U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999
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 .
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ].
The Registrant had no revenues for the fiscal year ended on
December 31, 1999. The aggregate market value of the voting
stock held by non-affiliates of the Registrant as of March 31,
2000: Common Stock, par value $0.001 per share -- $8,751,620. As
of March 31, 2000, the Registrant had 12,016,140 shares of common
stock issued and outstanding.
TABLE OF CONTENTS
PART 1 PAGE
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 10
ITEM 3. LEGAL PROCEEDINGS 10
ITEM 4. SUBMISSION TO MATTERS TO VOTE
OF SECURITY HOLDERS 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS 10
ITEM 6. PLAN OF OPERATION 12
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 15
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 15
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 15
ITEM 10. EXECUTIVE COMPENSATION 17
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 18
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 19
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES,
AND REPORTS ON FORM 8-K 20
SIGNATURES 21
PART I.
ITEM 1. BUSINESS.
(a) Business Development.
Eclipse Entertainment Group, Inc. ("Registrant") was
incorporated on January 27, 1997 in the State of Nevada with the
objective of satisfying a worldwide demand for quality,
American entertainment that is developed under carefully
managed budgets. Registrant will work to establish a network
of foreign and domestic buyers to produce or acquire
programming that directly meets their needs in terms of
content and cost.
(b) Business of the Registrant.
Eclipse Entertainment Group, Inc. was incorporated in Nevada on
January 27, 1997. 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 (attached as Exhibit 10.1 to this Form 10-KSB). 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.
(1) The Motion Picture Industry.
The business of the motion picture industry may be broadly
divided into two major segments: production, involving the
development, financing and making of motion pictures, and
distribution, involving the promotion and exploitation of
completed motion pictures in a variety of media.
Historically, the largest companies, the so-called "Majors" and
"mini-Majors," have dominated the motion picture industry by both
producing and distributing a majority of the motion pictures
which generate significant box office receipts. Over the past
decade, however, "Independents" or smaller film production and
distribution companies, such as the Registrant, have played an
increasing role in the production and distribution of motion
pictures to fill the increasing worldwide demand for filmed
entertainment product.
The Majors (and mini-Majors) include Universal Pictures, Warner
Bros. Pictures, Metro-Goldwyn-Mayer Inc., Twentieth Century Fox
Film Corporation, Paramount Pictures Corporation, Sony Pictures
Entertainment (including Columbia Pictures, TriStar Pictures and
Triumph Releasing) and The Walt Disney Company (Buena Vista
Pictures, Touchstone Pictures and Hollywood Pictures). Generally,
the Majors own their own production studios (including lots,
sound stages and post-production facilities), have nationwide or
worldwide distribution organizations, release pictures with
direct production costs generally ranging from $25,000,000 to
$75,000,000, and provide a continual source of pictures to film
exhibitors. In addition, some of the Majors have divisions which
are promoted as "independent" distributors of motion pictures.
These "independent" divisions of Majors include Miramax Films (a
division of The Walt Disney Company), Sony Classics (a division
of Sony Pictures), The Samuel Goldwyn Company (a division of
Metro-Goldwyn-Mayer), October Films (a division of Universal),
New Line (a division of Time Warner) and its Fine Line
distribution label, and Republic Pictures (a division of Viacom).
In addition to the Majors, the Independents engaged primarily in
the distribution of motion pictures produced by companies other
than the Majors include, among others, Trimark Holdings and
Artisan Entertainment. The Independents typically do not own
production studios or employ as large a development or production
staff as the Majors.
The Process, Beretta's Island, and Double Cross are
termed "independent feature films". This means that the movies
were produced without the initial backing of a major studio.
During the past decade independents enjoyed cash support from
major studios. With the resurgence of independent filmmaking,
production companies are gearing up again and independent
distributors are returning to the market.
The motion picture industry recently completed its second
straight record-breaking year both in the US and overseas. In
1999, U.S. ticket sales totaled $7.5 billion, up from $6.95
billion in 1998 (Associated Press, Dec. 28, 1999). 1999 ticket
sales of roughly 1.5 billion were the highest in 40 years.
Domestic box office totals for the first quarter of 2000 have
already exceeded the same period last year by 10.1% or $135
million (AC Neilsen EDI, Inc.).
In the US, sixteen new releases surpassed the $100 million mark
led by the latest "Star Wars" episode, "The Phantom Menace"
(Variety). Also, topped by "The Phantom Menace", 18 films
scored more than $100 million at the overseas box office during
1999 (Hollywood Reporter).
It was a good year for smaller films as the independent feature
"The Blair Witch Project" led the way with domestic box office
receipts of $141 million and an international box office of $79
million (Variety). Other low budget features such as "American
Beauty", "Being John Malkovich" and "Boys Don't Cry" left their
mark both at the box office and at the Academy Awards.
This strong performance has been felt at all levels of the film
industry, especially this year's American Film Market ("AFM") in
Santa Monica, California. For an increasing number of
international buyers and sellers at this year's AFM, there is a
feeling that countries around the globe are again hungry for
product and actually buying it (Variety, March 1,2000).
(2) Motion Picture Production And Financing.
The production of a motion picture usually involves four steps:
development, pre-production, production and post-production. The
development stage includes developing a concept internally, or
obtaining an original screenplay or a screenplay based on a pre-
existing literary work, or acquiring and rewriting a screenplay.
Creative personnel may be contacted to determine availability and
for planning the timing of the project, or in some cases actually
hired. In pre-production, a budget is prepared, the remaining
creative personnel, including a director, actors and various
technical personnel are hired, shooting schedules and locations
are planned and other steps necessary to prepare for principal
photography are completed. Production is the principal
photography of the project and generally continues for a period
of not more than three months. In post-production, the film is
edited and synchronized with music and dialogue and, in certain
cases, special effects are added. The final edited synchronized
product, the negative, is used to manufacture release prints
suitable for public exhibition.
The production of a motion picture requires the financing of the
direct and indirect overhead costs of production. Direct
production costs include film studio rental, cinematography,
post-production costs and the compensation of creative and other
production personnel. Distribution costs (including costs of
advertising and release prints) are not included in direct
production costs.
The Majors generally have sufficient cash flow from their motion
picture and related activities, or in some cases, from unrelated
businesses (e.g., theme parks, publishing, electronics, and
merchandising) to pay or otherwise provide for their production
costs. Overhead costs are, in substantial part, the salaries and
related costs of the production staff and physical facilities
which the Majors maintain on a full-time basis. The Majors often
enter into contracts with writers, producers and other creative
personnel for multiple projects or for fixed periods of time.
Independents generally avoid incurring substantial overhead costs
by hiring creative and other production personnel and retaining
the other elements required for pre-production principal
photography and post-production activities only on a project-by-
project basis. Unlike the Majors, Independents also typically
finance their production activities from various sources,
including bank loans, "pre-sales," equity offerings and joint
ventures. Independents generally attempt to complete their
financing of a motion picture production prior to commencement of
principal photography, at which point substantial production
costs begin to be incurred and require payment.
"Pre-sales" are often used by Independents to finance all or a
portion of the direct production costs of a motion picture. Pre-
sales consist of fees or advances paid or guaranteed to the
producer by third parties in return for the right to exhibit the
completed motion picture in theatres or to distribute it in home
video, television, international or other ancillary markets.
Independents with distribution capabilities may retain the right
to distribute the completed motion picture either domestically or
in one or more international markets. Other independents may
separately license theatrical, home video, television,
international and other distribution rights among several
licensees. Payment commitments in a pre-sale are typically
subject to delivery and to the approval of a number of
prenegotiated factors, including script, production budget, cast
and director.
Both Majors and Independents often acquire motion pictures for
distribution through an arrangement known as a negative pickup"
under which the Major or Independent agrees to acquire from
another production company some or all rights to a film upon its
completion. The Independent often finances production of the
motion picture pursuant to financing arrangements with banks or
other lenders wherein the lender obtains a security interest in
the film and in the Independent's rights under its distribution
arrangement. When the Major or Independent "picks up" the
completed motion picture, it may assume some or all of the
production financing indebtedness incurred by the production
company in connection with the film. In addition, the Independent
is often paid a production fee and is granted a participation in
the profits from distribution of the motion picture.
