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 September 30, 2010





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





For the
transition period from __________ to __________





COMMISSION FILE
NUMBER:  000-25097





EClips Media Technologies,
Inc.


(Name of
Registrant as specified in its charter)





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





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


(Address
of principal executive office)





(212)
851-6425


(Registrant’s
telephone number)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes x   Noo





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





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





Large
      accelerated filer
                    o
                    Accelerated
      filer
                    oNon-accelerated
      filer
                    o
                    Smaller
      reporting company
                    x


(Do not
check if smaller reporting company)


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





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.  205,025,338 shares of
common stock are issued and outstanding as of November 15, 2010.








ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARY


FORM
10-Q


September
30, 2010





TABLE
OF CONTENTS


Page
      No.PART
      I. - FINANCIAL INFORMATIONItem
      1.
                Financial
      Statements
                3Consolidated
      Balance Sheets as of September 30, 2010 (Unaudited) and December 31,
      2009
                3Consolidated
      Statements of Income for the Three and Nine months Ended September 30,
      2010 and 2009 (unaudited)
                4Consolidated
      Statements of Cash Flows for the Nine months Ended September 30, 2010 and
      2009 (unaudited)
                5Notes
      to Unaudited Consolidated Financial Statements.
                6Item
      2.
                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                18Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk.
                25Item
      4T.
                Controls
      and Procedures.
                26PART
      II - OTHER INFORMATIONItem
      1.
                Legal
      Proceedings.
                26Item
      1A.
                Risk
      Factors.
                26Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds.
                26Item
      3.
                Default
      upon Senior Securities.
                26Item
      4.
                REMOVED
      AND RESERVED
                26Item
      5.
                Other
      Information.
                26Item
      6.
                Exhibits.
                26




OTHER
PERTINENT INFORMATION





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








ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS





September
      30, 2010
                  
                  
                  December
      31, 2009(Unaudited)
                  
                  
                  (Audited)ASSETSCURRENT
      ASSETS:Cash
                  
                  $
                  19,827
                  
                  
                  $
                  -Prepaid
      expenses
                  
                  
                  234,925
                  
                  
                  
                  -Debt
      issuance cost
                  
                  
                  8,332Assets
      of discontinued operations
                  
                  
                  92,716
                  
                  
                  
                  -Total
      Current Assets
                  
                  
                  355,800
                  
                  
                  
                  -OTHER
      ASSETS:Property
      and equipment, net
                  
                  
                  34,222
                  
                  
                  
                  -Deposits
                  
                  
                  8,509
                  
                  
                  
                  -Total
      Assets
                  
                  $
                  398,531
                  
                  
                  $
                  -LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                  
                  $
                  105,371
                  
                  
                  $
                  -Derivative
      liabilities
                  
                  
                  2,252,276
                  
                  
                  
                  67,147Liabilities
      of discontinued operations
                  
                  
                  554,921
                  
                  
                  
                  167,686Total
      current liabilities
                  
                  
                  2,912,568
                  
                  
                  
                  234,833LONG-TERM
      LIABILITIES:Convertible
      debentures, net of debt discount
                  
                  
                  226,667
                  
                  
                  
                  7,620Total
      Liabilities
                  
                  
                  3,139,235
                  
                  
                  
                  242,453Stockholders'
      DeficitPreferred
      stock,  $.0001 par value; 10,000,000 authorized
                    Series
      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
                  
                  
                  -
                  
                  
                  
                  -Common
      stock; $.0001 par value; 750,000,000 shares authorized; 205,025,338 and
      129,725,338 shares issued and outstanding, respectively
                  
                  
                  20,503
                  
                  
                  
                  12,972Additional
      paid-in capital
                  
                  
                  28,687,154
                  
                  
                  
                  24,224,685Accumulated
      deficit
                  
                  
                  (31,448,661
                  )
                  
                  
                  (24,480,410
                  )Total
      Stockholders' Deficit
                  
                  
                  (2,740,704
                  )
                  
                  
                  (242,453
                  )Total
      Liabilities and Stockholders' Deficit
                  
                  $
                  398,531
                  
                  
                  $
                  -





See
accompanying notes to unaudited consolidated financial
statements.


