity (VIE), and requires
ongoing assessment of whether an entity is a VIE and whether an interest in a
VIE makes the holder the primary beneficiary of the VIE. It is effective for
annual reporting periods beginning after November 15, 2009. The adoption of ASC
Topic 810-10 did not have a material impact on the results of operations and
financial condition.





In
October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue
Arrangements.” This ASU establishes the accounting and reporting guidance for
arrangements including multiple revenue-generating activities. This ASU provides
amendments to the criteria for separating deliverables, measuring and allocating
arrangement consideration to one or more units of accounting. The amendments in
this ASU also establish a selling price hierarchy for determining the selling
price of a deliverable. Significantly enhanced disclosures are also required to
provide information about a vendor’s multiple-deliverable revenue arrangements,
including information about the nature and terms, significant deliverables, and
its performance within arrangements. The amendments also require providing
information about the significant judgments made and changes to those judgments
and about how the application of the relative selling-price method affects the
timing or amount of revenue recognition. The amendments in this ASU are
effective prospectively for revenue arrangements entered into or materially
modified in the fiscal years beginning on or after June 15, 2010. Early
application is permitted. The Company is currently evaluating this new
ASU.


10
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
2010


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





In
October 2009, the FASB issued ASU No. 2010-14, “Certain Revenue Arrangements
That Include Software Elements.” This ASU changes the accounting model for
revenue arrangements that include both tangible products and software elements
that are “essential to the functionality,” and scopes these products out of
current software revenue guidance. The new guidance will include factors to help
companies determine what software elements are considered “essential to the
functionality.” The amendments will now subject software-enabled products to
other revenue guidance and disclosure requirements, such as guidance surrounding
revenue arrangements with multiple-deliverables. The amendments in this ASU are
effective prospectively for revenue arrangements entered into or materially
modified in the fiscal years beginning on or after June 15, 2010. Early
application is permitted. The Company is currently evaluating this new
ASU.





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.





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 March 31, 2010, the Company had
an accumulated deficit of $26,230,659, and a working capital deficiency of
$712,549. Additionally, for the three months ended March 31, 2010, the Company
incurred net losses of $1,750,249 and had negative cash flows from operations in
the amount of $76,629. 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.





NOTE
3 – NOTE RECEIVABLE – RELATED PARTY





During
the first quarter of 2010, the Company entered into a demand promissory note
agreement with an affiliated company for which one of the largest shareholders
of the Company is the President. At March 31, 2010, the note receivable was
in the amount of $130,450 and bears interest at 6% per annum.  The
note is a demand note and is included on the accompanying balance sheet as a
short term note receivable. As of March 31, 2010, accrued interest from such
note receivable amounted to $432.





NOTE 4 - PROPERTY
AND EQUIPMENT





Property
and equipment consisted of the following:





Estimated
      life
                  
                  March
      31,2010Leasehold
      improvements
                  5
      years
                  
                  
                  8,3258,325Less:
      Accumulated depreciation
                  
                  
                  
                  (-
                  )$
                  8,325





In March
2010, the Company paid leasehold improvements of $8,325 on a facility lease by
an affiliated company for which our Chief Executive officer and director, Greg
Cohen, is the President.


11
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
2010


NOTE
5 – DERIVATIVE
LIABILITY





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 $ $894,091 and $67,147 at March 31, 2010
and December 31, 2009, respectively. Derivative liability expense and the gain
resulting from the decrease in fair value of this convertible instrument was
$950,166 and $380,842 for the three months ended March 31,
2010.




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





March
      31, 2010Expected
      volatility
                        211%
      - 235%Expected
      term
                        2-5
      YearsRisk-free
      interest rate
                        0.80%-2.55%Expected
      dividend yield
                        0%





NOTE
6 – 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.


12
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
2010


NOTE
6 – 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% Senior 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 March 31, 2010,
amortization of debt issuance cost amounted to $1,042 and is included in
interest expense.





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.





On March
22, 2010 the Company entered into securities purchase agreement with an
accredited investor pursuant to which the Company agreed to issue $50,000 of its
6% Senior Convertible Debentures for an aggregate purchase price of $50,000 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
1,000,000 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. 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 $50,000 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


13
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
2010


NOTE
6 – CONVERTIBLE DEBENTURES (continued)





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 by FINRA.





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





March
      31, 2010
                    
                    
                    December
      31, 2009Long-term
      convertible debentures
                    
                    $
                    325,000
                    
                    
                    $
                    75,000Less:
      debt discount
                    
                    
                    (298,958
                    )
                    
                    
                    (67,380
                    )Long-term
      convertible debentures – net
                    
                    $
                    26,042
                    
                    
                    $
                    7,620





Total
amortization of debt discounts for the convertible debentures – long term
amounted to $26,042 for the three months ended March 31, 2010, and is included
in interest expense. Accrued interest as of March 31, 2010 amounted to
$3,164.