Both Majors and Independents often grant third-party
participations in connection with the distribution and production
of a motion picture. Participations are contractual rights of
actors, directors, screenwriters, producers, owners of rights and
other creative and financial contributors entitling them to share
in revenues or profits (as defined in the respective agreements)
from a particular motion picture. Except for the most sought-
after talent, participations are generally payable only after all
distribution and marketing fees and costs, direct production
costs (including overhead) and financing costs are recouped by
the producer in full.
(3) Motion Picture Distribution.
Distribution of a motion picture involves the domestic and
international licensing of the picture for (i) theatrical
exhibition, (ii) home video, (iii) presentation on television,
including pay-per-view, video-on-demand, satellites, pay cable,
network, basic cable and syndication, (iv) non-theatrical
exhibition, which includes airlines, hotels, armed forces
facilities and schools and (v) marketing of the other rights in
the picture, which may include books, CD-ROMs, merchandising and
soundtrack recordings.
Theatrical Distribution and Exhibition. Motion pictures are often
exhibited first in theatres open to the public where an admission
fee is charged. Theatrical distribution involves the manufacture
of release prints; licensing of motion pictures to theatrical
exhibitors; and promotion of the motion picture through
advertising and promotional campaigns. The size and success of
the promotional and advertising campaign may materially affect
the revenues realized from its theatrical release, generally
referred to as "box office gross." Box office gross represents
the total amounts paid by patrons at motion picture theatres for
a particular film, as determined from reports furnished by
exhibitors. The ability to exhibit films during summer and
holiday periods, which are generally considered peak exhibition
seasons, may affect the theatrical success of a film. Competition
among distributors to obtain exhibition dates in theatres during
these seasons is significant. In addition, the costs incurred in
connection with the distribution of a motion picture can vary
significantly depending on the number of screens on which the
motion picture is to be exhibited and the ability to exhibit
motion pictures during peak exhibition seasons. Similarly, the
ability to exhibit motion pictures in the most popular theatres
in each area can affect theatrical revenues. Exhibition
arrangements with theatre operators for the first run of a film
generally provide for the exhibitor to pay the greater of 90% of
ticket sales in excess of fixed amounts relating to the theatre's
costs of operation and overhead, or a minimum percentage of
ticket sales which varies from 40% to 70% for the first week of
an engagement at a particular theatre, decreasing each subsequent
week to 25% to 30% for the final weeks of the engagement. The
length of an engagement depends principally on the audience
response to the film.
Home Video. The home video distribution business involves the
promotion and sale of videocassettes and videodiscs to video
retailers (including video specialty stores, convenience stores,
record stores and other outlets), which then rent or sell the
videocassettes and videodiscs to consumers for private viewing.
The home video marketplace now generates total revenues greater
than the domestic theatrical exhibition market.
Major feature films are usually scheduled for release in the home
video market four to six months after theatrical release to
capitalize on the recent theatrical advertising and publicity for
the film. Promotion of new home video releases is generally
undertaken during the nine to twelve weeks before the home video
release date. Videocassettes of feature films are generally sold
to domestic wholesalers on a unit basis. Unit-based sales
typically involve the sales of individual videocassettes to
wholesalers or distributors at $50.00 to $60.00 per unit and
generally are rented by consumers for fees ranging from $1.00 to
$5.00 per day (with all rental fees retained by the retailer).
Wholesalers who meet certain sales and performance objectives may
earn rebates, return credits and cooperative advertising
allowances. Selected titles including certain made-for-video
programs, are priced significantly lower to encourage direct
purchase by consumers. The market for direct sale to consumers is
referred to as the "priced-for-sale" or "sell-through" market.
Technological developments, including videoserver and compression
technologies which regional telephone companies and others are
developing, and expanding markets for DVD and laser discs, could
make competing delivery systems economically viable and could
significantly impact the home video market generally and, as a
consequence, the Registrant's home video revenues.
Pay-per-view. Pay-per-view television allows cable television
subscribers to purchase individual programs, primarily recently
released theatrical motion pictures, sporting events and music
concerts, on a "per use" basis. The fee a subscriber is charged
is typically split among the program distributor, the pay- per-
view operator and the cable operator.
Pay Cable. The domestic pay cable industry (as it pertains to
motion pictures) currently consists primarily of HBO/Cinemax,
Showtime/The Movie Channel, Encore/Starz and a number of regional
pay services. Pay cable services are sold to cable system
operators for a monthly license fee based on the number of
subscribers receiving the service. These pay programming services
are in turn offered by cable system operators to subscribers for
a monthly subscription fee. The pay television networks generally
acquire their film programming by purchasing the distribution
rights from motion picture distributors.
Non-Theatrical Markets. In addition to the distribution media
described above, a number of sources of revenue exist for motion
picture distribution through the exploitation of other rights,
including the right to distribute films to airlines, schools,
libraries, hotels, armed forces facilities and hospitals.
International Markets. The worldwide demand for motion pictures
has expanded significantly as evidenced by the development of new
international markets and media. This growth is primarily driven
by the overseas privatization of television stations,
introduction of direct broadcast satellite services, growth of
home video and increased cable penetration.
(4) Motion Picture Acquisition.
In addition to its own production activities, the Registrant
continually seeks to acquire rights to films and other
programming from Independent film producers, distribution
companies and others in order to maximize the number of films it
can distribute in the emerging new delivery systems. To be
successful, the Registrant must locate and track the development
and production of numerous independent feature films.
Types of Motion Pictures Acquired. The Registrant generally seeks
to produce or acquire motion pictures of the action and
action/adventure genres which will individually appeal to a
targeted audience. The Registrant will be very selective in
acquiring higher budget (over $10,000,000) films because of the
interest that the Majors have shown in acquiring such films, and
the associated competition and higher production advances,
minimum guarantees and other costs. The Registrant will acquire
projects when it believes it can limit its financial risk on such
projects through, for example, significant presales, and when it
believes that a project has significant marketability. In most
cases, the Registrant will attempt to acquire rights to motion
pictures with a recognizable marquis "name" personality with
public recognition, thereby enhancing promotion of the motion
pictures in the home video or international markets. The
Registrant believes that this approach increases the likelihood
of producing a product capable of generating positive cash flow,
ancillary rights income and the possibility of a theatrical
release.
Methods of Acquisition. The Registrant will typically acquires
films on either a "pick-up" basis or a "pre-buy" basis. The
"pick-up" basis refers to those films in which the Registrant
acquires distribution rights following completion of most or all
of the production and post-production process. These films will
generally be acquired after management of the Registrant has
viewed the film to evaluate its commercial viability.
The "pre-buy" basis refers to films in which the Registrant will
acquire distribution rights prior to completion of a substantial
portion of production and post-production. Management's
willingness to acquire films on a pre-buy basis is based upon
factors generally including the track record and reputation of
the picture's producer, the quality and commercial value of the
screenplay, the "package" elements of the picture, including the
director and principal cast members, the budget of the picture
and the genre of the picture. Before making an offer to acquire
rights in a film on a pre-buy basis, the Registrant may work with
the producer to modify certain of these elements. Once the
modifications are considered acceptable, the Registrant's
obligation to accept delivery and make payment will be
conditioned upon receipt of a finished film conforming to the
script reviewed by the Registrant and other specifications
considered important by the Registrant.
Sources of Distribution Rights. Typically, projects will be
submitted directly to the Registrant for consideration. The
Registrant will rely upon the personal contacts of its senior
officers which have been generated through their prior business
and personal dealings with Majors, other Independents, legal and
accounting firms, business management firms, talent agencies,
production lenders and personal managers who are actively
involved in the production community.
Acquisition Process. If the Registrant locates a motion picture
project which it believes satisfies its criteria, the Registrant
may pay an advance or a guaranteed minimum payment conditioned
upon delivery of a completed film ("minimum guarantee") against a
share or participation in the revenue actually received by the
Registrant from the exploitation of a film in each licensed
media. The minimum guarantee is generally paid prior to the
film's release. Typically, the Registrant will recoup the minimum
guarantee and certain other amounts from the distribution
revenues realized by the Registrant prior to paying any
additional revenue participation to the production company.