3





ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS





For
      the Three Months Ended
                
                
                For
      the Nine Months EndedSeptember
      30,
                
                
                September
      30,2010
                
                
                2009
                
                
                2010
                
                
                2009(Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)Net
      revenues
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Operating
      expenses:Payroll
      expense and stock based compensation
                
                
                101,875
                
                
                
                93,882
                
                
                
                969,167
                
                
                
                756,311Professional
      and consulting
                
                
                74,912
                
                
                
                72,014
                
                
                
                2,808,623
                
                
                
                203,642General
      and administrative expenses
                
                
                37,468
                
                
                
                68,607
                
                
                
                278,137
                
                
                
                185,900Total
      operating expenses
                
                
                214,255
                
                
                
                234,503
                
                
                
                4,055,927
                
                
                
                1,145,853Loss
      from continuing operations
                
                
                (214,255
                )
                
                
                (234,503
                )
                
                
                (4,055,927
                )
                
                
                (1,145,853
                )Other
      income (expense)Interest
      income
                
                
                -
                
                
                
                -
                
                
                
                2,157
                
                
                
                -Interest
      expense
                
                
                (145,286
                )
                
                
                (527
                )
                
                
                (258,974
                )
                
                
                (3,027
                )Derivative
      liability expense
                
                
                -
                
                
                
                -
                
                
                
                (3,260,076
                )
                
                
                -Change
      in fair value of  derivative liabilities
                
                
                (366,480
                )
                
                
                -
                
                
                
                2,032,567
                
                
                
                -Total
      other income (expense)
                
                
                (511,766
                )
                
                
                (527
                )
                
                
                (1,484,326
                )
                
                
                (3,027
                )Loss
      from continuing operations before provision for income
    taxes
                
                
                (726,021
                )
                
                
                (235,030
                )
                
                
                (5,540,253
                )
                
                
                (1,148,880
                )Provision
      for income taxes
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Loss
      from continuing operations
                
                
                (726,021
                )
                
                
                (235,030
                )
                
                
                (5,540,253
                )
                
                
                (1,148,880
                )Loss
      from discontinued operations, net of tax
                
                
                (1,421,064
                )
                
                
                (17,687
                )
                
                
                (1,427,998
                )
                
                
                (112,328
                )Net
      loss available to common shareholders
                
                $
                (2,147,085
                )
                
                $
                (252,717
                )
                
                $
                (6,968,251
                )
                
                $
                (1,261,208
                )Loss
      per common share, basic and diluted:Loss
      from continuing operations
                
                $
                -
                
                
                $
                (0.02
                )
                
                $
                (0.03
                )
                
                $
                (0.25
                )Loss
      from discontinued operations
                
                $
                0.01
                
                
                $
                -
                
                
                $
                0.01
                
                
                $
                0.02$
                (0.01
                )
                
                $
                (0.02
                )
                
                $
                (0.04
                )
                
                $
                (0.27
                )Weighted
      average common shares outstanding
                
                
                204,825,336
                
                
                
                11,946,924
                
                
                
                172,920,939
                
                
                
                4,605,873





See
accompanying notes to unaudited consolidated financial
statements.


4





ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS





For
      the Nine Months EndedSeptember
      30,2010
                                              
                                              
                                              2009(Unaudited)
                                              
                                              
                                              (Unaudited)Cash
      flows from operating activities:Loss
      from continuing operations
                                              
                                              $
                                              (5,540,253
                                              )
                                              
                                              $
                                              (1,148,880
                                              )Adjustments
      to  reconcile loss fromcontinuing operations to net
      cash used in operating activities:Depreciation
                                              
                                              
                                              3,254
                                              
                                              
                                              
                                              -Amortization
      of prepaid expenses
                                              
                                              
                                              13,108
                                              
                                              
                                              
                                              -Amortization
      of debt issuance costs
                                              
                                              
                                              4,168
                                              
                                              
                                              
                                              -Amortization
      of debt discount
                                              
                                              
                                              226,667
                                              
                                              
                                              
                                              -Impairment
      loss
                                              
                                              
                                              173,257
                                              
                                              
                                              
                                              -Change
      in fair value of  derivative liabilities
                                              
                                              
                                              (2,032,567
                                              )
                                              
                                              
                                              -Derivative
      liablity expense
                                              
                                              
                                              3,260,076
                                              
                                              
                                              
                                              -Stock
      based consulting
                                              
                                              
                                              2,650,000
                                              
                                              
                                              
                                              656,962Stock
      based compensation expense
                                              
                                              
                                              879,167
                                              
                                              
                                              
                                              -Contributed
      services
                                              
                                              
                                              10,000
                                              
                                              
                                              
                                              -(Increase)
      Decrease in:Interest
      receivable
                                              
                                              
                                              (2,157
                                              )
                                              
                                              
                                              -Prepaid
      expense
                                              
                                              
                                              (192,200
                                              )
                                              
                                              
                                              -Deposits
                                              
                                              
                                              (8,509
                                              )
                                              
                                              
                                              -Increase
      (Decrease) in:Accounts
      payable and accrued expenses
                                              
                                              
                                              (31,531
                                              )
                                              