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
7 - 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.  Trading of the Company’s securities on a 2:1 basis
commenced May 17, 2010 upon approval by FINRA.





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 three months ended March 31, 2010, the Company recorded stock based
compensation of $335,417 and prepaid expense of $238,583 to be amortized over
the service or vesting period.


14
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
2010


NOTE
7 - STOCKHOLDERS’ DEFICIT (continued)





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 three months ended March 31, 2010,
the Company recorded stock based consulting of $690,000.





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 first quarter of 2010, the Company entered into a demand promissory note
agreement with an affiliated company for which one of the largest shareholders
of the Company is the President.  At March 31, 2010, the note
receivable was in the amount of $130,450 and bears interest at 6% per
annum.





During
the three months ended March 31, 2010, the Company paid leasehold improvements
and rent of $8,325 and $7,694, respectively on a facility lease by an affiliated
company for which our Chief Executive officer and director, Greg Cohen, is the
President.





NOTE
9 - SUBSEQUENT EVENTS





On April
15, 2010 the Company issued an aggregate of 24,000,000 shares (12,000,000
pre-merger) 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 $0.04 ($.08 pre-merger) per share or
$962,400.




On April
7, 2010 the Company entered into securities purchase agreement with accredited
investors pursuant to which the Company agreed to issue $40,000 of its 6% Senior
Convertible Debentures for an aggregate purchase price of $40,000 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 800,000 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 warrants were treated as a discount
on the 6% Senior Convertible debentures and were valued at $40,000 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 184%; risk-free interest rate of 2.62% and an expected holding
period of five years.





On April
21, 2010 the Company entered into securities purchase agreement with accredited
investors pursuant to which the Company agreed to issue $40,000 of its 6% Senior
Convertible Debentures for an aggregate purchase price of $40,000 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 800,000 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 warrants were treated as a discount
on the 6% Senior Convertible debentures and were valued at $40,000 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 184%; risk-free interest rate of 2.52% and an expected holding
period of five years.


15
  ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
2010


NOTE
9 - SUBSEQUENT EVENTS (continued)





On April
30, 2010 the Company entered into securities purchase agreement with accredited
investors pursuant to which the Company agreed to issue $130,000 of its 6%
Senior Convertible Debentures for an aggregate purchase price of $130,000 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
2,600,000 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 warrants were treated
as a discount on the 6% Senior Convertible debentures and were valued at
$130,000 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 184%; risk-free interest rate of 2.43% and an expected
holding period of five years.





Between
April 2010 and May 2010, the Company issued a demand promissory note agreement
with an affiliated company for which one of the largest shareholders of the
Company is the President for a total amount of $25,000. The note is a demand
note and bears interest at 6% per annum.





In May
2010, the Company entered into a demand promissory note agreement and security
agreement with an unaffiliated company. The note receivable was in the
amount of $110,000 and bears interest at 6% per annum. This note is secured by
collateral or certain properties owned by the debtor as defined in the security
agreement.  Furthermore, this note receivable is personally guaranteed by
the Chief Executive Officer of the unaffiliated company.





On May 7,
2010 the Company entered into securities purchase agreement with accredited
investors pursuant to which the Company agreed to issue $15,000 of its 6% Senior
Convertible Debentures for an aggregate purchase price of $15,000 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 300,000 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 warrants were treated as a discount
on the 6% Senior Convertible debentures and were valued at $15,000 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 184%; risk-free interest rate of 2.17% and an expected holding
period of five years.






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 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.








Recent
Developments





On
December 22, 2009, the Company entered into a Purchase Agreement (the “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 Purchase Agreement was subsequently amended on
January 12, 2010.  As amended the 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
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.
Upon closing of the Purchase Agreement, a change of control will occur in which
Auracana, LLC will effectively have control of the Company through the exercise
of the voting rights attributable to the voting power of 500 votes for each
share outstanding of the Company’s Series D Preferred Stock acquired from the
Seller (750,000,000 votes total).  There is no agreement or
understanding in effect among the Purchasers with respect to the voting of any
of the Shares.




During
late 2009, the Company began to explore other business opportunities which in
light of the execution of the Purchase Agreement likely will be limited to
business opportunities introduced by Purchasers, and disposition of its existing
businesses.  Although no agreement has been entered, the Company has
been advised by Purchasers that a privately owned online sports marketing and
fantasy sports website and related businesses (the “Proposed Business”) is being
proposed to be acquired following the closing of the Purchase
Agreement.   Mr. Cohen is not affiliated with theProposed Business.