Film Library. The Registrant's distribution rights, which may
include either worldwide, foreign, or domestic rights, will
generally range from an initial licensing cycle of seven to 21
years to perpetuity.
(5) Feature Film Production.
The Registrant intends to produce one or more low-budget films
each year. The Registrant generally intends to retain
distribution rights for licensing to third parties
internationally. The Registrant's films generally will be
distributed by third parties domestically or are limited to
international distribution. In unique circumstances, the
Registrant may undertake limited domestic distribution or co-
distribution activities.
The Registrant's feature film strategy generally will be to
develop and produce feature films when the production budgets for
the films are expected to be substantially covered through a
combination of pre-sales, output arrangements, equity
arrangements and production loans with "gap" financing. To
further limit the Registrant's financing risk or to obtain
production loans, the Registrant often intends to purchase
completion bonds to guarantee the completion of production.
ITEM 2. PROPERTIES.
The Registrant maintains executive offices at 10900 NE 8th
Street, Suite 900, Bellevue, Washington, 98004.
ITEM 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Information.
From June 27, 1997 to November 5, 1999, the Registrant's
common stock was traded on the Over the Counter Bulletin Board.
After the latter date, the shares have been traded in the
National Quotation Bureau's Pink Sheets (symbol ECLE) and the
range of closing bid prices shown below is reported while trading
on the Bulletin Board and the Pink Sheets. The quotations shown
reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ending on December 31, 1999
High Low
Quarter Ended March 31, 1999 0.48 0.25
Quarter Ended June 30, 1999 * 0.37 0.25
Quarter Ended September 30, 1999* 0.69 0.50
Quarter Ended December 31, 1999** 1.00 0.19
* The shares did not trade from May 1, 1999 through September 12, 1999.
** The shares only traded for 13 days in the fourth quarter.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended December 31, 1998
High Low
Quarter Ended March 31, 1998 0.75 0.50
Quarter Ended June 30, 1998 1.31 0.64
Quarter Ended September 30, 1998 1.50 0.38
Quarter Ended December 31, 1998 0.81 0.37
In order to qualify for relisting on the Bulletin Board, the
Registrant must comply with the new eligibility rules of the
Bulletin Board (that is, all listed companies must be reporting
companies), and accordingly the Registrant filed its Form 10-SB
Registration Statement with the Securities and Exchange
Commission on November 19, 1999. The Registrant is anticipating
that this Form 10-SB will clear all comments in the near future
and thereafter be promptly relisted on the Bulletin Board.
(b) Holders of Common Equity.
As of March 24, 2000, there were approximately 60 shareholders of
record of the Registrant's common stock.
(c) Dividends.
The Registrant has not declared or paid a cash dividend to
stockholders since it became a "C" corporation. The Board of
Directors presently intends to retain any earnings to finance
Registrant operations and does not expect to authorize cash
dividends in the foreseeable future. Any payment of cash
dividends in the future will depend upon the Registrant's
earnings, capital requirements and other factors.
(d) Equity Securities Sold Without Registration.
On January 1, 1999, the Registrant issued 24,125 (post
reverse split) shares of its common stock to 4 non-affiliates
for an aggregate consideration of $24,125.
On January 11, 1999, the Registrant issued 150,000
(post reverse split) shares of its common stock to 2 non-
affiliates for an aggregate of $130,000, and issued 15,000 (post
reverse split) shares of its common stock to a non-affiliate in
consideration of $15,000 for legal services rendered.
On January 18, 1999, the Registrant issued 8,995
(post reverse split) shares of its common stock to a non-
affiliate in consideration of $8,995 for legal services rendered.
On April 4, 1999, the Registrant issued 7,500 (post
reverse split) shares of its common stock to 2 non-affiliates in
consideration of legal services rendered.
On April 5, 1999, the Registrant issued 6,000,000 shares
of its common stock to 10 non-affiliates for $60,000.
On April 6, 1999, the Registrant issued 40,000 shares
of its common stock to a non-affiliate in consideration for legal
services rendered.
On October 27, 1999, the Registrant issued 2,305,520
shares of restricted common stock to an affiliate in
consideration of cancellation of a promissory note in the amount
of $442,285.
No commissions or fees were paid in connection with these
sales. All of the above sales, except for the last one, were
undertaken pursuant to the limited offering exemption from
registration under the Securities Act of 1933 as provided in Rule
504 under Regulation D as promulgated by the U.S. Securities and
Exchange Commission, and all the offerings were made to
sophisticated investors; that is, the investor either alone or
with his purchaser representative(s) has such knowledge and
experience in financial and business matters that he is capable
of evaluating the merits and risks of the prospective investment,
or the issuer reasonably believes immediately prior to making any
sale that such purchaser comes within this description (the last
sale was made under Rule 506 of Regulation D).
ITEM 6. PLAN OF OPERATION.
The following discussion should be read in conjunction with the
financial statements of the Registrant and notes thereto
contained elsewhere in this report.
For the period from the Registrant's inception
through December 31, 1999, 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.
Net cash used in operating activities for the year ended
December 31, 1999 was approximately $113,000. The net cash used
in operating activities can be substantially attributed to the
net loss incurred to date. Net cash provided by financing
activities was approximately $115,000 for the year ended
December 31, 1999 resulting from the issuance of common stock
through private placements.
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 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.
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. The Registrant estimates
that it has incurred minimal costs of less than $10,000 related
to its Year 2000 initiative. 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 customers 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 Plan of Operation "forward looking statements"
within the meaning of Rule 175 under the Securities Act of 1933,
as amended, and Rule 3b-6 under 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."
ITEM 7. FINANCIAL STATEMENTS.
Financial statements as of and for the year ended December
31, 1999, and for the year ended December 31, 1998 are presented
in a separate section of this report following Part IV.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT.
(a) Officers and Directors.
The names, ages, and respective positions of the directors and
officers of the Company are set forth below. The Directors named
below will serve until the next annual meeting of the
Registrant's stockholders or until their successors are duly
elected and have qualified. Directors will be elected for a
one-year term at the annual stockholders' meeting. Officers
will hold their positions at the will of the board of directors,
absent any employment agreement, of which none currently exist or
are contemplated. There are no arrangements, agreements or
understandings between non-management shareholders and management
under which non-management shareholders may directly or
indirectly participate in or influence the management of the
Registrant's affairs.
David Gideon Thomson, Chairman of the Board.
Mr. Gideon Thomson, age 62, is a British entertainment
consultant, executive and producer. He has been semi-retired for
the last five years. Prior to that, he held top management
positions including Managing Director of Polytel (Polygram's
film and TV division), Deputy Chairman of the Robert Stigwood Organization
and Chairman of Charisma Records and Films. During his tenure at Polytel
and Robert Stigwood, Mr. Gideon Thomson was involved with many award
winning films and television programs, including such films as Saturday
Night Fever and Grease; the stage production of Evita; McVicar;
and the acclaimed film, Too Far To Go for NBC New York. He
was also the executive producer of the feature film
Quadrophenia. He has been an advisor to many US, UK and other
European film and TV production and distribution companies.
Franco Columbu, Chief Executive Officer/Director.
Dr. Columbu, age 58, oversees all film and television activities
of the Registrant. Dr. Columbu's extensive career in
bodybuilding and powerlifting has earned him every major title
including the prestigious Mr. Olympia, Mr. World and Mr. Universe
titles. His connections in the film industry are extensive,
having appeared in film such as Pumping Iron, Stay Hungry, Conan
the Barbarian, Running Man, and Terminator. He has produced two
feature films, Beretta's Island and Doublecross, through his
production company Franco Columbu Productions, Inc. He also has
been featured in several national commercials and been a guest
on numerous talk shows. In addition to his industry experience,
Dr. Columbu maintains an active chiropractic practice and
consults with private individuals on health concerns for over
five years. From 1998 to the present, Mr. Columbu has also
served as a Director of Westar.
Arthur Birzneck, President/Director.