                                              
                                              -Net
      cash used in continuing operations
                                              
                                              
                                              (587,520
                                              )
                                              
                                              
                                              (491,918
                                              )Loss
      from discontinued operations
                                              
                                              
                                              (1,427,998
                                              )
                                              
                                              
                                              (112,328
                                              )Adjustments
      to reconcile loss from discontinued operations to net cash provided by
      discontinued operating activities:Amortization
                                              
                                              
                                              233
                                              
                                              
                                              
                                              129,227Impairment
      loss
                                              
                                              
                                              1,043,038
                                              
                                              
                                              
                                              -(Increase)
      decrease in discontinued assets
                                              
                                              
                                              (89,086
                                              )
                                              
                                              
                                              (76,715
                                              )Increase
      (decrease) in discontinued liabilities
                                              
                                              
                                              382,179
                                              
                                              
                                              
                                              226,088Net
      cash (used in) provided by discontinued operations
                                              
                                              
                                              (91,634
                                              )
                                              
                                              
                                              166,272Net
      cash used in operating activities
                                              
                                              
                                              (679,154
                                              )
                                              
                                              
                                              (325,646
                                              )Cash
      flows from investing activities:Cash
      acquired in acquisition
                                              
                                              
                                              5,057
                                              
                                              
                                              
                                              -Cash
      used in acquisition
                                              
                                              
                                              (110,000
                                              )
                                              
                                              
                                              -Payment
      of leasehold improvement
                                              
                                              
                                              (14,025
                                              )
                                              
                                              
                                              -Purchase
      of equipment
                                              
                                              
                                              (23,451
                                              )
                                              
                                              
                                              (787
                                              )Investment
      in note receivable
                                              
                                              
                                              (171,100
                                              )
                                              
                                              
                                              -Net
      cash used in investing activities
                                              
                                              
                                              (313,519
                                              )
                                              
                                              
                                              (787
                                              )Cash
      flows from financing activities:Proceeds
      from issuance of common stock
                                              
                                              
                                              75,000
                                              
                                              
                                              
                                              344,899Net
      proceeds from debentures
                                              
                                              
                                              937,500
                                              
                                              
                                              
                                              -Net
      cash provided by financing activities
                                              
                                              
                                              1,012,500
                                              
                                              
                                              
                                              344,899Net
      increase in cash
                                              
                                              
                                              19,827
                                              
                                              
                                              
                                              18,466Cash,
      beginning of period
                                              
                                              
                                              -
                                              
                                              
                                              
                                              370Cash,
      end of period
                                              
                                              $
                                              19,827
                                              
                                              
                                              $
                                              18,836SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              6,095Income
      Taxes
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -Supplemental
      disclosure of non-cash investing and financing activities:Issuance
      of common stock in connection with acquisition of business
                                              
                                              $
                                              800,000
                                              
                                              
                                              $
                                              -Conversion
      of debt to equity (preferred stock)
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              58,257Conversion
      of preferred stock to common stock
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              7,250,000





See
accompanying notes to unaudited consolidated financial
statements.


5


ECLIPS
MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010





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





Organization and Description
of Business





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





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





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





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





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




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




In
September 2010, the Company decided to discontinue the operations of SD
acquisition Corp. because of the disappointing performance and negative results
of its most recent fantasy league event in August 2010. The Company has agreed
in principal to enter into a spin off agreement (the “Spinoff”) with Brand
Interaction Group, LLC (“BIG”) and Mr. Eric Simon, the Company’s former CEO,
pursuant to which the Company will return the Superdraft business to Mr. Simon
by exchanging 100% of the issued and outstanding capital stock of SD Acquisition
Corp., which owned and operated the Superdraft business, for the cancellation of
30,000,000 shares of the Company owned by Mr. Simon and BIG, the cancellation of
the Asset Purchase Agreement and Employment Agreement entered into between the
Company, Mr. Simon and BIG in June 2010. In addition, BIG will make certain
payments to some of the Company’s noteholders which would reduce, on a dollar
for dollar basis, amounts due and payable by the Company to such noteholders.
The Spinoff remains subject to revision.


6




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




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





Acquisition of Business of
Brand Interaction Group, LLC




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





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




Assets
      AcquiredCash
                  
                  $
                  5,057IntangibleTrademark
                  
                  3,863Goodwill
                  
                  1,043,038Total
      assets acquired
                  
                  1,051,958Liabilities
      Assumed
                  
                  183,806Net
      assets acquired
                  
                  $
                  868,152




Since the
Company decided to discontinue the operations of SD acquisition Corp., the
Company deemed the acquired goodwill to be impaired and wrote-off the goodwill
during the nine months ended September 30, 2010. Accordingly, the Company
recorded an impairment of goodwill of $1,043,038 in the accompanying statement
of operations.





