Form 10-Q Mass Hysteria Entertainment Company, Inc.

10-Q - Quarterly report [Sections 13 or 15(d)]

Published: 2014-10-20 16:39:54
Submitted: 2014-10-20
Period Ending In: 2014-08-31
f10q8312014.htm FORM 10-Q


ENT> 10-Q 1 f10q8312014.htm FORM 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended August 31, 2014


o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from _________________ to _________________

[f10q8312014001.jpg]

 

Commission File No.: 000-53739

 

MASS HYSTERIA ENTERTAINMENT COMPANY, INC.

(Exact name of registrant as specified in its charter)


Nevada

        20-3107499

 

(State or other jurisdiction of

incorporation or organization)

 

          (I.R.S. Employer

          Identification No.)

 

2920 W. Olive Avenue, Suite 208

Burbank, CA  91505

 (Address of principal executive offices)

 

Issuer

s telephone number:  (818) 459-8200

 

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

Yes

x
No
¨


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



Yes

x
No
¨




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of

large accelerated filed,
accelerated filer
and
smaller reporting company
in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨


Accelerated filer

¨




Non-accelerated filer

¨

(Do not check if a smaller reporting company)


Smaller reporting company

x


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

¨

Yes
x
No


Indicate the number of shares outstanding of each of the issuer

s classes of common stock, as of the latest practicable date. As of October 15, 2014, the number of shares of the registrant
s common stock outstanding was 1,798,084,071.




































 



 




 

  TABLE OF CONTENTS

 

Part I - Financial Information

Page numbers

 

 

Item 1.  Financial Statements

1

Item 2.  Management

s Discussion and Analysis of Financial Condition and Results of Operations

12

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

14

Item 4.  Controls and Procedures

15

 

 

Part II

Other Information

16

Item 1.  Legal Proceedings

16

Item 1A Risk Factors

16

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

16

Item 3.  Defaults Upon Senior Securities

16

Item 4.  Mine Safety Disclosures

16

Item 5.  Other Information

16

Item 6.  Exhibits

16

 

 

              Signatures

16

 





































i


 





PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


MASS HYSTERIA ENTERTAINMENT COMPANY, INC.

Balance Sheets

(Unaudited) 





August 31, 2014


November 30, 2013








ASSETS




CURRENT ASSETS





 Cash

 $            60,902


 $                    9



 Total current assets

               60,902


                       9

OTHER ASSETS





 Deposits

                 1,200


                     -   


 Prepaid expenses

                 5,000


                     -   


 Film costs

                 5,150


                2,000



 Total assets

 $            72,252


 $             2,009

LIABILITIES AND STOCKHOLDERS' DEFICIT




CURRENT LIABILITIES





 Accounts payable

 $          171,470


 $         137,740


 Accrued liabilities

             378,934


            443,766


 Accrued payroll

             609,829


            742,857


 Short-term debt

             243,572


            237,622


 Short-term convertible debt, net of discount of $591,554 and $26,151, respectively

             389,936


            270,629


 Derivative liability

          1,737,259


            324,020


 Deferred revenue

                 1,000


                1,000


 Stand ready obligation

             250,000


            250,000


 Convertible debt - related party

                      -   


            453,061



 Total current liabilities

          3,782,000


         2,860,695

LONG-TERM LIABILITIES





 Convertible long-term debt, net of discount of $4,924 and $21,684, respectively

             103,076


            178,316



 Total liabilities

          3,885,076


         3,039,011

STOCKHOLDERS' DEFICIT





Series A preferred stock, $0.00001 par value; 10,000 shares authorized; 10 issued and outstanding

                      -   


                     -   


Common stock, $0.00001 par value; 2,000,000,000 shares authorized, 605,872,251 and 18,145,865 shares issued and outstanding

                 6,059


                   181


Additional paid in capital

          8,563,600


         7,399,743


Accumulated deficit

      (12,382,483)


     (10,436,926)



Total stockholders' deficit

        (3,812,824)


       (3,037,002)



Total liabilities and stockholders' deficit

 $            72,252


 $             2,009


The accompanying notes are an integral part of the financial statements.

 

1



MASS HYSTERIA ENTERTAINMENT COMPANY, INC.

Statements of Operations

(Unaudited)



For the Three Months Ended

For the Nine Months Ended



August 31, 2014

August 31, 2013

August 31, 2014

August 31, 2013

Production Revenues

 $                            -   

 $                            -   

 $                            -   

 $                            -   







Operating expenses:






General and administrative

              251,945

                      223,829

                      717,722

             661,681


Total operating expenses

               251,945

                      223,829

                      717,722

            661,681







Operating loss

          (251,945)

                    (223,829)

                    (717,722)

            (661,681)







Other income (expense)






Interest expense

            (216,531)

                      (36,986)

                    (371,895)

          (241,422)


Excess fair value of derivative

                (54,311)

                      (13,842)

                 (3,083,417)

              (40,680)


Gain on fair value of derivative liability

              141,697

                        52,283

                   1,561,494

                    125,817


Gain on extinguishment of convertible note

                               -   

                               -   

                      665,983

                               -   


Loss on stand-ready guarantee

                               -   

                               -   

                               -   

                  (65,350)


Total other income (expense)

               (129,145)

                          1,455

                 (1,227,835)

                    (221,635)







Net Loss

 $              (381,090)

 $                 (222,374)

 $              (1,945,557)

 $               (883,316)



 

 

 

 

Net loss per share (basic and diluted)

 $                    (0.00)

 $                       (0.31)

 $                       (0.05)

 $                     (1.26)







Weighted average number of shares outstanding during the period-basic and diluted

            149,928,584

                      723,104

                 42,378,890

                    702,234



The accompanying notes are an integral part of the financial statements.