Mr. Birzneck, age 31, has been with the Registrant since its
inception and is responsible for overseeing all operating
activities and the development of its domestic and international
ventures. He is an executive producer of Westar's current
feature film, The Process. Prior to Eclipse, Mr. Birzneck spent
three years as president of Bask Entertainment Inc., a
Vancouver, Canada based production company. He has participated
financially in several film projects, most recently as an
investor in Canadian-based HPP Production's Hero of the Planet.
Mr. Birzneck also has been involved in promoting numerous Hip-Hop
music groups. As a principal of MB Productions, his clients
included Hip Hop artists Candy Man, Lighter Shade of Brown and
the Rascalz. From 1998 to the present, Mr. Birzneck has also
served as a Director of Westar
John G. Smith, Vice President Legal Affairs/Director.
Mr. Smith is a Cambridge, England-educated lawyer, who has
practiced corporate and commercial law in Western Canada for more
than 30 years, with a specialization in entertainment and
communications law. He is a principal, co-owner, and corporate
counsel of The Beacon Group of Companies that manages the
production, marketing, distribution and financing of motion
pictures, studio projects and entertainment software. He is a
member of the Canadian Bar Association and the Law Society OF
British Columbia; and was previously a governor of the
Canadian Tax Foundation and a director of the BC Motion Picture
Foundation, as well as a variety of performing arts
organizations. From 1998 to the present, Mr. Smith has also
served as a Director of Westar.
Brent Nelson, Director.
Mr. Nelson, age 38, has more than 15 years experience in
corporate and project financing and serves on the boards of
several companies in the United States and abroad: Palmworks,
Inc., CybeRecord, Inc., Interactive Objects, Inc., International
Digital Technology, Inc., Mobile PET Systems, Inc. and Polar
Cargo Systems, Inc. He has participated financially in several
film and music industry projects, including MB Productions
and the Canadian Hip Hop label Masiv Music. Approximately 5
years ago, Mr. Nelson founded and became Managing Director
of Northwest Capital Partners, L.L.C. a Bellevue, Washington
based venture capital company. Northwest Capital is very active
in both private and public financing on an international basis.
Mr. Nelson also is executive producer of the Registrant's
current feature film The Process. From 1998 to the present, Mr.
Nelson has also served as a Director of Westar.
(b) Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires
executive officers and directors, and persons who beneficially
own more than 10% of any class of the Registrant's equity
securities to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission
("SEC"). Executive officers, directors and beneficial owners of
more than 10% of any class of the Registrant's equity securities
are required by SEC regulations to furnish the Registrant with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to
the Registrant during or with respect to fiscal 1999, and certain
written representations from executive officers and directors,
the Registrant is aware that each such reporting persons
inadvertently failed to file a Form 3 at the time the Registrant
became registered under Section 12 of such act (January 18,
2000). Such forms are now in the process of being prepared and
filed.
ITEM 10. EXECUTIVE COMPENSATION.
(a) The current officers and directors have not received
any compensation to date. They will not be remunerated until the
Registrant turns profitable.
(b) There are no annuity, pension or retirement benefits
proposed to be paid to officers, directors, or employees of the
Registrant in the event of retirement at normal retirement date
as there is no existing plan provided for or contributed to by
the Registrant.
(c) No remuneration is proposed to be paid in the future
directly or indirectly by the Registrant to any officer or
director since there is no existing plan which provides for such
payment, including a stock option plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information regarding the
beneficial ownership of shares of the Registrant's common stock
as of March 24, 2000 (12,016,140 issued and outstanding) by (i)
all stockholders known to the Registrant to be beneficial owners
of more than 5% of the outstanding common stock; and (ii) all
directors and executive officers of the Registrant as a group:
Name and Address Amount of
Title of of Beneficial Beneficial Percent of
Class Owner Ownership (1) Class
Common Norwest Capital Partners, LLC 2,605,520 21.68%
Stock 10900 N.E. 8th Street
Bellevue, WA 98004
Common
Stock Arthur Birzneck 424,500 3.53%
16766 16th Avenue
Surrey, British
Columbia V4P 2P7
Common
Stock Brent Nelson 165,750 1.38%
10900 N.E. 8th Street
Bellevue, WA 98004
Common
Stock Franco Columbu 68,750 0.57%
1732 South Sepulveda
Boulevard, Los Angeles, CA
90025
Common
Stock David Gideon Thomson 0 0.00%
1732 South Sepulveda Boulevard
Los Angeles, CA 90025
Common
Stock John G. Smith 0 0.00%
1185 West Georgia Street
Suite 910
Vancouver, British Columbia V6E
4E6
Common
Stock Shares of all directors and 3,264,520(2) 27.17%
executive officers as a
group (5 persons)
(1) Except as noted in footnote 2 below, each person has sole
voting power and sole dispositive power as to all of the shares
shown as beneficially owned by them
(2) This figure also includes the 2,605,520 shares owned by
Northwest Capital Partners, L.L.C. since Mr. Nelson is the
managing director of this firm.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Other than as set forth below, there are no relationships,
transactions, or proposed transactions to which the registrant
was or is to be a party, in which any of the named persons set
forth previously had or is to have a direct or indirect material
interest.
There was a promissory note for $442,285 payable to
Northwest Capital Partners, L.L.C., a shareholder of the
Registrant controlled by Brent Nelson, a Director of the
Registrant. The note was unsecured and payable on demand. In
October 1999 the Registrant issued 2,305,520 shares of Common
Stock pursuant to Rule 504 Regulation D of the Securities Act of
1933 in satisfaction of that note.
Northwest Capital Partners, L.L.C. has advanced the
Registrant the sum of $51,165. There are no specific repayment
terms on this advance.
The Registrant entered into a marketing agreement with
Westar Entertainment, Inc., on January 1, 1998 under which this
firm is providing marketing for the Registrant's products both
domestically and worldwide. At the time this agreement was
entered, and to this date, Messrs. Columbu, Birzneck, and Nelson
are directors of Westar Entertainment, Inc.; Mr. Smith became a
director at a later time. Currently, Messrs. Birzneck and
Columbu each own approximately 40% of the issued and outstanding
shares of Westar Entertainment, Inc.; Messrs. Smith and Nelson
each currently own approximately 10% of such shares.
Certain of the officers and directors of the Registrant are
engaged in other businesses, either individually or through
partnerships and corporations in which they have an interest,
hold an office, or serve on a board of directors. As a result,
certain conflicts of interest may arise between the Registrant
and its officers and directors. The Registrant will attempt to
resolve such conflicts of interest in favor of the Registrant.
The officers and directors of the Registrant are accountable to
it and its shareholders as fiduciaries, which requires that such
officers and directors exercise good faith and integrity in
handling the Registrant's affairs. A shareholder may be able to
institute legal action on behalf of the Registrant or on behalf
of itself and other similarly situated shareholders to recover
damages or for other relief in cases of the resolution of
conflicts is in any manner prejudicial to the Registrant.
PART IV.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) Index to Financial Statements and Schedules Page
Report of Independent Accountants 22
Balance Sheet of the Registrant as of December 31, 1999 23
Statements of Operations for the year ended December 31, 1999
and the year ended December 31, 1998 24
Statements of Shareholders' Equity for the year
ended December 31, 1999 and the year ended December 31, 1998 25
Statements of Cash Flows for the year ended
December 31, 1999 and the year ended December 31, 1998 26
Notes to Financial Statements 27
(b) Reports on Form 8-K. There were no reports on Form 8-K
filed during the last quarter of the fiscal year covered by this
report.
(c) Exhibits included or incorporated by reference herein: See
Exhibit Index
SIGNATURES
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: April 10, 2000 By: /s/ Arthur Birzneck
Arthur Birzneck, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date
indicated:
Signature Title Date
/s/ David Gideon Thomson Chairman of the Board April 10, 2000
David Gideon Thomson
/s/ Franco Columbu Chief Executive Officer/ April 10, 2000
Franco Columbu Director
/s/ Arthur Birzneck President/Director April 10, 2000
Arthur Birzneck
/s/ John G. Smith Vice President Legal April 10, 2000
John G. Smith Affairs/Director
/s/ Brent Nelson Director April 10, 2000
Brent Nelson
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Eclipse Entertainment Group, Inc.