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.  Additionally, in September 2010, the
Company decided to discontinue the operations of SD acquisition Corp. because of
the disappointing performance and negative results of its most recent fantasy
league event in August 2010.


7


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




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





The
remaining assets and liabilities of discontinued operations are presented in the
balance sheet under the caption “Assets of discontinued operation" and “Liabilities of discontinued operation".  The carrying
amounts of the major classes of these liabilities as of September 30, 2010 are
summarized as follows:





September
      30,2010Assets:Cash
                        
                        $
                        29,086Receivables
                        
                        
                        60,000Other
      assets
                        
                        
                        3,630Assets
      of discontinued operations
                        
                        $
                        92,716LiabilitiesAccounts
      payables and accrued expenses
                        
                        $
                        (370,988
                        )Due
      to related party
                        
                        
                        (183,933
                        )Liabilities
      of discontinued operations
                        
                        $
                        554,921





The
following table sets forth for the nine months ended September 30, 2010 and
2009, indicated selected financial data of the Company's discontinued
operations.





September
      30,
                    2010
                  
                  
                  September
      30,
                    2009Revenues
                  
                  $
                  178,645
                  
                  
                  $
                  260,992Cost
      of sales
                  
                  
                  381,331
                  
                  
                  
                  189,450Gross
      (loss) profit
                  
                  
                  (202,686
                  )
                  
                  
                  71,542Operating
      and other non-operating expenses
                  
                  
                  1,225,312
                  
                  
                  
                  183,870Loss
      from discontinued operations
                  
                  $
                  (1,427,998
                  )
                  
                  $
                  (112,328
                  )





Basis of
presentation





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





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





ASB Accounting Standards
Codification





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


8




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




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





Use of
Estimates





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





Reclassification





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





Cash and Cash
Equivalents





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





Concentrations
of Credit Risk





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





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 September 30, 2010 and December 31,
2009. These securities are valued using inputs observable in active markets for
identical securities and are therefore classified as Level 1 within our
fair value hierarchy.


9


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





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





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





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





Property and
equipment





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





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. In September 2010,
the Company decided to discontinue the operations of SD acquisition Corp.
because of the disappointing performance and negative results of its most recent
fantasy league event in August 2010. Accordingly, during the nine months ended
September 30, 2010, the Company has determined that an adjustment to the
carrying value of goodwill was required. The Company recorded an impairment
of goodwill of $1,043,038 in the accompanying statement of
operations.





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


10





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





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





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 nine months ended September 30, 2010 and 2009, the Company did
not grant any stock options.





Related
Parties





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




Subsequent
Events





For
purposes of determining whether a post-balance sheet event should be evaluated
to determine whether it has an effect on the financial statements for the nine
months ended September 30, 2010, subsequent events were evaluated by the Company
as of the date on which the unaudited consolidated financial statements for the
nine months ended September 30, 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 82,000,000 at
September 30, 2010. There were no dilutive common stock equivalents as of
September 30, 2009.





Recent Accounting
Pronouncements





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


11


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





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





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





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





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





NOTE
2 – GOING CONCERN CONSIDERATIONS





The
accompanying consolidated financial statements are prepared assuming the Company
will continue as a going concern.  At September 30, 2010, the Company
had an accumulated deficit of $31,448,661, and a working capital deficiency of
$2,556,768.  Additionally, for the nine months ended September 30,
2010, the Company incurred net losses of $6,968,251 and had negative cash flows
from operations in the amount of $679,154. In
addition, from the time the Company decided to discontinue the operations of SD
Aquisition Corp., the Company has not commence any active operations. 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





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


12





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





NOTE 4 - PROPERTY
AND EQUIPMENT





Property
and equipment consisted of the following:





Estimated life
                      
                      September
      30, 2010Computer
      Equipment
                      
                      3
      years
                      
                      $
                      4,067Office
      Equipment
                      
                      5
      years
                      
                      
                      8,142Furniture
      and fixtures
                      
                      5
      years
                      
                      
                      11,242Leasehold
      improvements
                      
                      5
      years
                      
                      
                      14,02537,476Less:
      Accumulated depreciation
                      
                      
                      
                      
                      (3,254)$
                      34,222





During
the nine months ended September 30, 2010, the Company paid for leasehold
improvements of $14,025 on a facility lease by an affiliated company for which
our former Chief Executive officer and director, Greg Cohen, is the
President. For the nine months ended September 30, 2010 and 2009,
depreciation expense amounted to $3,254 and $0, respectively.