 

2





MASS HYSTERIA ENTERTAINMENT COMPANY, INC.

Statements of Cash Flows

(Unaudited)





For the Nine Months Ended





August 31, 2014

August 31, 2013

CASH FLOWS FROM OPERATING ACTIVITIES




Net loss

 $   (1,945,557)

 $      (883,316)


Adjustments to reconcile net loss to net cash used by operations:





Depreciation

                       -

                  519



Share-based compensation

           236,000

           180,000



Change in fair market value of derivative liability

      (1,561,494)

         (125,817)



Loss on excess fair value of derivative liability

        3,083,417

             40,680



Amortization of discount on convertible debt

           387,339

           186,753



Gain on extinguishment of convertible notes

         (665,983)

                      -



Loss on default

                       -

             65,350


Changes in operating assets and liabilities:





Deposits

             (1,200)

                      -



Prepaid expenses

             (5,000)

                      -



Accounts payable

             33,732

             63,297



Accrued liabilities

             59,389

             90,668



Deferred revenue

                       -

           298,884



Accrued payroll

           238,400

               1,000



Bank credit line

                       -

                      -

Net cash used in operating activities

         (140,957)

           (81,982)

CASH FLOWS FROM INVESTING ACTIVITIES





Film costs

             (3,150)

                      -



Other assets

                       -

               5,261

Net cash provided by (used in) investing activities

             (3,150)

               5,261

CASH FLOWS FROM FINANCING ACTIVITIES





Proceeds from issuance of convertible debt

           205,000

             76,500

Net cash provided by financing activities

           205,000

             76,500

Net increase (decrease) in cash

             60,893

                (221)

Cash and equivalents, beginning of period

                      9

                  278

Cash and equivalents, end of period

 $          60,902

 $                 57

Supplemental disclosures of cash flow information:




Cash paid for interest

 $                    -

 $                   -


Cash paid for income taxes

 $                    -

 $                   -

Supplemental schedule of non-cash investing and financing activities:




Conversion of convertible debt

 $        220,294

 $          12,600



Accounts payable converted to convertible notes

 $          60,000

 $                   -



Common stock issued for accrued salaries

 $        371,429

 $                   -


The accompanying notes are an integral part of the financial statements.  

 

3





MASS HYSTERIA ENTERTAINMENT COMPANY, INC.

NOTES TO THE FINANCIAL STATEMENTS

AUGUST 31, 2014

(Unaudited)

 

NOTE 1 - ORGANIZATION AND BUSINESS

 

The Company was incorporated as Michael Lambert, Inc. (

MLI
) in Nevada on November 2, 2005.  MLI was in the business of manufacturing handbags, but ceased operations in June 2009. To better reflect the Company
s new business plan, on June 25, 2009, MLI changed its name to Mass Hysteria Entertainment Company, Inc. (
Mass Hysteria
or the
Company
). The Company is an innovative motion picture production company that produces branded young adult film content for theatrical, DVD, and television distribution.

 

On August 5, 2009, Daniel Grodnik was appointed as the Company's President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board and Secretary. Mr. Grodnik has worked in the movie industry for more than thirty years. He has served as the Chairman and CEO of the National Lampoon, a publicly-traded entertainment company. On August 5, 2009, pursuant to the terms of a stock purchase agreement, an affiliate of Mr. Grodnik purchased a total of 7,985 shares of issued and outstanding common stock of The Company from Belmont Partners. At this time, Belmont Partners

designee was the sole officer and director of the Company.  In addition to the shares sold by Belmont Partners, the Company also issued 42,015 shares to Mr. Grodnik and certain affiliated parties in connection with the change of control (the
Control Group
). The total of 50,000 shares were issued to, or purchased by, Daniel Grodnik and the affiliated parties represents 74.6% of the shares of outstanding common stock of the Company at the time of transfer. For financial accounting purposes, this change in control by the Company was treated as a recapitalization with the assets contributed and liabilities assumed recorded at their historical basis. There were no assets significant acquired by the Company shareholders upon the change in control, which would have been recorded at fair value.  

 

The Company is entering a time of great change in the entertainment business. The motion picture business has had four significant revenue streams (theatrical, home video, cable and broadcast) since the early 1980's. Today, home video is in decline and new profit centers are opening up such as video-on-demand and internet portals that rely on micro-transactions.   Mass Hysteria plans to create movies that will take advantage of traditional revenue streams that are still viable, and at the same time, avail itself of those revenue streams that will define new media's involvement in the film business. The Company has developed a mobile application that allows the user to interact with the film in live time. This could be a revenue source for the Company depending on our ability to raise capital and generate interest in the experience.  There are technology and competitive risks associated with interactive mobile devices and theatrical films.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation


The financial statements of the Company are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission.  Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year 2013 as reported in the Company's Form 10-K have been omitted.  The results of operations for the three and nine months ended August 31, 2014 and 2013 are not necessarily indicative of the results to be expected for the full year.


4





In the opinion of management, the financial statements include all adjustments, consisting of normal recurring accruals, necessary to present fairly the Company's financial position, results of operations and cash flows.  These statements should be read in conjunction with the financial statements and related notes which are part of the Company's Annual Report on Form 10-K for the year ended November 30, 2013.