17


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, 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 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 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 by FINRA.




18




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




The
preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported net sales and expenses during the reporting
periods. On an ongoing basis, we evaluate our estimates and assumptions. We base
our estimates on historical experience and on various other factors that we
believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.





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.





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.





19





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.





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 May
2009, the FASB issued (ASC Topic 855), “Subsequent Events” (ASC Topic 855). This
guidance is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. It is effective for
interim and annual reporting periods ending after June 15, 2009.  The
adoption of this guidance did not have a material impact on our consolidated
financial statements.





In June
2009, the FASB issued ASC Topic 810-10, “Amendments to FASB Interpretation No.
46(R)”. This updated guidance requires a qualitative approach to identifying a
controlling financial interest in a variable interest entity (VIE), and requires
ongoing assessment of whether an entity is a VIE and whether an interest in a
VIE makes the holder the primary beneficiary of the VIE. It is effective for
annual reporting periods beginning after November 15, 2009. The adoption of ASC
Topic 810-10 did not have a material impact on the results of operations and
financial condition.





In
October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue
Arrangements.” This ASU establishes the accounting and reporting guidance for
arrangements including multiple revenue-generating activities. This ASU provides
amendments to the criteria for separating deliverables, measuring and allocating
arrangement consideration to one or more units of accounting. The amendments in
this ASU also establish a selling price hierarchy for determining the selling
price of a deliverable. Significantly enhanced disclosures are also required to
provide information about a vendor’s multiple-deliverable revenue arrangements,
including information about the nature and terms, significant deliverables, and
its performance within arrangements. The amendments also require providing
information about the significant judgments made and changes to those judgments
and about how the application of the relative selling-price method affects the
timing or amount of revenue recognition. The amendments in this ASU are
effective prospectively for revenue arrangements entered into or materially
modified in the fiscal years beginning on or after June 15, 2010. Early
application is permitted. We are currently evaluating this new ASU.




20




In
October 2009, the FASB issued ASU No. 2010-14, “Certain Revenue Arrangements
That Include Software Elements.” This ASU changes the accounting model for
revenue arrangements that include both tangible products and software elements
that are “essential to the functionality,” and scopes these products out of
current software revenue guidance. The new guidance will include factors to help
companies determine what software elements are considered “essential to the
functionality.” The amendments will now subject software-enabled products to
other revenue guidance and disclosure requirements, such as guidance surrounding
revenue arrangements with multiple-deliverables. The amendments in this ASU are
effective prospectively for revenue arrangements entered into or materially
modified in the fiscal years beginning on or after June 15, 2010. Early
application is permitted. We are currently evaluating this new ASU.





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.





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.





Results
of Operations





Three
months Ended March 31, 2010 Compared to the Three months Ended March 31,
2009








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 $365,417 and 164,878 for the three months ended March
31, 2010 and 2009, respectively.  The increase was primarily
attributable to the issuance of our common stock to our CEO pursuant to a
consulting agreement in February 2010.





Professional
and consulting expenses were $766,686 and $83,570 for the three months ended
March 31, 2010 and 2009, respectively.  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 $690,000 during the three months
ended March 31, 2010.





General
and administrative expenses, which consist of office expenses, insurance, rent
and general operating expenses totaled $18,813 for the three months ended March
31, 2010, as compared to $11,317 for the three months ended March 31, 2010, an
increase of approximately $7,500.





Total Other
Expense





Our
total other expenses in the three months ended March 31, 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 $950,166 in connection with the
issuance of the convertible debentures with warrants for the three months ended
March 31, 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 $380,842 during the three months ended March 31, 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.




21




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 18month
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 March 31, 2010 when compared to the same period in 2009 is
primarily attributable to the amortization of the debt discount amounting to
approximately $26,000 associated with the 6% convertible debenture.





Discontinued
Operations





For the
three months ended March 31, 2010 and 2009, we recorded total loss from
discontinued operations of $0 and $52,361, 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 $86,600 and $61,485 for the three months ended March 31,
2009. Research and development have been included in the loss from
discontinued operations, in the amounts of $77,477 for the three months ended
March 31, 2009.





Loss from continuing
operations





We
recorded loss from continuing operations of $1,150,916 for the three months
ended March 31, 2010 as compared to $259,765 for the three months ended March
31, 2009.





Net Loss





We
recorded net loss of $1,750,249 for the three months ended March 31, 2010 as
compared to $312,799 for the three months ended March 31, 2009.





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 March 31, 2010, we had a cash balance of $22,096. Our working capital deficit
is $712,549 at March 31, 2010. We reported a net loss of $1,750,249 and $312,799
during the three months ended March 31, 2010 and 2009,
respectively.  We do not anticipate we will be profitable in fiscal
2010.