NOTE
5 – DERIVATIVE
LIABILITIES





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





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





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





In
connection with the issuance of the 6% Senior Convertible Debentures, the
Company has determined that the terms of the convertible debenture include a
down-round provision under which the conversion price could be affected by
future equity offerings undertaken by the Company until the 18 month
anniversary of such convertible debenture. Accordingly, the convertible
instrument is accounted for as a liability at the date of issuance and adjusted
to fair value through earnings at each reporting date. The Company has
recognized a derivative liability of $ $2,252,276 and $67,147 at September 30,
2010 and December 31, 2009, respectively. Derivative liability expense and the
gain resulting from the decrease in fair value of this convertible instrument
was $3,260,076 and $2,032,567 for the nine months ended September 30, 2010.
Derivative liability expense and the loss resulting from the increase in fair
value of this convertible instrument was $0 and $366,480 for the three months
ended September 30, 2010.


13


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




NOTE
5 – DERIVATIVE LIABILITIES (continued)





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


September
      30, 2010Expected
      volatility
                      
                      
                      184%
      - 236%Expected
      term
                      
                      
                      1.20-5 YearsRisk-free
      interest rate
                      
                      
                      0.27%-2.62%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.




On
February 4, 2010 the Company entered into securities purchase agreement with an
accredited investor pursuant to which the Company agreed to issue $200,000 of
its 6% convertible debentures for an aggregate purchase price of $200,000. The
Debenture bears interest at 6% per annum and matures twenty-four months from the
date of issuance. The Debenture is convertible at the option of the holder at
any time into shares of common stock, at an initial conversion price equal to
the lesser of (i) $0.05 per share or (ii) until the eighteen (18) months
anniversary of the Debenture, the lowest price paid per share or the lowest
conversion price per share in a subsequent sale of the Company’s equity and/or
convertible debt securities paid by investors after the date of the
Debenture.  In connection with the Agreement, the Investor received a
warrant to purchase 4,000,000 shares of the Company’s common stock. The Warrant
is exercisable for a period of five years from the date of issuance at an
initial exercise price of $0.05, subject to adjustment in certain circumstances.
The Investor may exercise the Warrant on a cashless basis if the Fair Market
Value (as defined in the Warrant) of one share of common stock is greater than
the Initial Exercise Price. In accordance with ASC 470-20-25, the convertible
debentures were considered to have an embedded beneficial conversion feature
because the effective conversion price was less than the fair value of the
Company’s common stock. These convertible debentures were fully convertible at
the issuance date thus the value of the beneficial conversion and the warrants
were treated as a discount on the 6% Senior Convertible debentures and were
valued at $200,000 to be amortized over the debenture term. The fair value of
this warrant was estimated on the date of grant using the Black-Scholes
option-pricing model using the following weighted-average assumptions: expected
dividend yield of 0%; expected volatility of 219%; risk-free interest rate of
2.29% and an expected holding period of five years. The Company paid a legal fee
of $12,500 in connection with this debenture. Accordingly, the Company recorded
debt issuance cost of $12,500 which will be amortized over the term of the
debenture. As of September 30, 2010, amortization of debt issuance cost amounted
to $4,168 and is included in interest expense. As a result of the Merger with
EClips Media on March 16, 2010, the new conversion price of this debenture is
equivalent to $0.025 and the warrants increased to 8,000,000 shares of the
Company’s common stock.





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


14


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


NOTE
6 – CONVERTIBLE DEBENTURES (continued)





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





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





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





September
      30, 2010
                  
                  
                  December
      31, 2009Long-term
      convertible debentures
                  
                  $
                  1,025,000
                  
                  
                  $
                  75,000Less:
      debt discount
                  
                  
                  (798,333
                  )
                  
                  
                  (67,380
                  )Long-term
      convertible debentures – net
                  
                  $
                  226,667
                  
                  
                  $
                  7,620





Total
amortization of debt discounts for the convertible debentures amounted to
$226,667 for the nine months ended September 30, 2010, and is included in
interest expense. Accrued interest as of September 30, 2010 amounted to
$27,415.





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.


15


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


NOTE
7 - STOCKHOLDERS’ DEFICIT (continued)





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. Except as
otherwise noted, amounts set forth as of September 30, 2010 reflects the effect
of the 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 former 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 nine months ended September 30, 2010, the Company
recorded stock based compensation of $479,167 and prepaid expense of $95,833 to
be amortized over the service or vesting period.




