U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 000-28219
ECLIPSE ENTERTAINMENT GROUP, INC.
(Exact name of registrant as specified in its charter)
Nevada 91-1766849
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
10990 N.E. 8th Street, Suite 900, Bellevue, Washington 98004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (425) 990-5969
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
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) been subject to such filing
requirements for the past 90 days. Yes X No .
As of March 31, 2000, the Registrant had 12,016,140 shares
of common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes
No X .
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEET AS OF MARCH 31, 2000 3
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND MARCH 31, 1999 4
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND MARCH 31, 1999 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. PLAN OF OPERATION 7
PART II
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURE 11
PART I.
ITEM 1. FINANCAL STATEMENTS.
ECLIPSE ENTERTAINMENT GROUP, INC.
BALANCE SHEET (Unaudited)
March 31, 2000
ASSETS
Cash $ 183,973
Note receivable 266,000
Film costs 1,109,895
Property and equipment, net 582
Other assets 685
Total assets $1,561,135
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 83,119
Due to related party 437,004
Stock subscriptions payable 210,000
Total liabilities 730,123
Stockholders' equity
Preferred stock, $.001 par value;
10 million shares authorized;
no shares issued -
Common stock, $.001 par value;
50 million shares authorized;
12,016,140 shares issued and outstanding 12,016
Additional paid-in capital 1,320,131
Accumulated deficit (501,135)
Total stockholders' equity 831,012
Total liabilities and stockholders' equity $1,561,135
See Accompanying Notes to Financial Statement
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF OPERATIONS (Unaudited)
For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
Revenues $ - $ -
General and administrative expenses 20,061 66,750
Loss before provision for income
Taxes (20,061) (66,750)
Provision for income taxes - -
Net loss $ (20,061) $ (66,750)
Basic and fully diluted loss per
common share (nil) (nil)
Weighted average number of common
shares used in per share calculation 12,016,140 9,710,620
See Accompanying Notes to Financial Statement
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
Cash flows from financing activities:
Net income $ (20,061 $ (66,750)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 51 51
Services paid with common stock - 41,502
Changes in operating assets and
liabilities:
Increase in film costs - (97,101)
Decrease in accounts payable and
accrued expenses (6,193) (26,758)
Increase in due to related party 263,840 37,840
Net cash provided (used)
by operating activities 237,637 (111,216)
Cash flows from investing activities:
Proceeds from issuance of note
Receivable (266,000) -
Net cash used by investing
Activities (266,000) -
Cash flows from financing activities:
Proceeds from stock subscriptions
Payable 210,000 -
Proceeds from common stocks issued - 115,425
Net cash provided by financing
Activities 210,000 115,425
Net change in cash 181,637 4,209
Cash-beginning balance 2,336 -
Cash-ending balance 183,973 4,209
See Accompanying Notes to Financial Statement
ECLIPSE ENTERTAINMENT GROUP, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared in accordance with U.S. Securities and Exchange
Commission ("SEC") requirements for interim financial statements.
Therefore, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. The financial statements
should be read in conjunction with the year ended December 31,
1999 financial statements of Eclipse Entertainment Group, Inc.
("Registrant") included in the Form 10-KSB filed with the SEC by
the Registrant.
The results of operations for the interim periods shown in this
report are not necessarily indicative of results to be expected
for the full year. In the opinion of management, the information
contained herein reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of
such operation. All such adjustments are of a normal recurring
nature.
NOTE 2 - RELATED PARTY TRANSACTIONS
Due to related parties at March 31, 2000 consist of the
following:
Advances payable to an entity controlled by an
officer and shareholder of the Registrant
represent advances, unsecured, bearing no
interest, and due on demand $323,504
Promissory note payable to a shareholder, unsecured,
bearing interest at 8%, and due on demand 113,500
Total due to related parties $437,004
ITEM 2. PLAN OF OPERATION.
The following discussion should be read in conjunction with the
financial statements of the Resigtrant and notes thereto
contained elsewhere in this report.
Twelve Month Plan of Operation.
The business objectives of the Registrant, as developed by its
Board of Directors, are strongly focused on the production and
acquisition of action oriented feature films with strong domestic
and universal appeal that have been developed and/or produced
within well managed low to medium budgets. The Registrant
intends to develop a well integrated portfolio of these feature
films by producing or co-producing one or two action feature
films each year and by acquiring the rights to other similar
films which are available at attractive prices.