Bellevue, Washington
We have audited the accompanying balance sheet of Eclipse
Entertainment Group, Inc. as of December 31, 1999, and the
related statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1999 and 1998. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Eclipse Entertainment Group, Inc. as of December 31, 1999, and
the results of its activities and cash flows for the years ended
December 31, 1999 and 1998 in conformity with generally accepted
accounting principles.
/s/ L.L. Bradford & Company
L.L. Bradford & Company
March 24, 2000
Las Vegas, Nevada
ECLIPSE ENTERTAINMENT GROUP, INC.
BALANCE SHEET
December 31, 1999
ASSETS
Cash $ 2,336
Film costs 1,109,895
Fixed assets, net 633
Other assets 685
Total assets $ 1,113,549
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued
Liabilities $ 89,312
Due to related parties 173,165
Total liabilities 262,477
Stockholders' equity
Preferred stock - $.001 par value,
10,000,000 shares authorized, no shares
issued
Common stock - $.001 par value,
50,000,000 shares authorized,
12,016,140 shares issued and outstanding 12,016
Additional paid in capital 1,320,131
Accumulated deficit (481,075)
Total stockholders' equity 851,072
Total liabilities and stockholders'
Equity 1,113,549
The accompanying notes are an integral part of these financial
statements
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF OPERATIONS
For the For the
Year Ended Year Ended
December 31, 1999 December 31, 1998
Revenues $ - $ -
General and administrative
Expenses 142,227 268,786
Loss from operations (142,227) (268,786)
Provision for income taxes - -
Net loss $ (142,227) $ (268,786)
Basic and diluted loss per
common share $ (0.01) $ (0.08)
Weighted average number of
Common shares used in per share
Calculation $ 12,016,140 $ 3,465,000
The accompanying notes are an integral part of these financial
statements
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
Total
Common Stock Additional Accumu Stockholders
Number of Paid-In lated Equity
Shares Amount Capital Deficit Deficit
Balance at
January 1, 1998 3,250,000 3,250 404,063 (70,062) 337,251
Issuance of
common
stock $1.51
weighted average
price per share 215,000 215 325,407 - 325,622
Net loss - - - (268,786) (268,786)
Balance at
December 31, 1998 3,465,000 3,465 729,470 (338,848) 394,087
Issuance of
common
stock $0.02
weighted average
price
per share 6,205,620 6,206 109,219 - 115,425
Issuance of
common
stock for
past services
$1.04 40,000 40 41,462 - 41,502
Issuance of
common
stock in
satisfaction
of a $442,285
promissory
note 2,305,520 2,305 439,980 - 442,285
Net Loss - - - (142,227) (142,227)
Balance at
December
31, 1999 12,016,140 12,016 1,320,131 (481,075) 851,072
The accompanying notes are an integral part of these financial
statement
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF CASH FLOWS
For the For the
Year Ended Year Ended
December 31, December 31,
1999 1998
Cash flows from operating activities:
Net loss $ (142,227) $ (268,786)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 421 703
Services paid with common stock 41,502 -
Changes in operating assets and
liabilities:
Increase in film costs (133,420) (561,625)
Increase (decrease) in accounts
Payable and accrued liabilities 16,835 56,527
Increase in due to related
Parties 103,800 447,500
Net cash used by operating
Activities (113,089) (325,681)
Cash flows from financing activities:
Proceeds from issuance of common
Stock 115,425 325,622
Net cash provided by financing
activities 115,425 325,622
Net increase (decrease) in cash 2,336 (59)
Beginning balance - 59
Ending balance 2,336 -
Noncash financing activities:
2,305,520 shares of common stock
issued in satisfaction
of promissory note 442,285 -
The accompanying notes are an integral part of these financial
statements
ECLIPSE ENTERTAINMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. Organization and summary of significant accounting policies.
Organization - Eclipse Entertainment Group, Inc. (hereinafter
referred to as the "Company") was incorporated in the state of
Nevada in January 1997 to engage in the business of developing,
producing and marketing films for worldwide distribution.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Film costs and amortization - Film costs represent costs incurred
in the acquisition of distribution rights to motion pictures
which include advances, minimum guarantees paid to producers,
recoupable distribution and production costs, legal expenses,
interest and overhead costs. These costs have been capitalized in
accordance with Statement of Financial Accounting Standards No.
53 (SFAS 53). Film costs are amortized using the individual film
forecast method whereby expense is recognized in proportion to
current year revenues based upon management's estimate of future
revenues. Film costs are valued at the lower of unamortized cost
or estimated net realizable value. Revenue and cost forecasts
for films are regularly reviewed by management and revised when
warranted by changing conditions. When estimates of total
revenues and costs indicate that a film will result in an overall
loss, additional amortization will be provided to fully recognize
such loss.
Fixed assets - Fixed assets are stated at cost less accumulated
depreciation. Depreciation is provided principally on the
straight-line method over the estimated useful lives of the
assets, which are generally 5 to 7 years. The cost of repairs
and maintenance is charged to expense as incurred. Expenditures
for property betterments and renewals are capitalized. Upon sale
or other disposition of a depreciable asset, cost and accumulated
depreciation are removed from the accounts and any gain or loss
is reflected in other income (expense).
The Company periodically evaluates whether events and
circumstances have occurred that may warrant revision of the
estimated useful lives of fixed assets or whether the remaining
balance of fixed assets should be evaluated for possible
impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the fixed
assets in measuring their recoverability.
Loss per share - Primary and fully-diluted loss per share is
based on the weighted-average number of outstanding common shares
during the applicable period.
Comprehensive income - The Company has no components of other
comprehensive income. Accordingly, net income equals
comprehensive income for all periods.
Advertising costs - Advertising costs incurred in the normal
course of operations are expensed accordingly. No advertising
costs were incurred for the years ended December 31, 1999 and
1998.
Income taxes - The Company accounts for its income taxes in
accordance with Statement of Financial Accounting Standards No.
109, which requires recognition of deferred tax assets and
liabilities for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment
date.
Impairment of long-lived assets to be disposed - The Company
continually monitors events and changes in circumstances that
could indicate carrying amounts of long-lived assets may not be
recoverable. When such events or changes in circumstances are
present, the Company assesses the recoverability of long-lived
assets by determining whether the carrying value of such assets
will be recovered through undiscounted expected future cash
flows. If the total of the future cash flows is less than the
carrying amount of those assets, the Company recognizes an
impairment loss based on the excess of the carrying amount over
the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or the fair value
less costs to sell.
2. Film costs.
Film costs totaling $1,109,895 at December 31, 1999 consist of
completed but not released films. As of December 31, 1999 and
1998, amortization expenses have not been recorded since revenues
have been not recognized for these periods. Management believes
that these capitalized film costs will provide future revenue
benefits. Accordingly, these costs will be amortized in the
related periods when such revenues are generated in accordance
with SFAS 53 as discussed in Note 1.
3. Fixed assets.
Fixed assets consist primarily of office equipment with a
historical cost of $2,196 and accumulated depreciation of $1,564
at December 31, 1999.
4. Related party transactions.
Due to related parties at December 31, 1999 consist of the
following:
Advances payable to an entity controlled by
an officer and shareholder of the Company represent
advances, unsecured, bearing no interest, and due on
demand $ 51,165
Promissory note payable to a shareholder, unsecured,
bearing interest at 8%, and due on demand 115,000
Total due to related parties $173,165
5. Common stock.
On April 5, 1999, the Company's Board of Directors adopted a
resolution whereby it approved a 1 for 4 reverse stock split of
the issued and outstanding shares of common stock. Accordingly,
the accompanying financial statements have been retroactively
restated to reflect the 1-for-4 reverse stock split as if such
reverse stock split occurred as of the Company's date of
inception.
6. Income taxes.
The Company did not record any current or deferred income tax
provision or benefit for any of the periods presented due to
continuing net losses and nominal differences.
7. Fair value of financial instruments.
The carrying amounts of cash, accounts payable, accrued
liabilities, and due to related parties approximate fair value
because of the short-term maturity of these instruments.