Loss per Share

 

Loss per share is computed on the basis of the weighted average number of common shares outstanding. Diluted loss per share is computed on the basis of the weighted average number of common shares outstanding.  In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. At August 31, 2014, the Company

s dilutive securities outstanding consisted of (1) approximately 3,834,815,000 shares relative to convertible notes, and (2) 1,000 warrants to purchase common stock. The preceding common equivalent was excluded from the diluted net loss per share as the effects would have been anti-dilutive.


Recent Accounting Pronouncements


In June 2014, the Financial Accounting Standards Board (

FASB
) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. generally accepted accounting principles. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage that in prior years it had been in the development stage. These amendments are effective for annual reporting periods beginning after December 15, 2014, however the Company chose to adopt these pronouncements early during the quarter ended May 31, 2014.


NOTE 3 - GOING CONCERN

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company has limited available capital, and has historically had limited revenues from intended operations, suffered significant losses and used cash in operations. These matters raise substantial doubt about the Company's ability to continue as a going concern. We are seeking debt or equity capital to meet our obligations and business needs. There is no assurance that future capital raising plans will be successful in obtaining sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments that might result from these uncertainties. At August 31, 2014, the Company had an accumulated deficit of $12,382,483.


NOTE 4

 ACCRUED LIABILITIES


Accrued liabilities by major classification are as follows: 

 

August 31, 2014

November 30,  2013

Accrued interest

 $                  97,636

 $                  182,305

Accrued consulting fees

                       91,000

                       91,000

Accrued payroll taxes on CEO

s compensation

                     161,461

                     134,461

Accrued auto allowances due CEO

                       28,837

                       36,000

Total accrued liabilities

 $               378,934

 $                  443,766


5


Accrued interest represents interest on a long-term loan from a related party, and the interest on a short term notes payable to external parties.  Accrued consulting fees are for scriptwriters and a film consultant.  




Based on the CEO

s employment agreement, the Company accrues $30,000 per month for gross wages, while the CEO receives payments at various times only as cash becomes available. During the quarter ended August 31, 2014, the Company paid $31,600 in cash to the CEO, charging the payment to accrued salary. The CEO
s compensation is required to be reported on Internal Revenue Service (IRS) Form W-2; however, the Company has made no such reporting and has not withheld any amounts from cash payments made.  Payroll taxes are accrued for the CEO
s salary to properly reflect the amount of expense related to his compensation, which includes the contemplation of penalties and interest.  In the event the IRS audits the Company, it will likely be liable for certain taxes, penalties and interest.  


The Company entered into an employment agreement as of February 3, 2012 with its former Chief Financial Officer, which provided for a base salary of $90,000 per year, payable monthly, on a month-to-month basis. The Company will pay these wages only as cash becomes available. The agreement was terminated on August 31, 2013 and no wages have been paid to date.


On August 8, 2014, the CEO converted $371,429 in accrued salaries into 185,714,250 shares at a price of $0.002 per share.


Accrued payroll is as follows:


August 31, 2014

November 30,  2013

Accrued and unpaid compensation due CEO

 $                  491,704

 $                  624,732

Accrued and unpaid compensation due CFO

                     118,125

                     118,125

Total accrued payroll

 $                609,829

 $                742,857


NOTE 5- BORROWINGS


Short-Term Debt


(A)  

Related Parties


On August 31, 2012, the Company

s former Chief Financial Officer made an interest free demand advance of $30,000 to provide working capital, which remains outstanding at August 31, 2014. The Note was recorded at its estimated fair value of $27,778 at the acquisition date, and imputed interest was being accreted to non-cash interest expense to the maturity date, using an 8% interest rate.  No demand for payment has been made and the note remains unpaid.


On July 13, 2010, March 22, 2012 and October 25, 2012, the Company borrowed $60,000, $50,000 and $10,000, respectively, from a shareholder for use as operating capital.  On September 12, 2012, the Company, the shareholder and an external party entered into an Assignment Agreement whereby the external party agreed to assume $30,000 of the $60,000 July 13, 2010 debt in exchange for a 8% convertible note maturing October 24, 2013 (see Short-term Convertible Debt with Ratchet Provisions noted below).  The due date on the remaining balance of $30,000 of the $60,000 advance was extended to December 31, 2013 and bears interest at the rate of 15% per annum; the due date of the $50,000 advance was March 7, 2013 and it bears interest at the rates of 15% per annum through March 7, 2013 and 18% per annum interest thereafter if the repayment date is extended; and the $10,000 advance is payable on demand at an interest rate of 15% per annum.


During the nine months ended August 31, 2014, the Company incurred and accrued $10,294 in interest expense, respectively, related to this short-term debt. As of August 31, 2014, the Company has accrued a total of $50,191 of interest expense related to these notes.  

6



B)  

Film Finance Agreement


On August 11, 2012, the Company entered into an agreement with Coral Ridge Capital Partners, LLC (

CRCP
) under which CRCP agreed to provide $300,000 in equity financing towards the production of the motion picture currently entitled
End of the Gun
(the "Picture"). The initial $100,000 under this agreement was paid on June 12, 2012.   While it was the Company
s intent to commence filming of the Picture by September 1, 2012, certain casting delays postponed the commencement date. On January 25, 2013 the Company received a written notice of termination of agreement from CRCP. The termination was detrimental to the funding process; regardless, the Company continued to work diligently over the next 18 months to put the film into production. Ultimately, the Company determined that the film was not able to be financed without the Coral Ridge equity contribution and abandoned the project. Accordingly, the Company has included the $100,000 advance within short-term debt and has accrued interest payable of $23,572 through August 31, 2014.  The Company is engaged in settlement discussions regarding any amounts due and the arbitration proceeding originally scheduled for August 2014, has been postponed, with no new date set.