The Registrant has entered into a distribution agreement with
Westar Entertainment, Inc. on January 1, 1998 pursuant to which
this firm markets the Registrant's products both domestically and
worldwide (see Exhibit 10.1 to this Form 10-QSB). Under this
agreement, the Registrant and Westar Entertainment, Inc. will
share distribution revenues on a 50-50 basis. Working with
Westar Entertainment, Inc., the Registrant is working toward
establishing a strong network of domestic and foreign buyers and
will produce and/or acquire motion pictures that meet their needs
in terms of content and cost. The Registrant intends to develop
its portfolio to respond quickly and effectively to market needs,
and has attended and will continue to attend the major film
markets in order to stay in touch with the dictates of the
domestic and international markets. The major markets include
the AFM (American Film Market) in Santa Monica, California, the
Cannes Film Market (Marche du Film de Cannes) in Cannes, France,
and MIFED ("E.P. Fiera Internazionale Di Milano") in Milan,
Italy.
Eclipse has acquired the worldwide distribution rights to the
action/adventure films Beretta's Island, Double Cross and the
martial arts film The Process. Beretta's Island stars Franco
Columbu (MR. OLYMPIA) and Ken Kercheval with a special appearance
by Arnold Schwarzenegger. Double Cross stars Franco Columbu,
William Smith (Conan), Frank Stallone and Barbara Niven. The
Process stars and is directed by Ernie Reyes, Jr. (Red Sonja,
Ninja Turtles I & II), Cori Nemec (Drop Zone) and Ernie Reyes,
Sr. (Surf Ninjas).
Although the Registrant is, at the moment, focused on the
production, co-production and acquisition of low to medium budget
action films, it is also within its mandate to branch out into
similar genres of television programming as well as documentaries
and docudramas within budgetary constraints. Longer-range
projects include the acquisition of a movie studio project in
Sardinia, Italy, the formation or acquisition of a domestic video
label, and acquisition of a music division.
For the period from the Registrant's inception through March
31, 2000, there were no revenues and operating activities
related primarily to establishing the management and
operating infrastructure. The Registrant created the ability to
acquire and license worldwide or sell distribution rights to
independently produced feature films. The Registrant can
obtain rights to motion pictures at various stages of completion
(either completed, in production or in development) and licenses
distribution rights (including video, pay television, free
television, satellite and other ancillary rights) of motion
pictures to various sub-distributors in the United States and in
foreign markets.
The Registrant has a limited operating history. The
Registrant must establish and maintain distribution on current
rights to motion pictures, implement and successfully execute
its business and marketing strategy, provide superior
distribution of motion pictures, anticipate and respond to
competitive developments and attract and retain qualified
personnel. There is no assurance that the Registrant will be
successful in addressing these needs.
Film costs represent a major component of the
Registrant's assets. Film costs represent those costs
incurred in the acquisition and distribution of motion
pictures or in the acquisition of distribution rights to motion
pictures. This includes minimum guarantees paid to producers
or other owners of film rights, recoupable distribution and
production costs. The Registrant will amortize film costs using
the individual film forecast method under which film costs are
amortized for each film in the ratio that revenue earned in the
current period for such film bears to management's estimate of
the total revenue to be realized from all media and markets for
such film. The Registrant currently has not generated
revenues from such film costs, however, management believes
that distribution will commence in the early part of the year
2000. Net income in future years is in part dependent upon the
Registrant's amortization of its film costs and may be
significantly affected by periodic adjustments in such amortization.
The Registrant typically acquires distribution rights in
a motion picture for a specified term in one or more territories
and media. In some circumstances, the Registrant also acquires the
copyright to the motion picture. The arrangements the Registrant
enters into to acquire rights may include the Registrant agreeing to pay
an advance or minimum guarantee for the rights acquired and/or agreeing to
advance print and advertising costs, obligations which are
independent of the actual financial performance of the motion
picture being distributed. The risks incurred by the Registrant
dramatically increase to the extent the Registrant takes such actions.
The Registrant also incurs significant risk to the extent it engages
in development or production activities itself. The Registrant may, in
certain circumstances, reduce some of the foregoing risks by sub-licensing
certain distribution rights in exchange for minimum guarantees from
sub-licensees such as foreign sub-distributors. The investment
by the Registrant in a motion picture includes the cost of
acquisition of the distribution rights (including any advance or
minimum guarantee paid to the producer), the amount of the
production financed, and the marketing and distribution costs
borne.