8. Common stock.
In October 1999, the Company issued 125,000 shares of common
stock in error to an unrelated company. The Company has since
placed a stop on the 125,000 shares issued. Accordingly, the
12,016,140 shares of common stock issued and outstanding as of
December 31, 1999 does not reflect the 125,000 shares since these
shares were issued in error and a stop has been placed.
See accompanying Report of Independent Certified Public Accountant
EXHIBIT INDEX
Exhibit
No. 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 (see below).
27 Financial Data Schedule (see below).
DISTRIBUTION AGREEMENT
THIS AGREEMENT ("Agreement") is made with effect from January 1,
1998 by and between Eclipse Entertainment Group, Inc. ("Eclipse")
located at 10900 N.E. 8th Street, Suite 900, Bellevue, WA 98004
and Westar Entertainment, Inc. ("Westar") located at 1732 S.
Sepulveda Boulevard, Los Angeles, CA 90025.
Whereas Eclipse is a producer of motion pictures for worldwide
distribution, and is also in the business of acquiring ownership
and worldwide distribution rights of motion pictures produced by
other independent producers (which motion pictures, whether
produced by Eclipse or acquired by Eclipse now or hereafter
during the Term of this Agreement are herein called the "Eclipse
Pictures").
And whereas Westar is a worldwide distributor of motion pictures.
In consideration of the respective covenants, conditions,
warranties and representations hereinafter contained, and for
other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
Exclusive Grant of License: Eclipse hereby engages Westar to be
the exclusive worldwide distributor of Eclipse Pictures. Westar
hereby accepts the exclusive distribution rights in and to the
Eclipse Pictures, including but not limited to, the right to
exhibit, distribute, lease, rent, sub-distribute, sell, reissue,
release, transmit, broadcast, project, exploit, advertise,
publicize, promote and market the Eclipse Pictures, prints and
trailers thereof, excerpts, clips or portions therefrom, the
sound and music synchronized therewith, the title or titles
thereof (including the right to change the English language title
and to authorize foreign language titles), and any by-products
thereof, throughout the Territory (as defined below) and all
incidental rights pertaining thereto necessary to allow Westar
the full exercise of the rights granted herein, by any and all
media, means, methods, systems and processes, whether now known
or hereafter devised, recognized or contemplated (including
interactive, CD-ROM, TV series, live stage and publishing), and
in all sizes and gauges of film tape and other material now known
or hereafter developed, and to print, reprint, publish, copy and
vend the Eclipse Pictures in any and all languages, in any form
or media and in any style or manner Westar may desire; and to
license others to exercise any or all of the rights, powers and
privileges of Westar under this Agreement. Said rights shall
hereinafter collectively defined as the "Rights". The Rights
include all rights of any nature whether now known or hereafter
conceived and the licenses or privileges, under copyright or
otherwise to: (1) license the Eclipse Pictures in any and all
media, whether now known or hereafter devised, including, but not
limited to, cinematic rights (theatrical, non-theatrical and
public video), video rights (including free, pay, cable,
satellite and broadcast); (2) the license of all music and lyrics
synchronized with or written for or only in connection with the
Eclipse Pictures; (3) the right to assign, license, sub-license
or otherwise delegate any or all of the aforesaid, in accordance
with the terms herein thereof; and (4) the right, but not the
obligation, to maintain, protect and defend copyright of the
Eclipse Pictures and/or any similar protection which may be
available in the Territory but only on behalf of Eclipse.
Further, Westar shall have the right to register the entire
copyright in the Eclipse Pictures in any name as herein provided
in any jurisdiction in the Territory which permits or requires
registration or copyrights as a condition to obtain any remedies
for copyright infringement, to give constructive notice of
copyright ownership, or for other purposes. It is specifically
understood that the copyright in the Eclipse Pictures shall
remain with Eclipse.
Delivery of the Eclipse Pictures: Delivery of the Eclipse
Pictures to Westar ("Delivery") at Eclipse's sole expense except
as otherwise provided herein, is the essence of this Agreement.
Delivery of each Eclipse Picture shall be as soon as practical
for Eclipse. Westar reserves the right to check the quality of
all materials delivered hereunder at a laboratory of its choice.
All materials must pass laboratory inspection and must be
satisfactory for the manufacture of first class quality release
copies of each Eclipse Picture. Should Eclipse not complete
Delivery, any costs that Westar may incur in doing so may be
deducted from payments otherwise due to Eclipse hereunder.
Should Westar, its licensees or sub-distributors require any
Delivery materials which have not otherwise been provided by
Eclipse, Westar may in its discretion, but without obligation
therefor, arrange to have such Delivery materials made, and shall
deduct the cost thereof from payment otherwise due to Eclipse
hereunder.
Territory: The Territory ("Territory") for this Agreement shall
be the Universe. Territory shall be deemed to include, but not
be limited to all of the possessions and territories of the
countries and nations in the World including, but not limited to,
all armed service installations, embassies and ships at sea
wherever located, and oil platforms flying flags of any of such
nations or countries. The Territory shall include, but not be
limited to, all rights to use the Eclipse Pictures in or on any
airplane, airline or other transportation facilities which may be
flying the flag of any country or nation
Term: The Initial Term of this Distribution Agreement shall
commence on the execution of hereof and continue for five (5)
years. After expiration of the Initial Term, this Distribution
Agreement shall continue from year to year unless cancelled by
either party on sixty (60) days written notice. No license to a
third party shall be granted longer than ten years without
Eclipse's prior written consent.
Sales Policies: Westar shall use its good faith professional
business efforts in the exploitation of the Eclipse Pictures
pursuant hereto, Eclipse agrees that Westar and any sub-
distributors or licensees of Westar shall have complete authority
to distribute the Eclipse Pictures and to exercise the rights
granted herein in accordance with such sales methods, policies
and terms as they may, in their good faith discretion, determine.
Except as provided herein, Westar and such sub-distributors shall
have the broadest possible latitude in the distribution of the
Eclipse Pictures and the exercise of their judgement in all
matters pertaining thereto shall be final. Westar has not made
any express or implied representation, warranty, guarantee or
agreement as to the amount of Gross Receipts which will be
derived from the distribution of the Eclipse Pictures, nor has
Westar made any express or implied representation, warranty,
guarantee or agreement that there will be any sums payable to
Eclipse hereunder or that the Eclipse Pictures will be favorably
received by the exhibitors or by the public or will be
distributed continuously. In no event shall Westar incur any
liability to Eclipse hereunder based upon any claim by Eclipse
that Westar has failed to realize receipts or revenues which
should or could have been realized. Eclipse acknowledges that
Westar may simultaneously with the distribution of the Eclipse
Pictures distribute pictures produced and co-produced by it, or
others, or both, in competition with the Eclipse Pictures, and
Westar shall be under no duty to secure for the Eclipse Pictures
as favorable prices and terms as it secures for films produced by
it, by others or both, it being understood that without in any
way limiting the latitude or discretion of Westar or its
licensees hereunder, Westar agrees to use good faith criteria in
establishing the prices and terms for the Eclipse Pictures.
Wherever a licensee pays either a flat sum or percentage of the
receipts, or both, or makes other payments for the right to
exhibit a group of pictures under an agreement, Westar will
specify under separate contract what portion of the license
payments apply to the respective pictures in the group, and said
allocation shall be fair and equitable to Eclipse but shall in no
way be less that the scheduled minimum for that Territory.
Distribution Fees: Westar's distribution fees ("Distribution
Fee") with respect to the Gross Receipts (as defined below) from
the Rights of the Eclipse Pictures shall be Fifty Percent (50%)
of the Gross Receipts from the exploitation of the Rights in the
Territory. Westar shall remit the balance of Gross Receipts,
after deducting and retaining Distribution Fees, to Eclipse.
Gross Receipts: As used herein, the term "Gross Receipts" shall
mean the aggregate of all monies actually received (and not
subject to forfeiture or return) by Westar from its licensees or
sub-distributors from the sale, licensing, marketing and
exploitation of the Eclipse Pictures and any use of the Rights in
the Territory.