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





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





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





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





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


16




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


NOTE
8 - RELATED PARTY TRANSACTIONS





On
February 4, 2010, the Company entered into a Consulting Agreement (the
“Agreement”) with Colonial Ventures, LLC (the “Consultant”), a company
controlled by Chairman and former 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 nine
months ended September 30, 2010, the Company paid $80,000 in cash to this
consultant.  Compensation in the amount of $10,000 was recorded to
additional paid-in capital for contributed services provided by such consultant
in September 2010.





During
the nine months ended September 30, 2010, the Company paid leasehold
improvements and rent of $14,025 and $12,486, respectively on a facility lease
by an affiliated company for which our former Chief Executive officer and
director, Greg Cohen, is the President.





NOTE
9 – COMMITMENTS





Consulting
Agreement





On
June 24, 2010 the Company engaged Brooke Capital Investments, LLC
(“Brooke”) to perform certain investor relations, branding and media relations
services for the Company for a 12 month period (the “Consulting
Agreement”). The Company shall pay to Brooke an amount equal to $150,000, in
cash, on the date of execution of this Agreement. This Agreement may not be
terminated during the term and under no circumstance is Brooke under any
obligation to return all or any portion of the Consulting Fee to the Company. In
connection with this consulting agreement during the nine months ended September
30, 2010, the Company recorded investor relations expense of $40,000 and prepaid
expense of $110,000 to be amortized over the term of this
agreement.


17


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





Cautionary
Notice Regarding Forward Looking Statements





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





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




Overview





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





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





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




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


18




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




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




In
September 2010, we decided to discontinue the operations of SD acquisition Corp.
because of the disappointing performance and negative results of its most recent
fantasy league event in August 2010.  Accordingly, SD acquisition
Corp. is recorded as discontinued operations in the accompanying
consolidated financial statements. The Company has agreed in principal to enter
into a spin off agreement (the “Spinoff”) with BIG and Mr. Eric Simon, the
Company’s former CEO, pursuant to which the Company will return the Superdraft
business to Mr. Simon by exchanging 100% of the issued and outstanding capital
stock of SD Acquisition Corp., which owned and operated the Superdraft business,
for the cancellation of 30,000,000 shares of the Company owned by Mr. Simon and
BIG, the cancellation of the Asset Purchase Agreement and Employment Agreement
entered into between the Company, Mr. Simon and BIG in June 2010. In addition,
BIG will make certain payments to some of our noteholders which would reduce, on
a dollar for dollar basis, amounts due and payable by us to such noteholders.
The Spinoff remains subject to revision.





For the
nine months ended September 30, 2010, we had a net loss of $ 6,968,251 and
$679,154 of net cash used in operations. At September 30, 2010 we had a working
capital deficiency of $2,556,768. Additionally at September 30, 2010, we had an
accumulated deficit of $3,448,661. These matters and the Company’s expected
needs for capital investments required to support operational growth raise
substantial doubt about its ability to continue as a going concern. The
Company’s unaudited financial statements do not include any adjustments to
reflect the possible effects on recoverability and classification of assets or
the amounts and classification of liabilities that may result from our inability
to continue as a going concern.




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.




19




Use
of Estimates




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





Property
and Equipment





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





Valuation
of Long-Lived and Intangible Assets and Goodwill




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




·
            Significant
      changes in performance relative to expected operating
    results




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




·
            Significant
      industry or economic trends




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




Derivative
Liabilities





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


20





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





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





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





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


21





Results
of Operations





Three
and Nine months Ended September 30, 2010 Compared to the Three and Nine months
Ended September 30, 2009





Net
revenues





We have
not generated revenues during the three and nine months ended September 30,
2010.





Operating
Expenses





Costs
associated with the administration of the Company were included in continued
operations and in relation to the public entity. Payroll and stock based
compensation expenses were $969,167 and $756,311 for the nine months ended
September 30, 2010 and 2009, respectively, an increase of approximately of
$212,856 or 28%.  The increase was primarily attributable to the
issuance of our common stock to our Chairman pursuant to a consulting agreement
in February 2010. In addition, Pursuant to an Employment Agreement dated on
June 21, 2010 we issued 10,000,000 shares of common stock to our former
Chief Executive Officer, Mr. Eric Simon, valued at $0.04 per share or
$400,000. Payroll and stock based compensation expenses were $101,875 and
$93,882 for the three months ended September 30, 2010 and 2009, respectively, an
increase of approximately of $7,993 or 9%.





Professional
and consulting expenses were $2,808,623 and $203,642 for the nine months ended
September 30, 2010 and 2009, respectively, an increase of approximately of
$2,604,981 or 1,279%.  Professional expenses were incurred for the
audits and public filing requirements.  The increase was primarily
attributable to the issuance of our common stock to four consultants for
services rendered amounting to $2,610,000 during the nine months ended September
30, 2010. Professional and consulting expenses were $74,912 and $72,014 for
the three months ended September 30, 2010 and 2009, respectively, an
increase of approximately of $2,898 or 4%.