Through August 31, 2014, the Company has paid cumulative expenses totaling $14,688 in connection with the Picture, which have been recorded within operating expenses.


Short-term Convertible Debt with Ratchet Provisions


(A)  

Short-term Convertible Debt


On March 1, 2012, May 9, 2012, July 9, 2012, September 14, 2012 and September 28, 2012 the Company borrowed $10,000, $32,500, $30,000, $22,500 and $10,000 (for a total of $105,000), from external parties for use as operating capital. See below for additional advances made by this party during the year ended November 30, 2013.  The parties entered into convertible notes payable agreements, which make the Company liable for repayment of the principal and 8% annual interest by the various agreements

 expiration dates which range between October 6, 2012 and June 28, 2013.  If a default is called by the lender (which occurred as noted below) after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes
 inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. A portion of the notes has been converted and, as of August 31, 2014, approximately $13,444 in principal and interest remain outstanding.


On March 18, 2013 the Company received a notice of default from one of the lenders holding a then total of $131,200 of short-term convertible debt. Based upon the foregoing, the Company is now in default under the Notes. Demand was made for the immediate payment of $196,050, representing 150% of the then remaining outstanding principal balance together with default interest of 22% as provided for in the notes as of August 31, 2014. All principal and interest on these notes have been converted as of August 31, 2014.


During December 2012, the Company issued an 8% convertible promissory note to raise $40,000 to pay legal services owed. The Note matured on September 21, 2013, and any unpaid principal or interest at that date accrues interest at the default rate of 22% annually. The note may be converted into common stock, at 41% discount off the average of the lowest three (3) trading prices for the Company

s common stock within the ten (10) days preceding the conversion, at any time after 180 days from the issuance date until the maturity date, or, if later, until paid. A portion of the notes has been converted and, as of August 31, 2014, approximately $41,000 in principal and interest remain outstanding.




7


On January 14, 2013, the Company issued an 8% convertible promissory note to raise $55,000 in operating capital. The Note matured on October 17, 2013, and any unpaid principal or interest at that date accrued interest at the default rate of 22% annually. The note may be converted into common stock, at 50% of market price, at any time after 180 days from the issuance date until the maturity date, or, if later, until paid. If a default is called by the lender (which occurred as noted above) after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes

 inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. During the three months ended August 31, 2014, this note was fully converted through the issuance of common stock.


On June 12, 2013, the Company issued 8% convertible promissory notes to raise $21,500 in operating capital. This Note matured on March 14, 2014. The note may be converted into common stock, at 45% of the average of the three (3) lowest per share market values during the ten (10) trading days immediately preceding a conversion date at any time after 180 days from the issuance date until the maturity date, or, if later, until paid. . If a default is called by the lender (which occurred as noted above) after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes

 inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default.


On October 14, 2013, the Company issued an 8% convertible promissory note in the aggregate principal amount of $20,500 to pay payables that were owed.  The note has a maturity date of July 14, 2014. The note is convertible into shares of our common stock at a conversion price of forty-five percent (45%) of the average of the lowest trading price per share market values during the thirty (30) trading days immediately preceding a conversion date at any time after 180 days from the issuance date until the maturity date. If a default is called by the lender (which occurred as noted above) after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes

 inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default.


On February 24, 2014, the Company issued a 10% convertible promissory note in the aggregate principal amount of $25,000.  The note has a maturity date of February 24, 2015. The note is convertible into shares of our common stock at a conversion price of the lesser of $0.001 or fifty percent (50%) of the lowest trading day price during the twenty (20) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender (which occurred as noted above) after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 20% per annum is triggered and retrospectively applied from the notes

 inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default. During the three months ended August 31, 2014, the note was partially converted through the issuance of shares of common stock leaving a remaining principal balance of $17,748 as of August 31, 2014.


On March 1, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $30,000 to pay payables that were owed.  The note has a maturity date of March 31, 2015. The note is convertible into shares of our common stock at a conversion price of sixty percent (60%) of the average of the lowest closing price per share during the ten (10) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date.


8





On March 24, 2014, the Company issued a 10% convertible promissory note in the aggregate principal amount of $26,500.  The note has a maturity date of March 24, 2015. The note is convertible into shares of our common stock at a conversion price of fifty percent (50%) of the average of the lowest closing bid during the fifteen (15) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes

 inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default.


On May 16, 2014, the Company issued a 10% convertible promissory note in the aggregate principal amount of $50,000.  The note has a maturity date of August 16, 2015. The note is convertible into shares of our common stock at a conversion price of fifty percent (50%) of the average of the lowest closing bid during the ten (10) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes

 inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default.


On June 1, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $30,000 to pay payables that were owed.  The note has a maturity date of June 30, 2015. The note is convertible into shares of our common stock at a conversion price of sixty percent (60%) of the average of the lowest closing price per share during the ten (10) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date.


On August 11, 2014, the Company issued an 8% convertible promissory note in the aggregate principal amount of $103,500.  The note has a maturity date of August 13, 2015. The note is convertible into shares of our common stock at a conversion price of fifty percent (50%) of the average of the lowest three (3) trading prices during the thirty (30) trading days immediately preceding a conversion date at any time from the issuance date until the maturity date. If a default is called by the lender after failure to repay principal or interest when due, among other default provisions including untimely filings with the SEC, a default interest rate of 22% per annum is triggered and retrospectively applied from the notes

 inception date on the unpaid amount, as well the principal balance is increased by 50% of the face amount of the note deemed in default.