Distribution Expenses: The term "Distribution Expenses" shall
include, but not be limited to, expenses incurred with respect to
trailers, art work, promotional materials, delivery materials,
advertising, and any and all expenses incurred by Westar for the
sales, marketing and distribution of the Eclipse Pictures, the
exploitation of the Rights, and reasonable attorney's fees and
costs for any third party claims or causes of action related to
the Eclipse Pictures. All Distribution Expenses incurred by
Westar shall be paid to, or reimbursed to, Westar by Eclipse as
and when incurred by Westar.
Editing, Resetting and Foreign Versions: Westar may make or
cause to be made and/or authorize others to make English-language
and foreign-language versions of the Eclipse Pictures, whether
dubbed versions, superimposed versions or otherwise, all with
prior consultation with Eclipse. Eclipse will pay Westar for
same as a Distribution Expense if not paid by the territorial
distributor. Westar may also grant to any other persons, firms,
corporation or entities the right to make foreign-language
versions in the Territory during the Term. Westar, with the
prior written consent of Eclipse, may change the title of any
Eclipse Pictures in connection with its distribution in all or
any part of the Territory if, in the judgement of Westar, it is
desirable or expedient to do so.
Music Synchronization License Rights: Eclipse hereby licenses
to Westar for the Term and Territory the synchronization rights
in the Eclipse Pictures, only to be used in connection with the
distribution or exploitation of the Eclipse Pictures in all media
throughout the World. All other music rights including
performance rights are held by Eclipse.
Westar's Credit: Westar and its designees shall receive the
following credits with respect to the exploitation of the Eclipse
Pictures:
A. On-Screen Credit:
(i) A first card, single card, front end message presentation
credit on the screen, consisting of Westar's optical logo and
types credit reading "Westar Entertainment Presents" in a size
equal to the regular title, followed by Eclipse credits.
B. Credit in Paid Advertising:
(i) "Westar Entertainment Presents" above or preceding the
regular title in first position, along with the Westar logo.
Execution of Documents: Eclipse and Westar shall execute and
deliver any and all documents which may be necessary or
appropriate to fully implement the provisions of this
Distribution Agreement.
Eclipse's Warranties: Eclipse specifically represents and
warrants that (i) Eclipse has the full authority to grant the
Rights granted to Westar herein; (ii) that the Rights are and
will be free and clear of any liens, encumbrances, restrictions,
claims or rights inconsistent with or which could adversely
affect any of the Rights granted herein to Westar, and the
Eclipse Pictures as delivered will be free from any outstanding
payable of any kind; (iii) that the grant of the Rights to Westar
does not interfere with or infringe on the rights of any third
party; (iv) that all rights to music, story, name, likeness,
pictures caricatures, dialogue, voice-overs, the literary
material upon which the Eclipse Pictures are based and to any
other material of any nature whatsoever appearing, used or
recorded in the Eclipse Pictures have been and will be obtained
in proper form for the free and unrestricted use and exploitation
of the Eclipse Pictures in the Territory; (v) that Eclipse has
and will have the right to issue and authorize publicity
concerning persons appearing in or rendering services in
connection with the Eclipse Pictures or appearing in the paid
advertising of the billing, and has and will have the right to
use, reproduce, transmit, broadcast , exploit, publicize and
exhibit their names, photographs, likeness, voices and other
sound effects, as well as recording, transcriptions, films and
other reproductions thereof in connection with the Rights granted
herein to Westar; (vi)that there are and will be no restrictions
from Eclipse or third parties of any kind which could or would
prevent, limit or impair Westar's sole and exclusive Rights or
its right to any use or exploitation thereof; (vii) except as
provided herein Westar will not be obligated to make any payments
to anyone other than as expressly specified in this Distribution
Agreement in connection with the exercise by Westar, its
licensees or sub-distributors of any license rights granted,
including but not limited to, any guild, rerun, reuse, pension,
deferment or residual payments of any kind, nature or
description; (viii) that no third party is entitled to share
Gross Receipts of the Eclipse Pictures in any way which would
limit Westar's Distribution Fee as provided for herein; (ix) that
none of the Eclipse Pictures have been or will be released,
distributed or exhibited by any means or media whatsoever in any
part of the Territory, nor banned by censors of, or refused
import permits for any part of the Territory; (x) Eclipse has not
and will not exercise any right in the Eclipse Pictures which
might tend to derogate from or compete with the Rights herein
granted to Westar; (xi) Westar will quietly and peacefully enjoy
and possess all Rights without hindrance on the part of any
person, firm, corporation or entity,; and (xii) Eclipse further
represents and warrants that none of the Eclipse Pictures, nor
any materials contained therein or synchronized therewith, nor
the exercise of any rights or license t herein, will defame or
constitute unfair competition with any third party, violates or
will violate, infringes or will infringe, any trademark, trade
name, copyright or civil property, right of privacy, right of
publicity or "moral right of authors", or any law or regulation
or other right whatsoever of, or slanders or libels, any person,
firm, corporation, association or entity whatsoever. Westar
warrants that it will not make any changes in the Eclipse
Pictures or perform any act that would subject Westar to any
Liability whatsoever.
Infringements and Collection Suits: Westar may, in the name of
Eclipse, or otherwise, take such steps as Westar may deem
reasonably necessary or appropriate by action-at-law or otherwise
to prevent unauthorized exhibition or distribution of the Eclipse
Pictures or any infringement upon the rights of Eclipse or Westar
under this Distribution Agreement, and Westar or its nominee may,
as Eclipse's attorney-in-fact, execute, acknowledge, verify and
deliver all instruments pertaining thereto in the name of and on
behalf of Eclipse only in respect to infringement and collection
suits. Westar may also take such steps as Westar shall deem
necessary or appropriate by action-at-law or otherwise to recover
moneys due pursuant to any agreement relating to the exploitation
of the Rights. All costs and expenses, including reasonable
attorneys fees, in connection with such matters shall be borne by
Westar but shall be recoupable by Westar from Eclipse.
Offset Rights: In the event any written claim or lawsuit is
instituted against Westar or any licensee or sub-distributor of
Westar, which written claim or lawsuit (the "Liability") on a
claim inconsistent with any of Eclipse's warranties,
representations or agreements hereunder, Westar may offset any
moneys that Westar reasonably deem necessary, now or hereafter
payable to or for the account of Eclipse, in the amount of the
Liability plus Westars reasonable attorney's fees and costs,
whether or not the Liability has been reduced to judgement. In
addition, pending the final determination of such Liability,
Westar may withhold from such moneys payable to Eclipse hereunder
such amount as Westar may reasonably deem necessary to cover the
Liability plus Westar's reasonable attorney's fees and costs.
Westar may compromise or settle such Liability upon terms as
Westar may deem reasonable.
Indemnity:
A. Each party (in this capacity referred to as "Indemnitor")
agrees to indemnify and hold the other party (in this capacity
referred to as "Indemnitee") and its successors in interest.
licensees and assigns, the officers, directors agents,
shareholders, attorneys, and employees of the foregoing (in this
capacity referred to as "Indemnities") harmless from and against
and all costs, claims, charges, recoveries, losses, expenses
(including, but not limited tom reasonable attorney's fees),
liabilities, judgements, settlements, compromises or any other
out-of-pocket loss (hereinafter collectively referred to as a
"Loss") which may be made, asserted, maintained, secured, against
or suffered by Indemnities, or any of them caused by any breach
or alleged breach by Indemnitor of any provision of this
Distribution Agreement.
B. Each party agrees to give the other party timely written
notice of any claim, demand or action which is or may be subject
to this Paragraph including A or B hereof ("Demand") promptly
after obtaining knowledge thereof and shall make available to the
other party all documents and information in possession of that
party material the Demand. Within ten (10) days from receipt of
such notice, the applicable Indemnitor agrees to assume the
defense of the demand on behalf of itself and the applicable
Indemnities. Any Indemnitee shall have the right to participate
in the defense of any Demand through counsel of their choice at
their cost, if the applicable Indemnitor fails to promptly assume
the defense of any reasonable Demand, any Indemnitee may do so
and the applicable Indemnitor shall promptly reimburse all
Indemnitees for all costs, expenses (including, but not limited
to, reasonable attorney's fees) incurred in connection therewith
as such are incurred. Indemnitees shall not settle or compromise
any Demand without prior written consent of any Indemnitor,
unless that Indemnitor shall fail or refuse for any reason to
reimburse costs and expenses withheld. Both parties agree to
fully cooperate with the other in the defense of all Demands
initially made by third parties, including but not limited to,
prompt compliance with all reasonable discovery requests.