General
and administrative expenses, which consist of office expenses, insurance, rent
and general operating expenses totaled $278,137 for the nine months ended
September 30, 2010, as compared to $185,900 for the nine months ended September
30, 2009, an increase of approximately $92,237 or 50%. The increase is primarily
attributable to the impairment loss of $173,258 in connection with the issuance
of a secured 6% demand promissory note to RootZoo Inc. (“RZ”), an entity the
Company contemplated acquiring  but negotiations broke down and have
since been terminated. As a result of the discontinuance of all
negotiations for RZ, the Company elected to foreclose on its loan and to acquire
the RZ business under its foreclosed loan agreement. On May 15, 2010 the
Company demanded repayment of all outstanding amounts under the Demand Note. On
June 6, 2010, RZ entered into a Peaceful Possession Letter Agreement with
the Company pursuant to which RZ granted the Company all rights of possession in
and to the collateral which secures the Demand Note,
representing substantially all of the assets of RZ in partial satisfaction
with the Demand Note debt. Subsequently the Company, through an Assignment
Agreement, assigned the rights and possession of the collateral to its
subsidiary, RZ Acquisition Corp. Due to the termination of this negotiation, we
believe RZ is financially unable to satisfy its obligations to us and the
foreclosed assets of RZ has no value and  are worthless. Such increase
was offset by decrease in rent expense of $42,232 during the nine months ended
September 30, 2010. General and administrative expenses, which consist of
office expenses, insurance, rent and general operating expenses totaled $37,468
for the three months ended September 30, 2010, as compared to $68,607 for the
three months ended September 30, 2009, a decrease of approximately $31,139 or
45%. This is due to decrease in rent and general operating expense as a result
of decrease in operations.




Total
Other Expense





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





CHANGE IN
FAIR VALUE OF DERIVATIVE LIABILITIES AND DERIVATIVE LIABILITIES EXPENSE





We
recorded derivative liability expense of $3,260,076 in connection with the
issuance of the convertible debentures with warrants for the nine months ended
September 30, 2010. Change in fair value of derivative liabilities expense
consist of income or expense associated with the change in the fair value of
derivative liabilities as a result of the application of FASB ASC Topic No.
815-40,Derivatives
and Hedging – Contracts in an Entity’s Own Stock , to our financial
statements. The variation in fair value of the derivative liabilities between
measurement dates amounted to an (increase) decrease of $(366,480) and
$2,032,567 during the three and nine months ended September 30, 2010,
respectively. 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.





22


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





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





INTEREST
EXPENSE





Interest
expense consists primarily of interest recognized in connection with the
amortization of debt discount, amortization of debt issuance cost and interest
on our convertible debentures. The increase in interest expense when compared to
the same period in 2009 is primarily attributable to the amortization of the
debt discount amounting to approximately $128,125 and $226,667 during the three
and nine months ended September 30, 2010, respectively, associated with the 6%
convertible debenture.





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, we discontinued these
operations and disposed of certain of its subsidiaries, and prior periods have
been restated in our financial statements and related footnotes to conform to
this presentation.  Additionally, in September 2010, we decided to
discontinue the operations of SD acquisition Corp. because of the disappointing
performance and negative results of its most recent fantasy league event in
August 2010.





The
following table sets forth for the three months ended September 30, 2010 and
2009, indicated selected financial data of the Company's discontinued
operations.





September
      30,
                    2010
                  
                  
                  September
      30,
                    2009Revenues
                  
                  $
                  178,645
                  
                  
                  $
                  61,266Cost
      of sales
                  
                  
                  381,331
                  
                  
                  
                  27,509Gross
      (loss) profit
                  
                  
                  (202,686
                  )
                  
                  
                  33,757Operating
      and other non-operating expenses
                  
                  
                  1,218,378
                  
                  
                  
                  51,444Loss
      from discontinued operations
                  
                  $
                  (1,421,064
                  )
                  
                  $
                  (17,687
                  )





The
following table sets forth for the nine months ended September 30, 2010 and
2009, indicated selected financial data of the Company's discontinued
operations.