We
reported a net increase in cash for the three months ended March 31, 2010 of
$22,096. While we currently have no material commitments for capital
expenditures, at March 31, 2010 we owed $325,000 under various convertible
debentures.  During the three months ended March 31, 2010, we have
raised net proceeds of $237,500 from convertible debentures. We do not presently
have any external sources of working capital.





22


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 three months ended March 31, 2010
amounted to $76,629 and was primarily attributable to our net losses of
$1,750,249, offset by amortization of debt discount of $26,042, stock based
expenses of $1,025,417, derivative liability expense of $950,166, change in fair
value of derivative liabilities of ($380,842) and add back total changes in
assets and liabilities of $50,787. Net cash flows used in operating activities
for the three months ended March 31, 2009 amounted to $152,176 and was primarily
attributable to our net losses of $312,799, offset by discontinued operating
activities such as depreciation of $50,075, and total changes in assets and
liabilities of $102,291.





Investing  activities





Net cash
flows used in investing activities was $138,775 for the three months ended March
31, 2010. We paid leasehold improvement of $8,325 and invested $130,450 on a 6%
demand promissory note receivable. Net cash flows used in investing activities
was $789 for the three months ended March 31, 2009.





Financing
activities





Net cash
flows provided by financing activities was $237,500 for the three months ended
March 31, 2010. We received net proceeds from convertible debentures of
$237,500. Net cash flows provided by financing activities was $154,654 for the
three months ended March 31, 2009. We received net proceeds from sale of our
stock of $154,654.





Debenture
Financing





Between
December 2009 and March 2010, the Company entered into various securities
purchase agreement with accredited investors pursuant to which the Company
agreed to issue an aggregate of $325,000 of its 6% Senior Convertible Debentures
for an aggregate purchase price of $325,000. 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 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
Agreements, the Investors received an aggregate of 6,500,000 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 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.





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.





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.




23


The
following tables summarize our contractual obligations as of March 31, 2010, and
the effect these obligations are expected to have on our liquidity and cash
flows in future periods.





PaymentsDue by
      PeriodTotal
                    
                    
                    Less than 1
      year
                    
                    
                    1-3Years
                    
                    
                    4-5Years
                    
                    
                    5
    Years+Contractual
      Obligations :Long
      term loans
                    
                    $
                    —
                    
                    
                    
                    —
                    
                    
                    
                    325,000
                    
                    
                    
                    —
                    
                    
                    
                    —Total
      Contractual Obligations:
                    
                    $
                    —
                    
                    
                    
                    —
                    
                    
                    
                    325,000
                    
                    
                    
                    —
                    
                    
                    
                    —







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 4T.
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 March 31, 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 March 31,
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.





Changes in
Internal Controls.


There
have been no changes in the Company’s internal control over financial reporting
during the three months ended March 31, 2010 that have materially affected, or
are reasonably likely to materially affect, the Company’s internal controls over
financial reporting.





24




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 March
22, 2010 the Company entered into securities purchase agreement with an
accredited investor pursuant to which the Company agreed to issue $50,000 of its
6% Senior Convertible Debentures for an aggregate purchase price of $50,000 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
1,000,000 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 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.





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 securities were issued pursuant to
the exemption from registration provided by Section 4(2) of the Securities
Act of 1933, as amended.





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 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 securities were issued pursuant to
the exemption from registration provided by Section 4(2) of the Securities
Act of 1933, as amended.








ITEM
3.  DEFAULTS UPON SENIOR SECURITIES.





None.





ITEM
4.  (REMOVED AND RESERVED).








ITEM
5.  OTHER INFORMATION.





None.





ITEM 6.
EXHIBITS





2.1
                Agreement
      and Plan of Merger of Eclips Energy Technologies, Inc., and Eclips Media
      Technologies, Inc. dated as of March 2, 2010.3.1
                Certificate
      of Incorporation of Eclips Media Technologies, Inc.3.2
                By-laws
      of Eclips Media Technologies, Inc.3.3
                Certificate
      of Designation for Series A Convertible Preferred Stock4.1
                Form
      of 6% Senior Convertible Debentures of Eclips Media Technologies,
      Inc.4.2
                Form
      of Warrants of Eclips Media Technologies, Inc.31.1
                Rule
      13a-14(a)/15d-14(a) certification of Chief Executive Officer and Chief
      Financial Officer32.1
                Section
      1350 certification of Chief Executive Officer and Chief Financial
      Officer


25




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:
      May 17, 2010
              By:
              /s/ Gregory
      D. CohenGregory
      D. CohenChief
      Executive Officer(principal
      executive officer, principal financialand accounting
      officer)


26