Assignment, Successors: Both parties may assign this
Distribution Agreement provided that such assignment does not
release the assignor from assigner's responsibilities hereunder
and provided that the other party is advised of such assignment
before it is effected. This Distribution Agreement shall inure
to the benefit of and be binding upon the heirs, executors,
administrators, assignees and successors in interest of the
parties hereto.
Applicable Law: This Agreement shall be construed, interpreted
and enforced in accordance to the laws of the State of California
applicable to agreements executed and to be wholly performed
within such state and without regard to the conflict or choice of
law provisions thereof. All proceedings commenced to enforce
this Agreement shall be decided before a sole arbitrator in the
County of Los Angeles, State of California before the American
Film Association Arbitration Tribunal in accordance with AFMA
rules and procedures.
Partial Invalidity: If any provisions of this Distribution
Agreement is held invalid or unenforceable by any court of final
jurisdiction, it is the intent of the parties that such provision
shall be ineffective only to the extent of such prohibition or
invalidity and that all other provisions of this Distribution
Agreement shall be construed to remain fully valid, enforceable
and binding on the parties.
Interpretation: Wherever any words are used herein in a gender
they shall also be construes as though they were in the opposite
gender in all cases where they would apply and wherever any words
are used herein the singular form they shall be construed as
though they were also used in the plural form in all cases where
they would so apply.
Relationship of Parties: The relationship between Eclipse and
Westar is that of creditor and debtor with respect to sums due
pursuant to this Agreement. Nothing contained herein shall be
construed so as to create a joint venture or partnership between
Eclipse and Westar. Except as otherwise specifically set forth
herein, neither Eclipse nor Westar shall be authorized or
empowered to make any representation or commitment or to perform
any act which shall be binding on the other party unless
expressly authorized or empowered in writing.
Headings: The descriptive headings of the paragraphs of this
Agreement are inserted solely for convenience of reference and
are not part of this Agreement and are not intended to govern,
limit, amplify or aid in the construction of any of the terms or
provisions of this Agreement.
Counterparts: This Agreement may be signed in one or more
counterparts, each of which shell be deemed an original, but all
of which shall constitute one and the same instrument. The
respective signatures on each of such counterparts shall
constitute a binding agreement by and between the parties.
Notices: All notices, payments or approvals which either party
is required or may desire to give or to serve upon the other
party under this Distribution Agreement shall be in writing and
may be delivered personally, by facsimile transmission, by
overnight courier services or by registered or certified mail,
return receipt requested, prepaid first class mail to the said
party at the address set forth below or such other address of
which it may hereafter give notice to the other party in writing.
A copy of any notice sent by facsimile transmission must also be
sent by regular mail. Any notice sent by facsimile transmission
shall be deemed served the same day if it is a business day
during normal business hours of the recipient or the next
business day is received after recipient's normal business hours
or on a Saturday, Sunday or legal holiday. Any notice sent by
overnight courier service shall be deemed served the next
business day. Any notice sent by certified or registered prepaid
first class mail shall be deemed served seven (7) days after it
shall be deposited with the Canadian or United States Postal
Service.
Notices to Producer: Eclipse Entertainment Group, Inc.
10900 N.E. 8th Street, Suite 900
Bellevue, WA 98004
Tel: (425) 990-5969 Fax: (425) 990-5979
Notices to Westar: Westar Entertainment, Inc.
1732 S. Sepulveda Boulevard
Los Angeles, CA 90025
Tel: (310)477-4144 Fax: (310)477-6690
Accounting: Westar shall furnish Eclipse with detailed and
itemized reports quarterly, said reports to indicate Gross
Receipts, Distribution Fees and Distribution Expenses, and shall
be accompanied by Eclipse's Share of Gross Receipts shown to be
due. Any objection to a report shall be made in writing within
six (6) months of the rendering of same and if no objection has
been made said report shall be deemed final and any objection
thereto deemed waived and action thereon barred.
Entire Agreement: This Distribution Agreement constitutes the
complete and entire agreement and understanding between the
parties pertaining to the subject matter contained herein and
supercedes all prior and contemporaneous agreements,
representation and understandings, whether oral or written, of
the parties. No supplement, modification or amendment of this
Distribution Agreement shall be binding unless executed in
writing by all parties. Eclipse and Westar shall execute any and
all documents and instruments and shall do all acts which may be
necessary or appropriate to fully implement the provisions of
this Distribution Agreement.
Arbitration: Any controversy, dispute or claim arising out of
the interpretation, performance, breach or alleged breach of this
Distribution Agreement, shall be resolved by binging arbitration,
before a sole arbitrator, at the request of either party, in
accordance with the rules of the American Film Marketing
Association. The arbitrator shall apply California substantive
law and the California Evidence Code to the Proceedings. The
arbitrator shall have the power to grant all legal and equitable
remedies and award compensatory damages provided by California
law, including the power to award punitive damages in the event
of gross misconduct or fraud, that Eclipse may not enjoin the
distribution of any Eclipse Picture for any reason and shall be
limited to its damages at law for any claims arising under or in
connection with this Distribution Agreement. The arbitrator
shall prepare in writing and provide to the parties an award
including factual findings and the errors of law or legal
reasoning, and the award may be vacated or corrected pursuant to
California Code of Civil Procedure Sections 1286.2 or 1286.6 for
any such error. All such proceedings shall take place in the
County of Los Angeles, State of California.
Default and Cure: Neither party shall be liable for its breach
of the terms of this Distribution Agreement unless it shall have
received written notice of such breach from the non-breaching
party and the breaching party shall not within fifteen (15) days
after receipt of such notice have cured said breach. Such cure
right shall not be applicable to breaches which are incapable of
being cured. In the event Westar or Eclipse materially breaches
this Distribution Agreement and does not cure said breach in
accordance with the terms hereof, Westar or Eclipse may elect to
terminate this Distribution Agreement and all of its obligations
hereunder, it being understood that the exercise by Westar or
Eclipse of its rights or remedies under any one provision of this
Distribution Agreement shall not limit or affect its rights or
remedies concurrently or subsequently to exercise any other right
or remedy and shall be in addition to such other rights or
remedies as Westar or Eclipse may have at law, in equity, under
this Distribution Agreement or otherwise. All of Westar's and
Eclipse's rights and remedies under this Distribution Agreement
shall be cumulative.
No Waiver: No waiver of any of the provisions of this
Distribution Agreement shall be deemed, or shall constitute a
waiver of any other provision, whether or not similar, dissimilar
or identical, nor shall any waiver constitute a continuing
waiver. Nether party shall be deemed to have waived any
provision hereof except in writing signed by the party to be
charged.
Construction: This Distribution Agreement has been negotiated
and approved by the parties hereto and notwithstanding any rule
or maxim of construction to the contrary, any ambiguity or
uncertainty in this Agreement shall not be construed against
either party based upon authorship of any of the provisions
hereof.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the date first written above.
ECLIPSE ENTERTAINMENT GROUP, INC
By: /s/ Arthur Birzneck
Arthur Birzneck, President
Date: January 1, 1998
WESTAR ENTERTAINMENT GROUP, INC.
By: /s/ Franco Colombu
Franco Columbu, President
Date: January 1, 1998
<TABLE> <S> <C>
<S> <C>
<PAGE>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S FORM 10-KSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,236
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,236
<PP&E> 633
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,113,549
<CURRENT-LIABILITIES> 262,477
<BONDS> 0
0
0
<COMMON> 12,016
<OTHER-SE> 851,072
<TOTAL-LIABILITY-AND-EQUITY> 1,113,549
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 142,227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (142,227)
<INCOME-TAX> 0
<INCOME-CONTINUING> (142,227)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (142,227)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