The Company discounts the notes by the fair market value of the derivative liability upon inception of each note. These discounts are accreted back to the face value of the notes over the note term using the effective interest method.


Former Related Party Debt

 

At February 28, 2014, the Company had convertible notes totaling $453,061 due to a former affiliate of the Company. The notes were convertible into common shares, based on $40 to $80 share price, most of which is at the higher price.  The convertible notes bore interest at 6% per annum and were due August 31, 2015.   The Company had accrued $120,921 of interest expense related to these notes. On May 19, 2014, the former related party sold the four notes to an unrelated third party in a private transaction, and the total outstanding principal and interest were restated in a new single note with the new third party for the principal amount of $573,982 due May 16, 2015, convertible at 50 percent of the lowest bid price for the stock during the 10 prior trading days.

 9



The extinguishment of the original notes and entering into the new note constituted an extinguishment of the old notes due to substantially different terms.  Accordingly, the Company recognized a gain on extinguishment of convertible debt of $573,982.  The new note is considered fully discounted upon inception and includes a derivative liability due to the variability of the conversion feature.  The Company recorded a day one loss on excess fair value of derivative liability of $1,292,470. During the three months ended August 31, 2014, the holder converted approximately $46,000 in principal and interest through the issuance of common stock.


(B)  

Determination of Derivative Liability

 

The Company calculated the derivative liabilities using the Black-Scholes pricing model for each note upon inception and recorded the fair market value of the derivative liability as a discount to the note. When a derivative liability associated with a convertible note is in excess of the face value of the convertible note, the excess of fair value of derivative is charged to the statement of operations.


The derivative liabilities associated with these convertible notes were revalued during the period as principal was converted, using the Black-Scholes Model with the below range of inputs. Upon conversion of all or a portion of the convertible notes, the derivative liability associated with the principal converted is valued immediately before conversion using the Black-Scholes model. The change in fair value of the derivative liability associated with the principal converted is recorded as a gain/loss on fair value of derivative liability in the accompanying statement of operation, with the remaining value of that portion of the derivative liability written off with a corresponding credit to additional paid-in capital.


As of August 31, 2014, the Company has outstanding principal amounts on short term convertible debt of $981,490. At the inception of these notes, they were fully discounted due to the associated derivative liabilities. Aggregate remaining discounts on convertible notes to be accreted over the life of each respective note on an effective interest method are $596,478 as of August 31, 2014. For the nine months ended August 31, 2014, interest expense from accretion of the discount, including converted notes, was $336,559.




Aggregate derivative liabilities associated with remaining convertible notes were $1,737,259 as of August 31, 2014. Based on this revaluation at quarter end and the revaluation of derivative liabilities measured during the period immediately before extinguishment of associated convertible notes, the Company recognized a net gain in fair value of derivative liability of $1,561,494 during the nine months ended August 31, 2014.


As of August 31, 2014, the range of inputs used to calculate derivative liabilities noted above were as follows:  

 

 

August 31, 2014

 

 

November 30, 2013

 

Annual dividend rate

 

 

0.0

%

 

 

0.0

%

Expected life (years)

 

.01

1.01 years

 

 

.01 - .92 years

 

Risk-free interest rate

 

 

.03% - .16

%

 

 

.03% - .13

%

Expected volatility

 

 

431.20% - 536.5

%

 

 

331.50% - 479.40

%

 

 

Long-term Convertible Debt 
 

 

On March 31, 2011, the Company borrowed $200,000 from an external party for use as operating capital.  The parties entered into a long-term convertible note agreement, which makes the Company liable for repayment of the principal and 2% annual interest by the agreement

s expiration date of December 28, 2014.  Beginning September 27, 2011, the note is convertible into shares of our common stock at a fixed conversion price of $16.00 per share. As a result, the Company will be liable to issue up to 12,500 shares common stock upon conversion.  Based on a $22 closing price on the day of note agreement, we recorded a discount of $75,000 as a result of the beneficial conversion feature (
BCF
). As such, the Company discounted the note by the value of the BCF upon inception of the note.   During the nine months ended August 31, 2014, interest expense from accretion of the discount was $16,760, leaving a remaining discount of $4,924.  The discount being amortized approximates the effective interest method over the term of the note.


10



On February 24, 2014, the holder of the $200,000 note agreed to sell up to $100,000 in principal of the convertible note to an unrelated third party, with $50,000 of principal to be acquired at that time, and an additional $50,000 in principal to be acquired on or before August 14, 2014. The Company agreed to restate that portion of the original note party in a new convertible note due February 25, 2015 with interest due at maturity at 10 percent, and convertible at the election of the holder into common stock at the lower of $0.01 or fifty percent of the lowest trading price of the stock for the previous 20 consecutive trading days.  The same third party also invested an additional $25,000 in a new promissory note, on the same terms and both transactions closed in March 2014.  Due to the change in the terms of the replacement note, for accounting purposes only, the partial purchase of the note has been treated as the payment of that portion of the old note and the issuance of a new note for the new principal amount.  The second installment purchase of an additional $50,000 in principal of the original note was not exercised by May 14, 2014 and by the date of these financial statements.