General and administrative expenses consist of
related general corporate functions, including marketing
expenses, professional service expenses and travel. The
Registrant expects general and administrative expenses to
increase as it commences to promote and market its motion picture
distribution rights.
Since inception, the Registrant has financed operations
primarily through private placements of common stock. The
Registrant has significant ongoing liquidity needs to support its
existing business and continued growth. The Registrant may
seek additional funding through public or private financing or
other arrangements prior to such time. Adequate funds may not be
available when needed or may not be available on favorable
terms. If funding is insufficient at any time in the future,
the Registrant may be unable to develop or enhance its service
offering, take advantage of business opportunities or respond
to competitive pressures, any of which could have a negative
impact on the business, operating results and financial condition.
Over the next 12 months the Registrant will continue to attend
all major sales markets to sell its film products. The
Registrant's existing capital will not be sufficient to meet
the Registrant's cash needs, including costs of its registration
and complying with its continuing reporting obligations under the
Securities Exchange Act of 1934. Accordingly, additional capital
will be required.
The Registrant will attempt to raise approximately $1.5
million in additional funds over the next 12 months through a
private placement for production of its next feature film.
However, there can be no assurance that the Registrant will be
successful in raising such additional funds. Regardless of
whether the Registrant's cash assets prove to be inadequate to
meet the Registrant's operational needs, the Registrant might
seek to compensate providers of services by issuance of stock in
lieu of cash.
Capital Expenditures.
No material capital expenditures were made during the quarter
ended on March 31, 2000.
Year 2000 Issue.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced after January 1, 2000, and if not addressed,
the impact on operations and financial reporting may range from
minor errors to significant system failure which could affect the
Registrant's ability to conduct normal business operations. This
creates potential risk for all companies, even if their own
computer systems are Year 2000 compliant. It is not possible to
be certain that all aspects of the Year 2000 issue affecting the
Registrant, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The Registrant currently believes that its systems are Year 2000
compliant in all material respects. Although management is not
aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, the Registrant
may experience serious unanticipated negative consequences (such
as significant downtime for one or more of its suppliers) or
material costs caused by undetected errors or defects in the
technology used in its internal systems. Furthermore, the
purchasing patterns of consumers may be affected by Year 2000
issues. The Registrant does not currently have any information
about the Year 2000 status of its potential material suppliers.
The Registrant's Year 2000 plans are based on management's best
estimates.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis contains
"forward looking statements" within the meaning of Rule 175 of
the Securities Act of 1933, as amended, and Rule 3b-6 of the
Securities Act of 1934, as amended, including statements
regarding, among other items, the Registrant's business
strategies, continued growth in the Registrant's markets,
projections, and anticipated trends in the Registrant's business
and the industry in which it operates. The words "believe,"
"expect," "anticipate," "intends," "forecast," "project," and
similar expressions identify forward-looking statements. These
forward-looking statements are based largely on the Registrant's
expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Registrant's
control. The Registrant cautions that these statements are
further qualified by important factors that could cause actual
results to differ materially from those in the forward looking
statements, including, among others, the following: reduced or
lack of increase in demand for the Registrant's products,
competitive pricing pressures, changes in the market price of
ingredients used in the Registrant's products and the level of
expenses incurred in the Registrant's operations. In light of
these risks and uncertainties, there can be no assurance that the
forward-looking information contained herein will in fact
transpire or prove to be accurate. The Registrant disclaims any
intent or obligation to update "forward looking statements."
PART II.
ITEM 1. LEGAL PROCEEDINGS.
The Registrant is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Registrant has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. No Reports on Form 8-K were filed
during the three month period covered this Form 10-QSB.
(b) Exhibits. Exhibits included or incorporated by reference
herein: See Exhibit Index.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Eclipse Entertainment Group, Inc.
Dated: May 22, 2000 By: /s/ Arthur Birzneck
Arthur Birzneck, President
EXHIBIT INDEX
Number Description
3.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 2a to the Registration Statement on Form 10-
SB/A filed on December 28, 1999).
3.2 Bylaws of the Registrant (incorporated by reference to
Exhibit 2b to the Registration Statement on Form 10-SB/A filed on
December 28, 1999)
10 Distribution Agreement between the Registrant and Westar
Entertainment, Inc., dated January 1, 1998 (incorporated by
reference to Exhibit 10 of the Form 10-KSB filed on April 11,
2000).
27 Financial Data Schedule (see below).
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS CONTAINED IN THE
REGISTRANT'S FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
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<CASH> 189,973
<SECURITIES> 0
<RECEIVABLES> 266,000
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