September
      30,
                    2010
                  
                  
                  September
      30,
                    2009Revenues
                  
                  $
                  178,645
                  
                  
                  $
                  260,992Cost
      of sales
                  
                  
                  381,331
                  
                  
                  
                  189,450Gross
      (loss) profit
                  
                  
                  (202,686
                  )
                  
                  
                  71,542Operating
      and other non-operating expenses
                  
                  
                  1,225,312
                  
                  
                  
                  183,870Loss
      from discontinued operations
                  
                  $
                  (1,427,998
                  )
                  
                  $
                  (112,328
                  )




23





Loss
from continuing operations





We
recorded loss from continuing operations of $726,021 for the three months ended
September 30, 2010 as compared to $235,030 for the three months ended September
30, 2009. We recorded loss from continuing operations of $5,540,253 for the nine
months ended September 30, 2010 as compared to $1,148,880 for the nine months
ended September 30, 2009.





Net
Loss





We
recorded net loss of $2,147,085 for the three months ended September 30, 2010 as
compared to $252,717 for the three months ended September 30, 2009. We recorded
net loss of $6,968,251 for the nine months ended September 30, 2010 as compared
to $1,261,208 for the nine months ended September 30, 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 September 30, 2010, we had a cash balance of $19,827. Our working capital
deficit is $2,556,768 at September 30, 2010. We reported a net loss of
$6,968,251 and $1,261,208 during the nine months ended September 30, 2010 and
2009, respectively.  We do not anticipate we will be profitable in
fiscal 2010.





We
reported a net increase in cash for the nine months ended September 30, 2010 of
$19,827. While we currently have no material commitments for capital
expenditures, at September 30, 2010 we owed $1,025,000 under various convertible
debentures.  During the nine months ended September 30, 2010, we have
raised net proceeds of $937,500 from convertible debentures and $75,000 from the
sale of our common stock. We do not presently have any external sources of
working capital.




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





Operating
activities





Net cash
flows used in operating activities for the nine months ended September 30, 2010
amounted to $679,154 and was primarily attributable to our net losses of
$6,968,251, offset by amortization of debt discount and debt issuance costs of
$230,835, stock based expenses of $3,529,167, derivative liability expense of
$3,260,076, change in fair value of derivative liabilities of ($2,032,567),
contributed services of $10,000, depreciation of $3,254, impairment loss of
$173,257, discontinued operating activities such as impairment loss of
$1,043,038, and total changes in assets and liabilities from continued and
discontinued activities of $58,696. Net cash flows used in operating activities
for the nine months ended September 30, 2009 amounted to $325,646 and was
primarily attributable to our net losses of $1,261,208, offset by stock based
expenses of $656,962, discontinued operating activities such as depreciation of
$129,227, and total changes in assets and liabilities of $149,373.





Investing activities





Net cash
flows used in investing activities was $313,519 for the nine months ended
September 30, 2010. We paid leasehold improvement of $14,025, purchase of
equipment of $23,451, cash used in acquisition (net of cash acquired) of
$104,943 and invested $171,100 on a 6% demand promissory note receivable. Net
cash flows used in investing activities was $787 for the nine months ended
September 30, 2009.


24





Financing
activities





Net cash
flows provided by financing activities was $1,012,500 for the nine months ended
September 30, 2010. We received net proceeds from convertible debentures of
$950,000 offset by debt issuance cost of $12,500 and the sale of our common
stock of $75,000. Net cash flows provided by financing activities was $344,899
for the nine months ended September 30, 2009. We received net proceeds from sale
of our stock of $344,899.





Debenture
Financing





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





Contractual
Obligations





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





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





Payments
      Due by PeriodTotal
                                          
                                          
                                          Less
      than 1
                                            year
                                          
                                          
                                          1-3
                                            Years
                                          
                                          
                                          4-5
                                            Years
                                          
                                          5 Years
                                            +Contractual
      Obligations :Long
      term loans
                                          
                                          $
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          1,025,000
                                          
                                          
                                          
                                          —
                                          
                                          —Total
      Contractual Obligations:
                                          
                                          $
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          1,025,000
                                          
                                          
                                          
                                          —
                                          
                                          —




Off-balance
Sheet Arrangements





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





ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





Not
required for smaller reporting companies.


25


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





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





Changes
in Internal Controls.





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





PART II -
OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS.





None.





ITEM 1A.
RISK FACTORS.





Not required for smaller reporting
companies.





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





None.





ITEM 3.  DEFAULTS UPON SENIOR
SECURITIES.





None.





ITEM
4.  (REMOVED AND RESERVED).








ITEM
5.  OTHER INFORMATION.





None.





ITEM
6. EXHIBITS





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


* Filed herein




26




SIGNATURES





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




ECLIPS
      MEDIA TECHNOLOGIES, INC.Date:
      November 15, 2010
                    By:
                    /s/ Glenn
      KesnerGlenn
      KesnerChief Executive
    Officer(principal executive officer
      and principalaccounting officer)




27