On March 24, 2014, a second unrelated party agreed with the original note holder of the $200,000 note to purchase up to $100,000 in note principal and $5,000 in accrued interest and also agreed to invest an additional $26,500 in the Company.  Under the terms of the agreement, the third party agreed to purchase the $105,000 in principal and accrued interest in three installments, with $42,000 due at signing, $31,500 due 45 days thereafter, and a final $31,500 due 45 days after the second installment payment. The Company agreed to restate the portion of the original note acquired by the third party and to issue a new convertible note in the amounts of $42,000, due March 24, 2015, with interest due at maturity at 10 percent, and convertible at the election of the holder into common stock at fifty percent of the lowest closing bid price of the stock for the previous 15 consecutive trading days.  Due to the substantial change in the terms of the replacement note, for accounting purposes only, the partial purchase of the note has been treated as an extinguishment of that portion of the old note and the issuance of a new note for the new principal amount.  The actual closing and funding of the initial transaction occurred on May 4, 2014.The second installment purchase of an additional $31,500 in principal of the original note accordingly was due on June 16, 2014, but was not made by the date of these financial statements. The note was partially converted into shares of common stock leaving a remaining principal balance of 38,100 as of August 31, 2014.


As a result of the two purchase transactions, the balance of the $200,000 in original principal amount of the note has been reduced to $108,000 and continues to be held by the original holder along with a remaining discount of $4,924, on the original terms.




Note 6 - STOCKHOLDER'S DEFICIT

During the nine months ended August 31, 2014, approximately $220,294 of convertible debt and related accrued interest thereon was converted into 389,512,136 shares common of stock.  In connection with those conversions, approximately $344,370 was recorded to additional paid-in capital for extinguishment of derivative liabilities related to these conversions. See Note 5 relating to outstanding debt and derivative liabilities.


During the nine months ended August 31, 2014, the Company recognized stock compensation expense of $56,000 through the issuance of 12.5 million shares to various parties.  In addition, the Company recognized $180,000 in stock-based compensation related to stock options previously issued. On August 8, 2014, the CEO converted $371,429 in accrued salaries into 185,714,250 shares at a price of $0.002 per share.


Note 7 - SUBSEQUENT EVENTS


Subsequent to August 31, 2014, the Company continued to convert its outstanding debt into common shares of the Company through the issuance of approximately 1.2 billion shares of common stock.


The Company is in the process of amending its Articles of Incorporation to increase the authorized common shares so there are sufficient shares for conversions of outstanding convertible promissory notes and to use as collateral for planned film financings.  A Preliminary Schedule 14C Information Statement regarding the change was filed on October 17, 2014 (effective October 20, 2014 and, assuming no SEC comments, will be mailed to shareholders on or after October 31, 214.  The amendment will be effective 20 days after the mailing to shareholders.


11




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


CERTAIN STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q (THIS

FORM 10-Q
), CONSTITUTE
FORWARD LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (COLLECTIVELY, THE
REFORM ACT
). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS
BELIEVES
,
EXPECTS
,
MAY
,
SHOULD
, OR
ANTICIPATES
, OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF MASS HYSTERIA ENTERTAINMENT COMPANY, INC. (
THE COMPANY
,
WE
,
US
OR
OUR
) TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-Q, UNLESS ANOTHER DATE IS STATED, ARE TO MAY 31, 2014.


General


We were incorporated in Nevada on November 2, 2005 under the name

Michael Lambert, Inc.
.  Until August 5, 2009 we manufactured handbags.  On August 5, 2009 (the
Effective Date
), pursuant to the terms of a Stock Purchase Agreement, Daniel Grodnik (our Chief Executive Officer) and affiliated parties purchased a total of 7,985 shares of our issued and outstanding common stock (the
Change of Control
). This constituted a majority control of the Company.  In addition to the shares purchased, the Company also issued 42,015 shares to Daniel Grodnik and certain affiliated parties in connection with the Change of Control.  The total of 50,000 shares issued to Daniel Grodnik and the affiliated parties represented 74.6% of the shares of outstanding common stock of the Company as of the Effective Date.  In connection with the Change of Control, we changed our name to Mass Hysteria Entertainment Company, Inc. (
we
,
us
, the
Company
, or
Mass Hysteria
) and also changed our business plan.  We are now a multi-media entertainment company created to produce feature films for theatrical, DVD, video on demand (VOD) and television distribution with an interactive component for commercial, documentary and educational film market.  Our plan has been to create original interactive theatrical films and second screen (mobile app) experience for non-Mass Hysteria films.  In addition, we intend to continue creating traditional film and television projects.


Plan of Operations


We are a company without significant sources of revenue and require additional capital to operate; and consequently we are subject to the risks associated with such companies, including the uncertainty of the Company

s technology and intellectual property resulting in successful commercial products or services as well as the marketing and customer acceptance of such products or services; competition from larger organizations and dependence on key personnel. To achieve successful operations, the Company will require additional capital to finance the acquisition of film properties and their attendant costs, further development of our interactive technology, marketing and the creation and rendering of second screen content for original and repurposed movies for interactivity. No assurance can be given as to the timing or ultimate success of obtaining future funding.


As we reported earlier in the quarter, the Company has changed its mandate to concentrate on film financing and producing. To that end, the Company has committed resources and off-balance sheet funding to co-finance Daughter Of God, a film starring Keanu Reeves that commences photography October 27th in New York. The Company

s new direction includes reviewing numerous projects to co-finance and produce. Our goal is to create a portfolio and to invest in a slate of interesting, commercial and star driven projects over the next 12 months.


Currently, we are in development with Lionsgate on a reality series entitled, Ball and Chain. We recently closed a development deal with Sony Picture

s faith based label, Affirm Pictures, to develop a script from a novel

12



Affirm has acquired the rights to entitled, The Devil In Pew Number Seven.  The Company will be putting up the funding to pay a screenwriter to do an adaptation of the novel. Should the film be produced based on the script we fund, the Company

s CEO, Daniel Grodnik will produce the picture. Mr.  Grodnik is also an Executive Producer on a new movie that commenced photography October 13, 2014 in Mobile, Alabama starring Robert DeNiro and Dave Batista. The picture is being produced by the Emmett/Furla Company.


 The mobile app we have been developing will allow audiences to interact with theatrical movies and will provide a unique immersive quality that can offer each audience member a customizable and sharable experience. We recently agreed to end our relationship with a software development group to develop the app under the name SideKick

and instead expect to retain a new software developer to assist in developing the software under our own trade name in the near future. Due to our change in focus, the app is no longer our main focus, although we intend to continue our development activities.

 

COMPARISON OF OPERATING RESULTS


RESULTS OF OPERATION FOR THE THREE AND NINE MONTHS ENDED AUGUST 31, 2014 COMPARED TO THE THREE AND NINE MONTHS ENDED

AUGUST
31
, 2013


We had no revenue for the three and nine months ended August 31, 2014 and 2013.  The lack of revenue in both periods is due to the establishing and operationalization of our business plan.  As we begin to meet our business plan goals, we expect to generate revenue in the future. In the period from August 5, 2009 to date, we have assembled our management team, developed its intellectual property, and are continuing to implement our marketing strategies.   Mass Hysteria intends to create movies that take advantage of traditional revenue streams that are still viable, and at the same time, identifying those revenue streams that will define new media's involvement in the film business such as downloading applications to smart phones that will allow the theater-goer to "participate" with the on-screen experience. Our plan is to combine these entertainment experiences into an alternative theatrical experience for young adults. We expect to license and further develop our own mobile applications in the future, depending on our ability to raise capital and/or generate additional sources of revenues.  


For the three months ended August 31, 2014, we had general and administrative expenses of $251,945; interest expense of $216,531, excess fair value of derivative of $54,311, gain in fair value of derivative liability of $141,697.  For the three months ended August 31, 2013, we had general and administrative expenses of $223,829; interest expense of $36,986, excess fair value of derivative of $13,842, and gain on fair value of derivative liability of $52,283. Whereas general and administrative expenses are relatively consistent period over period, interest expense is a function of debt issued and accretion of discounts recognized that are unique to the period based on borrowings. In addition, the change in fair value of derivative liabilities changes period to period based on changing variables included in the Black Scholes option pricing model including the stock price on the day of valuation and the related effective conversion price.


We had a net loss of $381,090, for the three months ended August 31, 2014, as compared to a net loss from of $222,374, for the three months ended August 31, 2013. The primary reasons for the increased net loss are due to the loss on excess fair value of derivative liability noted above and increased interest expense due to accretion of debt discounts.


For the nine months ended August 31, 2014, we had general and administrative expenses of $717,722; interest expense of $371,895, excess fair value of derivative of $3,083,417, gain in fair value of derivative liability of $1,561,494, and gain on extinguishment of convertible notes of $665,983.  For the nine months ended August 31, 2013, we had general and administrative expenses of $661,681; interest expense of $241,422, excess fair value of derivative of $40,680, and gain on stand ready guarantee of $125,817. Whereas general and administrative expenses are relatively consistent period over period, interest expense is a function of debt issued and accretion of discounts recognized that are unique to the period based on borrowings. In addition, the change in fair value of derivative liabilities changes period to period based on changing variables included in the Black Scholes option pricing model including the stock price on the day of valuation and the related effective conversion price.


13



We had a net loss of $1,945,557, for the nine months ended August 31, 2014, as compared to a net loss from of $883,316, for the nine months ended August 31, 2013. The primary reason for the increased net loss is due to the loss on excess fair value of derivative liabilities noted above.


LIQUIDITY AND CAPITAL RESOURCES


We had total assets of $72,252 as of August 31, 2014, consisting of $60,902 in cash, $1,200 in lease deposits, $5,000 in prepaid expenses, and $5,150 in capitalized film costs. We had a working capital deficit of $3,721,098.


We had total liabilities of $3,885,076 of August 31, 2014, consisting of current liabilities, which included $171,470 of accounts payable; accrued liabilities of $378,934; accrued payroll of $609,829; short-term debt of $243,572; short-term convertible debt, net of discount of $389,936; a stand ready obligation of $250,000; derivative liability of $1,737,259; and convertible long-term debt of $103,076 net of discount.


We had a total stockholders

deficit of 3,812,824 as of August 31, 2014, and an accumulated deficit as of August 31, 2014 of $12,382,483.


We had $140,957 in net cash used in operating activities for the nine months ended August 31, 2014, which included $1,945,557 in net loss, offset by $236,000 in share-based compensation, $387,339 in amortization of discount on short-term debt, and changes in operating assets and liabilities totaling $325,321. We also had a $1,561,494 change in fair value of derivative liability, gain on extinguishment of convertible notes of $665,983, and a loss on excess of derivatives of $3,083,417. We had $3,150 used by financing activities for film costs. We had $205,000 provided by financing activities from proceeds from convertible debt.

 

Since we have no liquidity and have suffered losses, we depend to a great degree on the ability to attract external financing in order to conduct our business activities and expand our operations.   These factors raise substantial doubt about the Company

s ability to continue as a going concern.  If we are unable to raise additional capital from conventional sources, including increases in related party and non-related party loans and/or additional sales of stock, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results. We have no commitments to provide us with financing in the future, other than described above.  Our independent registered public accounting firm included an explanatory paragraph raising substantial doubt about the Company
s ability to continue as a going concern in our most recent annual filing.

  

In the future, we may be required to seek additional capital by selling debt or equity securities, selling assets, or otherwise be required to bring cash flows in balance when it approaches a condition of cash insufficiency. The sale of additional equity securities, if accomplished, and the conversion of convertible debt, if converted, may result in dilution to our shareholders. We cannot provide assure, however, that financing will be available in amounts or on terms acceptable to us, or at all.


Off-Balance Sheet Arrangements


None.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


As a

smaller reporting company
as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.



14




ITEM 4. CONTROLS AND PROCEDURES


(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the "Evaluation Date"), have concluded that as of the Evaluation Date, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. They were deemed not effective due to adjustment and disclosure omissions. The Company will continue to take steps to identify matters of accounting and disclosure. 


(b)   Changes in internal control over financial reporting. During the quarter ended August 31, 2014 we retained the services of an outside services firm to assist with closing of our books and records, and prepare our quarterly and annual filings with the SEC. This firm was not engaged for enough time during the period ended August 31, 2014 to have a material effect on our internal controls over financial reporting.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


INHERENT LIMITATIONS OF INTERNAL CONTROLS

 

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that: 

 

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

 

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with the U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

 

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

 

Management does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate. 




15




PART II: OTHER INFORMATION


ITEM 1 - LEGAL PROCEEDINGS


None during the quarter ended August 31, 2014 except for the referenced arbitration proceeding regarding the Coral Ridge agreement, originally scheduled for August, 2014, but postponed to a date still to be determined due to on-going settlement discussions.


ITEM 1A

RISK FACTORS


As a

smaller reporting company
as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.


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


1.  

See Item 5 of our Annual Report on Form 10-K for the year ended November 30, 2013 filed March 13, 2014 and amended by filing on April 14, 2014.


2.  

During the quarter ended August 31, 2014, we issued 365,564,132 shares of common stock upon conversion of convertible notes. The aggregate principal and interest amount of this note that was converted was $164,410. The issuances were exempt pursuant to Section 3(a)(9) of the Securities Act of 1933 as well as Section 4(2) of the Securities Act of 1933.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES


None during the quarter.


ITEM 4

MINE SAFETY DISCLOSURES


Not applicable.


ITEM 5 - OTHER INFORMATION


None


The following exhibits are filed as part of this quarterly report on Form 10-Q:


31.1

Rule 13a-14(a)/15d-a4(a) Certification of Chief Executive and Chief Financial Officer

31.2

Section 1350 Certification of Chief Executive and Chief Financial Officer


SIGNATURES

 

Pursuant to the requirements 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.


Dated: October 20, 2014

 

Mass Hysteria Entertainment Company, Inc.

 

 

 

 

 

By:

/s/ Daniel Grodnik

 

 

Daniel Grodnik, Chief Executive and Financial Officer

 




16




exhibit31.htm CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER


ENT> EX-31 3 exhibit31.htm CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER

Converted by EDGARwiz

EXHIBIT 31
:  
CERTIFICATION
OF PRINCIPAL EXECUTIVE
AND FINANCIAL
OFFICER

PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

 

I,
Daniel Grodnik
, certify that:

 

1.

I have reviewed this report on Form10-Q for the quarterly period ended
August
31
, 2014
of
Mass Hysteria Entertainment Company, Inc.
;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant
s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

(c)

Evaluated the effectiveness of the registrant
s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

(d)

Disclosed in this report any change in the registrant
s internal control over financial reporting that occurred during the registrant
s most recent fiscal quarter (the registrant
s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant
s internal control over financial reporting; and

 

 

5.

The registrant
s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant
s auditors and the audit committee of the registrant
s board of directors (or persons performing the equivalent functions):

 

 

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant
s ability to record, process, summarize and report financial information; and

 

 

(b)

any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant
s internal control over financial reporting.

 

Date:  
October 20
, 2014

 

 
/s/ Daniel Grodnik
                                 

By:      
Daniel Grodnik

Title:       Chief Executive Officer, Chief Financial Officer
and
Sole Di
rector

                (Principal Executive
and Financial
Officer )



exhibit32.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER


ENT> EX-32 4 exhibit32.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

Converted by EDGARwiz

EXHIBIT 32

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned, Daniel Grodnik, the Chief Executive and Chief Financial Officer, of Mass Hysteria Entertainment Company, Inc. (the

Company
), hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge, the Quarterly Report on Form 10-Q for the period ended August 31, 2014, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of the Company.



 

   /s/ Daniel Grodnik      .

Daniel Grodnik

Chief Executive Officer, Chief Financial Officer and Sole Director

(Principal Executive Officer, Principal Financial Officer and

Principal Accounting Officer)

Date:  October 20, 2014

 



 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.





Additional Files
FileSequenceDescriptionTypeSize
0001388488-14-000039.txt   Complete submission text file   1445580
mhys-20140831.xml 5 XBRL INSTANCE DOCUMENT EX-101.INS 169714
mhys-20140831.xsd 6 XBRL SCHEMA TAXONOMY DOCUMENT EX-101.SCH 11323
mhys-20140831_cal.xml 7 XBRL CALCULATIONS TAXONOMY DOCUMENT EX-101.CAL 26216
mhys-20140831_def.xml 8 XBRL DEFINITIONS TAXONOMY DOCUMENT EX-101.DEF 8217
mhys-20140831_lab.xml 9 XBRL LABELS TAXONOMY DOCUMENT EX-101.LAB 78644
mhys-20140831_pre.xml 10 XBRL PRESENTATION TAXONOMY DOCUMENT EX-101.PRE 64190

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